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The US Grows 4.6 Percent Annualized Rates

A guest post written by DAR Wong

Currency Market Observations – 29 September 2014

Fundamental Outlook

The US homes sales fare inconsistently recovery while orders for durable goods slide. American growth gains highest since 2011. Japan stagnates in inflation growth though there has been slight gain after pushed by sales-tax rise. German slides in both essential economic data and nudges European Central Bank to plan quick stimulus before drastic slowdown.

The US existing home sales slid 1.8 percent to 5.05 million annual rates from 5.14 million rates in July. Another report on new home sales gained 504,000 in August and boosted the market housing confidence, after it jumped higher than prior month’s revised date of 427,000 sales.

The orders for US durable goods in August dropped 18.2 percent and worse than median forecast. First-time jobless claims climbed 12,000 to 293,000 in the week ended 20 September, compared to revised 281,000 applications in previous week. Economic growth gained 4.6 percent annualized rates in Q2, highest since 2011.

FED Chair Janet Yellen warns investors the possibility that interest rates might be raised faster than expected. This is contrary to her projection from few months and has caused worries of falling equities. According to Yellen, she expresses that interest rates will move higher in quicker pace if the progressive economic data continues to exceed expectations.

Japan’s inflation slowed more than expected in August, putting pressure on policymakers to meet their target in lifting inflation within the country. Core consumer prices rose 3.1 percent from a year ago while Tokyo core prices gained 2.6 percent, both below median forecast.

European Central Bank (ECB) President Mario Draghi reiterates the policymakers are currently planning a new asset-purchase program to aim steering balance sheet away from deflation. He expresses the urgency to revive the 18-nations economy before the debt crisis resurges.

German business confidence measured by Ifo institute’s business climate index declined to 104.7 from 106.3 in August. Another important to gauge investors’ confidence slid to 104.7, going below forecast and compared to revised 10.3 in August. As the second largest economy in Euro area, German economy contracted in the second quarter and has raised an alarm that might drag down the regional growth.

Technical Forecast

USD/JPY seems to have strong resistance at 109.40 areas. This week, it will be a challenge to see the market pierces above 109.40 resistances in order to reach up at 110.00 benchmarks. If the bulls fail to do so, we expect the trend to fall back at 107.00 levels and will begin technical correction.

EUR/USD made new intra year-low at 1.2697 last week due to remarks of planned stimulus by ECB policymakers. The market is currently resisted at 1.2850 levels while it might drive lower in coming week. Technically speaking, we foresee the bears may reach 1.2600 – 1.2650 bottoms this week before bargain-hunting returns to market. The market will be very dependent on fundamental news from now on due to the contracting economy in 18-nations versus the new imminent stimulus.

GBP/USD has been strongly resisted at 1.6430 regions with the closing pattern on Friday prone to further weakening. This week, we reckon the trend may fall again and wind down to 1.6100 levels. Support will be tested at 1.6050 – 1.6100 grounds while bargain-hunting will rise in this area. Abandon your short-view if the trend pierces above 1.6430 resistances.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at dar@pwforex.com

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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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