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The U.S. FED Reinforces Stimulus

A guest post written by DAR Wong

Currency Market Observations – 4 November 2013

Fundamental Outlook

The U.S. inflation measured by consumer prices and producer prices both decline. Policymakers press on with monthly stimulus of USD85 billion to ensure recovery. Eurozone consumer prices slide for third month as unemployment rises in 17 nations. U.K. moves on moderate recovery but Pound falls below 1.6000 benchmarks due to liquidation for profits.

The U.S. factory output rose 0.1 percent in September after a revised 0.5 percent gain in prior month. The pending sales for existing home slumped 5.6 percent while making fourth month decline.

American retail sales excluding auto dealers rose 0.4 percent in September after following a 0.1 percent gain the prior month. Another report filed by Conference Board’s consumer confidence index dropped to 71.2 in October, dipping at 6-month low and below forecast.

The inflation weakened in U.S. economy after producer prices index shed unexpectedly by 0.1 percent in September due to retreating food prices. Core consumer prices were up 0.1 percent but less than projected. However, the government posted smallest budget deficits for past 5 years in the fiscal year ended 30 September at USD680.3 billion compared to shortfall USD1.09 trillion in fiscal 2012.

Weekly jobless claims rose 340,000 in 7 days ended 26 October and almost in-line with forecast. The U.S. Institute for Supply Management says its manufacturing index climbed to 56.4 in October, holding highest record since April 2011. However, the U.S. Federal Reserve announced after FOMC meeting that monthly stimulus of USD85 billion will remain in bond purchases until economy shows stronger recovery signs.

The three largest trading houses in Japan namely Mitsubishi Corp., Sumitomo Corp. and Marubeni Corp. have agreed to venture with Myanmar government. They will own 49 percent in the infrastructures to be built within 2 years near to the commercial capital of Yangon. The amount to be invested is estimated at JPY17 billion (USD174 million) on power, water and transport infrastructure at the site, which later will be used to distribute Japan-made goods.

The Eurozone Consumer Prices in September declined for a third month at 0.7 percent from a year ago. Unemployment rate in the 17 nations was 12.2 percent and worst than estimate. Euro currency fell after the data was released.

European Central Bank (ECB) comments financial institutions will soon begin relax rules to provide corporate loans in order to expedite recovery momentum. On the other hand, International Monetary Fund (IMF) joins the U.S. Treasury Department in rebuking Germany’s growing trade surpluses, which makes it difficult to reduce Euro debts.

U.K. mortgage approvals rose in September to highest record in 5-1/2 years. Lenders granted 66,735 mortgages, the most since February 2008, compared with a revised 63,396 the previous month. Hometrack Ltd. said that house prices in England and Wales rose 3.1 percent in October from a year earlier, the biggest gain since 2007.

Technical Forecast

USD/JPY was mild firm last week while trading from 97.43 – 98.45 regions. This week, we reckon the trend will be supported at 96.50 levels and testing 99.70 – 100.00 resistances may be possible if Yen weakens moderately. Technically, the market is still threading in constricted range from 96.50 – 100.50 regions without breaking beyond this price range.

EUR/USD has been falling rapidly from 1.3800 tops and closed at 1.3487 for the weekend. In our opinion, the market might begin to consolidate in coming week while lifting from 1.3450 – 1.3650 regions. Some short-covering for profits are expected but Euro currency could be embarking on a downtrend over this year-end. Buying interest will be expected to emerge at 1.3420 – 1.3450 regions for the time being.

GBP/USD fell last week together with Euro literally from recovering Dollar index. This week, we reckon the support will emerge at 1.5800 – 1.5900 regions and recovery might climb to 1.6050 areas. Pound will begin to consolidate for digesting the downfall last week. Abandon your long-view if the trend drives below 1.5880 supports!

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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