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DJIA Higher On Nearer to Greece Bailout Deal

A guest post written by DAR Wong

Currency Market Observations – 20 Feb 2012

Fundamental Outlook

The US economy is better off with improvements in all data. Europe is plagued with fear of Greek debt virus while leaders are working to grant the next bailout package by swapping debt instruments. UK adds another GBP50 billion to prevent economic impact from possible Greek default in March.

The US retail sales rose 0.4 percent in January but slowed down in automobile sales. Housing starts rose 1.5 percent to a 699,000 annual rate from December 689,000 pace. Jobless claims fell to 4-year low by dropping 13,000 in the week ended 11 February to 348,000.

The US index of leading indicators rose in January by 0.4 percent that marks outlook growth in coming 3-6 months ahead. Consumer prices that read the cost of living climbed less than forecast at 0.2 percent growth.

China, as the world’s second-largest economy, reduced its US debt securities by USD31.9 billion from November, or 2.8 percent, to USD1.11 trillion. Central bank governor, Zhou Xiaochuan of PBOC, said China may support Europe through channels such as the International Monetary Fund, the European Financial Stability Facility and the European Stability Mechanism.

Moody’s rating agency downgraded Italy, Malta, Portugal, Slovakia, Slovenia and Spain while three other countries including Austria, France and the United Kingdom are maintained in current AAA ratings but outlook changed to “negative”.

Greece has successfully obtained deeper budget cuts from own government to exchange for a second bailout worth EUR130 billion (USD170 billion). ECB is swapping its Greek bonds for new ones to ensure longer term of repayment and debt-structuring. The move is expected to be completed by Monday and target to slice EUR100 billion off Greek debt.

The UK retail sales unexpectedly rose 0.9 percent for a second month in January, adding to signs the economy may strengthen in Q1. Bank of England increased its bond-purchase program by GBP50 billion (USD79 billion) to 325 billion pounds in February to cushion from debt crisis in euro area and also steer away from recession.

Technical Forecast

USD/JPY has been bullish last week and closed at 79.54 on Friday. This is an ambiguous level as the market may climb higher to reach for 80.50 as next target. However, beware if the trend falls below 78.80 in case the bulls fizzle out.

EUR/USD took a dip below 1.3000 last week and rebound. This week, we reckon the market will consolidate from 1.3050 – 1.3280 regions but expecting some wild swings due to euro news on Greek debt. Abandon your view if the trend closes beyond either side of the extreme levels mentioned above.

GBP/USD touched the bottom 1.5644 and rose into corrective trend above 1.5800 benchmarks. This week, we foresee the market will be resisted at 1.5850 – 1.5900 regions while the down move may begin after midweek. We expect to see the trend testing the 1.5650 regions again if there is no further news that drive the market higher. Abandon your short-view if the market penetrates above 1.5900 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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