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Dow Jones Falls in Correction

A guest post written by DAR Wong

Currency Market Observations – 4 August 2014

Fundamental Outlook

The US housing recovery still stays sluggish though forecast for economic confidence lift higher. Gross Domestic Product (GDP) improves better and inflation reaches policymakers’ expectation at 2 percent. Dow Jones benchmarks begin to correct after Greenspan’s comment. Japan slows down in retail sales and industrial output while European regions slip into manufacturing declines.

The US pending home sales declined 1.1 percent in June after rising 6 percent in May, signaling struggle in housing demand. The Conference Board’s index for forecasting economic confidence in coming 6 months advanced to 90.9, the highest since October 2007, at 7-year high record amid increasing job market.

The national growth in American GDP rose 4 percent annualized rate from April through June, exceeding forecast. Another separate data on annualized GDP inflation reached 2.0 percent in Q2 and satisfied FED’s benchmark. Last Wednesday, policymakers tapered monthly bond buying to USD25 billion in their sixth consecutive stimulus cut and expecting to end all withdrawal in October.

The US jobless claims in the week ended 26 July climbed to 302,000, in line with the median forecast and better from revised 279,000 in prior week. Non-farm payroll in July advanced 209,000 after followed revised 298,000 increase in previous month.

American unemployment rate climbed to 6.2 percent vs. previous month 6.1 percent. Another separate report shows Institute for Supply Management’s index increased to 57.1, the highest since April 2011, from 55.3 a month earlier.

Dow Jones benchmarks slumped 463 points throughout whole week following comments from ex-FED’s chief Greenspan that stocks have long surpassed correction phase. Fear of selling was also partly caused by pressure from US and European Union on Russia’s sanction targeting at restriction in banking, energy and defense industries.

Japan retail sale dropped 0.6 percent in June from a year ago, indicating the effect of sales tax rise has begun to weigh down on market spending. However, household spending on annual basis was minus 3.0 percent in June and performed better than minus 8.0 percent in prior month.

Another report on Japan’s unemployment shows 3.7 percent in June and worst than expectation. Industrial output fell the most since the March 2011 earthquake by slid 3.3 percent in June and more than twice the forecast.

German inflation slowed to 0.8 percent in July from 1 percent in June. German retail sale rose 1.3 percent in June and better than expected. IN the Euro area, consumer prices gained 0.4 percent in July on annual basis while core consumer prices were in line with expectation at 0.8 percent from a year ago.

GfK consumer confidence in Britain was unexpectedly down at minus 2 in July month against positive 1 in June. Nationwide Building Society also reports the HPI at 0.1 percent gains for July after rising 1.0 percent in prior month. Both data showed stagnation.

Amid declines of manufacturing PMI in Europe, British factory index also slipped to 55.4 from a revised 57.2 in June. Manufacturing has begun to lose momentum in July for the European countries.

Technical Forecast

USD/JPY has no new development in price movements. The market has been threading from 101.00 – 103.00 ranges for months. Last week, the trend rose to 103.00 resistances and closed 102.61 levels. This week, we reckon the prices will wind down and settle at 102.00 areas for consolidation. Abandon your short-view in case it pierces above 103.00 resistances.

EUR/USD bottomed out at 1.3367 last week after sliding for 1 month. This week, we expect the market will make short-covering and test 1.3550 resistances. The support area at 1.3350 regions should hold the market well because we predict bargain-hunting is heavily grounded from 1.3300 levels upwards!

GBP/USD closed at 1.6818 on Friday and might have ended the bullish trend. This week, we forecast the selling pressure will be resilient at 1.7000 areas in case consolidation emerges. However, breaking below 1.6800 supports will continue to drive lower at 1.6730 levels where we believe bargain-hunting will arise. Trade cautiously as the market may be tricky in coming weeks.

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

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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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