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Jackson Hole Meeting Alerts Market

A guest post written by DAR Wong

Currency Market Observations – 26 August 2013

Fundamental Outlook

The U.S. Federal Reserve has begun its 3-day annual meeting in Jackson Hole on last Friday. Investors are still waiting to see the snowball effects on the eventual outcome of new policy while there will be another round of debate in U.S. Congress in September on raising the national debt limits. Europe economy continues to move out of recession as a whole vehicle led by Germany and U.K. recovery.

The U.S. weekly jobless claims ended on 17 August rose 13,000 to 336,000, matching the median forecast. The Conference Board’s of leading indicators gained 0.6 percent in July while pushed up by better job markets and housing recovery.

The American existing home sales advanced 6.5 percent in July to a 5.39 million at annual rate, making second highest level in 6-year record. However, new home sales plunged 13.4 percent from June, the most in more than 3 years and causing mixed sentiment in housing recovery demand.

The minutes release for last month’s FOMC meeting showed FED policymakers were mostly agreeable to begin tapering bond purchase over the year-end if economy picks up, while few said cutting down the stimulus might be needed soon.

The U.S. Treasury Secretary Jacob J. Lew is trying to persuade Congress to raise the USD16.7 trillion debt ceiling after Congress delegates return from their recess on 9 September. The Obama administration and lawmakers will confront to discuss this topic to be resolved by end September, so that new funding to the U.S. government will avoid a federal shutdown.

As the Jackson Hole meeting began on last Friday in Wyoming, a research study presented that the bond-buying program initiated by U.S. central bank has been a less potent tool for stimulating growth than policymakers believe. As the debate went on about tapering the stimulus, Director Christine Lagarde from International Monetary Fund (IMF) urged global policymakers to work closely together for their exit plans while endorsing swap arrangements between central banks as an instrument to weather instability.

Japan’s exports increased 12.2 percent in July from a year ago after prior month’s gain of 7.4 percent. Imports also climbed 19.6 percent, creating a trade deficit of JPY1.02 trillion (USD10.5 billion) and third highest record since 1979. The seasonally-adjusted deficit widened from June to JPY944 billion.

In Germany, the capital investment rose 1.9 percent in Q2 and held the first expansion in past 3 quarters. In the same period, consumption rose 0.5 percent and GDP climbed 0.7 percent as estimated. On yearly basis, the economy grew 0.5 percent from the same quarter last year, leading the Eurozone out of recession.

The U.K. mortgage lending for July increased 12 percent to GBP16.6 billion (USD26 billion). The Council of Mortgage Lenders says this data holds the highest record since 2008 after subprime crisis erupted.

Britain posts its first July budget deficit since 2010 after austerity measures began. Corporation-tax payments declined 0.9 percent while government spending jumped 4.5 percent by various ministries.

Technical Forecast

USD/JPY closed at 98.70 on Friday while market is relying on Dollar strength to speculate the next trend now. In our opinion, the trend is still pretty neutral since it is constricted inside 97.00 – 100.00 ranges. Only when it moves beyond either side of these extremes will extend into new direction.

EUR/USD seems to be toppish at 1.3400 regions though the market has been hovering at this level. This week, we predict the trend will be prone bias to bearish sentiment and may trade down to 1.3200 supports. However, piercing above 1.3450 resistances could lead an unexpected surge to 1.3650 regions.

GBP/USD has begun to fall from recent high 1.5717 and closed at 1.5568 for the weekend. Technically, we foresee the trend may make a double top formation in coming week but strong selling pressure will emerge at 1.5720 – 1.5750 regions to cap the uptrend. The support lies at 1.5450 levels should the liquidation begin for profit-taking.

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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