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US Stocks Garner in Strong Trend

A guest post written by DAR Wong

Currency Market Observations – 1 September 2014

Fundamental Outlook

The US shows improved economic data in durable goods order and growth in Q2 performance. American stocks rise amid speculation that growth will continue into coming new quarter with S&P 500 closes above 2000 benchmarks. Japan stays sluggish after sales rise effect has begun to slow down domestic demand and growth. European Central Bank (ECB) President Mario Draghi signals more stimulus if if economic situation worsens.

The US new home sale declined 2.4 percent in July to 412,000 annualized pace, making lowest in past 4 months after June was revised to 422,000 annualized rates. Order for durable goods soared 22.6 percent after revised 2.7 percent gains in June, confirmed by surge for airplane demand. But core order slid 0.8 percent versus revised 1.7 percent gains in prior month after transport equipment contracted.

Another separate report on business confidence filed by US Conference Board rose to 92.4 in august, highest since October 2007. Jobless claims dropped 1,000 to 298,000 in the week ended Aug. 23 from 299,000 in the prior period, little changed from previous week.

The preliminary growth revealed by Gross Domestic Product (GDP) rose 4.2 percent in Q2 through June and higher than prior 4.0 percent gains in previous quarter. The housing market strengthens after pending home sales index gained 3.3 percent after a 1.3 percent decrease in June. On separate report, consumer spending unexpectedly decreased 0.1 percent in July, the first drop in 6 months, after rising 0.4 percent in prior month.

In summary, US finished in better performance last week with improved economic data. Stocks rose with S&P 500 Index closed at 2003 benchmarks on Friday, biggest monthly gain since February. Investors speculate central banks will continue to spur growth after FED Yellen refrained to hike rates in recent Jackson Hole summit and European Central Bank (ECB) President hinted new stimulus.

Japan’s industrial production rose less than expected in July while household spending slumped. Output expanded 0.2 percent from June and household spending declined 5 percent in the Q2 seasons. Another report on inflation showed consumer prices excluding fresh food rose 3.3 percent from a year earlier, unchanged from prior month.

German business confidence declined for a fourth month, causing worries that the main economic engine in Eurozone may lead the fall. German Ifo institute’s business climate index fell to 106.3 in August from 108 in July. ECB President Draghi signals policymakers may adopt new stimulus for avoiding deflation risk if situation worsens.

Eurozone inflation has been slowing in August and the unemployment rate remains close to a record among the 18 nations. Consumer prices rose 0.3 percent in August from a year earlier after gained 0.4 percent in previous month. Unemployment remained at 11.5 percent in July.

Technical Forecast

USD/JPY has been hovering around 104.00 regions with limited bullish strength. This week, it will be a challenge to see the market climbing above 104.50 if it aims to ascend higher. Otherwise, we reckon likelihood to fall back at 103.00 supports if policymakers refrain to take new monetary action after the central bank meeting in this week.

EUR/USD continued to stay in weak demand last week. Technically, we reckon the market might be supported at 1.3050 – 1.3100 this week. The trend may rebound from this bottom and begin to consolidate but will be capped under 1.3250 resistances. Abandon your long view if the market falls below 1.3050 supports.

GBP/USD has begun to slow down in decline after reaching 1.6538 bottoms. This week, we foresee the market may start to consolidate sideways with 1.6700 resistances acting from topside. However, breaking below 1.6538 bottoms may indicate bear trend to drive lower at 1.6400 areas. Observe the UK manufacturing data for coming week.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at dar@pwforex.com

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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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