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Fear in Syrian War Dampens Stocks

A guest post written by DAR Wong

Currency Market Observations – 2 September 2013

Fundamental Outlook

The U.S. is deciding to lead warfare into Syria that caused sell-off in stock markets. Investors remain dormant to Dollar strength while observing the decision of United Nations. Japan’s inflation shows improvement as Abe government pulls the recession out from 2-decade recession. Britain celebrates recovery in housing markets after austerity measure has taken effects.

The U.S. order for durable goods fell 7.3 percent in July, making the first drop in past 4 months. The Conference Board’s index of sentiment shows consumer confidence advanced to 81.5 in July from a revised 81 the prior month that was stronger than median forecast.

The growth for Q2 measured by Gross Domestic Product (GDP) indicated 2.5 percent gains at annualized rate, up from an initial estimate of 1.7 percent. Jobless claims in the week ended 24 August declined by 6,000 to 331,000.

However, the U.S. pending home sales slid 1.3 percent in July, the most this year, after a 0.4 percent decrease in June. Another report on consumer spending rose 0.1 percent after following prior month 0.6 percent gains, showing cooling economy as Q3 began.

The performance of recovery is mixed in U.S. economy amid steady job growth. Treasury Secretary Jacob J. Lew urges Congress to raise the limit as debt limit will hit the USD16.7 trillion debt ceiling in probably another month’s time. On the other hand, President Obama is eager to lead air strike to Syria for punishment of using chemical weapons. No final agreement from United Nations while market traders watch on.

Japan’s core consumer prices climbed 0.7 percent in July from a year earlier and above median forecast. Abe government is adamant to pull the country out of recession since early 1990s. However, the Government Pension Investment Fund (GPIF) posted its smallest gain in Q2 on record domestic bond losses as domestic stocks rose.

German Ifo business climate index climbed to 107.5 from 106.2 in July. The August data was highest in 16 months and preparing Germany into this month’s election. Another report showed GDP expanded 0.7 percent in the second quarter.

German unemployment rose in August as it was up by seasonally adjusted 7,000 to 2.95 million. The adjusted jobless rate stayed at 6.8 percent, near a 2-decade low. Consumer prices rose 1.6 percent from a year earlier, compared with 1.9 percent in July.

The U.K. mortgage approvals rose to the highest in more than 5 years in July. Lenders granted 60,624 mortgages, the most since March 2008, compared with a revised 58,238 in previous month. Britain has begun to see recovery in housing demands and retail demands after 2 year of austerity measure in government spending.

Technical Forecast

USD/JPY has found temporary support at 96.80 levels while capped at 99.00 resistances. In our opinion, the market is narrowing into this constriction and will move into anew extension in coming week. By fundamental outlook, a draw down could be more likely to occur due to fear of Dollar strengthening in Europe. However, do not persist in your short-view if the trend pieces above 99.50 levels.

EUR/USD fell after mid-week due to profit-taking. This week, we reckon the market will trade sideways from 1.3100 – 1.3350 ranges as the trend consolidates. Not much fundamental weakness will be expected as the market is forecast to float above 1.3000 supports in September for window-dressing.

GBP/USD is beginning to slow down after falling for many days. Technically, we predict the trend will be supported at 1.5400 levels in coming week while making short-covering patterns. The market may trade gradually firmer towards 1.5600 as the sentiment moves from 1.5400 – 1.5600 regions. Abandon your long-view if the trend breaks beneath 1.5400 levels.

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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