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The Euro Debt Woes May Resurge

A guest post written by DAR Wong

Currency Market Observations – 23 Apr 2012

Fundamental Outlook

The US sees bumpy recovery in housing markets though retail sales pick up unexpectedly. Euro-debt fears surface again after Spanish yield soared to above 6.0 percent. G20 leaders met in Washington last week and warned Euro financial ministers to fix this viral issue urgently. UK begins to see small economic recovery but policymakers persist in holding on to stimulus program.

The US retail sales rose more than forecast in March by 0.8 percent gain and almost three times above median forecast. National Association of Home Builders/Wells Fargo index of builder confidence decreased to 25 this month from 28 in March. Another report on housing starts slid 5.8 percent in March to a 654,000 annual rate, indicating tough road to housing recovery.

The US factories dropped 0.2 percent in March for the first time in four months as manufacturing cooled down. Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000. Existing home sales dropped 2.6 percent in March to a 4.48 million annual rate from 4.6 million in February.

Japan’s overseas shipments rose 5.9 percent in March from a year earlier, exceeding forecast. The trade deficit was JPY82.6 billion (USD1 billion), narrowed down to lesser than forecast but data probably was distorted due to earthquake in March 2011.

European officials met in G20 meeting in Washington. Market rekindles fear in euro-debt woes after Spanish 10-year bonds yield climbed to 6.16 percent, the highest level since December. Italian yields for same maturity bonds also jumped to 5.56 percent.

In Germany, growth is sound and vibrant that has injected strength in euro value despite negativity news in debt woes. ZEW Center for European Economic Research in Mannheim said its investors’ confidence increased to 23.4 in April from last month 22.3. The report from Ifo institute’s business climate index that measures business confidence also rose for a sixth straight month to 109.9 in April from prior month 109.8.

The UK consumer prices rose 3.5 percent in March from a year earlier, up from 3.4 percent in February. Core prices accelerated to 2.5 percent. Jobless claims rose by 3,600 from February to 1.61 million while unemployment fell to 8.3 percent in the quarter through February from a 16-year high of 8.4 percent. Retail sales rose fastest in March over past 12 months when purchases including auto fuel gained 1.8 percent from February.

Technical Forecast

USD/JPY has been moving largely from 80.50 to 82.00 regions as forecast last week. The market is threading sideway for consolidation and we reckon it will narrow inside this band for another few weeks. Traders may trade from extreme ends while control the loss at 80.30 and 82.20 levels.

EUR/USD pulled up to above 1.3200 resistances on Friday against the strong selling sentiment in earlier week. Fundamentals factors have manipulated the market into reversal uptrend while short traders should not sit on stubborn losses. This week, we reckon the resistance will be set at 1.3260 levels that breaking above it will initiate a new bullish trend. Support has risen to 1.3050 regions which will resume the bears only if this is violated!

GBP/USD broke above our resistance identified at 1.6000 and began climbing higher. This week, we foresee the market will challenge the 1.6200 resistances but still uncertain if the bulls can charge higher than here. The support remains at 1.6000 levels.

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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