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Euro leaders reach key deal to bailout Spain

A guest post written by DAR Wong

Currency Market Observations – 2 July 2012

Fundamental Outlook

The US economy remains flamboyant with uneven recovery with improvement in housing demands amid struggling job markets. Japan’s yen assets rise to record holding among offshore banks as safe haven from euro debt crisis. European leaders reach key decision to bailout Spain and other troubled banks that trigger the highest single day surge in 2012.

The US new home sales climbed to a 369,000 annual rate in May and rose 7.6 percent from the prior month, due to falling mortgage rates. The pending home sales climbed 5.9 percent after slumping 5.5 percent in April. Another report on home values in 20 cities by S&P/Case-Shiller showed the index dropped 1.9 percent from a year earlier at the month ended April, the smallest decrease since November 2010.

The Conference Board’s index that measures consumer confidence dropped for a fourth straight month to 62 after it was revised to 64.4 in April. Orders for durable goods in May rose 1.1 percent, the first increase since February.

The weekly jobless claims decreased by 6,000 to 386,000 in the week ended June 23. The US consumer spending remained unchanged in May after rising 0.2percent in April, indicating stagnated labor markets.

Japan’s retail sales advanced 3.6 percent in May from a year earlier and gained 0.7 percent from April. The GDP growth for Q1 grew an annualized 4.7 percent while supported by household spending. However, Japan posted biggest decline in industrial production for May by sliding 3.1 percent from April, the biggest decline since March 2011.

Another report showed Japan’s consumer prices excluding fresh food fell 0.1 percent in May from a year earlier. Foreign central banks increased holdings of Japanese yen assets as safe haven in deepening fear of euro debt crisis. The offshore assets rose 26 percent to 44 trillion yen (USD555 billion) in December 2011, the highest since 2002.

German retail sales, after adjusted for inflation and seasonal swings, dropped 0.3 percent in May versus 0.2 percent decline in prior month. Simultaneously, the unemployment rose after seasonally adjusted 7,000 to 2.88 million. As investors were worried of Germany slump, Chancellor Merkel conceded to key deals with other European leaders in loosening loans to borrowing nations and banks.

Bank of England (BOE) Governor Mervyn King said his vote for more stimuli this month reflected his worries on worsening global outlook. He expressed concerns on deepening debt crisis in European economies with more sovereign troubles.

Technical Forecast

USD/JPY travels inside the range from 79.00 – 80.50 regions while prone to weakness. This week, we reckon the trend will remain unchanged while it consolidates sideways in the same areas as mentioned. In our opinion, we foresee immediate support will emerge at 79.50 levels and might climb higher back to 80.50 levels.

EUR/USD surged on Friday after fundamental news from European leaders put bullish sentiment into market. The trend jumped more than 250 pips in a day that was biggest range this year. This week, we expect the market may climb higher in early week to 1.2820 regions before exhaustion. Support lies at 1.2550 areas.

GBP/USD reversed fiercely from 1.5500 areas on Friday and climbed about 200 pips. From technical outlook we reckon the trend may trade higher in early part of coming week to 1.5760 regions while supported at 1.5600 levels. The market is prone to consolidate in technical recovery with expected short-coverings from last week.

Dar Wong

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

Wong is the founder and Principal Consultant of PWForex.com 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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