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American Payrolls Rises in Optimism

A guest post written by DAR Wong

Currency Market Observations – 8 July 2013

Fundamental Outlook

The U.S. payroll rises for second month in job market recovery while manufacturing data also lifts in optimism. Japan shows improvement in business outlook from quarterly Tankan report. Both European Central Bank (ECB) and Bank of England (BOE) hold their key interest rates unchanged and put the market under observation as bond yields rise.

The U.S. Institute for Supply Management’s (ISM) manufacturing index escalated to a three-month high in June at 50.9 compared to 49 last month. Another separate report on trade balance recorded a widening deficit in May at USD45 Billion as import rose significantly. The second index on service industries compiled by ISM declined to 52.2 from May’s reading 53.7, featuring slowdown in service sectors.

American weekly jobless claims slid 5,000 to 343,000 in the week ended 29 June and slightly below expectation. Job markets holds steady while payroll in June rose for a second month by 195,000 above expectation. Jobless rate stays at 7.6 percent and near to 4-year low.

The U.S. Dollar Index (USDX) shot to 2-month high after the U.S. non-farm payroll while Gold prices plunged more than USD40 from 1250.00/oz. Crude prices surged higher above 103.00 as market players reckoned the political unrest has trimmed supply on crude production.

Japan’s quarterly Tankan index rose to 4 in June from minus 8 in March. Data shows optimism among big manufacturers while investors are putting in confidence for “Abeconomics” for coming stimulus in October. The Yen slides again respectively to higher Dollar value with USD/JPY rate surpassing 101.00 levels on Friday’s session.

The European Central Bank (ECB) keeps interest rates unchanged at 0.5 percent amid rising bond yields in the region. Policymakers say they will keep benchmark interest rates on low side as commitment to spur growth. German factory orders suddenly declined for a second month in May. The orders, after seasonally adjusted, dropped 1.3 percent from April, when they fell a revised 2.2 percent.

The Bank of England remains its key interest rate at 0.5 percent and target purchase for bonds program at GBP375 Billion (USD567 Billion). Policymakers stress the significant rising bond yields will weigh on outlook of economy. Halifax reports housing prices increased 0.6 percent in May to an average GBP167,984 (USD256,000) and clocked the highest since August 2010.

The London-based Markit Economics and the Chartered Institute of Purchasing and Supply reports the manufacturing grew at the fastest pace in 2 years after the index rose to 52.5 in June from prior month 51.5. On back-to-back report, they announce the service index climbed to 56.9 from 54.9 in May, both showing a recovery from previous sluggishness.

Technical Forecast

USD/JPY has been riding in bullish trend last week. The market is unpredictable due to the weakening power of Yen favored by “Abeconomics”. This week, we reckon some selling pressure will emerge at 101.60 regions which may suppress the prices into technical correction at 99.00 regions. Abandon your short-view if the market pierces above 101.60 as this may climb further to 102.50 areas.

EUR/USD is unexpectedly bearish as it has fallen almost 600 pips from 1.3400 tops over past 2 weeks. Technically, we expect the market to conduct a rebound from 1.2800 this week while the corrective range may target at 1.3000 resistances. Abandon your long-view if the trend breaks loose beneath 1.2800 supports because Eurozone is in very uncertain situation as debt crisis may resurface soon.

GBP/USD managed to be supported at 1.4850 regions on Friday after the market fell from 1.5300 tops last week. In coming week, we expect the trend to slow down and move into consolidation with reversal aims at 1.5150 resistances. As we reckon the sideways range could be capped from 1.4850 – 1.5150 regions, do not sit on long-view once the bears break below 1.4800 supports.

Dar Wong

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

Wong is the founder and Principal Consultant of 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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