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Currency Market Observations – 3 Oct 2011

A guest post written by DAR Wong

The world economy remains fragile amid uncertainty

Fundamental Outlook

The US economy remains unstable in slow recovery while housing slump persists. Japan’s Government plans to revive the growth by increasing the tax revenue. Eurozone is affected by slowdown in Germany and rising threat of debt crisis.

The US new home sales declined in August to a 6-month low by 2.3 percent to 295,000 annual rates. Pending home sales also slid 1.2 percent after followed a 1.3 percent drop in July. The Conference Board’s sentiment index that measures consumer confidence increased to 45.4 from a revised 45.2 reading in August and indicated stagnancy. The S&P/Case-Shiller index of property values in 20 cities fell 4.1 percent in July from a year ago.

The demand for US capital goods climbed in August by the most in past 3 months, making 1.1 percent gain while durable goods shed 0.1 percent, less than forecast. The US economy grew at a 1.3 percent annual rate in the second quarter, helped by exports and spending on services.

Claims for jobless benefits dropped by 37,000 in the week ended 24 September to 391,000, the fewest since April. Consumer spending slowed in August when it rose 0.2 percent after a 0.7 percent increase the prior month. Personal earnings dropped 0.1 percent. The Institute for Supply Management-Chicago Inc. said its business index rose to 60.4 this month from 56.5 in August.

Japan’s factory output increased 0.8 percent in August, showing fatigue amid strong yen. Japan plans to spend a total of JPY19 trillion (USD247 billion) over 5 years for economic reconstruction after the 311 tsunami disaster. Bank of Japan vows to remain its interest rates at low levels to stimulate growth.

German unemployment declined more than median forecast in September. The number of laid-off workers was seasonally adjusted by down 26,000 to 2.92 million. Last record for unemployment was 6.9 percent in August. Retail sales, after adjusted for inflation and seasonal swings, slumped 2.9 in August vs. 0.3 percent gain in prior month. Debt crisis is threatening Europe into recession with German’s economy spiraling sluggishness.

Not much news was reported on Greece and other European debt issue as media tried to play down the panic sentiments among investors. However, market analysts still remain observant in the resolution towards October as Greece may face larger debt maturity.

Technical Forecast

USD/JPY has been trading at 76.10 levels while struggling to find supports there. The market lifted above 77.00 benchmarks on last Friday and took off some fear from investors. We feel uncertain of the trend now as global investors are expecting the Government to revive the growth. However, the next strong resistance lies at 77.85 while downside is still constricted to 76.00 – 76.50 supports.

EUR/USD traded sideways from 1.3362 to 1.3690 regions last week. We expect the market to find strong support at 1.3400 to 1.3420 regions that surfaced on Friday. We still remain our forecast to aim at 1.3950 levels in 2 weeks’ time unless the bear break beneath 1.3400 benchmarks.

GBP/USD has found strong support at 1.5540 which failure to hold may re-test downside target at 1.5400 levels. However, we are looking at strong resistances to act unto R1- 1.5750 and R2- 1.5870 regions in coming week. Trade cautiously as market may swing wild and mislead players.

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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