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The US Economy Improves with Stronger Dollar

A guest post written by DAR Wong

Currency Market Observations – 18 March 2013

Fundamental Outlook

The US economy improves with stronger retails sales and factory output. Jobless claims unexpectedly move down while the DJIA floats in new high record. Japan’s Upper House confirms Haruhiko Kuroda as the next central bank governor and market traders expect more stimulus policies will be released within weeks. European leaders meet in Brussels and loosen austerity plans for tight recovery.

The US retail sales jumped 1.1 percent in February, cheered by rising jobs and better consumer spending. The US jobless claims unexpectedly fell by 10,000 to 332,000 in the week ended 9 March. The producer price index rose 0.7 percent in February while core prices gained 0.2 percent for a second month.

Another report shows factory output in US economy for February rose more than forecast by 0.7 percent. Last week, the USDX reached 7-month high at 83.16 and receded on Friday. The index still stayed abode 82.00 benchmarks that indicates bullish trend. DJIA made new all-time high on Thursday at 15,539 records.

Japan’s upper house confirmed Prime Minister Shinzo Abe’s central bank nominee – Kuroda as the next central bank governor. The Nikkei 225 Average Index surged to closed at new 54-month high at 12,560 on Friday. Market traders expect more easing will be announced within weeks after Kuroda steps into new office as chief of Bank of Japan (BOJ).

Eurozone industrial output slid 0.4 percent in January, after it rose a revised 0.9 percent in prior month. On year-on-year basis, production fell 1.3 percent in January from a year earlier. Europe may resurge in debt crisis in Q2 as the austerity measures are squeezing more jobs tightening in the 17 nations.

On Friday, European stocks declined from 4-1/2-year high as investors rekindled worries in enlarging sovereign debts. European Union leaders met in Brussels and agreed to ease constraints on national budgets amid a deepening euro-area recession. More leniencies are granted to access on periodic basis to check the budget cuttings of France, Spain and Portugal with extended grace given.

UK industrial output dropped 1.2 percent in January after it jumped 1.1 percent in prior month. Investors are concerned of prolonged recession in dire straits while Pound has been sliding for past 2 months. Central bank governor Mervyn King denied lowering the British currency but stressed the advantage in spurring exports.

Technical Forecast

USD/JPY is taking a breather from the recent top 96.71 levels. The trend loitered at 95.50 areas on Friday while no actions emerged. This week, we foresee the trend will be supported at 94.50 regions and set to climb higher in near future. Prepare for 96.71 resistances to be pierced after Kuroda assumes new office.

EUR/USD reverses up from 1.2911 bottoms to 1.3100 regions while threading sideways for digestion. This week, we reckon the market will slow down in continual sideways around 1.3100 regions if no clear direction is signaled from fundamental news. Control loss if the trend unexpectedly shoots beyond the extremes.

GBP/USD recovers from 1.4831 lows and may move into consolidation in coming weeks. The trend has temporary ascended above 1.5000 benchmarks and could be making its way to 1.5280 in near future. We prefer to stay cautious by picking entry from 1.4950 – 1.5000 bottoms or above 1.5250 tops to capture fast profits.

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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1 Comment to The US Economy Improves with Stronger Dollar

  • Judy Jackson's Gravatar Judy Jackson
    March 29, 2013 at 7:43 AM | Permalink

    Thanks for sharing this information. I hope USD and Pounds will get stronger for the following months.