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Currency Market Observations – 29 Aug 2011

A guest post written by DAR Wong

Bernanke assures of recovery in Wyoming conference

Fundamental Outlook

The DJIA recovered on Friday after FED Governor Bernanke ensured of more tools to stimulate recovery but no details were mentioned. The U.S. growth contracted in less than estimate in Q2 2011. Japan implements a funding program to help exporters fight rising yen while has been countered by Bernanke’s remarks. Moody’s downgraded Japan’s credit rating last week.

The sales of new U.S. homes declined more than projected in July. Purchase fell 0.7 percent to 298,000 annual pace from prior month of 300,000 rate. Orders for durable goods rose 4 percent, the most in 4 months, after falling a revised 1.3 percent in June. Another separate report showed home prices in the U.S. increased 0.9 percent in June from the prior month, the biggest gain since September 2005, according to the Federal Housing Finance Agency.

The U.S. jobless claims climbed by 5,000 to 417,000 in the week ended Aug. 20. The U.S. economy expanded less than previously estimated in the second quarter, underscoring weakness. GDP climbed at 1 percent annual rate from April through June, down from previous estimate 1.3 percent. FED Chairman Ben S. Bernanke said central bank still has tools to revitalise economy but kept mum on details.

Moody’s cut Japan’s credit rating down 1 notch to Aa3, with a stable outlook. The public debt is projected to reach 219 percent of GDP in 2012 as stated by OECD. Following that, Finance Ministry unveiled a USD100 billion effort to help companies cope with surging yen and was applauded by central bank on this 1-year funding program.

Japan’s core consumer prices unexpectedly rose in July with the index excluding fresh food up 0.1 percent from a year earlier. Prime Minister Naoto Kan said he will resign after the parliament passes two pieces of legislation on subsidy in renewable energy and sales of deficit bonds.

German investors’ confidence measured by ZEW Center for European Economic Research in Mannheim said its index plunged to minus 37.6 from minus 15.1 in July. The August figure is the lowest since December 2008 and the biggest drop since July 2006. Another separate report on German business confidence measured by Ifo institute in Munich reported decline to 108.7 in August from 112.9 in July.

U.K. consumer confidence measured by index of sentiment declined 2 points to 49 from June, the lowest reading since April. The Britain’s economic growth slowed in the second quarter as manufacturing shrank and services showed signs of losing momentum. GDP rose 0.2 percent from the first quarter, the same as estimated a month ago. Output rose 0.7 percent from a year earlier. A separate report showed services fell 0.1 percent in June, the final month of the quarter.

Technical Forecast

USD/JPY declined on Friday after Bernanke’s remarks to ensure recovery. The market sat tight at 76.50 levels after falling from last week’s high 77.69. This week, we expect the trend to spring up again if the support 76.50 can stay firm and intact. Breaking the R1 – 77.70 may attempt R2 – 80.00 in near future.

EUR/USD has been threading sideways while subject to U.S. dollar strength. The market closed on Friday at 1.4495 while moving into the resistance 1.4500 – 1.4550 territories. The market sentiment is very uncertain now due to varying fundamentals. Technically speaking, breaking above the aforementioned resistance mat attempt 1.4700 levels while driving below 1.4320 will confirm new bearish trend.

GBP/USD rebound on Friday day-candle from low 1.6207. We foresee the market will thread sideways between 1.6200 – 1.6500 regions in coming week while picking entry near extreme end could be best option. No sign of extend yet until we see the trend violates beyond any of the ultimate ends as mentioned above.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

Wong is the founder and Principal Consultant of PWForex.com 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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