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Japan Approves New Stimulus Package

A guest post written by DAR Wong

Currency Market Observations – 3 December 2012

Fundamental Outlook

The US economy posts uncertainty when market investors are still guessing on outcome of January budget by President Obama. The recent tension in Egypt civilian unrest has triggered some flight of funds back into US assets. Japan’s cabinet approves new stimulus as Prime Minister Yoshihiko Noda attempts to boost economy before December election. The European Central Bank clears Greece for the grant of loan in December worth EUR34.4 billion.

The US consumer confidence measured by Conference Board’s index climbed to 73.7 in November, the highest since February 2008, from a revised 73.1 reading the prior month. New home sales dropped 0.3 percent to a 368,000 annual pace, following a revised 369,000 rate in September. Another report on pending home resale index climbed 5.2 percent, exceeding the highest estimate, to 104.8 after a revised 0.4 percent gain in September.

American consumer spending measured by household purchases climbed at 1.4 percent rate in Q3, the smallest gain in more than a year and down from previous quarter at 2 percent gain. Initial jobless claims slid 23,000 to 393,000 in the week ended 24 November.

Japan’s retail sales fell 1.2 percent in October by the most in 11 months from a year earlier, after making 0.4 percent annualized gain in prior month. Industrial production increased 1.8 percent in November from prior month, when it dropped 4.1 percent.

As world’s third largest economy, Japan’s consumer prices excluding fresh food for October were unchanged from a year earlier. The nation’s jobless rate stayed at 4.2 percent for a third month. In an attempt to boost the slowing economy, Japan’s cabinet approved a new round of fiscal stimulus worth JPY880 billion (USD10.7 billion) on Friday before the elections on 16 December.

European finance ministers eased the terms on emergency aid for Greece and said they have found the formula to nurse debt-stricken Greece. The policymakers also have cleared the installment loan to Greece in December with EUR34.4 billion (USD44.7 billion).

German unemployment climbed for an eighth straight month in November as jobless rate increased at seasonally adjusted 5,000 to 2.94 million. However, an index of executive and consumer sentiment in the euro area climbed to 85.7 from a revised 84.3 in October.

Technical Forecast

USD/JPY has been resisted below 82.85 levels while it closed at 82.47 for the weekend. We reckon the market will continue to trade sideways and move from 81.50 to 83.00 ranges in coming week. In our opinion, the market will consolidate until Japan’s newly elected government is formed in mid-December for new direction.

EUR/USD closed at 1.2986 after falling from a double-top at 1.3020 areas on Friday’s intraday resistances. This week, we reckon the market might turn down and consolidate with support lifting at 1.2850 regions. However, breaking above 1.3020 again may drive the trend up to 1.3100 levels.

GBP/USD closed at 1.6016 on Friday with selling pressures building up from 1.6060 areas. This week, the trend may turn lower if the sentiment continues to weigh on weakening U.K. data. Technically, we expect the trend to re-visit 1.5900 levels if there is no strong fundamental factor reported. Abandon your short-view if the trend violates above 1.6060!

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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