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The US Shows Economic Recovery

A guest post written by DAR Wong

Currency Market Observations – 22 October 2012

Fundamental Outlook

The US projects better economic data and cushions speculations for further stimulus by policymakers. The Europe is sinking into debt crisis again while European Union leaders gather to resolve the issue. However, investors are confident of another bailout in Spain by European Central Bank. The Britain shows recovery in jobs and jobs but pounds declines amid profit-taking.

The US retail sales rose 1.1 percent in September after followed a revised 1.2 percent increase in August, triggered by launching of new i-phones sales. The industrial production rose 0.4 percent and higher than median forecast, after a 1.4 percent drop in August. Consumer-price index increased 0.6 percent for a second month in September while core prices rose 0.1 percent.

Another separate report on housing starts jumped to an 872,000 annual rate in September. Building permits added optimism after it was reported with gain to an 894,000 annual rate. Both data exceeded the median forecast and indicated growth in housing demands.

The US jobless claims increased by 46,000 to 388,000 in the week ended October 13. The Conference Board’s gauge of the outlook showed leading indicators increased 0.6 percent after a revised 0.4 percent drop in August that was bigger than initially reported.

On Friday, US existing home sales fell 1.7 percent to a 4.75 million annual rate in September, matching median forecast. Overall economy is strong and preparing to back up Obama for the coming election.

European Union leaders met in Brussels for a two-day summit to resolve sovereign debt crisis. European leaders committed to their goal of establishing a euro-area bank supervisor by year-end, opening the prospect of direct aid to Spain’s banks. ECB will be made as main supervisor over this new framework from January 2013.

The Spanish 10-year bond yield fell 12 basis points to 5.35 percent on Wednesday, the lowest level since April 2. Spain sold a combined EUR4.61 billion of securities maturity due in 2015, 2016 and 2022.

The UK jobless claims fell 4,000 to 1.57 million in September while the payrolls surged 212,000 to 29.6 million in the quarter through August. Analysts reckon the double gain could owe to increased hiring due to the Olympics seasons. Another report showed retail sales gained 0.6 percent from August, when they fell 0.1 percent.

Technical Forecast

USD/JPY closed in strong sentiment for weekend at 79.30 levels. The market needs to stay strong above 79.00 supports until mid next week in order to climb higher to above 80.00 benchmarks. Otherwise, falling below 79.00 will land in 78.50 areas again.

EUR/USD turns down from last week’s high 1.3139. We reckon the trend will begin to weaken while it consolidates in the range from 1.2900 – 1.3150 regions this week. While the market is still moving sideways, abandon your short-view if the bulls break above 1.3150 resistances.

GBP/USD falls from last week’s high 1.6178 and closed at 1.5997 in bearish sentiment. This week, we foresee the resistance will cap at 1.6080 levels while the downside target aims at 1.5860 regions. Abandon your short-view if the pierces above 1.6100 again.

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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