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The US Home Market Recovers in Optimism

A guest post written by DAR Wong

Currency Market Observations – 30 June 2014

Fundamental Outlook

The US new and existing home markets show recovery with better demand. However, growth measure still remains weak amid contracting consumer spending. Japan rises in inflation at higher consumer prices after sales tax increment but household expenditures decline. UK current account narrows in Q1 and continues to spur speculation on interest rate hike before year-end.

The US existing home sales climbed 4.9 percent to a 4.89 million annualized rate, after 4.66 million pace in April. Another separate report shows new home sales jumped 18.6 percent to a 504,000 annualized pace, making the largest 1-month surge since January 1992

American Conference Board’s index climbed to 85.2, the strongest reading since January 2008, from 82.2 in May. This reading reflects the economic outlook for coming 6 months. The GDP economic growth fell 2.9 percent annualized rate in Q1, more than forecast and after 1 percent drop in prior quarter.

Demands for US durable goods meant to last at least 3 years slid 1 percent after rose 0.3 percent in May. The US personal spending which accounts for about 70 percent of the economy, climbed 0.2 percent but below median forecast. Initial jobless claims fell by 2,000 to a 1-month low of 312,000 in the week ended June 21.

The FED official, James Bullard, comments that the recovery in US credit markets in post-crisis years after 2009 has resulted in an expanding economy and hard to defend low borrowing costs.

Japan’s core consumer prices excluding fresh food rose 3.4 percent in May from a year earlier. Inflation jump is believed to be triggered from initial impact of sales tax rise implemented in April.

Another data from Japan’s government says household spending dropped 8 percent, more than a forecast fall of 2.3 percent. Unemployment rate for May was down to 3.5 percent from prior month 3.6 percent.

Euro areas economic confidence fell to 102 from a revised 102.6 in May. The preliminary estimate for German CPI rises 0.3 percent in June and quells worries of deflation. German Ifo institute’s business climate index declines to 109.7 from 110.4 in May.

UK current account for Q1 narrowed down sharply to minus GBP18.5 billion compared to minus GBP23.5 billion in previous Quarter. GDP for final quarter of 2013 grew at 0.8 percent and in-line with median forecast.

Technical Forecast

USD/JPY is still trapped in the range from 101.00 – 103.00 regions. This week, we reckon the bears might break below the 101.00 supports if USD continues to weaken against yen. Immediate resistance has moved down to 102.00 levels while breaking below 101.00 supports may drive lower to 99.50 areas in near future.

EUR/USD has been hovering around 1.3600 levels and market is prone to move in either trend direction in coming week. Technically, we predict the initial range limit will be restricted to 1.3500 – 1.3700 regions until we see the strength breaks beyond either one of them. This week, pay attention to manufacturing PMI data of European nations that will lead Euro currency trend.

GBP/USD has been dawdling around 1.7000 levels but fails to gather bullish strength for climbing higher. Technically, we reckon the trend might begin to correct soon if the escalation could to take place after mid-week. The market is temporary support at 1.6950 levels but driving beneath here will lead the bears to 1.6800 areas before bargain-hunting steps in. Abandon your short-view if the trend marches above 1.7065 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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