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The US Job Data Improves in More Hiring

A guest post written by DAR Wong

Currency Market Observations – 06 August 2012

Fundamental Outlook

The US job data escalates in recovery amid looming economy. Investors become disappointed in European Central Bank’s President Draghi for showing no commitment in putting stimulus into euro and resolving debt crisis. London economists expect growth to fall in 2012 by judging at falling retail sales, job shrinkage and weak housing prices.

The US Conference Board’s index of consumer confidence for outlook over next 3 to 6 months increased to 65.9 in July from prior 62.7, signaling better outlook over year-end. FED policymakers reinforced its stance to standby for injecting stimulus if necessary for reviving the job markets.

The Institute for Supply Management’s factory index was 49.8 in July compared to 49.7 in June, settling at 3-year low record and staying below 50 benchmarks indicates contraction. The US unemployment claims rose 8,000 to 365,000 in the week ended July 28 showing struggling job creation in the contracting economy.

On Friday, the monthly payroll figure increased in July by 163,000 followed a revised 64,000 gain in June. Unemployment rose to 8.3 percent. American factory orders fell 0.5% in June against an expected gain.

The economic confidence in Eurozone declined to 87.9 in July from prior 89.9, threatened by increasing worries of debt crisis. Euro unemployment in the 17 nations hit a revised 11.2 percent in June and unchanged from May. The euro-area inflation rate remained at 2.4 percent in July, the same as in the previous two months.

A gauge of manufacturing in euro region fell to a 37-month record low of 44 from 45.1 in June. The murky situation adds further disappointment to investors when European Central Bank’s President Mario Draghi mentioned no stimulus and showed no commitment in reversing debt crisis in last Thursday meeting.

UK manufacturing fell to 45.4 in July from a revised 48.4 in June, indicating deepening recession. Britain’s mortgage rate fell to lowest record in 18-months in June after lenders granted only 44,192 loans to buy homes, compared with a revised 50,544 the previous month.

Another report from the Confederation of British Industry showed annual retail sales growth fell to 11 in July from 42 in prior month, much worse than median forecast. Many UK economists predict Britain will face 0.5 percent fall in growth in whole 2012 and the shortfall of tax revenue will force Chancellor of the Exchequer – Osborne to miss his target for cutting the deficit to GBP120 billion for this fiscal year.

Technical Forecast

USD/JPY recovered from 78.07 based on Friday after US payrolls surged. The market closed at 78.46 for the weekend after falling off 78.77. This week, we reckon sideway trend will occur again while market still keeps its support at 78.00 levels. Topside is opened to 79.30 regions should traders short-cover in market.

EUR/USD has been swinging sideways from 1.2130 to 1.2400 regions last week though trend is still prone to be bearish. This week, we reckon the market may be constricted inside this same range but picking to short from 1.2400 areas may be wiser as the trend could lose its footing again. However, piercing and settling above 1.2400 resistances might attempt 1.2520 targets.

GBP/USD has been well supported at 1.5500 areas as we predicted last week. This week, we reckon the market trend is still strongly resisted at 1.5700 levels while the bear might take control again. In our opinion, the overall evaluation of market fundamentals and technical outlook are still pessimistic for investors. Beware of breaking beneath 1.5470 supports as this could initiate a new southern direction.

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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