DAR Wong: The global oil prices pull up fear of rapid inflation
Fundamental outlook
THE US existing home sales climbed in January with rising consumer confidence. Japan suffers lesser dents in deflation after rising energy prices and food cost. The euro economy still advances in economic confidence while being led by Germany. Last week, crude oil prices surpassed US$100 benchmark due to unrest in Libya spreads.
The US existing home sales unexpectedly escalated in January with purchases increased 2.7 per cent to a 5.36 million annual rate, making highest levels in eight months. Initial jobless
claims flattened to 391,000 from 413,000 in the week ended February 19, falling more than expected forecast. Another separate report showed durable goods rose 2.7 per cent in January, showing moderate uptrend in capital spending.
The quarterly growth report showed US economy grew 2.8 per cent annual rate in three months ended December, slower than median forecast due to bigger government deficits.
Despite that, consumer confidence increased in February to the highest level in three years when Thomson Reuters/University of Michigan final index of sentiment climbed to 77.5.
Japan’s exports increased below expectation in January after overseas shipment rose 1.4 per cent only from a year earlier. Inflation measured by core consumer prices declined 0.2 per cent in January from a year earlier, taking an ease from deeper previous decline due to rising energy prices.
A composite index in euro-area that measures both manufacturing and services in the 17-nations rose to 58.4 from 57 in January, making highest record in four years. Germany’s
business confidence reported by Munich-based Ifo institute continued to make fresh high record in February by increased to 111.2 from 110.3 in January.
Another separate report on European confidence advanced to 107.8 from 106.8 in January. The sentiment among euro-region manufacturers rose to 6.5 in February from prior 6.1.
Services confidence jumped to 11.1 from 9.9 and an index of consumer confidence advanced to minus 10 from minus 11.2.
UK’s index of sentiment rose to minus 28 from minus 29 January, showing persistent
pessimism in consumer confidence.
With gradual increased tension in Libyan unrest and rise of protests in Middle East, crude oil prices have been short-squeezed in the futures markets with fear in cutting supply. Nomura Holdings Inc said oil prices may surge to US$220 a barrel if political unrest in North Africa halts exports from Libya and Algeria.
Technical forecast
US dollar/Japanese yen broke our supports at 82.50 regions last week with small raindrop
declines. We reckon the market will possibly test 81.00 regions as major supports before bouncing up again. Abandon your long-view once the market breaks below this benchmark.
Euro/US dollar showed engulf pattern on Friday’s closing with corrective sentiment. This week, the market may test 1.3500 — 1.3550 regions again with ultimate resistance identified at 1.3850 levels. Abandon your short-view if the bulls violate above 1.3850 levels.
UK pound sterling/US dollar settled at 1.6113 after taking a dip below 1.6050 levels. This week, we reckon the market will turn bearish once the selling forces penetrate below 1.6050 with an immediate support resting at 1.5950 regions.
From technical outlook, we expect bearish sentiment to surface gradually in coming months unless the uptrend turns above 1.6300 benchmarks.
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 22 years of trading experience in global derivatives and foreign exchange markets. He can be reached at
Source: The Borneo Post
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