Tweet this

Dealing Desk Hotline

(603)-2181 8848

European Central Bank Cuts Rate

A guest post written by DAR Wong

Currency Market Observations – 11 November 2013

Fundamental Outlook

The U.S. economy grows as jobless claims reduce continually. Policymakers prepare to sell USD80 billion worth of Treasury bonds before February and lifted DJIA at record close on last Wednesday. However, European Central Bank cuts refinance rate to 0.25 percent and perceived by market analysts as weakening sentiment. Asia equities fell on Friday as investors stayed cautious.

The U.S. Institute for Supply Management’s non-manufacturing index increased to 55.4 from 54.4 in September, and accelerated fastest in 16 years record. Another report on weekly jobless claims slid 9,000 to 336,000 in the week ended 2 November. The quarterly growth for Q3 gained 2.8 percent annualized rate after up 2.5 percent in the prior quarter.

The U.S. Treasury Department will sell USD10 billion to USD15 billion of its first floating-rate notes at end January. Policymakers also prepare to sell USD30 billion in three-year notes on 12 November, follow by USD24 billion in 10-year debt on 13 November and USD16 billion in 30-year bonds on 14 November, totaling USD70 billion. Traders anticipate stimulus to revive and support the economic recovery over year-end.

On Friday, American payroll for October weathered the government shutdown and rose 204,000 that is above median forecast. Unemployment was reported at 7.3 percent and slightly above last month data.

In Japan, no fundamental supports are seen from Bank of Japan after record monetary easing was pumped in since May. Japanese Yen is beginning to rise against Dollar as central bank fails to meet its inflation target at 2 percent. Market analysts expect stronger steps to be taken for reviving the economy.

In Europe, a composite index on services and manufacturing industries dipped to 51.9 from 52.2 in September. Another report on German factory output, adjusted for seasonal swings and inflation, jumped 3.3 percent from August, leading recovery in largest euro-economy.

On 7 November, European Central Bank unexpectedly cut its benchmark interest rate to a record low by 25 basis points in a bid to spur inflation. Now, the key refinance rate stands at 0.25 percent and suppressed Euro currency on selling pressure. Market traders interpret the policy action as weakening sentiment in crisis recovery after European and U.S. stocks fell towards weekend.

U.K. construction activity unexpectedly rose in October to 59.4 from prior month 58.9. The Confederation of British Industry raises the forecast for the British economy with 1.4 percent gains this year and 2.4 percent in 2014. Another separate report shows industrial production jumped 0.9 percent from August, when it fell 1.1 percent.

The index for services PMI in U.K. also climbed to 62.5 from 60.3 in September. The European Commission makes a separate forecast that British economy will grow 2.2 percent in 2014 while the 17 nation bloc will recover 1.1 percent next year.

Technical Forecast

USD/JPY pulled up on Friday after the payroll figure and approached 99.00 levels. The market is still swinging inside our predicted consolidating range from 96.50 – 99.50 regions without certain direction. This week, we reckon the trend may mostly likely fall again back to 97.00 levels. Abandon your short-view if the market pierces above 99.50 resistances.

EUR/USD fell after European rate cut. The rising payroll on Friday spiked Dollar again which caused a plunge in Euro currency to 1.3300 regions. This week, we expect emerging support will rise at 1.3250 – 1.3300 regions and likely to initiate a technical rebound. Technically, we foresee the trend will move in 1.3250 – 1.3400 ranges for technical recovery. Abandon your long-view should the trend break below 1.3250 supports.

GBP/USD has begun to turn down from 1.6100 tops. This week will see a big challenge as we have spotted very firm support at 1.5900 levels. However, technical patterns are more prone to bearish trend if Dollar continues to rise. Breaking the 1.5900 supports will test the next level at 1.5780 areas if downward pressure persists. Abandon your short-view if the market pierces above 1.6120 resistances.

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).

Subscribe to OPF Blog via Feed Reader or Email

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.


Share and Enjoy:
[] [Digg] [Facebook] [Google] [Mixx] [MySpace] [Twitter] [Windows Live] [Yahoo!] [Email]

Post a Comment

Displayed next to your comments.

Not displayed publicly

If you have a website, link ti it here


OPF reserves the right to delete comments that are snarky, offensive, or off-topic. If in doubt, read our Comments Policy.