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Yellen Emphasizes Stimulus on Recovery

A guest post written by DAR Wong

Currency Market Observations – 18 November 2013

Fundamental Outlook

The U.S. Dow Jones Industrial Average (DJIA) Index made new historical record high last week. Federal Reserve Janet Yellen says economic recovery needs to be assured before withdrawing financial stimulus. American import rises and widens trade deficit. British jobless rate improved by falling from previous quarter. U.K. job numbers improve as unemployment falls.

The U.S. budget deficit narrowed in October by USD91.6 billion that was significant below USD120 billion shortfalls from a year ago. Trade deficit jumped 8 percent to USD41.8 billion from revised USD38.7 billion in August, indicating an increase in import than export in September.

Jobless claims in the week ended 9 November slid 2,000 to 339,000 from a revised 341,000 the week. Factory output rose more than forecast by gaining 0.3 percent after followed 0.1 percent gain in the prior month. Janet Yellen, current Vice Chairman of Federal Reserve, assures her stimulus until robust recovery is seen and undeterred by bubble risk.

Germany came under renewed pressure from the European Union to boost domestic spending. Top officials put blame on Germany for widening the nation’s trade surplus and causing Euro strength to escalate, thus obstructing the recovery in Eurozone economy.

The consumer prices among 17 nations among Euro area rose in-line with expectation at 0.7 percent for October on year-on-year basis. Core inflation gained 0.8 percent from a year ago compared to up 1 percent in September.

The British jobless rate dropped to 7.6 percent in Q3, the lowest since 2009, from 7.7 percent in the three months through August. Claims for unemployment benefit fell 41,700 last month.

The U.K. consumer prices rose 2.2 percent in October from a year earlier compared with 2.7 percent in previous month. Core inflation slowed to 1.7 percent, the least since September 2009. Another report on retail sales including fuel dropped 0.7 percent from September, when they rose 0.6 percent.

Technical Forecast

USD/JPY floated above 100.00 benchmarks on Friday as Yen weakened. Technically, we still reckon the trend to be sideways and the market needs to break above 101.50 resistances in coming week to confirm the bull trend. In case of draw-down, the market may head down to 98.50 levels for its first target for taking profit.

EUR/USD is temporary capped under 1.3500 levels and may be turning down in coming week. In our opinion, the market will be strongly resisted at 1.3570 regions in case the bulls climb higher. However, chances of winding down will be greater in coming week due to profit-taking. We expect the draw-down correction to re-test 1.3350 levels.

GBP/USD has been acting resilient in short-covering in past week. The market is loitering at 1.6100 regions and a clear runaway in the up move on coming Monday might ascend to 1.6200 – 1.6250 regions. Technically, we have spotted the support to emerge at 1.5900 levels should the trend soften. Abandon our long-view if the trend pierces below 1.5850 levels.

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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