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European Currencies Flew in Confidence

A guest post written by DAR Wong

Currency Market Observations – 30 Jan 2012

Fundamental Outlook

The US FED Chairman Bernanke remarked favoring in low interest rates till 21014 to aid recovery. IMF lowers the estimate for global growth in 2012 again to 3.3 percent. UK economy shows stagnation despite pound soars to 4-week high.

The US durable goods advanced 3 percent in December after rising 4.3 percent the prior month. Jobless claims rose by 21,000 to 377,000 in the week ended 21 January, while still stays at low numbers. Another report showed new home sales unexpectedly decreased 2.2 percent to a 307,000 annual pace in December.

The Conference Board’s gauge of the outlook for the next 3 to 6 months increased 0.4 percent after climbing 0.2 percent in November, marking beginning of growth in US recovery. The growth measured by GDP in last quarter climbed 2.8 percent annual pace after following 1.8 percent gain in the prior quarter. Consumer spending rose 2 percent in the fourth quarter, little changed from the 1.7 percent gain in the prior three months.

Japan’s consumer prices excluding fresh food dropped 0.1 percent in December from a year earlier, due to exports slump and rising yen value. However, retail sales rose 2.5 percent in December from a year earlier and spurred by higher consumer spending.

The euro-area composite index that measures the manufacturing and services industries rose to 50.4 in January from 48.3 in December, making 5-month high and pulled up by Germany’s growth. The German business confidence measured by Ifo institute climbed to 108.3 from 107.3 in December.

Greek debt crisis is still remaining in uncertainty and fear of viral spread has been warned throughout. Fitch Ratings agency cut the credit ratings of Italy, Spain and three other euro-area countries on Friday.

UK GDP fell 0.2 percent in Q4 against 0.6 percent gain in the previous quarter ended at September. The industrial production slid 1.2 percent in last quarter with manufacturing contracting 0.9 percent, the most in more than 2 years. Construction shrank 0.5 percent, while services stagnated. In 2011, GDP rose 0.9 percent versus 2.1 percent in 2010.

Technical Forecast

USD/JPY swung inside the range from 76.50 – 78.30 regions due to the USD movements from Bernanke’s remarks. We reckon the market will be entrapped in this price band with no clear trend unless the movement breaks beyond the aforementioned benchmarks.

EUR/USD was very bullish over 5 days and closed at 1.3216 for the weekend. We reckon the market will be turning down only if the trend settles beneath 1.3190 levels in coming week. Otherwise, the bull may continue to march higher to 1.3430 regions should there be additional supporting news from Euro area on resolving debt crisis.

GBP/USD has been up for last 11 days and recovered very strongly from the recent bottom 1.5234. The market closed at 1.5723 on Friday while we foresee the resistance will be tough to challenge in coming week at the triple top 1.5775 levels. Traders should observe if the market can penetrate and settle above this resistance or just making a false break for reversal down in the next 5 days.

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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