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The US Added Jobs in Optimism

A guest post written by DAR Wong

Currency Market Observations – 9 Jan 2012

Fundamental Outlook

The US payroll shows increment while unemployment records at almost 3-year low. Eurozone continues to be threatened by slowdown and recession is predicted by many analysts. Deepening crisis of sovereign debt will put the region into test in 2012 amid more repayment arising in coming months.

The US Institute of Supply Management’s factory index climbed to 53.9 in December from prior month 52.7.  Another separate report on construction spending rose in November with building outlays increased 1.2 percent, exceeding median estimate.

During mid week, a second report released by Institute for Supply Management showed services index rose to 52.6 from 52 in November. Jobless claims for the week ended 31 Dec declined 15,000 to 372,000. On Friday, the US payroll data added 200,000 jobs in December after followed a revised 100,000 gain in November. Jobless rate unexpectedly fell to 8.5 percent which was almost at 3-year low record.

In Eurozone, a composite index based in both manufacturing and services industries rose to 48.3 from 47 in November. Another report on consumer sentiment fell to 93.3 in December while pulled down by German factory orders dropping 4.8 percent in November.

Euro economy is edging toward a recession as many governments toughen budget cuts to contain the region’s debt crisis. Demands for general commodities and energies will contract and affect the exports from emerging markets.

The UK services activity based on the survey of purchasing managers (PMITSUK) rose to 54 in December from prior month 52.1. Another major property mortgage firm Halifax Ltd said housing prices slid 0.9 percent to an average GBP160,063 (USD248,000) in December while declined 2.2 percent from a year ago.

In overall, British property market will face uncertainty in 2012 as housing prices deteriorated last year without recovery seen. Analysts predict the Bank of England will hold its benchmark interest rates at 0.5 percent while completing the bond purchase program at GBP275 billion before June.

Technical Forecast

USD/JPY moved in little sideways last week but supported at 76.60 regions. However, it will take the bulls to charge above 78.00 levels to confirm the uptrend. When both euro and dollar index recede, this will become bad news for Japan as investors will hedge more into buying yen. Once the bears go beneath 76.60, we shall be expecting to see 75.50 regions again!

EUR/USD has begun new bearishness after breaking beneath 1.2860 regions, which has turned into resistance now. Downgrades of Hungary and Euro’s crisis have dampened investors’ confidence. This week, we expect the market to test the lower support at 1.2550 levels before some technical rebound will resume. Abandon your short-view if market reverses above 1.2860 levels.

GBP/USD is facing great challenge of economic slowdown and influence of euro’s decline. This week, we have identified the strong support at 1.5300 regions but technical outlook shows very heavy selling forces from topside. We prefer to pick short near to 1.5500 with controlled risk and prepare for the dive down!

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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