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US Hits Narrowest Budget Deficit Since 2007

A guest post written by DAR Wong

Currency Market Observations – 14 January 2013

Fundamental Outlook

The US jobless claims rise unexpectedly with sharp narrow down in government’s budget deficit. Japan unveils new stimulus in aggressive aim to reverse the ailing economy from recession and deflation. European Central Bank (ECB) and Bank of England (BoE) both hold their interest rates unchanged. ECB President Draghi expresses confidence in recovery when financial markets stabilize in 2013 and spike European currencies.

The US consumer credit gained USD16 billion in November after prior month’s gain of USD14.1 billion. Jobless claims increased by 4,000 to 371,000 in the week ended 5 January, showing improvement in job markets. Another report on government’s budget deficit narrowed to its best in December with shortfall shrank almost completely to USD260 million from USD$86 billion in December 2011.

USDX was down last week after remarks made by ECB Chief as well as suppressed by the narrower trade deficits ion Friday. However, the US trade deficit unexpectedly widened in November with increasing imports. Trade gap swelled 15.8 percent to USD48.7 billion, the largest since April.

Japan’s Finance Minister Taro Aso plans to acquire bonds issued by the European Stability Mechanism and euro-area sovereigns to maintain weak yen. On Friday, Prime Minister Shinzo Abe unveiled his first major policy stimulus with USD10.3 trillion (USD116 billion) aiming to drive a recovery from recession and end deflation. Yen receded to 30-month low against greenback beyond 89.00 benchmarks.

Eurozone’s economic confidence improved in December after an index of executive and consumer sentiment rose for a second month to 87 from 85.7 in November. ECB President Mario Draghi said the euro-area economy will recover in 2013 as bonds markets stabilize. In last week’s central bank meeting, policymakers kept its benchmark interest rate at 0.75 percent.

The average price of a home in England and Wales was GBP227,026 (USD366,000) last month, reported by Acadametrics and LSL Property Services Plc (LSL) in London. From a year earlier, value rose 3.2 percent. The Bank of England held interest rates at a record low of 0.5 percent in the central bank meeting and policymakers kept the quantitative easing target of GBP375 billion (USD600 billion) unchanged.

Technical Forecast

USD/JPY escalated again last week in strong market sentiment to above 89.00 levels. We reckon the market support is very resilient at 88.00 regions now and crossing above 90.00 in near future will aim at 92.00 areas as our next targets. Japan has invited global onlookers at its planned recovery and we foresee the yen will continue to recede.

EUR/USD reversed sharply above 1.3300 regions from last week’s 1.3039 bottoms after the comments made by ECB President. This week, we expect the market support to rise at 1.3250 – 1.3280 areas while the market may continue to short-squeeze to R1 – 1.3400 or R2 – 1.3500 benchmarks. Abandon your long-view should the market sink below 1.3250 supports lest buyers begin to liquidate for profit.

GBP/USD is weaker in surging sentiment compared to euro currency. This week, we reckon the market is well supported at 1.6000 – 1.6030 regions while the market will consolidate to find new direction. Abandon your long-view should the trend break beneath 1.6000 supports. However, piercing above 1.6180 resistances could climb higher to 1.6300 targets!

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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