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Ukraine Tension Boosts Demands

A guest post written by DAR Wong

Currency Market Observations – 3 March 2014

Fundamental Outlook

The US expands at slower pace in growth while housing recovery still stays looming. Germany sees steadiness in accelerating economy as unemployment declines. The Ukraine Tension spurs flight of funds into leading economies in US and Britain as demands having been surging for stocks and bonds. UK grows for fourth straight quarter in Q4.

The US consumer confidence measured by Conference Board’s index decreased to 78.1 in February from a revised 79.4 in January. New home sales increased 9.6 percent to a 468,000 annualized pace in January, highest in past 5 years record. Another report on pending home sales rose 0.1 percent in January and less than forecast, conflicted the housing recovery in open markets.

The weekly jobless claims increased 14,000 to 348,000 in the week ended 22 February, exceeding all forecast. Orders for durable goods fell 1 percent in January compared to revised 5.3 percent slump in December, making improvement at smaller dip.

The US Institute for Supply Management shows factory gauge unexpectedly increased to 59.8 this month from 59.6 in January. Gross domestic product expanded at a slower pace than initially estimated at 2.4 percent in the fourth quarter.

Japan’s industrial output rose 4 percent in January and above median forecast, indicating boost in demands ahead of sales tax rise in April. Core consumer prices rose 1.3 percent in January while unemployment rate remained at 3.7 percent, both in line with forecast.

German business confidence measured by Ifo institute’s business climate index advanced to 111.3 in February from 110.6 in January, making highest record in past 2-1/2 year. Another report on German unemployment fell for third month in February, showed good signs by seasonally adjusted 14,000 downwards to 2.914 million after falling by 28,000 in January.

In Eurozone, an index of executive and consumer sentiment rose to 101.2 in February from prior month 101.0. Euro made biggest monthly rally since last April as higher-than-projected inflation emerged. Consumer price flash estimate in February rose 0.8 percent from a year ago and may refrain policymakers from adding monetary stimulus in next week’s meeting.

The Greek bonds jumped, sending yields to a 4-year low. Traders speculate the country will negotiate for settlement with international creditors to ensure smooth bank-recapitalization. The 30-Y bonds yield fell below 7.0 percent for the first time since April 2010.

The UK economy made straight gains in Q4 after being led by more trades, investment and consumer spending. British gross domestic products (GDP) rose 0.7 percent in final quarter while government’s 10-Y bonds rose with yield falling to 5-week’s low. The deepening tension in Ukraine has boosted demand for haven assets in strong economies like US and UK markets.

Technical Forecast

USD/JPY closed at 101.75 on Friday with rising trend in Yen. This week, we reckon the market may fall further with targets aimed at S1 – 100.70 and S2 – 99.50 regions. The trend has been trading sideways for few weeks and still waiting for solid news to lead it out of consolidation. Abandon your short-view if the bulls ascend beyond 102.70 resistances.

EUR/USD shot up above 1.3770 and reached 1.3825 highs on Friday after the consumer prices rose higher. This week, the market may continue to be bullish so long the market stays above 1.3700 supports. The trend might thread on from 1.3700 – 1.3900 ranges but beware of piercing up above 1.3900 resistances as this could climb into bullish sentiment.

GBP/USD has been threading sideways last week while the market is still capped under 1.6823 highs. Technically, the market is prone to decline in coming week. We foresee the downside targets lie at S1 – 1.6500 and S2 – 1.6330 levels if the bear trend begins. However, beware of further up move beyond 1.6823 because this will trap short traders for unexpected upward reversal.

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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