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The EU Reaches No Deal in Budget Bailout

A guest post written by DAR Wong

Currency Market Observations – 26 November 2012

Fundamental Outlook

The US housing data improves amid lower jobless claims. Japan exports fall again for fifth month as Japanese cabinet has been dissolved for election in mid December. European leaders fail to produce the budget plan after meeting in Brussels summit and no bailout is reached for Greek sovereign debts.

The US existing home sales for October increased 2.1 percent to a 4.79 million annual rate, higher than median forecast. Housing starts rose 3.6 percent to 894,000 annual rate above expectation. Demands are believed to be generated from lower mortgages rates.

The weekly jobless claims for Americans slid 41,000 to 410,000 in the week ended 17 November. The leading indicators measured by Conference Board’s gauge increased 0.2 percent after a revised 0.5 percent gain in September, as investors show concerns towards January fiscal cliff.

Japan exports fell for a fifth month after trade tension rose with China and weak demand deepened in Europe. Finance Ministry said overseas shipment fell 6.5 percent in October from a year earlier, leaving a trade deficit of JPY549 billion yen (USD6.7 billion). The cabinet was dissolved on last Monday and preparing to campaign for next election in coming mid December.

European Union policymakers from 27 nations met in Brussels summit but failed to reach agreement for the next seven-year budget plan and no deal has been devised for Greek debt. The rating agency Moody’s cut France by one grade to Aa1 and said its outlook remains negative, citing an uncertain fiscal outlook for Europe’s second-biggest economy in Eurozone.

A composite index that measures service and manufacturing index in Eurozone was little changed at 45.8 in November from prior month 45.7. As the largest economy in euro-area among 17 nations euro-area, German business confidence measured by Munich-based Ifo institute reported its business climate index climbed to 101.4 from 100 in October, the first gain in eight months.

Technical Forecast

USD/JPY rose last week due to strengthening euro currency. The market closed at 82.39 for weekend and we reckon some liquidation may occur this week for profit-taking. Technically, we expect the trend to consolidate from 81.60 to 82.80 regions before deciding on next direction. However, piercing above 82.80 may climb higher to 83.50 areas.

EUR/USD was bullish last week despite no deal was reached in Brussels summit. The market shot up on late session of Friday and closed at 1.2973. This week, we reckon limited room at the topside while sellers will ambush at 1.3050 regions if the bulls ascend further. Hence, we expect more likelihood in consolidating range above the EMA200 support at 1.2900 levels to the 1.3050 resistances in early coming week.

GBP/USD broke above 1.5960 resistances on Friday and surged to close at 1.6024 on Friday. This week, we expect the trend to consolidate in narrow range from 1.5960 – 1.6060 ranges as fundamental factors remain weak in British economy. However, be mentally prepared if market short-squeezes to 1.6100 – 1.6120 regions but selling interest will be expected to emerge in this price area.

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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