Fundamental Outlook
THE US is facing debt ceiling soon but Congress has not mentioned the negotiation of another budget solution. Japan’s gross domestic product (GDP) improved in last quarter by contracting at a much smaller pace after the stimulus of yen devaluation began.
G20 nations met in Toronto to discuss new deadline of cutting deficits after the preset three-year target made in 2010 has not been fulfilled this month.
The US retail sales rose in January by gaining 0.1 per cent that matched the median forecast. Jobless claims dropped 27,000 to 341,000 in the week ended February 9, in better job markets.
Before the weekend, Federal Reserve chairman Ben S Bernanke said the US economy was far from operating at full strength and reiterated his commitment to record easing.
Democrats and Republicans in the US Congress have not begun negotiations for plans on cutting US$1.2 trillion, the deadline will be coming near the end of February.
According to sources, US leaders might advance a six-month funding measure about US$974 billion on February 25 that would finance the government through September 30.
Another report showed US government posted a January budget surplus for the first time in five years at US$2.88 Billion, compared with a US$27.4 Billion deficit in January 2012.
Japan’s GDP contracted an annualised 0.4 per cent in the three months through December, following a revised 3.8 per cent contraction in the previous quarter.
Consumer spending rose 0.4 per cent from the previous quarter. On the other hand, Economy Minister Akira Amari said the government’s 10.3 trillion yen (US$111 billion) stimulus package announced on January 11 would begin in April instead of starting in January 2013.
Last week, Euro finance chiefs met in Brussels to discuss aid to Cyprus and Greece as a tightening election contest in Italy and corruption allegations in Spain threatened to reignite the region’s debt crisis.
GDP in the euro area fell 0.6 per cent in the fourth quarter from the previous three months, the biggest decline since the first quarter 2009.
After the Group of 20 (G20) leaders committed at a Toronto summit in 2010 to halve budget deficits by this year, most advanced nations were now facing failure on the preset target.
Hence, G20 will discuss adopting a new deadline for deficit goals and may set 2016 as the new target date.
UK retail sales including fuel fell 0.6 per cent in January after they dropped a revised 0.3 per cent in prior month. GDP shrank 0.3 per cent in the last quarter of 2012 and was facing the threat of an unprecedented triple-dip recession.
The pound fell in sharpest weekly decline since June last year.
Technical forecast
US dollar/Japanese yen has slowed down in surge and consolidated last week from 92.00 to 94.50 ranges. This week, we reckon the market will continue to climb higher once it breaks above 94.50 resistances while expecting to reach 95.00 to 95.50 targets. Abandon your long-view if the trend sinks below 92.00 levels.
Euro/US dollar has been moving in weak sentiment as we predicted last week.
This week, we expect the trend may touch down at 1.3250 areas before bouncing up for recovery. Topside resistance emerges at 1.3500 regions which will cap the upcoming trend in case technical recovery begins.
Pound/US dollar flushed down in weakness after growth contracted in the last quarter.
The market is expected to digest the bears by making mall consolidation at 1.5650 to 1.5680 areas this week. The continual downtrend could reach 1.5200 levels should pound recede further against dollar.
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].