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FED Yellen Reassures Low Interest Rates

A guest post written by DAR Wong

Currency Market Observations – 23 June 2014

Fundamental Outlook

The US FED chief Yellen assures of low interest rate after cutting another USD10 billion from stimulus. International Monetary Fund (IMF) reduces the growth forecast for US this year to 2 percent. UK inflation rises at slow pace amid slower retail sales.

The US industrial production rose 0.6 percent in May compared to minus 0.3 percent in prior month, signaling recovery in confidence for factories, mines and utilities. Housing starts decreased to an annualized rate of 1 million from 1.07 million in April. Building permits also dropped to 990,000 annualized rates from prior 1.06 million revised data.

The US jobless claims were down by 6,000 to 312,000 in the week ended 14 June. In the FOMC statement, Federal Reserve (FED) policymakers confirmed the cutting of stimulus by another USD10 billion to USD35 billion. No clue was given when the interest rates will rise but FED chief Yellen continued to assure low interest rates to monitor recovery.

International Monetary Fund (IMF) cuts its growth forecast for the US economy this year. Official comments that FED may need to maintain interest rates at zero for longer than investors expect. Growth for world’s largest economy was cut to 2 percent this year, down from an April estimate of 2.8 percent.

Japan’s exports declined 2.7 percent in May from a year ago, making first drop in past 15 months. Another report on trade balance was improved to negative JPY860 billion compared to revised negative JPY880 billion in April.

European Commission says that Eurozone consumer confidence fell to an annual rate of minus 7.40 in May from prior month of minus 7.10 reading. German Producer Price Index fell to a seasonally adjusted annual rate of minus 0.2% from minus 0.1% in April.

UK consumer prices rose 1.5 percent in May, the least since October 2009 and down from 1.8 percent in April. UK Confederation of British Industry (CBI) reports the industrial order expectation for June rose 11 points compared to zero reading in previous month.

British retail sales were down by seasonally adjusted 0.5 percent in May and same as forecast. Another separate report on showed retail sales rose 3.9 percent at annualized rates after rising 6.5 percent in April. The National Statistics Office says that UK Public Sector Net Borrowing rose to a seasonally adjusted GBP11.48 billion, from revised 9.00 billion in the preceding quarter and below expectation.

Technical Forecast

USD/JPY traded in very narrow range around 102.00 for the whole of last week. Technically, the market is still rather inactive and gradually losing participation from traders due to lack of fundamental influences. This week, we reckon the market trend will remain in the range from 101.00 – 103.00 regions. Japan has refrained from adding stimulus and traders will look forward to US influences to move this market.

UR/USD is well supported at 1.3500 regions and has been hovering at 1.3600 areas before weekend. This week, we reckon the market may begin to climb for short-covering if it can stand firm above 1.3500 levels. In our opinion, the trend may probably ascend to 1.3750 regions if demand rises. However, abandon your long-view if the trend falls below 1.3500 supports.

GBP/USD has broken above 1.7000 benchmarks last week. However, slower inflation in UK weakened the Pound before the weekend. Technically, we reckon the market must stand above 1.6920 supports in order to re-test the highs above 1.7063 made last week. Resuming the bull trend could aim at 1.7120 but falling below 1.6920 levels will initiate new selling pressure in market.

Dar Wong

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

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at

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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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