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A guest post written by DAR Wong

Currency Market Observations – 5 May 2014

Fundamental Outlook

The US shows growth in economic recovery generally while supported by the huge payroll increase. Federal Reserve (FED) Yellen assures of low interest rates amid tapering progress. Bank of Japan (BOJ) Governor Kuroda refrains from putting up new stimulus but reassures of inflation growth. On the other hand, European Central Bank (ECB) President Draghi assures of further easing if necessary though it may not be needed now.

The US pending home sales index rose 3.4 percent in March, highest in past 3 years and making first gain in 9 months. Another report filed by Institute for Supply Management’s factory index rose to 54.9, the strongest so far this year, after gained 53.7 in prior month.

The US consumer spending climbed 0.9 percent in March after gained 0.5 percent previously. Data showed it was almost highest in past 5 years. However, weekly jobless claims rose 14,000 to 344,000 in the period ended April 26, and posted looming job market.

On Friday, US Labor Department reported non-farm payroll rose 288,000 in April after followed 203,000 gains in prior month. Data shocked the market from its over-expected growth while unemployment dropped to 6.3 percent, first time since September 2008. Dow Jones stocks rose initially but fell towards end of day as escalating tension in Ukraine overshadowed market optimism.

Federal Reserve policymakers assure they will keep interest rates at low levels while trimming the stimulus to full withdrawal by end of this year. So far, the FED committee has pared monthly asset buying to USD45 billion. Meanwhile, investors are still observing cautiously of the effects from tapering program as the stimulus package has been cut almost 50 percent from the original USD85 billion.

BOJ officials predict the consumer prices excluding fresh food, will increase 1.9 percent in the fiscal year starting April 1, 2015, and 2.1 percent the next year. BOJ stuck yesterday with a plan for an annual increase in the monetary base of between 60 trillion yen and 70 trillion yen ($683 billion). No further stimulus has been mentioned.

European Central Bank President Mario Draghi claims that an imminent quantitative easing program is not likely to occur so soon. However, policymakers will watch closely of the inflation rate growth as consumer spending has been stalling in Euro area as slowest after Japan, among all developed nations.

Economy in Eurozone signals mixed sentiment as jobless rate in March reached near to 12 percent record high that was recorded in last December. Unemployment in the 18 nations was 11.8 percent in March. Meanwhile, Market Economics reports the Purchasing Manager Index rose to 53.4 in April from 53 a month.

Market Economics in London reports the Purchasing Manager Index declined to 60.8 from 62.5 in March. UK construction slowed down in April when the new orders for materials rose to 60.8 from 58.4 in March. However, British Pound climbed to monthly high 1.8918 on Friday as Dollar weakened.

Technical Forecast

USD/JPY had a big swing up to 103.01 on Friday and closed lower at 102.18 levels. This week, we reckon the trend may continue to decline while resisted at 102.50 levels. The bears will likely drive lower to 101.20 targets once the 102.00 immediate supports are broken. Piercing above 102.50 resistances need to abandon your short-view.

EUR/USD is unpredictable after it swung up on Friday and closed at 1.3873 levels on Friday. This week, we predict the market will be ranged from 1.3750 – 1.7920 regions with sideways consolidation. Only breaking beyond either side will extend into new direction. Fundamental factors will become essential triggers for leading market trend for coming week.

GBP/USD settled at 1.8873 for the weekend after created 1.8918 highs last week. The market is uncertain as well for coming week. Technically, we reckon the trend may turn weak and trade lower at 1.8750 areas for bargain-hunting. Range may swing from 1.8750 – 1.8950 regions but breaking above 1.8950 resistances need to abandon your short-view!

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at dar@pwforex.com

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