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Western Stocks Decline Ahead of Weekend

A guest post written by DAR Wong

Currency Market Observations – 23 July 2012

Fundamental Outlook

The US economy is constricted in little movement with no significant expansion seen. Euro stocks and currency slide ahead of weekend due to Spanish debt woes. The Britain struggles in emerging from recession but still plagued by ballooning budget deficits.

The US retail sales in June were much affected by shrinking employment after it dropped 0.5 percent vs. 0.2 percent decrease in May. Industrial production rose 0.4 percent after a revised 0.2 percent drop in May. The National Association of Home Builders/Wells Fargo sentiment index rose 6 points to 35 in July and surpassed the median forecast.

Another report showed American housing starts rose 6.9 percent in June to a 760,000 annual pace after a revised 711,000 rate in prior month. Existing home sales dropped in June after purchases slid 5.4 percent to 4.37 million annual rates at 8-month low record. The weekly job-benefit claims increased by 34,000 to 386,000 in the week ended July 14, showing no sign of improvement.

In Eurozone, German investors’ confidence measured by ZEW Center said its index fell to minus 19.6 in July from minus 16.9 in the previous month, showing cool down in growth. Towards to euro finance leaders, investors show no confidence in their efforts for bailing out the Greek and Spanish debts as euro fell to its lowest on Friday over 2-year record.  

The UK inflation declined 0.4 percent in June at 2.4 percent, making the lowest pace over last 2.5 years. Consumer prices rose 2.4 percent from a year earlier, the least since November 2009. Another report on jobless rate fell to 8.1 percent in May from prior 8.2 percent while jobless-benefit claims rose higher to 6,100 records.  

British housing markets remain at bottoms as the gauge of the quarterly outlook for property prices slipped to 15 in June from 19 in March. Halifax’s monthly house-price reported the home values increased only 1 percent in June from previous month. The other report by Nationwide Building Society showed 0.6 percent drop.

The UK retail sales increased merely 0.1 percent in June, including auto fuel. As the country is struggling to emerge from recession, the national budget deficit widened in June with shortfall, which excludes government support for banks, recorded GBP14.4 billion (USD23 billion) compared with GBP13.9 billion from a year earlier.

Technical Forecast

USD/JPY closed at the support area 78.46 on Friday while opening to guesswork for next week’s trend. In our opinion, we reckon that 79.00 levels will act as strong resistance unless the upcoming bulls could violate this level to initiate the uptrend. If the selling forces continue, we might see the market landing at 77.60 – 78.00 regions in coming week.

EUR/USD closed with bearish sentiment at 1.2153 which is a 2-year low record. This week, we foresee a possible plunge to beneath 1.2000 benchmarks if selling pressures begin in early week. As we predicted correctly last week, the resistance remains at 1.2300 levels that failing to close above here will cap all upcoming bulls.

GBP/USD turned down to 1.5615 on Friday after unfavorable data released in budget deficits. We forecast the trend will begin to head southward with resistance suppressing at 1.5680 regions. This week, the support may rise at 1.5460 – 1.5500 levels before we see some bargain-hunting appears in market.

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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