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The US Unemployment Sinks to 4-Year Low

A guest post written by DAR Wong

Currency Market Observations – 11 March 2013

Fundamental Outlook

The US non-farm payroll rises 236,000 as jobless rate dives to 4-year low record. Dow Jones Average Index (DJIA) makes new historical high 14,412 on Friday after super job growth. Japan recovers in Domestic Growth Product (GDP) and exit of central bank chief Shirakawa spurs new weakening trend in Yen value. European Central Bank (ECB) and Bank of England (BOE) hold interest rates and policies unchanged.

The US Institute for Supply Management’s non-manufacturing index unexpectedly increased to 56 in February from prior month 55.2. Another report on US business spending excluding military equipments and aircrafts climbed 7.2 percent in January and the biggest gain since September 2004. Factory order dropped 2 percent after a revised 1.3 percent increase in December, slumped in demands for hardware and military aircrafts.

The US trade deficits widened 16.5 percent in January to USD44.4 Billion from USD38.1 billion in December due to increasing oil imports. Jobless claims unexpectedly fell by 7,000 to 340,000 in the week ended 2 March at 6-week low record. Net worth for households and non-profit groups increased by USD1.17 trillion in Q4, or 1.8 percent from the previous three months, to USD66.1 trillion.

On Friday, monthly payroll for February climbed 236,000 after a revised 119,000 gain in January. The unemployment declined to 7.7 percent at lowest since December 2008. Wholesale inventories gained 1.2 percent in stockpiles in January as consumer spending picked up. DJIA escalated to new all-time high at 14,412 levels as celebration to job recovery at highest record since sub-prime crisis erupted. Dollar spiked higher against European currencies.

Japan’s GDP rose an annualized 0.2 percent in Q4, compared with a preliminary calculation of a 0.4 percent contraction. The current account deficit in January was JPY364.8 Billion (USD3.8 billion) and lower than initial estimate. Yen made new record at 3-year low at 96.00 levels as Dollar surged.

In Eurozone, an index that measures services industry fell to 47.9 from 48.6 in January. Exports in the 17-nations slid 0.9 percent in the Q4 of 2012, down for first time in more than 3 years and GDP contracted 0.6 percent. Both ECB and BOE held interest rates and policies unchanged in last Thursday meeting, giving little clue for the recovery status in Euro economy amid rising debt crisis.

The leading economy – German reported its factory orders, after adjusted for seasonal swings and inflation, declined 1.9 percent from December. Another report on industrial production held unchanged in January, after rising 0.6 percent in December.

Euro finance ministers have discussed for looser budget policies as austerity plans backfires in many countries. The election rout in Italy, France’s squabble against German-led plan in austerity measures and other viral issues of sovereign debt debacles from Cypress, Spain etc have waned confidence of investors in the absence of assurance from policymakers.

Technical Forecast

USD/JPY reached 96.56 highs on Friday as US job payrolls surged. The market settled at 95.99 and will be prone to soar in coming weeks. Technically, we foresee the market will sit tight on 95.00 supports and aim at 98.00 levels as our next targets if Yen continues to devalue in favor of BOJ’s policy.

EUR/USD declined and closed at 1.3004 on Friday. Technically, we reckon strong support at 1.2960 – 1.3000 that will be laid with buying interest. This week, submerging below 1.3100 resistances may attempt another dive if 1.2960 supports cannot hold the plunge. Only floating above 1.3100 levels could see a technical recovery to 1.3250 regions.

GBP/USD closed at 32-month low 1.4922 on Friday as Dollar surged. The market has potential to fall further in depth due to backlash of austerity measures in the economy. This week, we reckon continual plunge may each down to 1.4700 areas should bearish trend continues. The market needs to elevate to 1.5200 regions before we can access the technical recovery.

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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