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Bernanke Stresses on Steady Recovery

A guest post written by DAR Wong

Currency Market Observations – 02 Apr 2012

Fundamental Outlook

The US FED chairman Bernanke claims more accommodative policies will be needed to ensure further progress in recovery. European finance ministers agree to pump in more fresh money for cushioning the crisis for coming 2 years. UK improves in services amid housing slump.

The US Conference Board’s consumer confidence index dropped to 70.2 in March from prior month 71.6. The S&P/Case-Shiller index of property values in 20 cities fell 3.8 percent in January from a year earlier, matching the median forecast. The orders for US durable goods in February advanced 2.2 percent, less than projected but persists in mild recovery.

Initial jobless claims slid 5,000 in the week ended 24 March to 359,000, making lowest record since April 2008. The US gross domestic product (GDP) expanded at a 3 percent annual rate from October through December, unchanged from initial estimate. Another report said consumer spending climbed 0.8 percent in February, adding evidence for recovery.

The US FED Chairman Ben S. Bernanke announced on last Monday that accommodative monetary policy will be needed to sustain growth and keep unemployment low at current 8.3 percent. Stocks and commodities spiked after his comment.

Japan’s retail sales increased 3.5 percent in February from a year earlier, a third straight monthly rise and indicating return of consumer confidence. Another separate report on consumer prices excluding fresh foods climbed 0.1 percent from a year earlier, showing a mild improvement.

On Friday, the Trade Ministry said Japan’s industrial production slid 1.2 percent in February. Other reports showed the unemployment rate fell to 4.5 percent. A weakening yen will aid in exports and improvement in the economic recovery.

Last Friday, Euro-area finance ministers agreed in Copenhagen to create fresh aid funds of EUR500 billion (USD666 billion) that will add on to existing EUR 300 billion bailout funds. This total EUR800 billion funds will be used to defend a turmoil over next 2 years.

In UK, home values dropped 1 percent in March at biggest decline since February 2010. Mortgage approvals fell to lowest in February over past 8 months. Only 48,986 home loans were granted compared to revised 57,899 cases in the previous month.

Another report showed UK services industries grew 0.2 percent in January, making sign of gaining momentum in the first quarter. Consumers are still pessimistic in home market while the austerity measures are beginning to take effect in services and manufacturing recovery.

Technical Forecast

USD/JPY recoiled up on Friday from bottom 81.83 and closed at 83.85 for the weekend. We reckon the market has completed the first phase of correction. This week, the trend may move sideways from 82.00 – 83.50 regions in firm sentiment or decline further to 80.50 levels as our next lower target. Observe the down trend once the bears break beneath 82.00 supports.

EUR/USD closed at 1.3340 on Friday with tight range shown in day chart. Technically speaking, the market should be capped at 1.3400 resistances while prone to dive lower at 1.3150 – 1.3200 regions in coming week. However, beware of fundamental news that may protrude above 1.3400 resistances and aim at 1.3500 if the bulls take charge!

GBP/USD penetrated above 1.6000 resistances and reached 1.6038 on Friday before it settled at 1.5996 for the weekend. This week, the sentiment is neutral as the trend may attempt higher at 1.6100 regions or head down to 1.5800 support for consolidation. Observe the fundamental news in early week to decide the trend direction.

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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