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The US Adds Payrolls But Wanes Stimulus

A guest post written by DAR Wong

Currency Market Observations – 5 November 2012

Fundamental Outlook

The US has been attacked by superstorm Sandy with estimated contraction of USD25 billion in last quarter. Overall data released last week were strong in US. economy and concluded before weekend with rising payrolls. Japan boosts its asset purchase program but fails to weaken yen value rapidly. The UK analysts expect an expansion in growth next year but investors remain cautious for observation.

The US. consumer spending measured by household purchases rose 0.8 percent in September, more than forecast. The Institute for Supply Management’s factory index rose to a 5-month high at 51.7 in October from prior 51.5. Another report by the Conference Board’s sentiment index showed consumer confidence increased to 72.2, the highest since February 2008.

Weekly applications for jobless benefits by Americans fell 9,000 to 363,000 in the week ended 27 October. The non-farm payrolls added 171,000 workers in October and unemployment rate recorded at 7.9 percent at near to 3-year low.

The Hurricane Sandy that moved into US. continent hampered the New York Stock Exchange for a 2-day closure on early last week. Analysts estimates the economic damage and losses could total USD25 billion in the final quarter as more than 7 million Americans were cut off electricity and water supply, airlines disrupted and thousands of retailers and transportations were forced to close down.

Bank of Japan (BOJ) held central bank meeting on last Tuesday. Policymakers boost its asset-purchase program by JPY11 trillion (USD138 billion) and announced the facility to underwrite banks’ loans. However, market traders expect more financial stimulus and yen has been weakening moderately without much interest.

The UK consumer confidence measured by GfK NOP Ltd reported the index declined to minus 30 in October from minus 28 in previous month. However, the Confederation of British Industry forecasts the British economy will stagnate this year and expand 1.4 percent in 2013.

Technical Forecast

USD/JPY closed at 80.42 on high side after being well supported at 79.50 levels last week. We forecast the market will climb higher in coming week to 81.50 regions in short-covering. Traders are finally seeing a breakout of the trend in months of slow consolidation and most probably will begin to establish new long traders.

EUR/USD moved in our expected range while it fell from 1.3020 highs to close at 1.2830 for weekend. This week, we expect some sideways technical short-covering will take place for profit-taking between 1.2800 -1.2900 ranges. Towards the weekend, the market may begin new selling wave once the selling forces break beneath 1.2800 supports. Abandon the short-view if the trend pierces above 1.2900 resistances.

GBP/USD pulled up to 1.6175 highs and closed at 1.6019 on Friday. The market has built a strong resistance at 1.6130 areas while we foresee it will trade lower back to 1.5900 regions in coming week. The market is facing selling pressures but supported by the U.K. policymakers in verbal outlook for better economic performance. Breaking beneath 1.5900 will initiate bearish forces.

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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