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Currency Market Observations – 5 Sep 2011

A guest post written by DAR Wong

The DJIA plunged again after stagnated U.S. job data

Fundamental Outlook

The DJIA was down 253 points on Friday after U.S. non-farm payroll showed stagnation and jobless rate remained at 9.1 percent. In Japan, investors expect another intervention in rising yen by Bank of Japan (BOJ) after 3 months of unsuccessful stimuli. Market analysts expect the European Central Bank (ECB) to reverse back to lower rates for stimulating economy growth. U.K. is having weaker outlook and pessimism among consumers.

The U.S. pending sale of previously owned homes fell in July by 1.3 percent after followed 2.4 percent gain the previous month. Consumer confidence measured by Conference Board’s index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July.

The S&P/Case-Shiller index of property values in 20 cities fell 4.5 percent from June 2010 on annual basis and could be stabilizing after 4.6 percent annual decline in May. Another report from Institute for Supply Management’s factory index fell to 50.6 last month from 50.9 in July. Jobless claims fell 12,000 to 409,000 in the week ended 27 Aug.

The monthly data on U.S. non-farm payroll for August remained unchanged and put more pressures on Government to revive stagnated economy. Unemployment rate stayed at 9.1 percent.

Japan’s unemployment rate rose to 4.7 percent in July and payrolls fell by 40,000 from a month earlier. The weak figure is caused by rising yen and economic slowdown. Japan’s industrial production rose less than expected when factory output increased 0.6 percent in July from June.

An index of executive and consumer sentiment in Eurozone fell to 98.3 from a revised 103 in July. The August data is the lowest since May 2010 and risks recession. Policymakers stressed of low rates to survive debt crisis in 2012.

The British business confidence plunged in August. The index for this outlook dropped sharply to minus 3 from 19 in July. Another report by Markit Economics and the Chartered Institute of Purchasing and Supply on manufacturing fell to 49, the lowest in 26 months, from 49.4 in July. The Nationwide Building Society reported the average cost of a U.K. home dropped 0.6 percent to GBP165,914 (USD269,800) from July, making the August data lowest in past 10 months.

Technical Forecast

USD/JPY remains stagnated while sitting on 76.50 supports. The market is expecting another intervention in coming week after the yen has risen for 3 months since the last one occurred in May. We foresee strong supports at 76.50 regions which may rebound back to 80.00 based on fundamental news. Abandon your long-view if the market violates the aforementioned supports.

EUR/USD declined last week and laid support at 1.4200 regions. We reckon the trend will reverse up in coming week and begin to consolidate. Our target aims at 1.4450 levels over 1 week from natural correction. Abandon your long-view if the market sinks beneath 1.4160 levels.

GBP/USD sits nicely on EMA200 line at 1.6131 and sets to rebound soon. According to our technical study, the market may re-test the 1.6150 bottoms in early week before going up. We expect a consolidation to occur in 1 -2 weeks time that might re-visit 1.6400 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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