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Currency Market Observations – 12 Sep 2011

A guest post written by DAR Wong

Stocks plunge amid renewed Greek debt crisis

Fundamental Outlook

The US President Obama reveals a USD447 billion proposal that will raise Gross Domestic Product (GDP) in 2012 and add jobs. Commodities and stocks plunged on Friday after Greek debt emerged and implicated selling fear. Japan slows down in economy but waiting for another intervention stimulus with G7 nations.

The US Institute for Supply Management’s index of services increased to 53.3 in August from 52.7 in July, making unexpected jump against forecast of decline. Another report showed trade deficit narrowed in July as exports climbed to a record. Trade gap shrank 13.1 percent, the most since February 2009, to USD44.8 billion from a revised USD51.6 billion shortfall in June. Jobless claims climbed by 2,000 to 414,000 in the week ended 3 September.

The US Commerce Department said whole inventory rose 0.8 percent in inventories after followed a 0.6 percent rise in June. On Friday, President Obama revealed a USD447 billion stimulus proposal, aiming to increase infrastructure spending and tax cuts to raise next year’s GDP by 2 percentage points and add 1.9 million jobs.

Japan’s factory orders dropped 8.2 percent in July vs. 7.7 percent gain in June. Blames on decline growth were put on rising yen for causing slowdown in demands and exports. Japan’s GDP shrank at an annualized 2.1 percent rate in the three months ended 30 June, more than the 1.3 percent contraction reported last month.

Inflation rate in Germany fell to 2.5 percent from 2.6 percent in July. European stocks dived towards weekend amid concern of re-emergence of ballooning Euro sovereign debt crisis. Germany assures of commitment to bailout plan should Greece fails in repayment.

The UK producer prices rose 0.1 percent in August compared to revised 0.3 percent gain in prior month, making least gain in a year due to energy prices drop. UK retail sales fell 0.6 percent from a year earlier in August, causing slide in pound. The average price of a home in England and Wales gained 0.3 percent in August to GBP219,078 (USD352,000), reported by Acadametrics Ltd. and LSL Property Services Plc.

Technical Forecast

USD/JPY still hovers in neutral 77.50 regions. However, lifting above 76.50 levels indicates sign of staying firm otherwise breaking beneath may gather new bearish strength. From technical outlook, we reckon the market may climb gradually back to 80.00 regions in near future amid expectation of another stimulus.

EUR/USD declined sharply on Friday while reacting to news of probable defaults in Greece again. The market dropped beneath the ultimate 1.4830 supports. Only turning above this benchmark will effectively constitute new bulls and drive up to 1.4100 as corrections. However, we foresee possibility to test lower at 1.3550 in coming week before the rebound begins!

GBP/USD fell on Friday below 1.5910 and reached strong supports at 1.5844 regions. We foresee the coming week will stage a rebound and reverse up to 1.6100 as our first target. Further meltdown may hit the 1.5780 supports if the market cannot be held at 1.5844 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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