Fundamental outlook
US pending homes sales increased while consumer confidence saw a positive gain. The US treasury yields rose to its highest record since 2011, ahead of unemployment in the coming week. Stock prices in US and Europe remained bullish during the New Year opening. UK economy is seen as recovering with rising mortgage loans and manufacturing growth.
The US pending home sales increased 0.2 per cent after declining 1.2 per cent in October. The recent rise in US bond as well as the concern over interest rate stepping into market, hampered recovery growth in housing.
In separate report by Conference Board, consumer confidence was measured as increasing to 78.1 in December from the previous month at 72.
The S&P/Case-Shiller index of property prices gained 13.6 per cent from October 2012 after a 13.3 per cent annual surge ended September. The Institute for Supply Management’s factory index eased to 57 from November’s 57.3, which was the highest since April 2011. Jobless claims fell by 2,000 to 339,000 in the period ended December 28.
As the year closed in 2013, the Dow Jones Industrial average (DJIA) index jumped 26 per cent in 2013, ending at 16,557 levels on December 31. Last Friday, US treasury yields rose to the highest levels since 2011 when 10-year bond yields exceeded three per cent and 30-year bond yields approached four per cent. Fed chariman Bernanke remarked that the recovery is making a head start amid rising employment.
In the eurozone, Markit reported that the manufacturing index rose to 52.7 in December from 51.6 in November.
The the outcome data is the same as initially estimated published on December 16. Euro currency snapped its bull run in early January after climbing from November, due to profit-taking activities.
The UK manufacturing growth unexpectedly slowed down in December as export weakened. The gauge of factory activity fell to 57.3 from a revised 58.1 in November.
In a separate report, UK mortgage approvals was seen as increasing more than median forecast in November. The data rose to the highest level in almost six years after 70,758 mortgage loans were granted. Nationwide Building Society said housing prices climbed 1.4 per cent in December.
Technical Forecast
US dollar/Japanese yen touched a five-year high at 105.44 and receded on Friday. This week, we foresee the support will sit at 104 levels and breaking below here might drive lower to test 102.4 regions. On the other hand, surging above 105.5 resistances will continue the ascension to 107 targets.
Euro/US dollar plunged for two days before last weekend due to profit-taking. This week, we reckoned the support might temporary rise at 1.358 levels while dropping lower will meet bargain-hunting at 1.35 regions. The trend might be moving into sideways more likely as the technical recovery could drive up to 1.372 areas.
British pound/US dollar had decreased from its recent high at 1.6603 levels. This week, we expect the market to make a technical correction at 1.62 regions as market demand wanes.
The market has been climbing for past eight weeks without correction. Hence, it is reasonable to expect some liquidation this week. Abandon your short-term view if the trend goes above 1.6603 again!
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 & FX markets. He can be reached at [email protected]