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Currency Market Observations – 25 July 2011

Currency Market Observations – 25 July 2011

A guest post written by DAR Wong

The Eurozone finalizes on Greek bailout

Fundamental Outlook

The U.S. Congress is still in debate of raising the debt limits amid weak recovery. Japan’s exports decreased in June from a year ago but rose on monthly basis. European banks and officials pledged on Friday to provide combined funds EUR 54 billion in bailing out Greece. Last week, Gold prices reached new high at 1609.90 on high demands as safe haven.

The U.S. National Association of Home Builders/Wells Fargo sentiment index climbed to 15 this month, higher than 13 in June and showing rising confidence in homebuilders. Housing starts jumped more than forecast with 629,000 houses broke ground at an annual pace and up 15 percent from May. Another report showed existing home sales unexpectedly declined in June as purchases dropped 0.8 percent to a 4.77 million pace.

The American jobless claims increased 10,000 in the week ended 16 July to 418,000, slightly above forecast. Federal Reserve Bank of Philadelphia’s general economic index rose to 3.2 from minus 7.7 the prior month. In summary, no spectacular improvement is seen from economic data while global investors are still waiting for outcome of Congress decision in raising the debt limits by 2 Aug.

Japan’s exports decreased 1.6 percent in June from a year earlier but jumped 5.4 percent from May on a seasonally adjusted basis, showing fastest gain since February. Other data showed trade surplus unexpectedly increased by JPY 70.7 billion (USD898 million) in June due to higher imports.

German investor confidence measured by ZEW Center for European Economic Research in Mannheim said its index fell to minus 15.1 from minus 9 in June. Another report on business confidence in July measured by Ifo institute in Munich said the climate index declined to 112.9, the lowest in nine months. A report on 22 July showed Europe’s services and manufacturing industries grew at the slowest pace in almost two years this month.

European banks pledged to participate in a bond exchange and debt buyback program to bailout Greece. The combined funds will provide EUR 54 billion (USD77.6 billion) to Greece for first 3 years until mid-2014, then building up to a total of EUR 135 billion through 2020.

U.K. consumer confidence measured by the index of sentiment declined 4 points in June to 51 on monthly basis. Retail sales including fuel rose 0.7 percent from May, when they dropped a revised 1.3 percent. Austerity measures are still putting lid on slow recovery in British economy.

Technical Forecast

USD/JPY posts danger in dropping with rising yen amid slow economy. The market tested the previous support at 78.30 regions but may be opened to larger decline in coming week despite warning from Japan’s policymakers. We reckon a probability to see 77.00 levels in near future otherwise the bulls need to pull above 79.30 resistances to regain upward momentum.

EUR/USD will depend on outcome of solving euro debt crisis this week in deciding the market direction. From technical outlook, it is prone to drop to 1.4150 regions once the bears settle below 1.4350 on Monday. Topside resistance still sits at 1.4440 that breaking beyond there may attempt 1.4550 levels.

GBP/USD was bullish last week following European stock sentiments. This week, we reckon it may consolidate with strong support at 1.6200 levels unless the trend turns bearish very fast beneath this benchmark. Breaking above 1.6340 may surge to 1.6550 as next target if more positive news releases on solving debt crisis.

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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