Friday, December 2

American payrolls increase in optimism

0

Fundamental Outlook        

THE US data mostly strengthened in recovery while Federal Reserve policymakers signalled in continual buying of assets with monthly US$85 billion. The Japanese government bought euro bonds and yen receded further in value against the greenback in a 2-1/2 year record. UK recovery kicked off the New Year with improved factory orders above the 50 benchmark.

US durable goods advanced 4.6 per cent in December while pending home sales declined 4.3 per cent to 101.7 after a revised 1.6 per cent increase in November. The S&P/Case-Shiller index of property values increased 5.5 per cent from November 2011, the biggest year-over-year gain since August 2006.

Last Tuesday, the US Fed announced it would continue to purchase securities with US$85 billion a month. The division would be US$40 billion monthly injections in mortgage-backed securities and US$45 billion in Treasury securities. The weekly jobless claims rose 38,000 in the week ended January 26 to 368,000. Another report showed US consumer spending rose 0.2 per cent in December while Gross Domestic Product (GDP) shrank 0.1 per cent at an annual rate in the fourth quarter.

On Friday, American payrolls rose 157,000 in January following a revised 196,000 advance in the prior month, showing consistent recovery in jobs markets. Jobless rate increased to 7.9 per cent.

Japan’s retail sales rose 0.1 per cent in December, compared with falling 0.1 per cent in the previous month. The new government decided to increase its defence budget for the first time in 11 years, increasing 0.8 per cent to 4.68 trillion yen (US$51.7 billion).

The Japanese government bought 400 million euros (US$545 million) of the European rescue fund’s debt auctioned in January, pushing yen lower for devaluation crossing above 91.00 in US dollar/Japanese yen rate.

European Commission reported the index of economic confidence rose to 89.2 from a revised 87.8 in December. The euro-area inflation rate unexpectedly fell in January as annual inflation rate marked at two per cent from the prior 2.2 per cent, dampened by high unemployment and austerity measures across the 17-nation currency bloc.

UK Hometrack Ltd reported housing prices slid 0.3 per cent in January from a year ago. Consumer confidence rose to minus 26 from minus 29 in December, showing optimism in recovery. Another report on manufacturing expanded for a second month in January as factory output rose to 50.8, compared with a revised 51.2 in December.

Technical forecast   

US dollar/Japanese yen closed at 92.83 for the weekend with continual bullish strength in market. This week, we foresee the trend may climb higher to 95 targets once it can settle above 93 benchmarks. The buying interest in market is still very vibrant while we have spotted the supports to emerge at 90.50 regions.

Euro/US dollar reached 1.3711 highs last week in our expected target and settled at 1.3639 on Friday. This week, we are still holding a bullish view in market with target aimed at 1.3860 as our next higher levels. On the downside, support will act strong at 1.2450 areas in case the trend draws down for correction.

Pounds/US dollar fell on Friday from intra-week high 1.5880 for about 200 pips. The market is still under selling pressure after making an attempt to move into consolidation. This week, we expect the trend to be trading sideways again with resistance capped at 1.5900 areas. Only breaking below 1.5650 supports will drive lower to 1.5500 regions.

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
dar@pwforex.com