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Japan Gains Traction in Economy

A guest post written by DAR Wong

Currency Market Observations – 28 July 2013

Fundamental Outlook

The U.S. existing home sales decline while new home sales rise. China reports the PMI manufacturing slides but Asian markets sentiment have been supported by gains in German PMI manufacturing. Japan sees exports growing and consumer prices surging and pulling the economy from 20-year deflation. Greece wins a new bailout from Euro governments that will tide through September.

The U.S. existing home sales shed 1.2 percent to a 5.08 million annualized rate in June. Another separate report on new homes rose to the highest level in 5 years as purchases climbed 8.3 percent to an annualized pace of 497,000 homes. Market buyers are still speculating widely if mortgage rates will rise soon following debate of policymakers in tapering financial stimulus after September.

The American jobless claims rose 7,000 to 343,000 in the week ended 20 July. Orders for core durable goods were on par but below consensus, showing demand for equipment lasting for minimal 3 years have contracted. Dow Jones sentiment was struggling to stand above 14,500 throughout the week but the bull steam seemed to be fizzle out in reaching 16,000 targets.

On Friday, Thomson Reuters/University of Michigan final index of consumer sentiment advanced to 85.1 in July from 84.1 at the end of June. The data rose to highest level in past 6 years and reversed the DJIA sentiment from negative zone to close at 14,558 for the weekend.

Market investors anticipate the Federal Reserve policymakers will taper the monthly bonds purchase from current USD85 Billion to USD65 Billion after September. The International Monetary Fund cautions that such plan to exit from unprecedented asset purchases could trigger excessive volatility in interest-rates instruments.

The Japan’s exports rose for a fourth straight month in June and climbed 7.4 percent from a year earlier. Imports climbed 11.8 percent and narrowed trade deficit to JPY180.8 Billion (USD1.8 billion). For past months, weakening Yen has helped to spur overseas shipment. In a separate report, the consumer prices excluding fresh food gained 0.4 percent in June from a year earlier, highest since 2008.

HSBC reports the China PMI manufacturing declined in June to 47.7 and below expectation. On the other hand, German PMI manufacturing rose to 50.3 and above consensus. Euro currency remains strong as the German gains in manufacturing have erased negative sentiment in Asian global markets.

Greece wins the release of a EUR2.5 billion (USD3.3 billion) loan to tide through the coming weeks. Debt crisis will be further postponed as European governments seek a common relief until Germany’s election is over in September.

The U.K. GDP accelerated 0.6 percent in Q2 after it gained 0.3 percent at the previous quarter ended March. Pound has been trading firm throughout last week as central bank holds on to its policy at record low interest rate 0.5 percent and asset purchase program worth GBP375 Billion (USD573 Billion).

Technical Forecast

USD/JPY illustrates a decline in technical day-chart. Technically, we forecast a good opportunity to enter short-position if the market retraces up to 99.20 regions. Otherwise, the bears may engulf the market sentiment and moving down to 97.00 targets will be highly possible in coming week.

EUR/USD has been trading in firm sentiment as it hangs around 1.3300 levels. This week, we reckon there may be a technical correction at 1.3150 regions while the trend consolidates within 1.3150 – 1.3300 ranges. In our opinion, the market will move sideways until the payroll data decides a new directional trend on coming Friday.

GBP/USD closed at 1.5382 on Friday but may climb higher to attempt 1.5500 targets incoming week. Technically, the market may consolidate from 1.5200 – 1.5500 ranges as some profit-taking activities will be seen. Though the British economy has shown recovery, the technical strength indicates some exhaustion and probably will slow down until we see new fundamental clue in USD direction.

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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