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The US GDP Gains In Confidence

A guest post written by DAR Wong

Currency Market Observations – 29 October 2012

Fundamental Outlook

The US housing markets move on recovery while Gross Domestic Product (GDP) for third quarter rose 2 percent annually. The Japan exports weaken further amid falling consumer prices, spurring market traders in expecting another stimulus over the month end meeting. The British growth unexpectedly jumps in preliminary GDP report that spiked up the pound from technical bottoms. 

The US new home sales surged in September by increasing 5.7 percent to a seasonally adjusted 389,000 annual rate. Another report on pending home sales were up 0.3 percent below median forecast but still pointing to recovery on annual rate of 14.5 percent gain over 12 months.

The American initial claims dropped 23,000 in the week ended 20 October and smaller decline indicated better job markets. Orders for durable goods rose 9.9 percent in September and higher than expectation, proving demands for increased capital spending. Core orders without aircrafts and defense equipment were also up 2 percent.

On Friday, the US GDP for third quarter rose 2 percent annual rate and higher than expectation. Commodity prices edged higher after data release while reacting to lower US dollar strength.

Japan exports fell 10.3 percent in September and drove down 4 months in a row. Core consumer prices slid 0.1 percent at annual rate and policymakers are facing pressures to ease policy further. Minister Yoshihiko Noda instructs his cabinet to prepare a fresh stimulus package and market traders are expecting the announcement to be made on central bank meeting on 30 October. 

European Commission supports a new financial taxation which reinforces 10 eurozone countries to use a single rule among financial institutions to contribute to sovereign debts. These countries are France, Germany, Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.

German business sentiment dropped for the sixth successive month in October. Munich-based Ifo reported its business climate index fell to 100.0 in October from 101.4 in September. Euro currency faces selling pressures amid weaker fundamental factors amid debt crisis.

UK reported its preliminary GDP for the Q3 with gain at 1 percent, above median forecast and better than previous quarter at 0.4 percent contraction. Pound spiked up 1.510 bottoms after data release in short-covering. Bank of Governor Mervyn King says policymakers will be ready to inject more cash to support economy if it shrinks again.

Technical Forecast

USD/JPY climbed up to 80.38 while it closed at 79.64 for the weekend at small retreat. Technically, we reckon the market has emerged from the consolidation after months of uncertainty and will be prone to ascend higher in November month. Sitting on strong supports at 79.20 areas, we expect the trend to reach up to 81.50 targets but going higher amid monetary fundamentals could test 84.00 resistances.

EUR/USD closed at 1.2937 for the weekend in down trend last week. Moving forward, we predict the support will remain at 1.2850 areas while the market might thread in consolidation from 1.2850 – 1.3070 range. Euro currency is facing selling pressure again but may hold firm temporary due to supports from central bank leaders.

GBP/USD pulled up from 1.5913 bottoms to 1.6144 highs after better growth was reported in British economy. This week, we reckon the market will make small technical draw down to 1.5980 – 1.6020 regions in profit-taking. Breaking beneath 1.5980 supports may drive the trend lower to 1.5900 areas.

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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