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U.K. Properties Rise to Record High

A guest post written by DAR Wong

Currency Market Observations – 16 December 2013

Fundamental Outlook

The U.S. budget deficit narrows as industrial production increases. Weekly jobless claims surge after Thanksgiving Day. Yen devalues again and yields on Japanese Government Bonds drop. U.K. housing prices rise to record high after demands push property values higher.

The U.S. government unveils plan to ease spending cuts by about USD63 billion over next 2 years that will reduce the deficit by USD23 billion, breaking a three-year cycle of fiscal standoffs. In a separate report, the budget deficit narrowed in November as revenue increased to USD182.5 billion while spending totaled USD317.7 billion.

The U.S. jobless claims surged 68,000 to a 2-month high of 368,000 as of weekly cycle ended 7 December, exceeding median forecast. Retail sale gained 0.7 percent after followed 0.6 percent advance in October. Core retail sale was up 0.4 percent and double the forecast.

American producer prices declined 0.1 percent in November and down for a third month, after dropping 0.2 percent in prior month. Core prices rose 0.1 percent. Tapering of monetary stimulus rekindles concern in market as Treasury yield has climbed last week to 2.87 percent on Friday.

Last week, the Chinese Yuan surged to a 20-year high as trade surplus swells to the biggest since 2009. The Yuan traded at 6.0710 regions towards weekend and reflected the strongest level since 1993. Market economists speculate China’s policymakers may be more willing to float Yuan value at open market to cool down its heating inflation.

Japanese Yen devalued to 103.92 on Friday at 28-month’s weakest level before rebounding. The contracting market trend has pulled up the Japanese Government Bond (JGB) which inversely punts down on the yield. Widening spread of yield in U.S. Treasury and JGB is trading at biggest gap since April 2011 and raises concerns of tapering in U.S. stimulus.

Royal Institution of Chartered Surveyors reports the U.K. housing price index increased to 58 in November, the highest since June 2002. Another report on industrial production increased 0.4 percent from September, when it rose 0.9 percent, indicating recovering signs for Q4.

U.K. housing prices rose to record high in November as strengthening demand pushed values higher in all regions of England and Wales. LSL Property Services Plc (LSL) says property values increased 0.6 percent from October to an average GBP238,839 (USD390,900).

Technical Forecast

USD/JPY made new high 103.92 on Friday and closed at 103.16 levels. This week, we reckon strong buying interest at 102.50 regions that may push the trend higher. The market sentiment remains bullish and prone to pierce above 104.00 for trying 105.00 targets. However, beware of unexpected fundamental news in case turning below 102.50 levels might ignite a bear trend!

EUR/USD reached one-week high at 1.3811 and closed at 1.3736 for the weekend. This week, the market may move into consolidation from 1.3600 – 1.3800 ranges while waiting for new direction to emerge. We expect high probability in bullish sentiment for taking another uptrend once the current resistance breaks at 1.3811 levels. The market should not drive below 1.3600 supports for maintaining bullish trend.

GBP/USD is currently facing support at 1.6260 levels as the trend may begin to consolidate in coming week. Resistance stays at 1.6465 which was last week’s high. Technically, we foresee a possibility to drawdown at 1.6150 regions before market rebounds higher. Keep track of U.K. economic data as the continual strength in recovery might lead the Pound higher at 1.6600 regions once the uptrend pierces above 1.6465 resistances.

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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