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The US Treasury Yields at Highest Since 2011

A guest post written by DAR Wong

Currency Market Observations – 6 January 2014

Fundamental Outlook

The US pending homes sales increase while consumer confidence also gains in optimism. The US treasury yields rise to highest record since 2011 ahead of unemployment in coming week. Stock prices in US and Europe remain in bullish sentiment as of New Year opening. UK economy is seen recovering with rising mortgage loans and manufacturing growth.

The US pending home sales increased 0.2 percent after declined 1.2 percent in October. The recent rise in US bond hampers growth in housing recovery as fear of interest rate is stepping into market. Another separate report on consumer confidence measured by Conference Board climbed to 78.1 in December from prior month 72.0.

The S&P/Case-Shiller index of property prices gained 13.6 percent from October 2012 after a 13.3 percent annual surge ended September. The Institute for Supply Management’s factory index eased to 57 from November’s 57.3, which was the highest since April 2011. Jobless claims fell by 2,000 to 339,000 in the period ended 28 December.

As the year closed in 2013, the Dow Jones Industrial average (DJIA) index jumped 26 percent in 2013, ending at 16,557 levels on 31 December. Last Friday, US treasury yields rose to the highest levels since 2011 when 10-year bond yields exceeded 3 percent and 30-year bond yields approached 4 percent. FED Chairman Bernanke remarks the recovery is making a head start amid rising employment.

In the eurozone, Markit reports an index of manufacturing rose to 52.7 in December from 51.6 in November. The outcome data is same as initial estimate published on 16 December. Euro currency snapped its bull run in early January after climbing from November, due to profit-taking activities.

The UK manufacturing growth unexpectedly slowed down in December as export weakened. The gauge of factory activity fell to 57.3 from a revised 58.1 in November.

Another report on UK mortgage approvals rose more than median forecast in November. The data rose to the highest level in almost 6 years after 70,758 mortgage loans were granted. Nationwide Building Society says housing prices climbed 1.4 percent in December.

Technical Forecast

USD/JPY touched over a 5-year high at 105.44 and receded on Friday. This week, we foresee the support will sit at 104.00 levels and breaking below here might drive lower to test 102.40 regions. On the other hand, surging above 105.50 resistances will continue the ascension to 107.00 targets.

EUR/USD plunged for 2 days before last weekend due to profit-taking. This week, we reckon the support may temporary rise at 1.3580 levels while dropping lower will meet bargain-hunting at 1.3500 regions. The trend might be moving into sideways more likely as the technical recovery could drive up to 1.3720 areas.

GBP/USD has fallen off recent high 1.6603 levels. This week, we expect the market to make a technical correction at 1.6200 regions as market demand wanes. The market has been climbing for past 8 weeks without correction. Hence, it is reasonable to expect some liquidation this week. Abandon your short-view if the trend drives above 1.6603 again!

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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