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American Payroll Wanes Tapering Stimulus

A guest post written by DAR Wong

Currency Market Observations – 9 September 2013

Fundamental Outlook

The U.S. payroll rises lesser than expectation and wanes the forecast for withdrawing stimulus. The Institute of Supply Management on manufacturing and service index indicate steady growth. The European Central Bank (ECB) and Bank of England (BOE) keep their key interest rates unchanged. Syrian war remains as major concern in market sentiment as traders await the final decision of President Obama.

The U.S. market sentiment is currently influenced by the Syrian warfare as traders observe the ongoing fundamental news. The missile test carried out in Mediterranean Sea on last Monday by Israel shattered the traders’ confidence and mistook for the declaration of war. However, President Obama surprised the media by saying he wished to seek opinion of U.S. Congress for taking such military actions against Syria. Global stock markets and commodities have been swinging in uncertainty throughout the week.

The U.S. Institute for Supply Management reports its manufacturing index rose to 55.7 in August and above expectation. Service index for August also gained to 58.6 and highest since December 2005. Sentiment for first half of last week was bullish and wide expectation on tapering stimulus triggered some sell-offs in Dow Jones stocks.

After the mid-week, construction spending in America economy gained 0.4 percent and made 4-year high record. However, factory orders dropped 2.4 percent in July by the most in 4 months.

The monthly focus on U.S. trade deficit widened slightly more than expected in July as exports dipped. Trade gap increased 13.3 percent to USD39.1 billion. The weekly claims for jobless benefits slid 9,000 to 323,000 and boosted further in market rumor on reducing bond-purchase program in September.

On Friday, the other monthly major data on U.S. non-farm payroll showed 169,000 gains in August and crushed the traders’ view of probable tapering again. Unemployment rate dropped to 7.3 percent.

Germany exports fell unexpectedly in July but imports rose. Seasonally-adjusted exports fell 1.1 percent versus 0.5 percent gains in imports. Market traders initially expected the Euro to be strong due to the forthcoming election in Germany. However, the sentiment proved otherwise after the ECB President Mario Draghi reiterated that central bank will not participate in further debt relief for Greece.

On the whole, the European finance ministers will likely decide on a third bailout for Greece in November. This will only take effect after the group of ministerial officers has approved the assessment of reforms properly carried out by Greece.

On Thursday, both ECB and BOE left their key interest rates unchanged in the meeting. Euro currency was weakening but faced some short-covering on Friday as profit-taking occurred. Pound traded sideways in slight buying interest.

U.K. manufacturing production gained 0.2 percent in August but below expectation. Another report on trade balance slid GBP9.9 billion compared to GBP8.2 billion in prior month.

Technical Forecast

USD/JPY JPY has begun to turn down on Friday as market closed with weakening sign. We reckon the sentiment for this week will be bearish with resistance capped at 99.50 levels. The penetration above 100.00 psychological benchmark is definitely a sign of bull pattern in case the fundamental changes. On the other hand, we forecast higher probability of traveling southward at 97.00 targets if Yen rises.

EUR/USD has hit strong buying interest at 1.3100 regions on Friday as market turned up from this benchmark. The trend will likely recover in coming week after falling for many days from 1.3400 tops. Technically, we reckon the trend will consolidate from 1.3100 – 1.3300 ranges in near future while traders adjust their positions. Abandon your long-view if the market breaks below 1.3100 supports.

GBP/USD seems to be fizzling out above 1.5650 levels. This week, the market will be prone to disintegrate if it could not climb above 1.5700 resistances. In our opinion, the trend will tend to move back to 1.5450 areas as demand slows. Technically, we reckon the range will travel from 1.5450 – 1.5700 but risk needs to be controlled at 1.5700 levels for short traders.

Dar Wong

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

Wong is the founder and Principal Consultant of PWForex.com and holds a professional qualification in NASD series 3 and 5 approved by National Futures Association (USA).

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DISCLAIMER: This post is written for general information only. The author, publisher and/or any third party involved in the distribution of this work assume no legal responsibilities and shall have no liability whatsoever for any direct or consequential losses, costs or expenses arising from the use of the information contained herein.

 

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