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European Currencies Recover in Bull Trend

A guest post written by DAR Wong

Currency Market Observations – 23 Jan 2012

Fundamental Outlook

The US shows steady recovery in housing sales while inflation is under control. The euro and pound ran up strongly amid new lending plan proposed by International Monetary Fund (IMF) to counter European debt crisis. European Union (EU) will hold a meeting on 23 January with all finance ministers to work on new fiscal plan to crisis.

The US Federal Reserve Bank of New York’s general economic index rose to 13.5 in January from revised 8.2 in prior month. Producer prices that mark the factor costs slid 0.1 percent while making second drop in the past three months. Another report on consumer prices remained unchanged in December while core prices rose 0.1 percent as projected.

The National Association of Home Builders/Wells Fargo sentiment gauge increased to 25 in January, above median forecast and showing confidence rising among builders. Existing home sales rose in December by climbing 5 percent to a 4.61 million annual rate, showing steady recovery and highest level since Jan 2011. Job market steadies with lesser claims since the benefit claims plunged 50,000 to 352,000 in the week ended 14 January.

Japan’s machinery orders unexpectedly rose 14.8 percent in November from a month earlier, signaling capital spending unaffected despite the high yen value. However, investors remain wary and stay at bay from yen trading.

The euro gained rapidly last week due to new proposed lending by IMF with estimated USD500 billion to fight debt crisis. Investors will decide to liquidate in profit-taking while depending on coming Monday’s outcome of EU meeting. The finance ministers of EU countries will meet in Brussels on 23 January to discuss a permanent plan to stem out all debt crises.

UK consumer prices rose an annual 4.2 percent in December compared to prior month 4.8 percent and after peaked at 5.2 percent in last September. Analysts said UK is ready already stepping into midst of recession with long persistent housing fatigue.

Another report from UK Nationwide Building Society said its index of consumer confidence fell 2 points to 38 in December. Retail sales rose 0.6 percent after falling 0.5 percent in November, but probably due to price cuts in many departmental stores.

Technical Forecast

USD/JPY is remaining stagnant while it hovers around median band in 77.00 regions. The market has been trading in low volume and inactive for past months. Our outlook stays unchanged unless the market breaks beyond 76.50 or 78.00 levels.

EUR/USD recovered last week from bottom 1.2625 to 1.2986 after the IMF lending proposal. This week, we reckon the market will begin to consolidate and be supported at 1.2850 regions. Once pierces above 1.3000, the trend may test higher ground at 1.3100 levels!

GBP/USD also sprang into bullish recovery from 1.5282 to 1.5577 and closed near to this top for weekend. Same as euro, the pound is firmly supported at 1.5450 levels for coming week. However, positive news from the EU meeting on Monday might spur another up run to 1.5700 regions!

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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