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Commodities Plunge Amid China Data

A guest post written by DAR Wong

Currency Market Observations – 22 April 2013

Fundamental Outlook

The U.S. economy remains little changed with increasing housing starts amid contracting inflation. G20 meeting begins with Yen devaluing further as no leader protests against currency weakening in Japan. China sees growth at less than 8 percent for 4 consecutive quarters that hammer the commodity demands.

The U.S. National Association of Home Builders/Wells Fargo index of builder confidence dropped to 42 in April from prior month 44, the lowest since October. Housing starts for March climbed 7 percent to a 1.04 million annual and recovered to highest record since June 2008. Another report shows consumer price index shed 0.2 percent after 0.7 gains in February, due to price drop in energies. Core reading rose 0.1 percent and less than forecast.

The U.S. Federal Reserve says the U.S. economic expansion remains “moderate” amid gains in manufacturing, housing. Weekly jobless claims increased 4,000 to 352,000 in the week ended 13 April with little change.

China reports its GDP for Q1 grew 7.7 percent from a year earlier, marking a fourth consecutive gain at less than 8 percent in past decade. Last week, commodities tumbled to mostly intra-year lows following China’s report.

The recent slump in gold prices may lead policymakers to pursue more easing stimulus for driving up commodity prices. The International Monetary Policy (IMF) trims the global growth forecast and urges European policymakers to use “aggressive” monetary policy as recovery in European regions lags behind the rest of the world.

Japan’s overseas shipment in March rose 1.1 percent from a year earlier and above estimate. Trade shortfall was JPY362.4 billion (USD3.7 billion) from JPY777.5 billion in February, with improvement taking effect from lower Yen value.

The Japanese Yen has been falling for a fourth day against the dollar after the Group of 20 gave no comment on Bank of Japan’s (BOJ) weakening policy. Analysts interpret the silent permission as leeway to more decline in Yen value since it may not contravene global currency devaluation.

European Central Bank (ECB) President Mario Draghi comments the economic situation in the 17-nations remains no improvement since the last meeting on 4 April. Policymakers predict the euro-area economy will shrink 0.5 percent this year before growing 1 percent in 2014.

Technical Forecast

USD/JPY closed at 99.50 for the weekend while reversing up amid G20 meeting. The market is now sitting at 97.30 supports with emerging buying interest that might pierce above 100.00 benchmarks soon. This week, we foresee the fundamental factors will play essential part to lead the trend into consolidation from 97.30 – 100.00 regions or breaking above 100.00 to reach for 101.50 targets.

EUR/USD topped 1.3201 last week and fell. Technically, the market may be turning down this week if the trend does not penetrate above 1.3200 resistances again. This week, the market might consolidate sideways in first few days inside 1.3020 – 1.3150 ranges but anytime breaking below 1.3000 could initiate a new selling force in market. We reckon reversing below 1.3000 will land at 1.2900 supports.

GBP/USD has been trading from 1.5210 – 1.5410 ranges last week. The trend needs to penetrate below 1.5200 supports this week before we could see 1.5050 targets. Prior to this, there may be small sideways that will gain at 1.5300 – 1.5350 tops during early part of this week.

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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