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Bank of Japan Names New Prospective Governor

A guest post written by DAR Wong

Currency Market Observations – 4 March 2013

Fundamental Outlook

The US economic data are positively strong in housing and manufacturing. Japan prepares to vote Haruhiko Kuroda as new central bank head in March once Masaaki Shirakawa steps down. Eurozone is plagued by rising unemployment and UK economy remains fragile. Both Euro and Pound plunge in weak sentiments.

The US new home sales jumped 15.6 percent to a 437,000 annual pace in January, exceeding the highest forecast in 2 decades. The Conference Board’s consumer sentiment index climbed to 69.6. Another report on pending sales of existing houses gained 4.5 percent to the highest level since April 2010.

The US durable goods excluding transportation equipment climbed 1.9 percent in January by the most in a year. Jobless claims declined by 22,000 to 344,000 in the week ended 23 February. The growth for last quarter 2012 grew 0.1 percent annual rate, up from a previously estimated 0.1 percent drop.

Manufacturing index measured by Institute for Supply Management’s factory index rose to 54.2 in February. Another report on household purchases that marks consumer spending gained 0.2 percent after a 0.1 percent gain the prior month.

Japan’s main opposition party agreed to support the takeover of Haruhiko Kuroda as next Bank of Japan (BOJ) governor. Prime Minister Shinzo Abe hopes to get his nominee passed in Upper Parliament and quickly appoint Kuroda once Massaki Shirakawa steps down on 19 March.

Japan’s industrial production rose for a second month in January by rising 1 percent from December. Consumer prices excluding fresh food fell 0.2 percent in January from a year earlier, the third-straight monthly decline. With the economy still slowing down, Prime Minister aims to nominate a new central bank who will lead additional stimulus in April.

The European Central Bank (ECB) reported the annual inflation in 17 nations slowed to 1.8 percent in February from 2 percent prior month. Another data shows that 18.998 million people were unemployed in the euro area in January, up 201,000 from the previous month.

UK consumer confidence stayed at minus 26 in February after increasing 3 points in January. Gross domestic product fell 0.3 percent in the fourth quarter. A separate report shows manufacturing plunged to 47.9 in February, compared with a revised 50.5 in prior month.

Bank of England (BOE) released the mortgage approvals with unexpected decline to 54,719 in January from a revised 55,632 in December. Net mortgage lending rose by 147 million pounds ($221 million), the least since August. Policymakers expect the recovery to be slow this year.

Technical Forecast

USD/JPY tested 91.00 supports last week and closed at 93.54 for the weekend. Technically, we reckon the market will trade sideways for next 2 weeks before new BOJ governor steps in. Market range is expected to move from 91.00 – 94.50 regions while entering from extreme might be safer for speculators.

EUR/USD plunged to 8-week low at 1.2967 before closing briefly above 1.3000 benchmarks on Friday. This week, we foresee the market will be capped at 1.3140 resistances while falling may continue if the market closes beneath 1.3000 levels on any day. Downside room is opened to 1.2880 areas if the trend recedes further. Abandon your short-view if the market rises above 1.3140 resistances.

GBP/USD initiated a new fall on Friday from 1.5150 regions. Technically, we expect the market to be very resilient at 1.5250 resistances and trend might plunge further this week. The market is under free fall pressure now so long as it does not reverse above 1.5250 resistances. Downside target may aim at 1.4650 should the bears engulf market this week.

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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