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Dow Jones Hits New High

A guest post written by DAR Wong

Currency Market Observations – 25 November 2013

Fundamental Outlook

The U.S. net long-term assets rise in foreign holdings and lifts Dow Jones Industrial Average (DJIA) Index to historical close above 16,000 levels. Investors remain cautious in inflation check amid concerns of tapering in early 2014. Japanese Yen devalues as USD rises from the diversification from their difference in monetary policies. U.K. economic data show consistent improvements in narrowing trade deficits and factory output, thus supporting Pound on elevation.

The U.S. net long-term portfolio investment inflow was USD25.5 billion in September after a revised USD9.8 billion outflow in previous month. China raises the holdings of U.S. treasuries by 2 percent and Japan increased 2.5 percent, bringing positive sentiments in market to continue invest in American assets.

The Federal Reserve (FED) Chairman Ben S. Bernanke reiterates low interest rates to ensure smooth recovery. However, the minutes of last FOMC meetings reveal policymakers may plan to reduce their USD85 billion monthly bond-purchase program in coming months. On the other hand, World Bank President Jim Yong Kim advises FED officials to adopt slow exit of its monetary stimulus and urges emerging markets to prepare probably higher global interest rates.

The U.S. consumer prices receded minus 0.1 percent in October after making 0.2 percent gain in prior month. Core prices remained unchanged at 0.1 percent. Another report on producer prices dropped 0.2 percent after 0.1 percent decline in September. Core prices were up 0.2 percent and above median forecast. Gold prices fell retrospective to slow inflation rate.

Retail sales climbed 0.4 percent, the most in past 3 months after no change in September. Jobless claims in the week ended 16 November dropped by 21,000 to 323,000 from a revised 344,000 the previous week. DJIA made its first historical close above 16,000 levels as investors poured in more funds into stock mutual funds.

Japan posted biggest trade deficit in October with JPY1.09 trillion yen (USD10.9 billion) shortfall running for consecutive 16 months. Imported fuel soared in the wake of the nuclear industry’s shutdown. Yen weakened past 101 per dollar for the first time since July as funds flight into short-term U.S. assets like stocks and Dollar.

German ZEW Economic sentiment measured investors’ confidence in October to be same as median forecast. Reading was reported at 54.6 compared to 52.8 in prior month. Another report on business confidence by German Ifo institute increased to 109.3 in November from 107.4 in October, signaling highest reading in past 1-1/2 years. Euro currency pulled up ahead of weekend by positive outlook in German data.

Britain’s budget deficits narrowed in October from a year earlier. Net borrowing excluding temporary support for banks was GBP8.1 billion (USD13 billion) compared with GBP8.2 billion a year earlier. New orders in U.K. factories reported by CBI’s manufacturing gauge climbed to 11 from minus 4 in October, the highest since March 1995.

Bank of England officials say they will keep policy unchanged this month and keep record-low interest rate even if the unemployment falls to 7 percent.

Technical Forecast

USD/JPY climbed higher above 100.00 benchmarks due to rising Dollar. This week, we reckon the market may test 101.50 resistances and piercing above here could drive higher to 103.00 targets. Technically, support has emerged at 99.50 regions and will see bargain-hunting in case the trend draws down for correction.

EUR/USD is consolidating from 1.3400 – 1.3580 ranges with no clue in direction. This week, we expect swinging sentiment to arise in market while buying interest will be prone to be seen. However, beware of the bulls if they break above 1.3580 resistances as this will probably lead to 1.3650 regions.

GBP/USD resumed bullish trend last week after sequential economic data showed recovery signals. The market is now supported at 1.6100 levels and probably will climb up to test 1.6250 regions to form triple-top formation. However, it is difficult to predict if the trend could ascend to 1.6370 targets or might begin to turn down if the resistance at 1.6250 levels remains strong.

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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