Fundamental Outlook
THE US non-farm payroll rose 236,000 as jobless rate dived to a record four year low. Dow Jones Average Index (DJIA) reached new historical high of 14,412 on a Friday after super job growth. Japan recovered in gross domestic product (GDP) and exit of central bank chief Shirakawa spurred new weakening trend in the yen’s value. European Central Bank (ECB) and Bank of England (BOE) held interest rates and policies unchanged.
The US Institute for Supply Management’s non-manufacturing index unexpectedly increased to 56 in February from prior month at 55.2. Another report on US business spending excluding military equipments and aircraft climbed 7.2 per cent in January representing the biggest gain since September 2004. Factory order dropped two per cent after a revised 1.3 per cent increase in December, slumping in demands for hardware and military aircrafts.
The US trade deficits widened 16.5 per cent in January to US$44.4 billion from US$38.1 billion in December due to increasing oil imports. Jobless claims unexpectedly fell by 7,000 to 340,000 in the week ended March 2 at six-week low record. Net worth for households and non-profit groups increased by US$1.17 trillion in the fourth quarter (4Q), or 1.8 per cent from the previous three months, to US$66.1 trillion.
On Friday, monthly payroll for February climbed 236,000 after a revised 119,000 gain in January. The unemployment declined to 7.7 per cent at its lowest since December 2008. Wholesale inventories gained 1.2 per cent in stockpiles in January as consumer spending picked up. DJIA escalated to new all-time high at 14,412 levels as celebration for job recovery at highest record since sub-prime crisis erupted. Dollar spiked higher against European currencies.
Japan’s GDP rose an annualised 0.2 per cent in 4Q, compared with a preliminary calculation of a 0.4 per cent contraction. The current account deficit in January was 364.8 billion yen (US$3.8 billion) and lower than initial estimate. Yen made new record at three-year low at 96.00 levels as the dollar surged.
In eurozone, an index that measures services industry fell to 47.9 from 48.6 in January. Exports in the 17-nations slid 0.9 per cent in the 4Q of 2012, down for first time in more than three years and GDP contracted 0.6 per cent. Both ECB and BOE held interest rates and policies unchanged in last Thursday meeting, giving little clue for the recovery status in Euro economy amid rising debt crisis.
Germany reported its factory orders, after adjusted for seasonal swings and inflation, declined 1.9 per cent from December. Another report on industrial production held unchanged in January, after rising 0.6 per cent in December.
Euro finance ministers discussed for looser budget policies as austerity plans backfired in many countries. The election rout in Italy, France’s squabble against German-led plan in austerity measures and other viral issues of sovereign debt debacles from Cypress, Spain etc have waned confidence of investors in the absence of assurance from policymakers.
Technical Forecast
US dollar/Japan yen reached 96.56 highs on Friday as US job payrolls surged. The market settled at 95.99 and will be prone to soar in coming weeks. Technically, we foresee the market will sit tight on 95.00 supports and aim at 98.00 levels as our next targets if yen continues to devalue in favour of BOJ’s policy.
Euro/US dollar declined and closed at 1.3004 on Friday. Technically, we reckon strong support at 1.2960 – 1.3000 that will be laid with buying interest. This week, submerging below 1.3100 resistances may attempt another dive if 1.2960 supports cannot hold the plunge. Only floating above 1.3100 levels could see a technical recovery to 1.3250 regions.
Pound/US dollar closed at 32-month low 1.4922 on Friday as Dollar surged. The market has potential to fall further in depth due to backlash of austerity measures in the economy. This week, we reckon continual plunge may each down to 1.4700 areas should bearish trend continues. The market needs to elevate to 1.5200 regions before we can access the technical recovery.
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].