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Japan’s Trade Deficits Swell Again

A guest post written by DAR Wong

Currency Market Observations – 25 February 2013

Fundamental Outlook

The US housing starts and existing home sales show momentum of recovery from new buying interest. The FOMC minutes releases the minutes of January meeting stating possible termination in stimulus in 2013 which strengthens the Dollar. The Japan’s trade deficits swell again despite the recent rapid devaluing Yen, putting pressures on government to recede the currency further. German is seen with recovering business and investors’ confidence though the resurgence of debt crisis continues to post threats.

The US National Association of Home Builders/Wells Fargo builder confidence index fell to 46 in January compared to prior month 47 which was the highest reading since April 2006. Housing starts broke ground on annualized rate 613,000 units and were up 0.8 percent from December. Another report showed existing home sales increased 0.4 percent in January to a 4.92 million annual rate, showing momentum in housing recovery.

The US producer-price index rose first time over 4 months in January by climbing 0.2 percent after a 0.3 percent decline in December. The leading indicators pointing to outlook over next 6 months gained 0.2 percent from a 0.5 percent rise in December, matching forecast.

The US Federal Reserve released FOMC minutes of last month’s meeting stating the possibility to termination stimulus policy. Dollar strengthened against the European currencies and put lid on commodity prices.

Japan Finance Minister Taro Aso commented no intention to buy foreign bonds through Bank of Japan (BOJ) and caused the Yen to slow down in devaluation. Japan’s trade deficit in January swelled to a record JPY1.63 Trillion (USD17.4 Billion) on energy imports and a weaker yen. However, exports climbed 6.4 percent from a year earlier, the first rise in eight months.

German investors’ confidence measured by ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations climbed to 48.2 from 31.5 in January. Another report released by Ifo institute in Munich said its business confidence index rose to 107.4 from 104.3 in January. Both data indicated strong record growths.

A composite index based in both services and manufacturing industries in Eurozone slid to 47.3 from 48.6 in January, struggling to recover from recession. European Commission said euro-area economy will shrink in 2013 after the previous contraction in 2012. Debt crisis remains a concern in driving unemployment higher as governments, consumers and companies curb spending.

Technical Forecast

USD/JPY has been trapped inside 92.00 – 94.50 ranges for past 2 weeks. This week, we advise traders to observe the fundamental news as the market might continue to climb higher once the Japanese favors weaker Yen. Buying from bottom areas should be controlled with risk management once the trend turns below 92.00 supports.

EUR/USD has been very weak last week and made 5-week low record below 1.3250 levels. This week, we foresee the market may have further room at the bottom with support resting at 1.3070 areas. The market may begin to consolidate soon from 1.3070 – 1.3300 ranges once buying interest emerges. Abandon your long-view if the trend violates beneath 1.30000 benchmarks.

GBP/USD formed new 13-month low at 1.5131 levels last week in bearish sentiment. This week, we expect a technical rebound to occur and probably will consolidate from 1.5150 to 1.5550 ranges. Abandon your long-view if the trend sinks beneath 1.5100 levels.

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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1 Comment to Japan’s Trade Deficits Swell Again

  • March 1, 2013 at 6:28 AM | Permalink

    Great information. I have also observed the past weeks that, USD has been very low. This can be a good sign for some however, if we will be talking about oversees workers, this would mean very bad deal for them because convertion rte of their money will drop. It is really good to have these graph and article for reference and information.

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