Fundamental Outlook
The US Fed chairman Bernanke claims more accommodative policies will be needed to ensure further progress in recovery. European finance ministers agree to pump in more fresh money for cushioning the crisis for coming two years. UK improves in services amid housing slump.
The US Conference Board’s consumer confidence index dropped to 70.2 in March from the previous month’s 71.6. The S&P/Case-Shiller index of property values in 20 cities fell 3.8 per cent in January from a year earlier, matching the median forecast. The orders for US durable goods in February advanced 2.2 per cent, less than projected but persisted in mild recovery.
Initial jobless claims slid 5,000 in the week ended March 24 to 359,000, registering the lowest record since April 2008. The US gross domestic product (GDP) expanded at a three per cent annual rate from October through December, unchanged from the initial estimate. Another report said consumer spending climbed 0.8 per cent in February, adding evidence for recovery.
Bernanke announced last Monday that accommodative monetary policy would be needed to sustain growth and keep unemployment low at current 8.3 per cent. Stocks and commodities spiked after his comment.
Japan’s retail sales increased 3.5 per cent in February from a year earlier, a third straight monthly rise and indicating return of consumer confidence. Another separate report on consumer prices excluding fresh foods climbed 0.1 per cent from a year earlier, showing a mild improvement.
On Friday, the Trade Ministry said Japan’s industrial production slid 1.2 per cent in February. Other reports showed the unemployment rate fell to 4.5 per cent. A weakening yen would aid in exports and improvement in the economic recovery.
Last Friday, euro area finance ministers agreed in Copenhagen to create fresh aid funds of 500 billion euros (US$666 billion) that would add on to existing 300 billion euro bailout funds. This total 800 billion euro funds would be used to defend a turmoil over next two years.
In UK, home values dropped one per cent in March at biggest decline since February 2010. Mortgage approvals fell to lowest in February over past eight months. Only 48,986 home loans were granted compared with revised 57,899 cases in the previous month.
Another report showed UK services industries grew 0.2 per cent in January, showing signs of gaining momentum in the first quarter. Consumers were still pessimistic in the home market while the austerity measures were beginning to take effect in services and manufacturing recovery.
Technical Forecast
US dollar/Japanese yen recoiled up on Friday from bottom 81.83 and closed at 83.85 for the weekend. We reckon the market has completed the first phase of correction.
This week, the trend might move sideways from 82 to 83.50 regions in firm sentiment or decline further to 80.50 levels as our next lower target. Observe the down trend once the bears break beneath 82 supports.
Euro/US dollar closed at 1.3340 on Friday with tight range shown in day chart. Technically speaking, the market should be capped at 1.3400 resistances while prone to dive lower at 1.3150 to 1.3200 regions in coming week. However, beware of fundamental news that might protrude above 1.3400 resistances and aim at 1.3500 if the bulls take charge.
British pounds/US dollar penetrated above 1.6000 resistances and reached 1.6038 on Friday before it settled at 1.5996 for the weekend. This week, the sentiment is neutral as the trend might attempt higher at 1.6100 regions or head down to 1.5800 support for consolidation. Observe the fundamental news in early week to decide the trend direction.
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 23 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected].