Fundamental Outlook
THE US economy remained little changed with increasing housing starts amid contracting inflation. G20 meeting began with yen devaluing further as no leader protested against currency weakening in Japan. China saw growth at less than eight per cent for four consecutive quarters that hammered commodity demands.
The US National Association of Home Builders/Wells Fargo index of builder confidence dropped to 42 in April from prior month 44, the lowest since October. Housing starts for March climbed seven per cent to a 1.04 million annual and recovered to highest record since June 2008. Another report showed that consumer price index shed 0.2 per cent after 0.7 gains in February, due to price drop in energies. Core reading rose 0.1 per cent and less than forecast.
The US Federal Reserve said the US economic expansion remained ‘moderate’ amid gains in manufacturing and housing. Weekly jobless claims increased 4,000 to 352,000 in the week ended April 13 with little change.
China reported its gross domestic product (GDP) for the first quarter (1Q) grew 7.7 per cent from a year earlier, marking a fourth consecutive gain at less than eight per cent in the past decade. Last week, commodities tumbled to mostly intra-year lows following China’s report.
The recent slump in gold prices might lead policymakers to pursue more easing stimulus for driving up commodity prices. The International Monetary Policy (IMF) trimmed the global growth forecast and urged European policymakers to use ‘aggressive’ monetary policy as recovery in European regions lagged behind the rest of the world.
Japan’s overseas shipment in March rose 1.1 per cent from a year earlier and above estimate. Trade shortfall was 362.4 billion yen (US$3.7 billion) from 777.5 billion yen in February, with improvement taking effect from lower yen value.
The yen had been falling for a fourth day against the dollar after the Group of 20 gave no comment on Bank of Japan’s (BOJ) weakening policy. Analysts interpreted the silent permission as leeway to more decline in yen value since it might not contravene global currency devaluation.
European Central Bank (ECB) president Mario Draghi commented the economic situation in the 17-nations saw no improvement since the last meeting on April 4. Policymakers predicted the euro-area economy to shrink 0.5 per cent this year before growing one per cent in 2014.
Technical Forecast
US dollar/Japan yen closed at 99.50 for the weekend while reversing up amid G20 meeting. The market was now sitting at 97.30 supports with emerging buying interest that might pierce above 100.00 benchmarks soon. This week, we foresee the fundamental factors will play essential part to lead the trend into consolidation from 97.30 to 100 regions or breaking above 100.00 to reach for 101.50 targets.
Euro/US dollar topped 1.3201 last week and fell. Technically, the market may be turning down this week if the trend does not penetrate above 1.3200 resistances again. This week, the market might consolidate sideways in first few days inside 1.3020 to 1.3150 ranges but anytime breaking below 1.3000 could initiate a new selling force in market. We reckon reversing below 1.3000 will land at 1.2900 supports.
Pound/US dollar has been trading from 1.5210 to 1.5410 ranges last week. The trend needs to penetrate below 1.5200 supports this week before we could see 1.5050 targets. Prior to this, there may be small sideways that will gain at 1.5300 to 1.5350 tops during early part of this week.
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].