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Cyprus Resolves in Debt Bailout

A guest post written by DAR Wong

Currency Market Observations – 1 April 2013

Fundamental Outlook

The US economy recovers steadily as Gross Domestic Product for Q4 gained traction. Cyprus reopens the bank in orderly situation after the bailout has been approved by European Union with closure of national second largest bank. Fears in Eurozone subside as Euro currency slows down in devaluation and also due to short-covering ahead of long weekend.

The US durable goods climbed more than forecast in February as the orders rose 5.7 percent after a 3.8 percent drop in the prior month. New home sales fell 4.6 percent to a 411,000 annualized pace but still below expectation, following a 431,000 rate in January.

Another report on the index of pending American home sales declined 0.4 percent to 104.8 in February, but holding at second-highest level since April 2010, after a revised 3.8 percent increase in prior month. Weekly applications for unemployment claims rose 16,000 to 357,000 in the week ended 23 March.

The growth measured by Gross Domestic Product (GDP) for Q4 gained 0.4 percent annual rate, up from a 0.1 percent prior estimate and following a 3.1 percent gain in the third quarter. Consumer spending rose 0.7 percent in February after following 0.4 percent advance in January. Dollar has been remaining strong amid steadfast recovery in US economy.

Last week, European governments and the International Monetary Fund agreed to lend Cyprus EUR10 billion (USD13 billion) if the country is willing to liquidate its second-largest bank – the Laiki Bank and consolidates the assets into the national largest bank – Bank of Cyprus. Finally, Cypriot government dodges a disorderly sovereign default by bowing to demands from creditors. An estimated EUR5 Billion has been self-raised by imposing tax levy on depositors in addition to the loan bailout.

The UK services rose 0.3 percent in January after they dropped 0.4 percent in December. Market activity was in low liquidity mainly due to staying sideways to observe Cyprus debt situation and short week ahead of Good Friday.

Asia stocks were unstable due to viral fears from Euro plunge amid Cyprus debt. But after mid week, regional bourses stabilized and climbed steadily while entailing new historical high closing in DJIA at 14,557. Bullish sentiments are expected to emerge in coming week among Asia equity markets.

Technical Forecast

USD/JPY has been trading in small range from 93.50 – 95.00 during last week. Technically, the market is still consolidating and we expect a reversal uptrend once it penetrates above 95.00 levels. Observe the Japan’s government as policymakers said in January they will implement cash stimulus injection in April. Support continues to stay resilient at 93.00 – 935.0 areas.

EUR/USD made 17-week low last week at 1.2749 and closed slightly higher for weekend. This week, we reckon some short-covering may emerge with selling pressure acting from 1.3000 regions. Breaking the 1.2750 supports might draw down lower to test 1.2650 levels.

GBP/USD has slight profit-taking from selling activities but trend still remains strong though. This week, we reckon the market may move sideways but prone to buying sentiment. Support will act resilient at 1.4970 – 1.5000 regions while testing the 1.5300 topside areas could be possible before fizzling out.

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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