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Housing Slump May Drag US Recovery

A guest post written by DAR Wong

Currency Market Observations – 31 March 2014

Fundamental Outlook

The US housing slump still exists while growth climbs from improving job market. Japan shows inflation unchanged amid weakness in consumer spending. Economic confidence in Euro area rises and releases tension of new stimulus by policymakers. Britain reports contraction in current account.

The US new home sales fell in February to the lowest level in 5 months after it declined 3.3 percent to a 440,000 annualized pace from prior month 455,000. The Conference Board’s sentiment index rose to 82.3 in March, the highest since January 2008, from 78.3 a month earlier and pulled up DJIA stocks.

Another report on American orders for durable goods gained 2.2 percent in February and core data gained 0.2 percent. Overall Gross Domestic Product in final quarter grew 2.6 percent annualized rate and higher than initial estimate 2.4 percent gains.

The weekly jobless claims slid to 311,000 in the week ended March 22. Before weekend, American pending home sales dropped 0.8 percent in February versus prior month 0.2 percent contraction, showing weak sentiment in housing recovery. Consumer spending rose 0.3 percent from 0.2 percent rise in January.

Japan’s consumer prices, excluding fresh food, rose 1.3 percent from a year earlier in February and in line with expectation. Household spending fell for the first time in 6 months at minus 2.5 percent annual rates while retail sales slowed to 3.6 percent gains. The unemployment rate dropped to 3.6 percent in February.

German Ifo Institute’s business climate index fell to 110.7 in March from prior month surging 111.3, the highest level since July 2011. Separately, the Eurozone economic confidence rose to 102.4 from 101.2 in February, above medina forecast and eased pressure on policymakers taking actions in coming central bank meeting.

UK retail price inflation slowed to 2.7 percent in March from prior month 2.8 percent. Consumer prices rose at annualized 1.7 percent. On Friday, British GDP rose an unrevised 0.7 percent in the fourth quarter and the current-account deficit narrowed to GBP22.4 billion (USD37.2 billion) from a record GBP22.8 billion.

Technical Forecast

USD/JPY closed at 102.81 from rising Dollar. This week, we reckon the trend will test 103.70 – 104.00 regions while sellers may ambush to liquidate for profits. Downside also could be strong at 101.00 – 105.00 areas with much uncertainty in the Japan’s economy. However, we prefer to observe the range from 101.00 – 104.00 in case the new direction extends beyond these extremes.

EUR/USD has been holding well at 1.3700 levels as predicted last week. The market is prone to trade sideways from 1.3700 – 1.3850 regions for coming trend while we expect traders might adjust their positions in market. The market has turned into neutral sentiment with no certainty in direction now while waiting for the next central bank meeting.

GBP/USD went into short covering last week and closed at 1.6636 levels on Friday. The market is beginning to consolidate and may be moving sideways as well. Range is expected to trade from 1.6450 – 1.6700 regions while most general market opinion is to pick short entry from this pull up retracement.

Dar Wong

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

Wong is the founder and Principal Consultant of PWForex.com 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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