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Greece Extends Deadline to work out Austerity

A guest post written by DAR Wong

Currency Market Observations – 23 February 2015

Fundamental Outlook

The US inflation stays weak while FOMC minutes show favor of policymakers leaning to near zero interest rates. Greece wins extended time to work out for debt repayment and has boosted equity prices. UK inflation improves with shrinking jobless claims while policymakers remain unchanged policy in support growth.

The US factory output climbed 0.2 percent while housing starts dropped rose to 1.07 million in January from a year ago, compared to revised 1.09 million in previous annualized data. Producer prices slid 0.8 percent in January after falling 0.2 percent in December due to falling Crude prices.

FOMC minutes release reports that near to zero rates will be maintained for a while since unemployment and low Crude prices have slowed down inflation growth. The Dow average benchmarks advanced 121.09 points to year-record high closing at 18,140.44 on Friday after Greece has been granted an extension for bailout package.

American jobless claims reduced to 283,000 in the week ended 14 February. The Federal Reserve Bank of Philadelphia reports the manufacturing index dropped to 5.2 in February after 6.3 reading in previous month.

Japan has officially exit recession after the government reported the annual inflation grew 2.3 percent in final quarter in preliminary report. The quarterly comparison gained 0.6 percent after dropping 0.5 percent in prior quarter ended September.

Another report on Japan’s exports rose 17 percent in January from a year earlier. Imports fell 9 percent, leaving a deficit of JPY1.2 trillion (USD9.9 billion), narrowing from last January’s record shortfall of JPY2.8 trillion. Policymakers remain unchanged policy and target to maintain low yen for recovery.

German ZEW economic sentiment that measures investors’ confidence advanced to 53.0 reading after 48.4 in January. Markit reports the German manufacturing index stays at 50.9 in February and unchanged from revised data in January. As second largest economy among 19 nations, French manufacturing index fell to 47.7 from prior 49.2 in January.

Current account in Eurozone, measuring the imports versus exports activities, grew EUR17.8 billion in December against the EUR19.9 billion in prior month. Euro currency has been poising for recovery by maintaining above 1.1300 levels for weeks.

Greece and the Eurozone creditors have reached a deal to extend Greece’s bailout for 4 months till end June. The lead time gives Greece government room to work out new austerity plan in repaying sovereign debts. Investors bet the US Federal Reserve and major central banks will keep interest rates low to boost recovery for few months.

UK consumer prices rose 0.3 percent in January from a year ago while core prices, excluding food and energy, gained 1.4 percent from a year. The unemployed claims fell by 38,600 in January after showing revised 35,800 counts in prior month. Policymakers have voted for unchanged monetary policy with asset purchase program stays at GBP375 billion.

UK retail sales in January fell 0.3 percent after rising 0.2 percent in December. Another report on public sector net borrowing was reduced by GBP9.4 billion from a revised data of increasing GBP9.9 billion in December.

Technical Forecast

USD/JPY has been poising for weaker Yen while market holds firm above 118.00 supports. This week, we reckon possibility for the bulls to climb above 120.00 benchmarks for initiating new buying interest. Falling back beneath 118.00 supports will indicate temporary abandonment of long views in case of new fundamental influences.

EUR/USD closed at 1.1380 on Friday though market has tried to stay firm. On weekly chart, the technical outlook is still uncertain and thread from 1.1300 – 1.1450 ranges in tight consolidation. This week, we forecast the trend has to break beyond either side to lead new direction. This will to depend on outcome of Euro economic data or Dollar influence.

GBP/USD stays firm as we predicted last week. Moving forward, the trend may consolidate sideways from 1.5300 – 1.5500 ranges this week but piercing above 1.5500 will advance to 1.5600 targets. Control your risk efficiently in case of drawdown below 1.5300 supports.

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 dar@pwforex.com

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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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