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Yen Reaches 30-Month Low against Dollar

A guest post written by DAR Wong

Currency Market Observations – 21 January 2013

Fundamental Outlook

The US shows a recovery in housing starts and improving job market. However, investors are worried the debt limit will be hit soon if nothing is resolved by the US congress. Japan is reversing from recession with rapid weakening of yen while policymakers will meet this week to discuss further easing measures. Europe loses steam in the currency bullish sentiment as bad debt weigh on recovery.

The US retail sales climbed 0.5 percent in December, making biggest jump in past 3 months. Industrial production advanced 0.8 percent from November. Another report on housing starts climbed 12.1 percent in December to a 954,000 annual rate, exceeding forecast.

Weekly jobless claims decreased 37,000 to 335,000 in the week ended 12 January, the fewest since January 2008 and signaling better job markets. Building permits climbed 0.3 percent in December to a 903,000 annual rate, the most since July 2008, from a 900,000 pace in November.

The US Treasury Secretary Geithner warns the recent budget talks will only last till sometimes in March and severe economic hardship may emerge if no further solution is imposed on raising debt ceiling. Treasury bills maturing around the time when US government runs out of money to pay its obligations are higher than those on longer-maturity securities.

Japan’s machinery orders, an indicator of capital spending, climbed 3.9 percent in November. The yen trades to near 2.5-year low at 90.00 benchmarks as traders speculate the Bank of Japan (BOJ) will announce open-ended asset buying in the 2-day policy meeting starting 21 January.

International Monetary Fund (IMF) agrees to disburse EUR3.2 billion (USD$4.3 billion) to Greece after the country made new budget cuts. As the euro has been climbing after ECB President made recent optimistic remarks on regional recovery in 2013, it fell from almost 1.3400 highs on last Friday against greenback after reports showed Italian industrial orders dropped and Spanish bad loans increased.

The UK consumer prices for December rose 2.7 percent from a year earlier, but unchanged from prior month. Core prices slowed to 2.4 percent. A separate ONS data showed UK factory output prices fell 0.1 percent from November while core prices unchanged on monthly basis. Retail sales including fuel declined 0.1 percent in December despite the holiday seasons.

Technical Forecast

USD/JPY closed higher on weekly basis at 90.09 in lieu of central bank meeting. This week, wide speculation of trend is expected from 87.50 – 93.00 regions depending on the decision of policymakers. Traders will wait for the confirmation of more asset purchase to spike up the market.

EUR/USD is heavily resisted at 1.3400 as we predicted last week. The bulls have fizzled out but supported at 1.3250 for time being. This week, the technical chart suggests down trend once the 1.3250 neckline is violated and moving back to 1.3100 areas is possible. However, beware of piercing above 1.3400 resistances again as this will lead to 1.3500 regions.

GBP/USD broke below 1.6000 benchmark supports and settled at 1.5864 on Friday. The market has shown weakness with existing resistance building up at 1.5950 – 1.6000 areas now. This week, we forecast the trend will move lower to 1.5650 regions if the aforementioned resistance is intact.

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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