Fundamental Outlook.
Both the US new and existing home sales declined in February proving continual distress in housing demands. Japan is pumping record cash into the central bank’s lenders account to aid crisis recovery.
The damage caused by recent earthquake in Sendai is estimated to be four times larger than Katrina hurricane in 2005. Bank of England (BOE) policymakers indicate risk of accelerating infl ation and prepare rates hike in May.
The US existing home sales in February shed 9.6 per cent to a 4.88 million annual rate. The median housing price dropped 5.2 per cent from a year earlier with 39 per cent of the sales were abandoned property.
Another separate report showed new home sales decreased 16.9 per cent to a 250,000 annual pace, proving fatigue in housing markets.
The American durable goods, made to last for years, received lesser orders in February with 0.9 per cent plunge after gaining 3.6 per cent in prior month. While consumers were concerned of slowdown in recovery, Labour Department reported initial jobless claims dropped 5,000 to 382,000 in the week ended March 19, in line with median forecast.
The overall growth in the fourth quarter of 2010 grew 3.1 per cent at annual rate, led by a jump in consumer spending. Economists expect a decline in fi rst quarter due to energy rises.
Japan’s central bank policymakers added emergency cash since the earthquake. Bank of Japan’s lending current-account balances as of March 22 exceeded 36.4 trillion yen record set in March 2004.
Its government estimates the damage caused by earthquake and tsunami at 25 trillion yen (US$309 billion), about four times the size of destruction durng 2005 Hurricane Katrina in New Orleans, US. German business confidence fell less than median forecast in March.
Munich-based Ifo institute said its business climate index declined to 111.1 from 111.3 in February, a record never seen since Germany unifi ed in 1991.
UK retail sales lost more than economists forecast in February by 0.8 per cent after it jumped revised 1.5 per cent in January.
Inflation accelerated in February when consumer prices rose 4.4 per cent from a year earlier after a four per cent increase in January. Core prices rose an annual 3.4 per cent after prior three per cent increase.
A separate report showed the budget deficit unexpectedly widened as government revenuefell. BOE officials are pressured to rates hike for combating inflation in May central bank’s meeting.
Technical Forecast
US dollar/Japanese yen has been remaining fl at at 81.00 regions after the G7 intervention jump-started the market from 76.67 lows. The bulls refuse to cross above 82.00 levels that could elevate higher to 84.00 regions, thus showing reluctance of investors’ sentiments. We reckon the market is waiting for clearer fundamental direction to decide its new trend.
Euro/US dollar created a recent high 1.4248 but lower than the previous high 1.4282 made inlast November. In our opinion, the market has potential to go either way due to fundamental news in early week. Observe your consolidation zone from 1.4050 to 1.4220 levels that breaking beyond any side of these benchmarks might initiate a new direction.
Going high will potentially test 1.4350 regions while downside targets are identified at 1.3820 regions.
The UK pound sterling/ US dollar had a straight fall after making a recent top 1.6401 last week. While it is supported at 1.5970 in coming week, we foresee a potential technical rebound may recover to 1.6270 regions. Traders should take advantage of this good range to create profi ts but tighten your risk factors from buying from bottoms.
Disclaimer: This article was written for general information only. No liability by the writer or newspapers.
Dar Wong is the founder of PWFOREX.com with 22years of trading experience in global derivatives and foreign exchange markets. He can be reached at dar@ pwforex.com.