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Currency Market Observations – 17 Oct 2011

A guest post written by DAR Wong

The DJIA markets surged amid stronger US retail sales

Fundamental Outlook

The US retail sales showed strong recovery in September that lifted the DJIA markets on Friday. European Union (EU) and International Monetary Fund (IMF) officials are working to resolve the euro debt which activated much buying interest in stocks recovery. UK economy reached highest 15-year record at 8.1 percent in 3 months through August ad put British Government on hard pressure to stimulate growth.

The US jobless claims benefits decreased 1,000 in the week ended 8 October to 404,000 and showed little change. The national trade deficit registered at USD45.6 billion in August, indicating stagnancy from previous month. The retail sales for September rose by most in 7 months as purchase grew 1.1 percent, exceeding the median forecast.

On Friday, the US government reported its annual budget deficit exceeded USD1 trillion for a third consecutive fiscal year, paving a tough journey to get nods for implement new proposals. The shortfall recorded USD1.3 trillion in 2011 and up from USD1.29 trillion in prior year.

Japan’s machinery orders rebounded in August by 11 percent on demands, the fastest increase in a year. Recent Tankan’s quarterly report showed companies plan to increase capital spending by 3 percent in the year ending March 2012, lesser than 4.3 percent forecast. Strong yen still acts as major threats to exports and economic recovery.

European leaders are hot on heels to halt further declines by trying to stem out crisis spread. As they plan to pass a new bailout package worth EUR8 billion (USD11 billion) in November, Greek bondholders are preparing to lose as much as 50 percent of their investments. Spain had its credit rating cut one level by Standard & Poor’s as threats of defaults rise.

The National Institute of Economic and Social Research said UK GDP grew 0.5 percent in the three months through September at weak recovery. The British Chambers of Commerce commented the recent bond purchase program worth GBP75 billion might be insufficient to salvage the slowdown.

UK unemployment rate rose to the highest record by 8.1 percent in since 1996 in the three months through August, instigating pessimism among consumers. The property company – Acadametrics Ltd. and LSL Property Services Plc said the average price of a home in England and Wales fell 0.3 percent in September to GBP218,650 (USD343,000), the lowest since June while undermined by euro debt crisis.

Technical Forecast

USD/JPY is hopelessly loitering between 76.00 – 78.00 regions though the actual range reduces to smaller scale inside this band. There is no way to forecast the trend anymore as technical trend has come to a standstill. Investors are losing confidence and interest in market while waiting for new fundamental factors to lead it out beyond!

EUR/USD challenged our predicted high 1.3700 last week and escalated to 1.3894. We reckon a strong resistance will emerge at 1.3950 levels in coming week but the market will probably thread sideways from 1.3700 – 1.3950 regions. The market has been elevated by exciting news of European leaders committing to stem out debt crisis but may not last long once the eagerness wanes without real performance.

GBP/USD could be reaching the top now with some expectation to form antennae spikes in early part of coming week. We reckon the resistance will be tough around 1.5870 while support is identified at 1.5700 regions. We prefer to hunt for new short trades in mid week by observing the top reversal patterns. Abandon your short-view if the market settles 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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