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Bernanke’s Speech Revives Market Recovery

A guest post written by DAR Wong

Currency Market Observations – 15 July 2013

Fundamental Outlook

The U.S. inflation shows sign of recovery as Bernanke comments on backing stimulus. Dow Jones sentiment reverses to uptrend after U.S. released budget surplus and better-than-expected producer prices. In Eurozone, Portuguese bond yields soar high amid quite situation. Traders are watching closely for next probable market ripple if crisis resurges.

The U.S. consumer borrowing rose USD19.6 billion in June after followed a revised USD10.9 billion gain in the previous month. Another separate report shows producer cost rose 0.8 percent and higher than median forecast, after following 0.5 percent gain in May. Core prices rose 0.2 percent and above expectation.

The U.S. government posted the widest monthly budget surplus USD116.5 Billion in June, highest in past 5-year record. Jobless claims for the week ended 6 July reached 360,000 and above median forecast.

After the FOMC minutes released on Wednesday, the FED Chairman Ben S. Bernanke commented a foreseeable future for re-injection of financial stimulus despite debates of tapering among other policymakers. The remarks weakened Dollar tremendously and headed for steep decline about 2.00 points from 84.50 tops. Euro and Pound reversed up sharply against greenback after falling for more than 2 weeks.

China’s exports unexpectedly declined in June by 3.1 percent from a year ago. The trade balance gained 27.1 Billion from May and slightly below median expectation. However, inflation measured by consumer prices rose 2.7 percent in June from a year ago and indicated inflation growing. Asia equities traded strong throughout the week ans supported by Bernanke’s verbal support.

In Eurozone, situation remains dormant as the 17 nations struggle to emerge from recession. Portugal’s 10-year bond dropped in its longest stretch of weekly declines since before year 2000, as the yield averaged 7.38 percent in past year. The political dispute in coming new elections causes alarm that may endanger the nation’s financial-aid program.

The U.K. manufacturing data fell 0.8 percent in May after it declined 0.2 percent in previous month. Mark Carney, new governor of Bank of England, will align the central bank’s policy closer to the Federal Reserve next month by ebbing the interest rates at low-key. He is seen to be following the American policy by working on monetary policy that will be linked to inflation forecasts and unemployment.

Technical Forecast

USD/JPY fell from the 101.50 tops last week after Bernanke’s speech. The market closed at 99.20 for the weekend after reaching 98.25 lows. This week, we foresee possible correction may move up to 100.50 if Dollar strengthens. However, overall trend outlook still remains weak unless it pierces above 100.50 resistances. Beware of the trend dawdles below 99.00 levels for too long as this may trigger new bears to plunge lower especially when 98.25 is broken.

EUR/USD sprang up from 1.2760 bottoms to 1.3200 as recovery following the Dollar weakness. This week, we foresee the trend will trade sideways from 1.2950 – 1.3150 ranges while searching for new direction. Technically, the market is supported by weakening Dollar trend while traders are remaining alert on Euro debt fundamentals.

GBP/USD closed at 1.5100 regions after surging from 1.4820 bottoms to 1.5200 tops last week. Technically, we reckon the support will remain at 1.5050 levels while market may attempt higher grounds above 1.5300 targets. However, beware of it diving back to below 1.5000 benchmarks as this could initiate new selling pressure.

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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