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The US Shows Recovery in DJIA Markets

A guest post written by DAR Wong

Currency Market Observations – 20 August 2012

Fundamental Outlook

US retail sales advanced for the first time in four months while construction growth rose at its highest in a four-year record that lifted the stock markets. German growth slowed down in Q2 due to debt crisis but exports for Euro area grew in June among 17 nations. European Central Bank (ECB) still poised for stamping out the regional debt crisis while supported by Germany.

The US retail sales rose 0.8 percent in July, making first gain in 4 months after sliding the previous month by 0.7 percent. Factory output advanced 0.6 percent after 0.1 percent growth in June. The core CPI climbed 0.1 percent in July and was up 2.1 percent over the past 12 months, making little change in inflation price.

Another report on National Association of Home Builders/Wells Fargo builder confidence index rose to 37, showing best record since February 2007 and joyfully lifted DJIA markets last Thursday. The improvement in residential pickup was further reinforced by the strong gain in building permit with 812,000 annual growth rates in July, its best record in past 4 years.

The US initial jobless claims climbed by 2,000 to 366,000 in the week ended August 11, in line with median forecast. Another report on the index of US leading economic indicators climbed more than forecasted in July. The Conference Board’s gauge of the outlook for the next 3 to 6 months increased 0.4 percent, after a revised 0.4 percent drop in June.

German Growth Domestic Product (GDP) for Q2 rose 0.3 percent from the first quarter, when it gained 0.5 percent. The gain was below forecast and believed to be dragged down by euro debt crisis. However, another report on GDP in the Eurozone fell 0.2 percent from the first quarter. The viral debt crisis is affecting the economic slump by damaging the investors’ confidence with rising unemployment.

German Chancellor Angela Merkel is backing ECB’s efforts in helping to reduce borrowing costs among indebted countries with conditional implementation. This includes strict conditions of borrowing governments to initiate austerity measures and budget controls, in which Spain and Italy have not responded for aid request.

The UK Royal Institution of Chartered Surveyors said, property price index fell to minus 24 from minus 22 in June, the worst in a 12-month record. The jobless claims unexpectedly fell in July by 5,900 to 1.59 million, due to more job creations for the Olympics Games. Another separate report showed retail sales, including auto fuel, gained 0.3 percent and was boosted in oil and food prices by discounted sales.

Technical Forecast

USD/JPY pulled up by reacting to stronger US growth recovery last week. The market closed at 79.55 for the weekend while bypassing above the EMA200 resistance line. This week, we reckon the trend will encounter selling forces at 79.60 – 80.00 areas with probability of rolling back down to 78.80 levels. The trend is largely trading inside a consolidation phase and will embark on a new upward trend only after it can break above 80.00 resistances.

EUR/USD traded in the range from 1.2250 – 1.2380 areas last week while failure to close above 1.2350 levels indicated weakness. This week, we expect the resistance to emerge at 1.2380 – 1.2400 regions if the trend desires to head southward to 1.2150 levels. Otherwise, breaking above 1.2400 may attempt 1.2520 regions for a longer technical consolidation.

GBP/USD reached 1.5744 highs last week after breaking the 1.5700 resistance for just one day. The market turned down on Friday and closed at 1.5688. This week, we reckon the trend to be bearish and may head down to 1.5500 regions. However, the resistance at 1.5750 levels needs to be capped without breaking above this benchmark.

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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