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Currency Market Observations – 6 Jun 2011

A guest post written by DAR Wong

The US Payrolls Reduce With Rising Unemployment

Fundamental Outlook

The US payrolls rose in slower pace in May. Consumer confidence has been slackened and housing slump still persists in American economy. Eurozone is focused at Greek debts as centre of attraction for bailout as Euro currency recovers to positive news. The sluggish UK economy is under impact of weaker consumer confidence and housing plunge.

The US Conference Board’s index for consumer confidence slid to 60.8 from a revised 66 reading in April, showing the worst data in past 6 months. The factory index reflected by Institute for Supply Management dropped more than projected to 53.5 in May from prior month 60.4.

Another report by S&P/Case-Shiller reported home prices plunged 5.1 percent in the first quarter from the same time in 2010. On month to month basis, housing price index fell 3.6 percent in March from a year ago, the biggest year-over-year decline since November 2009. Jobless claims was down 6,000 to 422,000 in the week ended May 28 but lesser than forecast.

On Friday release, the US payrolls increased below expectation by 54,000 in May, after a revised 232,000 gain in April that was smaller than initially estimated. Unemployment rate rose to 9.1 percent and underscoring weak recovery. Dollar index plunged upon this data report and spiked reversal up in commodity prices.

Japan’s factory output rose 1 percent in April, only at half the median estimate and unemployment rose to 4.7 percent from 4.6 percent in March. Prime Minister survived a no-confidence vote and market analysts claimed possible “V” recovery to be seen in Japan’s economy soon.

German economy remains as strongest in Eurozone despite other sovereign debts erode investors’ confidence. Unemployment fell in May for a consecutive twenty-third months due to expansion in exports and growing business confidence. The jobless rate declined to 7 percent.

After long discussion among European policymakers, European Union and International Monetary Fund officials completed a rescue plan worth EUR78 billion (USD 113 billion) for Greek bailout on Friday by ordering asset sales and austerity measures.

In UK economy, a report from Hometrack Ltd. showed British house prices dropped 0.1 percent in May following demands contraction. Obviously, weaker consumer confidence in recent months had deterred property buyers while analysts expect the next rate hike will be seen probably in August only. Thus, pound is still weak in market trend.

Technical Forecast

USD/JPY moved in tight range from top 81.77 and down to 80.05. Market dropped on Friday after weak US jobs data and reaching the support levels that we predicted last week. We reckon the market is still in fatigue though the direction is unclear. The next support at 79.50 regions may be tested unless the trend reverses above 81.77.

EUR/USD has reached our price target above 1.4600 regions forecast last week. We expect the market to slow down and will begin to consolidate soon with bottom supports to be tested at 1.4450 levels. The current tops at 1.4650 regions should guard well against the bulls with new selling interest emerging in early week. Abandon your-view is the market penetrates above 1.4700 levels!

GBP/USD is bearish in coming week though the market may test the topside resistance 1.6500 regions. Traders are advised to pick short entry from top regions in early week as suggested and aim for bottoms around 1.6280 levels. We predict the mid term trend over coming months will be weak unless the bulls break above 1.6550 resistances.

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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