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The U.S. Government May Shut Down

A guest post written by DAR Wong

Currency Market Observations – 29 September 2013

Fundamental Outlook

The U.S. jobless claims continue to reduce while growth expands. However, the federal budget dry-up may implicate shut down in U.S. government due to political impasse in raising the debt limit. Japan prepares to announce the new tax-levy plan next week. Britain has shown steady recovery from rising consumer spending.

The U.S. Conference Board’s consumer confidence index declined to 79.7 in September from prior month 81.8. Another report by S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent from July 2012, matching the median forecast.

American orders for core durable goods were down 0.1 percent in August against a rising expectation. The weekly U.S. jobless claims dropped 5,000 to 305,000 ended 21 September.

New home sales rose 7.9 percent in August to a 421,000 annualized pace, almost in-line with median forecast as buyers rushed in before mortgage rates may increase. However, pending home sales fell 1.6 percent, after a revised 1.4 percent decrease in July.

Another report showed GDP rose at 2.5 percent annualized rate in Q2 after expanding 1.1 percent in the first quarter. Consumer spending climbed 0.3 percent after revised 0.2 percent advance in July.

On Friday, Dow Jones stocks fell amid concern that a political impasse over the federal budget will hurt the economy. The government may shut down from 1 October due to hitting the budget debt limit unless the Congress acts.

Japan’s core inflation rose 0.8 percent in August from a year earlier. Prime Minister Shinzo Abe expresses willingness to dialogue with China regarding a group of disputed islands. He is also set to announce on 1 October about raising the tax-schedule in 2014.

German business confidence filed for Ifo institute’s business climate index climbed to 107.7 from a revised 107.6 in August, rising less than forecast. Market analysts believe Germany will be harnessing on new political powers and strong on economic recovery after last week Election.

The International Monetary Fund suggests that Euro countries should prepare to set up an insurance program for common mutual borrowing. On the other hand, European Central Bank President Mario Draghi says he is ready to deploy another long-term refinancing operation to provide funds to European banking system if such need arises.

The U.K. consumer confidence rose in September as the index sentiment hiked to 108.1 from prior month 106.7. Household recovery picks up as worries for job security reduces. The household spending rose 0.3 percent and disposable income increased 1.5 percent, the most in a year.

British gross domestic product advanced 0.7 percent in second quarter, matching a previous estimate. The current account deficit narrowed to GBP13 billion in the same quarter from revised GBP21.8 billion in the previous three months.

Technical Forecast

USD/JPY has been hovering from 97.50 – 99.50 ranges for past 2 weeks while waiting for the Japan’s Prime Minister to make announcement on 1 October. Stay tune to this market fundamental as the outcome may either drive the prices down to 96.00 levels or reverse to 101.00 regions. There is no clue to the direction until we get clear decision from the new policy in coming week.

EUR/USD topped 1.3560 regions on Friday due to weakening Dollar. The market is uncertain as we will be facing the U.S. and Japan’s news in coming week. Failure to protrude above 1.5600 resistances could be moving down to 1.3350 – 1.3400 regions due to liquidation. However, breaking above 1.3600 levels might climb higher to 1.3720 targets!

GBP/USD is entrapped between 1.6050 – 1.6150 ranges while waiting to break either way in coming week. Just like the Yen and Euro, the British Pound is narrowing in its price movement and seeing crucial direction after the news releases this week. Driving down below 1.6050 will probably test 1.5900 supports while piercing above 1.6150 could reach 1.6350 targets!

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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