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Currency Market Observations – 27 Jun 2011

A guest post written by DAR Wong

The European Union agrees to bailout Greece

Fundamental Outlook

The US Federal Open Market Committee held last week showed no clear direction of cutting the budgets neither implementing another Quantitative Policy. Commodity prices declined while USD index turned into consolidation. The week’s attention was focused on Greek bailout as the Government worked on austerity measures in order to receive loans from European Union.

The US existing home sales fell 3.8 percent to a 4.81 million annual pace in May though in-line with median forecast. New homes sales was down 2.1 percent to a 319,000 annual pace, indicating struggles to maintain recovery momentum. Another separate report on US jobless claims increased 9,000 in the week ended June 18 to 429,000. Job seekers were concerned of tight labor markets as unemployment chalked up 9.1 percent in May.

American durable goods rose 1.9 percent in May and more than forecast compared to 2.7 percent April drop. GDP grew at a 1.9 percent pace in the first quarter, matching the forecast and favored by policymakers as signs of initial recovery.

While investors have been waiting for FED governors to act upon the expiry of last QE in June, Chairman Ben S. Bernanke only claimed assured of maintaining stimulus to revive economy but no definite details were given. Gold and Crude oil prices fell after FOMC meeting in mid week.

Japanese yen rallied to 0.00 regions that were previously intervened by Group of Seven in March. Market traders are forecasting more gains due to weak recovery after the 311 national crises. However, as Japan falls into its third recession in a decade, majority politicians and policymakers are now focusing in Eurozone debt issues as more urgent matter beside US economic slowdown and uprisings in the Middle East.

In Greece, Prime Minister Papandreou won parliamentary votes to implement an austerity measure worth EUR78 billion (USD112 billion). The action has eventually gained approval and bailout package was endorsed by officials from the European Union and the International Monetary Fund.

European Central Bank President Jean-Claude Trichet said the risk of financial stability in the Eurozone may be over-exposed and will threaten to infect more banks.

Technical Forecast

USD/JPY was well supported at 80.00 levels last week while the market moved in little range. We expect not much price movement will occur until we see a fundamental change in Japan’s policymakers. Investors are steering away from this market for fear of unexpected intervention by central bank. Topside resistance remains at 82.00 regions.

EUR/USD traded sideways with little strength though European Union agrees to bailout Greece. We expect the market to consolidate for another week between 1.4050 – 1.4450 regions until the traders are convinced to find its new trend breakout. We suggest traders to trade from extreme ends while using aforementioned levels as risk controls.

GBP/USD is ready to plunge further if the bears break beneath 1.5930 this week. Otherwise, the trend may reverse to 1.6100 regions as small corrections amid a long-termed downplay. On breaking the 1.5930 supports, we target to reach 1.5750 regions this week before we expect some short-coverings.

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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