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The U.S. Increases Payrolls amid Recovery

A guest post written by DAR Wong

Currency Market Observations – 10 June 2013

Fundamental Outlook

The U.S. manufacturing and services index move in mixed sentiments. Jobless benefits claims fall while the payrolls jump higher in optimism. Dow Jones recovers from the recent correction inversely to decline of Japanese Yen. The U.K. reports modest recovery in housing demands and trade deficits narrow down amid higher exports.

The U.S. Institute for Supply Management’s factory index slid to 49 in May, at almost 4-year low record and from prior month 50.7 reading. From the same institute, service index climbed to 53.7 from 53.1 in April, indicating moderate recovery in non-manufacturing sector.

Due to rising stock values and improving job markets, household net worth and non-profit groups increased by USD3 Trillion from January through March, or 4.5 percent from the previous three months, to USD70.3 Trillion. Consumer borrowing accelerated in April by increasing USD11.1 Billion in credit followed a revised USD8.37 Billion gain in the previous month.

The U.S. trade deficit grew in April after imports climbed. The trade shortfall rose 8.5 percent to USD40.3 Billion from prior USD37.1 Billion in March. Jobless claims fell 11,000 in the week ended June 1 to 346,000. On Friday, the U.S. Commerce Department reported monthly payrolls in May rose 175,000 after a revised 149,000 increase in April. Unemployment rate rose slightly to 7.6 percent from prior 7.5 percent.

Last week, Japanese Yen dropped from brink of 100.00 tops to briefly below 95.00 on Friday. Japan shares slid correction while Nikkei 25 Average Index continued to decline about 1200 points from 13,750 tops. The composite index has been coming off from the recent 5-1/2 year record tops at 15,942 levels and clocks about 20 percent losses. However, Finance Minister Taro Aso says policymakers will not intervene in the financial market.

German factory orders decreased 2.3 percent from March after seasonally adjusted. Industrial production jumped 1.8 percent I April vs. prior month’s gain of 1.2 percent, which was highest in more than year.

European Central Bank (ECB) President Mario Draghi comments the euro-area economy will return to growth by the end of the year. In last Thursday meeting, policymakers held the main refinancing rate unchanged at 0.5 percent.

The U.K. construction unexpectedly returned to growth in May while retail sales increased. Markit and the Chartered Institute of Purchasing and Supply says the index of building activity rose to 50.8 from 49.4 in April. A separate report from the British Retail Consortium shows retail sales increased an annual 1.8 percent in May.

First-time home buyers in the U.K. climbed to a 13-month high in April. LSL Property says purchases rose 15 percent from the previous month to 22,000, the highest since March 2012. Trade deficits narrowed in April when trade gap recorded at GBP8.2 billion (USD12.8 billion) compared with GBP9.2 billion in March.

Technical Forecast

USD/JPY has dropped below our support 99.50 predicted last week, the market tested the 95.00 supports on Friday and closed at 97.50 regions. This week, we reckon the trend will be choppy while constrained in 95.00 – 100.00 ranges. If there is no fundamental support by the central bank, market is more prone to consolidate in bottom prices while capped at 98.00 resistances. Abandon your long-view if the trend penetrates below 95.00 levels.

EUR/USD broke above 1.3130 resistances and reached 1.3306 highs last week. Technically, the market is now staying firm but also may be losing steam. Hence, we foresee a potential consolidation from 1.3050 – 1.3300 this week as the some profit-taking may arise. Abandon your short-view should the bulls charge above 1.3300 tops again.

GBP/USD shot to 1.5684 highs before it receded and closed at 1.5557 for the weekend. The bullish trend was unexpected and short-squeezed traders from below 1.5300 regions. This week, we foresee the market trend will range from 1.5400 – 1.5700 levels where it may hover around 1.5550 areas most of the time. We forecast the bearish sentiment will only come in after mid-week going below 1.5550 levels.

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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