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The US Ends Government Shutdown

A guest post written by DAR Wong

Currency Market Observations – 21 October 2013

Fundamental Outlook

The U.S. lifts its shutdown after closing the government partially for 17 days. The U.S. currency weakens and triggers demands in metal commodities. Debt ceiling has been restated to 7 February while Congress has to put the borrowing limit under the benchmarks of USD16.7 trillion. U.K. consumer prices and retail sales grow and push pound higher on fundamental recovery.

Last week, there were few economic data on the release as the market watched closely on the final decision of U.S. lawmakers. The Congress reached an agreement on very last minute to re-open the government on full scale. Debt ceiling has been pushed forward to next year 7 February as alternative income measures will be used to equate the debt issance.

The U.S. jobless claims dropped 15,000 to 358,000 in the week ended 12 October vs. prior week 373,000 records. After the government averted the closure, Dollar index sank to 8 month’s lowest record amid expectation of delay in tapering stimulus in November. Gold spiked in short-covering from 1275.00 to above 1320.00 regions.

As the largest creditor to America, China is worried of default by U.S. government on its bonds holding. According to data, China is currently holding USD1.4 trillion of debt instruments issued by U.S. Treasury Department. The second largest creditor – Japan, says that U.S. may avoid a fiscal crisis but could still default in paying to creditors.

China’s growth in Q3 picked up 7.8 percent and in-line with median forecast. However, this is first growth among the past 3 quarters. After the data was released on Friday, Asia stocks climbed in optimism.

The British CPI on yearly basis rose 2.7 percent in September while core prices rose 2.2 percent. Both were better than forecast and pulled up the Pound. Another separate report on monthly jobless claims was down 41,700 in October, more than expected. Unemployment rate remained the same at 7.7 percent.

U.K. retail sales including fuel increased 0.6 percent from August, when they declined 0.8 percent. Pound reversed after mid last week and flew past 1.6200 benchmarks, especially in responding to weakening dollar.

Technical Forecast

USD/JPY has been trading from 96.50 – 99.00 ranges for past 2 weeks. This week, we foresee the trend will begin to fall while resistance will probably cap at 98.50 regions. On breaking below 96.50 supports, the bears might reach lower to 95.50 targets if Dollar continues to weaken. However, do not persist in short-view if the market pierces above 99.00 resistances.

EUR/USD is hitting 1.3700 again for double-top formation to 4 February. This week, we reckon the market may face selling pressure at 1.3700 regions and might begin to digest into sideways trend. Technically, the market will be trapped inside 1.3600 – 1.3700 ranges which could move into either way upon breaking. Only sinking below 1.3600 levels will initiate new selling trend in the market.

GBP/USD is temporary capped at 1.6250 resistances. This week, the market is prone to soften for technical consolidation as we foresee the trend could trade from 1.6050 – 1.6250 ranges. However, abandon your short-view in case the bulls pierce above 1.6250 levels.

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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