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Yen Rises as Safe Haven Asset

A guest post written by DAR Wong

Currency Market Observations – 17 March 2014

Fundamental Outlook

The US stocks turn down amid fear of Ukraine tension and China slowdown. Gold and Yen rises as flight of fund have moved into it as safe haven as Dollar wanes. European Central Bank (ECB) President Draghi comments on his aim to lower euro value and interest rates.

The US core retail sale was up 0.3 percent and advanced for the first time in past 3 months. Jobless claims fell to 3-month low record at 315,000 in the week ended 8 March. The US stocks retreated while treasuries climbed on Ukraine tension.

The US producer prices were down unexpectedly in February by 0.1 percent after followed 0.2 percent gains. The core prices dropped 0.2 percent.

Last week, global equity markets were weak amid fears of Russia troops stepped up military exercises on Border of Ukraine. China also reported the decline in trade balance at USD23 billion and consumer inflation stayed frail at 2.0 percent.

The US Dow Jones benchmarks fell from near record high 16,400 regions and settled at 16,065 levels for the weekend. Treasuries climbed, as copper and crude oil led commodities lower amid concern that signs of a slowing economy in China will hurt demand. Through the 5 days, the yen strengthened together with Gold metal.

Yen gained for a fifth day versus the dollar. Market closed at 101.34 on Friday after making the longest consecutive fall in USD//JPY rates over 10 months. Investors sought haven assets before a weekend referendum if Crimea would still be part of Ukraine or seek allegiance to the Kremlin government.

European Central Bank (ECB) President Mario Draghi says his forward guidance may help to weaken the euro and lower real interest rates in coming months. The fear of rising euro amid low growth may trigger risk of deflation and pose difficulty to achieve inflation preset by policymakers at 2.5 percent.

Eurozone Industrial production was down 0.2 percent in February and below median forecast. In U.K. economy, factory output rose more than forecast in January by 0.4 percent, showing evident of recovery signs.

Technical Forecast

USD/JPY has been winding down last week due to fear in Ukraine. This week, we foresee the breaking of 100.70 supports may lead the bears to 99.50 targets should Yen rises further. The market will only reverse up if we see a clear political situation in Russia-Ukraine scuffle. Topside resistance will emerge at 102.70 – 103.00 in case the bulls climb up.

EUR/USD surged on Friday and closed at 1.3913 levels. Euro remains strong though ECB policymakers have tried to pull it lower. This week, we reckon the bargain-hunting will start at 1.3850 regions and may escalate above 1.4000 benchmarks. Technically, crossing above 1.4000 levels will ascend to 1.4100 as our next target!

GBP/USD is sitting on 1.6600 supports and may be prone to go higher in coming week. The market is subject to positive fundamental news while consolidating from 1.6600 – 1.6800 regions. We predict a probability to pierce above 1.6800 resistances and move up to 1.7000 levels in coming week. Abandon your long-view if the trend sinks beneath 1.6600 supports.

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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