THE US economy is little changed while investors still monitoring the US dollar value. Japanese yen traded sideways in digestion after recent devaluation. European Union reached to an agreement to cut budget spending for the next seven years in Brussels meeting. Both Bank of England (BOE) and European Central Bank (ECB) kept interest rates unchanged. The US factory orders climbed 1.8 per cent in December though below forecast, after it was revised at 0.3 per cent drop in November.
Consumer credit rose for a fifth straight month in same stated month with consumer borrowing gained US$14.6 billion after followed a revised US$15.9 billion advance in November. Another report showed US wholesale inventories unexpectedly falling 0.1 per cent in December for the first time in six months. Trade deficits shrank to record low with trade gap narrowed 20.7 per cent to US$38.5 billion in December, the smallest since January 2010, after oil exports surged.
Japan posted current account deficit for December with shortfall at 264.1 billion yen (US$2.8 billion). Then yen slowed down in devaluation last week after Finance Minister Taro Aso said the weakening pace could be too fast. On the other hand, Bank of Japan (BOJ) Governor Masaaki Shirakawa will step down on March 19 and the retirement might accelerate Prime Minister Shinzo Abe’s campaign for aggressive easing.
European Union leaders agreed to a seven-year budget in spending cut for the first time. The proposed budget for period 2014 to 2020 was set at 960 billion euros (US$1.3 trillion), less than the 994 billion euros spent in the current budget cycle.
European Central Bank (ECB) president Mario Draghi expressed concerns of policymakers that strong Euro will hamper their efforts to pull the economy out of recession. Last Thursday, ECB kept its benchmark rate at a record low of 0.75 per cent.
The UK Acadametrics and LSL Property Services Plc reported average price of a home in England and Wales increased 0.2 per cent to 227,478 pounds (US$357,300) in January. BOE remained its interest rate unchanged at 0.5 per cent and its bond purchases will remain at 375 billion pounds (US$589 billion).
The NIESR predicted that the UK economy would expand 0.7 per cent this year instead of the 1.1 per cent forecast in November. The British Retail Consortium said retail sales rose 1.9 per cent in January from a year earlier.
Technical Forecast
US dollar/Japanese yen declined on Friday and settled at 92.64 for the weekend. Technically, we reckon the supports will lie at S1–92.00 and S2–90.30 levels if profit-taking persists in coming week. However, the possibility of surging higher is still potential while we keep our target at 95.00 areas. The euro/US dollar has begun its downfall after it broke below 1.3500 levels last week. This week, we expect the market to build up resistances at 1.3500 areas while continual plunge could drive to 1.3250 regions. The euro was facing liquidation as a sign to aid recovery in debt and exports in the 17-nation bloc.
The pound/US dollar may be trading in consolidation from now on with resistances emerging at 1.5850 – 1.5900 areas. The market is support at 1.3700 levels after it reversed up recently from 1.5630 regions. As we foresee the range for coming week may be constricted to 1.5700 – 1.5900 regions, abandon your long-view if the market sinks below 1.5700 again as danger of initiating new selling pressure.
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 24 years of trading experience in global derivatives and forex markets. He can be reached at [email protected].