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Obama Wins Election for New Term

A guest post written by DAR Wong

Currency Market Observations – 12 November 2012

Fundamental Outlook

The US economy was focused in national Presidential election last week while Obama won another 4-year term. The polling influence sends dollar into strengthening along way with tougher road ahead for economic recovery. Japan faces recession as yen resurges against dollar amid contraction in Q3 growth. Bank of England (BOE) announces the halt in asset purchase program and conclude stimulus.

The US Institute for Supply Management’s non-manufacturing index declined to 54.2 in October from prior month 55.1, showing tune down in service sectors. Claims for jobless benefits fell by 8,000 to 355,000 in the week ended 3 November. Another report showed the US trade deficit unexpectedly shrank in September with gap declined to USD41.5 billion, the smallest since December 2010.

Last week, Obama won the election for another 4-year term as President of US country. Despite expectation of further stimulus by his continual efforts, Dow Jones markets fell sharply after Obama won the polls and dollar strengthened. Market prices of gold, crude and greenback against other major currencies moved in mixed sentiment.

Japan GDP shrank an annualized 3.4 percent in the third quarter. Exports and consumer demands contract and moving into recession. Bank of Japan (BOJ) remains under pressure to add more monetary stimulus after it expanded its asset-purchase program for the second time in two months in recent meeting.

ECB President Mario Draghi comments the economic outlook is worsening and policymakers will standby to activate its bond-purchase program if necessary. Greece is under pressure to implement austerity measures and restructure economy while waiting for bailout. Euro finance chiefs are still holding on to EUR31.5 billion (USD40.1 billion) of finance aid frozen for Greece since June until the conditions are met for release.

The UK manufacturing output rose 0.1 percent in September and less than forecast. The BOE Monetary Policy Committee announces a halt in the asset purchase program at GBP375 billion (USD599 billion) and concludes the third round of quantitative easing. Governor Mervyn King comments central bank will focus in more lending to baks’ liquidity instead of buying corporate bonds.

Technical Forecast

USD/JPY comes down to 79.04 on Friday and closed near to the lowside for weekend. Traders are losing confidence in yen as its urges against the dollar. This week we reckon the trend will consolidate from 79.00 – 80.00 ranges again with bullish strength erased. Breaking beneath 79.00 supports will initiate new selling pressure.

EUR/USD trades in gradual weakness as it declines to 1.2700 levels from 1.2876 highs. This week, we foresee the market may pull up to 1.2800 regions before it begins a new downfall. The bottom target is aimed at 1.2500 areas for the bears to crash down as euro weakens.

GBP/USD has been trading in sideways from the top at 1.6043 levels but the trend dived on Friday to 1.5900 areas in bearish sentiment. This week, we expect some buying interest will support the market at 1.5850 – 1.5900 regions while topside resistance will cap at 1.6000 levels. Breaking below 1.5900 will sink to 1.5750 regions.

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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