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Dow Jones Corrects amid Steady Economy

A guest post written by DAR Wong

Currency Market Observations – 19 May 2014

Fundamental Outlook

The US economy posts better traction in recovery while Dow Jones benchmarks retreat on expected timely withdrawal of stimulus. Japan gains in economic growth that result in Yen rise. German posts stronger growth despite the overall 18 Euro nations slowdown momentum in growth. UK stays firm in recovering employment markets.

The US posted smaller budget surplus in April from a year ago. Revenue exceeded spending by USD106.9 billion versus last year’s same month at USD112.9 billion surplus. Another report on producer prices rose 0.6 percent in April that was highest since September 2012. Core prices, excluding volatile food and fuel, rose 0.5 percent after rising 0.6 percent in March.

American weekly jobless claims dropped 24,000 to 297,000 in the week ended May 10, lowest in 7-years record. The consumer price index increased 0.3 percent after rising 0.2 percent in March.

Japan’s current-account surplus shrank last fiscal year to the smallest on record with JPY789.9 billion surplus (USD7.74 billion) in the year ended March. Economy grew at an annualized 5.9 percent in Q1 before the sale tax rise and at fastest pace since 2011. Consumer spending increased 2.1 percent on quarter, while business investment rose 4.9 percent.

German investor confidence fell for a fifth month in May due to slowing inflation. ZEW research center reports its index slid to 33.1 from 43.2 in April. Another separate report on preliminary report on German economic growth for Q1 was reported at 0.8 percent gains.

Among the 18 nations in Eurozone, economic growth rose 0.2 percent in Q1 and lost traction, after the previous quarter was revised down to 0.2 percent from preliminary 0.3 percent. Last week, European Central Bank (ECB) President Draghi claimed willingness to inject stimulus in coming June if economic recovery stalls.

However, trade balance in Eurozone recorded EUR15.2 billion in April and above expectation. Euro currency bounced from 1.3650 bottoms after reacting to better surplus.

The British claimant for job benefits was down 25,100 in the month of April while unemployment stayed at 6.8 percent. Pound poised for staying firm before weekend above 1.6800 levels after hitting intra-week low at 1.6754 levels.

Technical Forecast

USD/JPY traded lower towards the weekend while hovering at 101.30 supports. This week, we will be observing the breaking below 101.30 supports for the bears to sink lower at 100.70 regions. On the other hand, rebounding of the trend will probably go back up to 103.00 areas in case Yen weakens. Only fundamental news could decide the direction since the market has been trading inside 101.30 – 103.00 ranges for many weeks.

EUR/USD has been under selling pressure after ECB President commented Euro being overpriced and probably will take stimulus action in June. Technically, we reckon that bargain-hunting will emerge at 1.3600 – 1.3650 regions if the trend recedes further. Topside resistance will stay at 1.3800 – 1.3830 regions in case short-covering appears.

GBP/USD has gradually turned weak in the prices while hovers at 1.6800 levels. This week, we forecast the market will be resisted at 1.6900 areas in case of technical recovery. However, the trend is prone to decline further in our prediction with supports rising at S1 – 1.6600 and S2 – 1.6450 regions.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at dar@pwforex.com

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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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