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Currency Market Observations – 31 Oct 2011

A guest post written by DAR Wong

Euro recovers due to Brussels meeting

Fundamental Outlook

The US housing markets shows mixed sentiments in new and pending sales data. The euro strengthens as European leaders agree to increase the bailout package to stem out debt crisis. British pound follows in bullish trend but analysts doubt the recent bonds purchase program is sufficient to support recovery.

The US consumer confidence unexpectedly sank and home prices stagnated. New York-based Conference Board’s household sentiment index slumped to 39.8 in October, worst data since March 2009. The S&P/Case-Shiller reported property values in 20 cities were little changed in August but down 3.8 percent from a year ago.

The American new home sales rose in September by climbing 5.7 percent to a 313,000 annual pace, more than forecast. But pending home sales slid 4.6 percent. Another report on durable goods, excluding transportation equipment, climbed 1.7 percent in September and highest since March. Initial jobless claims dropped 2,000 to 402,000 in the week ended 22 October.

The euro jumped higher as European leaders agreed in Brussels meeting to resolve debt crisis with bailout package worth EUR1 trillion. However, bondholders were enticed to accept 50 percent write-downs in Greek bonds. From the outcome of meeting, European officials are exploring to loan funds through International Monetary Fund and China in order to expand the rescue funds.

The UK consumer confidence fell to its lowest level in October since February 2009. The index of sentiment declined 2 points from September to minus 32, showing weakness in spending. Since the austerity cut measures, market analysts are still showing concerned of rising unemployment amid low consumer spending. Many voiced for further stimulus as the recent bonds purchase program of raising additional GBP75 billion might be insufficient.

Technical Forecast

USD/JPY has dipped beneath 76.00 with strong yen rising to historical high against dollar. However, market has been inching in small range in daily price movements. Traders may wish to consider in abandoning their ong-views if the market breaks below 75.50 levels while the global investors are expecting the Japan’s Government to intervene soon. 

EUR/USD pulled up and crossed the EMA200 benchmarks above 1.3960 after the positive news emerged from Euro leaders during mid-week. The market reached 1.4247 highs and began to consolidate sideways. This week, we expect the range to be trading from 1.4090 – 1.4300 regions. Secondary support may test 1.4020 levels if the higher one gives way!

GBP/USD traded above 1.6100 levels last week and closed at this to price band. This week, we foresee the strong support will emerge at 1.6000 – 1.6040 regions while market moves in sideways trend. On hind sight, the market may reach up new high at 1.6200 regions before the bulls turn weak.

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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