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Commodities Weaken Amid Strengthening Dollar

A guest post written by DAR Wong

Currency Market Observations – 05 Mar 2012

Fundamental Outlook

The strengthening dollar after Bernanke’s remarks on no further stimulus cap rise on Gold and oil prices in markets. The US economy expands steadily and FED policymakers believe will see modest recovery this year. The UK central bank is looking to hold the bonds purchase program unchanged in coming week.

The American pending home resale gained 2 percent in January after a 1.9 percent decrease the prior month. Another report showed orders for US durable goods fell in January by the most in 3 years, making a 4 percent plunge after revised 3.2 percent gain in prior month and led by a slowdown in demand for commercial aircraft and business equipment.

The Institute for Supply Management’s factory index in February fell to 52.4 from prior month 54.1 as orders eased. The index above 50 still indicates expansion though decline was unexpected. Jobless claims fell 2,000 for the week ended 25 February to 351,000, matching the lowest level since March 2008 and indicated improvement in job markets.

The FED policymakers said the US economy expanded at a “modest to moderate pace” in January. FED Chairman Bernanke remarked that central bank will keep rates low but may not succumb to further monetary easing. During mid week, DJIA stocks and Gold fell while US rose.

An index of executive and consumer sentiment in the 17-nation euro area rose for a second month in February by increasing to 94.4 from prior month 93.4. The uptick was led by stronger German output rebound and Greek financial bailout which also lifted the Euro in firm sentiment in early February.

The UK central bank policymaker Martin Weale said that UK inflation may be more resilient than forecast which might halt the government from injecting further stimulus aid. This week, the 9-member Monetary Policy Committee led by Governor Mervyn King of Bank of England (BOE) will probably hold its asset-purchase target at GBP325 billion (USD515 billion) after injected GBP50 billion in bonds purchase last month.

Technical Forecast

USD/JPY has been in bullish technical recovery especially when backed by strong dollar news. This week, we reckon the market has some more rooms to rise till 82.50 regions before fizzling out. Further escalation due to positive fundamental factors may lift the trend to higher resistance 84.00 should there be unexpected news. The support has built up very strongly at 80.00 regions now.

EUR/USD has turned down from recent high 1.3486 and resisted by both technical EMA200 line and fundamental comments by FED Bernanke. This week, we foresee the trend will consolidate with downside support emerging at 1.3100 levels while resistance will cap at 1.3350 regions. Overall trend has turned bearish and may attempt lower levels after this consolidation is completed in 1-2 weeks time.

GBP/USD fell last week after failing to protrude above 1.6000 benchmarks. This week, we expect the support to emerge at 1.5760 regions while the market may begin to consolidate. Topside resistance lies at 1.5930 levels in case of possible technical retracement. Abandon your short-view if the market penetrates above 1.5950 levels.

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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1 Comment to Commodities Weaken Amid Strengthening Dollar

  • March 10, 2012 at 1:15 PM | Permalink

    Great, with these awesome tips it becomes easy to earn from Commodity market.