Wednesday, July 31

Asad Rizvi

GMT

As we get close to the FED's decision on its policy stance, its the language that will guide the market in the absence of FED Chairman's press conference, as he is not due to speak. I disagree with the with view that FED members will shift their stance on forward guidance towards highly accommodative approach. Lot of people are talking of slower growth in in 2nd quarter, but forgetting that it was past factor and the contributing element was sequester and tax. The surprising element of extreme low or high is a possibility and market could react accordingly.

Jobs data due on Friday will be more critical, as FED emphasis to reduce its asset buying will be largely based on economic performance. Today's ADP employment change data that indicates about change in employment pattern in USA that also impacts growth and consumer spending will also help in determining the trend.

Bernanke has been very clear that asset purchase and interest rate are two different subjects that should not be mixed up. If FED does not plan to reduce its asset purchases amount then why did he find it necessary to explain that they are two separate issues. My understanding is that Fed will taper down because it cannot print money forever, but for growth and employment purpose and to encourage bank lending for stable business activity, interest rates will be kept low. Low rates will not inflate debt position, cost of debt funding will not rise, low interest rate reduces risk of surge in non performing loans and helps corporate sector profitability.

Therefore, FED may once again assure of maintaining low interest rate by benchmarking it with both, inflation and jobs target. But Fed Chairman is smartAs we get close to the FED's decision on its policy stance, its the language that will guide the market in the absence of FED Chairman's press conference, as he is not due to speak. I disagree with the with view that FED members will shift their stance on forward guidance towards highly accommodative approach. Lot of people are talking of slower growth in in 2nd quarter, but forgetting that it was past factor and the contributing element was sequester and tax. The surprising element of extreme low or high is a possibility and market could react accordingly.

Jobs data due on Friday will be more critical, as FED emphasis to reduce its asset buying will be largely based on economic performance. Today's ADP employment change data that indicates about change in employment pattern in USA that also impacts growth and consumer spending will also help in determining the trend.

Bernanke has been very clear that asset purchase and interest rate are two different subjects that should not be mixed up. If FED does not plan to reduce its asset purchases amount then why did he find it necessary to explain that they are two separate issues. My understanding is that Fed will taper down because it cannot print money forever, but for growth and employment purpose and to encourage bank lending for stable business activity, interest rates will be kept low. Low rates will not inflate debt position, cost of debt funding will not rise, low interest rate reduces risk of surge in non performing loans and helps corporate sector profitability. 

Therefore, FED may once again assure of maintaining low interest rate by benchmarking it with both, inflation and jobs target. But Fed Chairman is smart and may not deviate much from his last FOMC and hence market will once start looking at the economic numbers and will wait for Fed minutes for more guidance

Meanwhile, during Asian & European session US Dollar may have a weaker tone as recent release of positive German & European data could provide some support, but as we get close to policy announcement we could be heading for a subdued trading session. Gold may struggle to maintain its strength.  

EURO @ 1.3264  = Likely to hold 1.3240-50 levels for a move towards 1.3290, break would encourage for a test 1.3310-15, or else 1.3215. However, in a bigger scenario the key support level is 1.3150 and major resistance at 1.3385.

GMT 2:55 - GOLD @ $ 1334 = Expecting choppy trading during the day, should top out around $ 1338-40 zones. Prior to US session break above $ 1346 will encourage for $ 1355, which is not a favoured move as, fall below $ 1327 confirms visit to $ 1315-20 zones.

In a bigger move after FED FOMC announcement the levels to watch is $ 1285 and $ 1375.

GMT 3:00 - GBP @ 1.5231 = Cable has strong resistance around 1.5270-780 zones, current fall could extend up to 1.5140 on break of 1.5180. However, upside move would help Pound to test 1.5340 zones.

GMT 3:04  - JPY @ 98.01 = Unless move beyond 98.40-50, risk is for more gains,as Japanese currency could test and break 97.70 for a move towards 97.30, or else 98.90.

GMT 3:07 - AUD 0.9039 = Aussie continues to struggle and could dip to test level of physiological 0.90 for of 0.8970-80 levels, unless holds below resistance 0.9080.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Tuesday, July 30

Asad Rizvi

Monday was quite a dull day, as market awaits release of batch of data's and monetary policy announcement by 3-major Central Banks this week. Activity is likely to remain thin and clueless unless release of economic indicators provide clearer direction.
Traders and investors are still confused by Fed Chairman's sudden U-Turn in his 2nd appearance soon after his June policy announcement on Fed's scaling down plan. June minutes clearly says that market should be informed/prepared prior to Fed's decision, which should be based on improve labour market condition and growth.
Based on economic performance, I will not be surprised to see more Fed members vouching for tapering, which will be known after the release of July minutes. Since there is no press conference after the release of MPS, there could more firework after release of FED minutes in August,
In its June press release Fed members was clear that to reduce uncertainty, it want to communicate in best possible manner that how it will adjust to it's asset purchases that will be purely based on economic developments and economic outlook. Some suggesting "Forward Guidance", a term, which is is frequently used there days by the all the Central Banks Chiefs. It was pioneered by Reserve Bank of New Zealand about 16-years ago. Basic idea is to tell or communicate in advance about the strategy that may help to reduce volatility. But it did not help on 1st instance when Bernanke started the tapering talk.
However, I would like to remind that in his testimony to congress that FED still plans to scaling down its massive bond purchase program this year. He has already set the mood, market is half prepared and I will not be surprised if more tapering hint is passed on that will help market to prepare for the coming event.
GMT 2:39 - EURO @ 1.3253 = Euro could hold around 1.3265-70 and on the rise if it fails to break 1.3290, we could witness fall and break of 1.3220-25 zones that should encourage for a test of 1.3200-05 levels. Or else 1.3320.
GMT 2:47 - GBP @ 1.5330 = Cable is struggling to gain pace and as long as it hold below 1.5350-60, see risk for a drop towards 1.5280 and may test 1.5250-60 zones. Break of 1.5390 should encourage for more gains.

GMT 2:51 - JPY @ 98.12 = Protection is around 98.40-50, as see risk for a test of 97.45, break would encourage for 97.10-20 zones. Or else 98.70.

GMT 2:54  - AUD @ 0.9161 = Aussie will struggle to move beyond 0.9185-95 levels for a test of 0.9120. Else 0.9210.

GMT 3:01  - GOLD @ $ 1329 = Gold during Asian and European session should struggle to move beyond $ 1333-35 levels for test of $ 1321-23 zones. Break $ 1308 risk for $ 1305 or $ 1301. On the up $ 1340 should hold or else $ 1351.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Monday, July 29 – Aug 2

Asad Rizvi

Last week, in the absence of major key economic data announcement, some of the minor data’s released from Europe and USA suggested few positive signs that brought stability, reducing the volatility that helped market to trade within narrow band. Japanese Yen and Gold made gains by stretching an extra mile. Yen still in a consolidating phase after huge one sided move seen in previous months. Gold recovered on hopes that Fed could delay its unwinding plan.

We are heading for a volatile week, due to FED’s policy announcement on Wednesday and release of some of the major US economic indicators that includes Consumer Confidence, GDP, Initial Jobless Claims, Manufacturing PMI to be followed by US Non-Farm Payroll and Unemployment data.

The big question in everyone’s mind is FED’s stance on tapering. I think combination of release of various US economic data this week may give more confidence about FED’s next move. I am expecting improved economic data this week, as unemployment rate will surely fall because last time since it was 7.55 pct US labor department had to announce 7.6 pct.

Prior to NFP and policy announcement, US GDP data release on Wednesday is expected to fall around or below 1 pct, but watch out for a surprise better number, as market is discounting poor data, better data release will surely catch many wrong footed, as sentiments will once again tilt towards tapering.

Following Fed decision on interest rate, BOE and ECB will announce its monetary policy on Thursday. Release of economic data from UK and Europe is likely to keep market on toes. Though do expect shift in policy stance, BOE minutes due two weeks later may provide better outlook for Sterling.

However, if we take a deeper look at the performance of European economy, since ECB’s last policy announcement presently it stands is in a better shape. Previously it was thought that after Draghi’s emphasis on forward guidance ECB could be heading for prolonged softening stance.

Recent releases of batch of European economic numbers have shown recovery in the Euro zone region. This should give ECB time and space, but Draghi’s opinion will provide further guidance. He may avoid talking decline in borrowing cost, but sudden change in his thoughts on forward guidance may not that easy. Overall, ECB policy should remain unchanged.

In currencies, Yen was the major beneficiary benefiting for bond weakness. On Monday, BOJ Governor is due to speak and market will be taking queue from his speech about Japan’s Central Banks ongoing hyper easy policy stance. This week’s release of non-farm payroll could be another driving factor for the currency.

Overall, I remain optimistic about growth picking up in USA in next quarter. But there are signs of economic recovery in Europe too. Therefore, initially we could see some USD weakness, as expectation of better Spanish GDP data and positive comments from Italian economic minister about possible exit from recession in 4^th quarter should give boost to Euro. But US Dollar is expected to rally back, as we approach crucial Fed policy announcement on Wednesday. Ideally, I would prefer to pick Euro top, Yen is another currency that should ease and Gold gain should be short lived.

GOLD @ $ 1329.90 = Saw a prefect move in gold last week, which was in line of my expectation. It remained soft though unable to fall below $ 1308. Prior to Fed policy announcement gold after making small gan will lose its sheen.

A move beyond $ 1338 will help gold to test $ 1350-55 zones. But I would prefer short as $ 1370 should not surrender for a fall. Break of $ 1312 will encourage for a test of $ 1295-00 levels, if surrenders drop to $ 1258-60 will a good possibility.

EURO @ 1.3276 = Initially Euro will have a stronger tone and should stay above 1.3180 for test of 1.3340-50, break risk for 1.3390 before exhausting. Fall below 1.3140 risk for a test of 1.3050, or else 1.3450. Range for the week 1.2950 – 1.3470.

GBP @ 1.5375 = Cable will find support around 1.5240, which may hold for a test 1.5480. Break risk for 1.5550. But fall below support level will push pound towards 1.5020-50 zones. Range for the week 1.5020- 1.5590.
JPY @ 98.15 = Yen’s next major resistance is around 97.10-20. Japanese currency will soon get exhausted. Break of 99.75 will see push towards 100.20-40. Or else 96.50. Range for the week 96.40 – 100.90.

AUD @ 0.9255 = Aussie is gaining some of its lost momentum, but is unlikely to make big strides. On the downside only break of support 0.9150 levels will see further losses. But prior to down move another upside test of 0.9320-50 is possible before resumption of down move. Range for the week 0.9080 – 0.9380.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Friday, July 26

Asad Rizvi

Once again the signals on economy is positive from Europe and USA, as both the regions are indicating steady growth. Though outlook on economy in Europe has been improving, but it is faced with a bigger challenges. Since Euro zone region is vastly spread out it is still faced with high unemployment rate, deficit is not manageable as yet. Germany banking system could be in better shape, but regions banking system is still faced with liquidity shortage and capitalization issue is haunting them, which means economic distortion/imbalance in one country can overall cause sever damage. IMF is already demanding from ECB to slash its policy rates and to take measures to revive bank lending to spur growth so that job condition improves, which is the real truth.

USA is faced with different situation and for years growth and employment is its priority. US GDP may disappoint this quarter, as its economy may contract in 2nd quarter to or below 1 pct, but its unemployment from nearly double digit is down to 7.6 pct in a span of 4-5 years, which is substantial recovery in economic terms, whereas unemployment rate in Europe is at alarmingly high level of 12.2 pct. However, this not mean party time for USA, as both the region is faced with sever challenges. The US economic recovery could be due to earlier measure taken by FED, Europe is considering to pick clues from FED, while new Japanese government came from behind to act quickly. This does not guarantee global recovery, as cracks have started to appear in so called BRICS countries, but China's slowdown could be more damaging that could lead to another collapse. The world will be faced with real challenge when FED announces its scaling down plan.

Meanwhile, in the absence any major data release, range bound trading is expected. US Dollar took some pounding one of the WSJ Fed watcher's comment that he does not see change in FED's asset purchase program in it next weeks policy meeting. Well this could good opportunity to catch the top. It may also help gold to hit new highs  in New York before falling next week.

GMT 1.40 - EURO @ 1.3275 = I consider this move as good opportunity to buy Euro around 1.3290-00, only break could see some violation extending top towards 1.3325 for dip to test 1.3240-50 zones, break could see fall extending towards 1.3220-25. However, 1.3350 should hold.
GMT 1:50 - GBP @ 1.5385 = May hold around 1.5340-50 for test and break of 1.5398 for 1.5425-30 before exhausting, or else 1.5310.
GMT 1:54 - JPY @ 99.24 = Failure to move beyond 99.65-70 risk for some more Yen strength that  could see a test of 98.80-90 zones.
GMT 2:00 - AUD 0.9261 = Aussie gained against expectation but, I would like to remain cautious around 0.9280-90 levels, as any move beyond should be good opportunity to Sell with Stops 0.9360 for 0.9225 or 0.9190.
GMT 2:13 - GOLD @ $ 1335.80 = Gold may hold around $ 1328-30 and only break risk for drop to around $ 1320-25 levels in Asia or early Europe. However, today I see upside risk and possible test and break of $ 1345 and this rally could stretch up to $ 1354. 

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Thursday, July 25

Asad Rizvi

After a nervous start due to release of weak manufacturing report from China, mixed reaction was seen on Wednesday, as economic data's released from the Europe and USA showed signs of economic recovery. China's PMI below 50 is surely a worrisome factor hinting that the economy is contracting that could add to global slowdown. 

Every economy has its own pros and cons. German growth matters European market, though current recover suggest that bank lending condition may have improved in Germany, but overall rest of the European market is still struggling for credit expansion. Similarly, USA economy faces tough challenge and is finding tough to make to make big strides to reduce its unemployment rate and hence. Therefore, slow growth pace or economic contraction does not help the cause.

Yesterday was another successful day, as my call on Gold, Euro, GBP, JPY & Aussie have been on the dot. I also did warn to keep a close watch on US bonds as 10-years US treasuries yields jumped by 8 basis point, which is another major market indicator about future interest rate trend. But today market looks naughty, as it could be choppy because German IFO, UK GDP data and US Durable goods and Jobless claims data's are good enough to upset the market sentiment and drive market crazy.

GMT 2:19 - EURO @ 1.3199 = Euro should hold around 1.3210-15 levels, break could see minor push towards 1.3240 zones. On a bigger picture needs to move beyond 1.3280-90 for next major move. However, on the downside fall below 1.3150 is required for 1.3125, break would extend losses towards 1.3085 zones.
GMT 2:34 - GBP @ 1.5319 = Choppy moves expected, but prior to data should hold around support level of 1.5260-70, break of 1.5370-80 will challenge 1.5420, if surrenders, gain could extend up to 1.5480 before exhausting. However, break of support level would see Cable plunge to test 1.5160.
GMT 2:39 - JPY 100.12 = Yen is still in good demand around 100.40-50 and requires to clear 1001.20 for more losses or Japanese currency have enough muscles to test and fall below 99.60-70 levels to test 99.20.
GMT 2:88 - AUD @ 0.9147 = Aussie should find strong resistance around 0.9180 and could further dip to test 0.9110-15 zones, only break here will encourge for 0.9085-90. Or esle 0.9220.
GMT 3:03 GOLD @ $ 1320 = Gold could still trade in wide range between $ 1290 - $ 1335 unless there is clarity. But any violation of band would mean extension of move either way by roughly another $ 20. Until New York $ 1325 looks topish and break would see $ 1330. i am expecting test and possible break of $ 1311 for $ 1307 possibly test of $ 1302

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Wednesday, July 24

Asad Rizvi

Normally US economic data such as Richmond FED Manufacturing Index does not make much impact in the market, but in the absence of any major news event index plunging to Negative 11 against expectation of + 9 is the biggest miss in 7-years, as new orders fell. This was mainly caused due to drop in big ticket items and and low shoppers turn out that hits retail sales business. Traders look for reasons to move the market. Today's New Home Sales data will more clue about spending by home buyers on furnishing and home financing. Earlier US May house price index showed a disappointing reading of 0.7 pct versus expectation of 0.8 pct.
While, recently market has been concentrating on economic events in USA, Europe could once gain come into limelight, as there is long list of data due to the released. However, Europe is still faced with numerous problems, as Greece was notified that it cannot receive next tranche of its bailout funding, since it failed to comply with the reform list. Interestingly, this time its other way round as European Commission (EC) notified Germany that it cannot confirm that if Greece has met all 22 of its demand required to meet the funding available, as they could confirm have inspected 17 only.
The big question is that then why is Greece quiet or why  should Greece be penalized if it is not Greece's fault. I think this could be smart play by the European policy makers to avoid unrest, as Portugal is already an unsettled issue, which is lingering on. Spain's PM will also be appearing in front of its Parliament to face question over corruption scandal, which could be exciting and exert pressure on European currency if opposition threatens non confidence vote.
Another area to note is US treasury auction. Yesterday in US session we saw US Treasury yields surging by 3-4 basis point, as market will watching next 2-days auction. Foreign participation will be the key to watch.
Meanwhile, its a bad start to the day as Australian CPI dropped hinting possibility of rate cut. Furthermore, China's flash manufacturing PMI dropping down to 47.7 against expectation of 48.5 versus 48.2 in May, does not bode well for the global economy as it hugely relay on Asian growth and attaining growth level of 7 pct looks challenging.
GMT 2:10 - EURO @ 1.3209 = I see Euro heavy around 1.3230-50 zones and needs to break 1.3285 levels for further gains. Risk for fall could increase if 1.3150-60 surrender for a move towards 1.3095.
GMT 2:18 - GBP @ 1.5360 = Cable may struggle to move beyond 1.5390 and break would give advantage for of another 20-25 pip up move before down again as see risk for a test of 1.5315-20 zones. Or else 1.5440.
GMT 2:22  - AUD @ 0.9262 = Aussie should find cap around 0.9280-90 and needs to break 0.9220 for 0.9180 or else 0.9310.
GMT 2:30 - GOLD @ $ 1343.50 = Gold should hold around $ 1345-48 levels and only break would encourage for a move towards $ 1352-54 zones. However, today I would prefer picking the top to sell and watch $ 1335. Break risk for test of $ 1327-30 zones.
GMT 2:36 - JPY @ 99.75 = Break of 99.98 is required for a move towards 100.30-40 zones. However, push beyond 99.35-40 would risk for a test of 99.05-10 zones. 

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Tuesday, July 23

Asad Rizvi

In my Monday's weekly post, I warned not be too complacent about Shinzo Abe's win, as though all odds may favor further weakening of Japanese currency after his election win, but there could be some Yen gains before the next big move occurs. Market did not care about Shinzo's win because next challenge for the government is to introduce much needed promised structural reforms so that Japan's economy can grow at a faster pace as Shinzo's LDP is expected to give tax break to corporations and by making capital investments or else market will not be shy to go in opposite direction.
Meanwhile, in the absence of any major data release, US existing home sales dropped in June, which is not encouraging, as the growth pace in recent weeks have slowed down a bit. One supportive factor could be that the fall is due to fewer homes available, which could only be known after the release of inventory. Today's US Housing Price Index will give better sense about the housing market recovery. 
While, the up-move in gold has been perfect, but was at very fast pace stretching beyond my target of $ 1330. However, I consider this move, as a good opportunity for those missing the boat earlier to off load their expensive holdings, as nothing extra ordinary has happened to support the Yellow metal. It is an effort by the hedge funds having access to cheap funds caught badly with their purchase at higher levels trying to dictate the market. There is a huge risk that healthier release of US economic data will strength tapering case that should weigh on gold and tapering announcement should further add pressure on gold prices. Hence, I would still prefer to pick the top, though some gain is possible. Do not Hurry.
GMT 2:28 - EURO @ 1.3197 = Euro may finds strong support around 1.3150-70 zones and could gradually inch up towards 1.3230-40 zones, only break will encourage for 1.3270. However, break of support levels would risk test of 1.3115.
GMT 2:35  - GBP @ 1.5372 = Bias is on the upside as long as 1.5340-45 holds on break of 1.5390 for 1.5408, possibly 1.5443 or else 1.5316.
GMT 2:39 - JPY @ 99.48 = Needs to move beyond 99.70-80 zones for 100.05 or else has the ability to penetrate 99.15 for 98.95.
GMT 2:43 -  AUD @ 0.9277 = Today tone is on the upside if 0.9230-40 holds for 0.9320-30 or else 0.9210.
GMT 3:00 - GOLD @ $ 1336 = Choppy move in gold is expected. Watch for $ 1330-32 levels, should hold for $ 1344, or else break sees $ 1320. Suspect there is a minor risk for test of $ 1360-65 zones before down again. Though it could too early to call for upper target.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Monday, July 22-26

Asad Rizvi

Last week there was lot of confusion, fear and nervousness in the financial market about Fed Chairman’s appearance in front of Senate standing committee for his semi-annual testimony, but nothing extra ordinary happened, as he was repeating almost what he said in his Boston speech. My expectation is that FED will start tapering this year once the US economy starts to accelerate.  

G-20 Finance Ministers and Central Bankers are meeting in Moscow over weekend and Fed’s plan to taper quantitative easing should be one of the major topics of discussion. Sensibly, G-20 has focused on growth this time rather than opting/demanding for harsh austerity measure that does not help the cause. Nothing new should be expected, as normally press release always shows confidence and improving global economic conditions with couple of minor additions and subtractions.

This week, we may not encounter any major economic data to drive the market, but I will not be surprised if market loses its patience and one small event could bring volatility after uncertain last week that did not provide enough opportunity to trade aggressively. Events in Portugal and Spain could bring the spark.

Japan’s Sunday election is another major event, which is linked to its economy. PM Shinzo Abe’s call for ultra lose monetary that got boost in September last year will get almost free hand to act, as he is likely to win 2^nd leg of elections that will help in ending six-year of parliamentary deadlock. I think initially market will be looking for the size of margin, the bigger the size of win will increase the level of confidence making it easier for Abe’ government to target his promised reform work. A win will allow Abe’s LDP government to rule both the lower and upper house.      

Meanwhile, Pound Sterling made a comeback after Dovish Bank of England boss Mark Carney joined the bandwagon by voting in favor of current policy i.e., to refrain from adding further liquidity, though in his 1^st appearance BOE Governor focused on growth being his top priority. This shows confidence in economy. However, 2^nd quarter GDP announcement sue on July 25 will give a better picture about UK’s economic performance.   

GOLD @ $ 1294.50 = Last week, the expected down move did not occur in gold, neither gold could make a convincing upside break of $ 1298 though it briefly touched $ 1300 marks. This was mainly because of perception that Bernanke’s tilt has shifted towards easing.
In my view since large money is invested in gold by the hedge funds, they are making every effort to halt the slide by taking protection behind quantitative easing factor ignoring the real fact that global inflation is too low, European unrest has eased, Central Banks has no reason to buy gold. Therefore in boarder term gold has little upward room against all odds that still favors big fall.
Initially, I will not be surprised to see gold making an upside attempt and the levels to watch is break $ 1305-08 that could push gold towards $ 1325-30 zones. However, US Existing Home Sales data on
Monday will provide 1^st clue about the next move. A positive data will ease the pressure. On the down side, break $ 1275-80 will encourage for a test of $ 1250-60 zones.      

EURO @ 1.3140 = We could see Euro making further gains if 1.3190 breaks for a move towards 1.3250 zones. However, the up move should exhaust and should not extend beyond 1.3290-00, or else it may open doors for 1.34. A break of 1.370 is required to challenge 1.3020-40 zones. Range for the week 1.2980 – 1.3310.

GBP @ 1.5256 = Bias could be slightly on the upside. Break of 1.5295 could see some more upside move towards 1.5325 that could extend up to 1.5410. On the downside should hold 1.5120-40 levels, as break here would risk for 1.5025. Range for the week 1.5025- 1.5420.

JPY @ 100.53 = Though all odds favor further weakening of Japanese currency, but election is one factor that should not be ignored for a surprise move. Only break of 99.70 risks for test of 99.10-20 zones. However, I am expecting a move and break of 101.60 for a test of 102.40. Range for the week 99.10 – 103.50.

AUD @ 0.9166 = Aussie is still struggling and any up move should see resumption of selling. AUD is unlikely to surpass 0.9240-80 levels. Break of 0.9105 will open doors for test of 0.9010-30 zones.  Range for the week 0.9010 – 0.9320.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Friday, July 19

Asad Rizvi

Finally Bernanke phobia will be over and market should start concentrating on economic factors. In his 2nd day appearance in front of the Senate committee, Fed Chairman played smart to cool market sentiment by providing a clear message that despite unemployment rate falling below 6.5 pct, FED will hold interest rates near Zero pct for a longer period and hinting that tapering factor will largely depend on economic recovery.

My reading is that the timing of announcement clearly suggest that at current growth pace, FED may not hesitate to start its unwinding program. Fed is well aware about the poor 2nd quarter GDP growth, which is estimated to be around or below 1pct due to slow growth caused by known fiscal factors (Sequester & Tax) that will be announced on July 31 and this information should be priced in. But if GDP number shows improved growth, it will help tapering sentiment. Importantly, prior to September meeting, there are 2-jobs data announcement that should provide better sense about the economy.
Bernanke made very interesting comment on gold, he said that no one understand gold prices and that he doesn't pretend to understand then either. On the question about fall in prices, he said that it could mean that people have more confidence in outlook, he was surely referring to economy. Once again I am connecting his statement with tapering, as he could be hinting that FED will reduce its asset purchase amount, as economy gets better and this could be sort of early warning to Gold Bulls.
What everyone is forgetting is that FED is aggressively buying bonds since 2008 and the size of its balance sheet has grown by over three times to nearly USD 3.5 trillion and @ USD 85 billion per month Fed's bond buying adventurism amounts to USD 1 trillion annually. More importantly there is a cost factor and ultra loose monetary has its implications on the economy. So there has to be an end.
Meanwhile, Moody's upgraded US ratings to stable from negative is positive. On the data front its more or less flat day after yesterday's US initial jobless claims showing better job conditions. Overall despite Dovish behavior by the FED Chairman did not weaken US Dollar, which means USD has found support and should gradually makes gains, as release of economic data should be the driving force behind USD next move.

GMT 3:42  - EURO @ 1.3137 = We could be on the last up leg towards 1.3190, if 1.3105 holds. However, only break may encourage for 1.3230, which is not a favored move as, Euro should exhaust on the rise. Break of 1.3105 levels will encourage for 1.3065.
GMT 3:50 - JPY @ 99.95 = Its once gain the NIKKEI factor due to weekend Japanese election helping Yen to make gains. 99.40 is the level to watch that should hold for resumption of Yen weakness or else 98.90. I am expecting re-test and break of 100.50 for 100.98. Break would confirm more losses for Yen.
GMT 4:06 - GBP @ 1.5228 = I am expecting 1.5190-00 to hold for a test of 1.5270-75 beyond that cable is a, or else  1.5155-60.
GMT 4:07 - AUD @ 0.9184 = Aussie looks heavy around 0.9220-40, break of 0.9160 would encourage for a test of 0.9135.
GMT 4:16 - GOLD @ $ 1293 = Gold could test $ 1295-98 zones and is likely to exhaust for a drop toward 4 1285, break will encourage for test of $ 1275-78 levels. Else on the up watch for $ 1308

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Thursday July 18

Asad Rizvi

GMT 3:15  - Nothing new as yet, the message is obvious that FED wants growth at a faster pace, probably aware that return on an average daily injection of USD 3.9 billion in economy based on 22 working days a month, it is difficult for FED to justify the cost. He is rightly worried and unhappy that the job situation is far from satisfactory. 

His testimony loaded with IF'S used quite frequently and explaining the difference between tapering and tightening and assuring that FED would be prepared to employ all is tool, including an increase in pace of purchase and then adding that market is beginning to understand our message indicates that though he remains Dovish, but FED has to take a breather and halt injection liquidity at some point. 

Here I don't want to mix economics with politics, but we look at the past history, there could be a possibility that Fed Chairman's current stance is a pro active measure to engage Senate into a debate on fiscal policy relating to Federal Debt Ceiling prior to November deadline to minimize the risk of possible economic distortion. 

Bottom line is that confusion persist, as FED Chairman could be doing this intentionally because such a strategy provides little space to guess about Fed's next move and helps to bring stability. US 10-year bond yield is back below 2.50 pct, overall financial market looks stable. FED Chairman is again schedule to appear today before the Senate in a Q&A session and market will be looking for more clues. 

Meanwhile, US economy is giving mixed signal, FED Beige Book suggest "modest to moderate" growth, pointing towards consumer spending, Industrial output, housing, retail sales and manufacturing sector. After Bernanke's testimony market will be keenly watching economic progress that should provide future guidance. Today's initial jobless claims is an important employment indicator that could bring some life in the market. Philadelphia Fed Survey is another US data due today. In the absence of any clarity market will remain choppy and directionless until Bernanke is done with his Q&A session.

GMT 3:15  - EURO @ 1.3108 = Likely to hold 1.3050-80 levels, with firm protection at 1.3010 a gradual up move will be seen, but needs to break 1.3190 for test of 1.3235-50 zones. 
GMT 3:22 - GBP @ 1.5193 = Cable could drift down, but needs to hold around 1.5130-40 zones for test of 1.5230-50 levels or else slide could extend towards 1.5077. 
GMT 3:26 - JPY @ 99.77 = Break of 99.98 will pave way for a test of 100.45-50 zones and beyond. However fall below 99.40 would risk for 99.10. 
GMT 3:30 - AUD @ 0.9187 = As long as 0.9230 is protected Aussie could sip to test 0.9110-20 zones. however, upside break will encourage for 0.9270. 
GMT 3:38 - GOLD @ $ 1278.50 = Gold is likely to hold below $ 1285-88 levels and needs to break $ 1265-68 zones for bigger fall towards $ 1250 or else test of $ 1295-98 possible.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Wednesday, July 17

Asad Rizvi

Bernanke known for his Dovish stance will be presenting his semi-annual testimony to Congress, as market is keen to know that if FED still plans to carry on with his asset purchase strategy or will shift it's stance. He did confuse the market by hinting Fed's tapering plan in his late May policy announcement, but following month he applied brakes by setting condition before making his next move. I am note sure what caused shift his earlier tempo, it could be market forces or fear of facing congress aggression to defend growth with additional liquidity or reason best know to him.

What baffles me is that why did Chairman Bernanke had to talk about Fed's tapering plan hinting that it could end by mid-2014 if it is a premature subject to talk and what caused him to take a sudden U-turn after his May announcement. I think there is surely immense internal pressure to halt or reduce money printing and it may have reached a point that Fed Chairman may have thought that he should mentally prepare the market for the next move. It is quite possible that timing of withdrawal of its liquidity injection may not be as important as it is important to inform and prepare the market about its next possible move.

Interestingly, after Fed's call in May that they intend to withdraw it's asset purchase program there was lot of noise/pleading/demand not end its asset purchase program fearing/threatening of grave consequences for the global financial market by the so called Dig Daddies minting money in tons due to cheap availability of funds. Is this going to be the dominating and influencing factor for Fed to change its stance and delay tapering or it's credibility is more dear to FED that it will not succumb to any external pressure or will it go for the third and easiest but temporary option by opting for tiny tapering to silence all the critics ?

Today, uncertainty will prevail in the market and it would not be easy to get hold of the real trend until tomorrow. In another major event of the day BOE minutes will be keenly watched because of Mark Carney's first appearance as BOE Governor. 

GMT 3:11 - EURO @ 1.3140  = Likely to hold around 1.3102, as see bounce back from 1.3120-25, break o1.3175-80 will encourage for av test of 1.32 zones. However, on the downside 1.3040 is the key level. 
GMT - 3:19 - GBP @ 1.5115 = Prior to BOE announcement Cable could come under pressure and should hold below 1.5150, see risk for a drop towards 1.5070-80 zones. However levels to watch is 1.5010, if surrenders break of 1.4940 is required for bigger fall. But do keep an eye on 1.5195, break risk for more gains.
GMT  - 3:23  - JPY @ 99.38 = Break of 99.90 is required for 100.30, which looks tough, as see risk for another test of 98.80-90 zones, break will encourage for 98.30. 
GMT  - 3:27 - AUD @ 0.9234 = Aussie is loosing its gloss, unless break above 0.9270-80 levels see risk for a move towards 0.9180-90 zones. 
GMT  - 3:33  - GOLD @ $ 1291 = Bias is on the upside as long as $ 1285 holds. Likely to see a push towards $ 1298 and could stretch up to $ 1302. Or else $ 1277. If we talk of a bigger of picture, levels to watch is $ 1260 and $ 1320.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Tuesday, July 16

Asad Rizvi

As market awaits Bernanke's semi-annual testimony to Congress on Wednesday, there is lot of guess work going on about economic distortion by the Bears. Mixing poor Retail Sales numbers with 2nd quarter GDP does not make enough sense because retail sales is mildly down. Increase in payroll number does not mean/guarantee lavish or over consumer spending and if  2nd quarter GDP is below expectation, it should not be very surprising data because it will be the effect of past US economic performance caused by tax and sequester. Do not overlook New York Empire State Manufacturing Index data suggesting that after contracting last month manufacturing condition in the region has has shown improvement.

I feel pity for the bears trying to come up with all sorts of reasoning that could possibly delay tapering fearing more bashing if Fed decides to scale down its asset purchase. I think with ongoing market mood, today's CPI could bring more excitement as any increase in inflationary pressure could see market tilt towards reduction in Fed bond buying plan and softer data should give more hope to the Doves.

I am expecting very similar to Monday's move in currencies. We did see Yen weakening that was short lived and unlikely to beyond yesterday's low. Euro need to surpass 1.3120 for more gains and Cable has bias upside as long as 1.5010-20 holds.

GMT 2:26 - EURO @ 1.3073 = I am expecting 1.3020 to hold, but needs to break 1.3098 for a test of 1.3120-30 zones and only break would encourage for 1.3150-60 Or else 1.2975. 

GMT 2:36 - GBP 1.5111 = Cable is likely to stay strong and buying of dips is expected around 1.5060-70 zones. Watch for break of 1.5150-55 that would encourage for 1.5180, failure to push beyond in Europe could mean test of support levels, before up again, or else 1.5020

GMT 2:41 - JPY @ 99.75 = Move beyond 100.10-20 looks difficult as see risk for test and break of 99.55 for a move towards 99.20-30 zones, or else 100.80.

GMT 2:45 - AUD @ 0.9163 = Likely to have stronger tone. 0.9120 should hold for 0.9210, I will not be surprised to see more gains, or else 0.9080.

GMT 2:50 -GOLD @ $ 1281.60 = Should hold below $ 1285-86 for a move towards $ 1272-74, Break will encourage for $ 1268 or else upside break could see possible test of $ 1288-90 levels.

  

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Monday, July 15-19

Asad Rizvi

GMT In the absence of any major economic data last week, FED’s FOMC meeting minutes followed by Chairman Ben Bernanke’s speech on monetary policy dominated the market. There is lot of confusion and debate going on about Fed’s next Policy move after Ben in his last month’s press conference gave a clear signal that Fed is planning to reduce its asset purchase amount, which could be done by middle of next year, but it would continue with its accommodative policy stance for longer period of time. It seems that Bernanke probably succumbed to external pressure or had to change his statement wording to halt uneasiness in the financial market at his Boston appearance last Wednesday by giving another view that it could be too soon to say that the economy has recovered.

I don’t think FED is confused about its next line of action, as there is no change in Fed’s policy stance. Scaling down of its asset purchase will purely depend on economic performance.  At its current growth pace majority of the Fed voting members should not obstruct to the tapering plan. If we have a deeper look at the recent statements given by various Fed members their intention is quite clear.

In my view, on Wednesday and Thursday, in his third time appearance this week to give his semi-annual monetary policy report to Congress. Chairman Bernanke will defiantly have to answer about Fed’s tapering plan that will give much needed direction to the market. Market is mixing tapering with tightening. He may be asked this question that will provide more clarity. I am expecting FED Chairman to show the positive angle of economy because in comparison to his previous appearance, some improvement is witnessed in recent months.

If we take last week’s initial jobless claims as an example that were up by 16.000, it is not at all a bad weekly number due to Independence Day holiday in USA. Unemployment could be little worrisome factor as it is still hovering around 7.6 pct and did not drop in line with payroll that added more jobs and remained flat. This is because payroll survey obtains information from government and private companies that clearly indicates additional jobs number, whereas, unemployment number is based on household survey that ask adults if they have a job or do not have a job, if they say they are looking for job, they are considered unemployed and if they don’t want a job they are not added in the unemployment list because they are not part of workforce.

Meanwhile, European woes continue to weigh on the market with France being downgraded and Portugal still in doldrums, the news from economic front remains a matter of concern, as Euro zones industrial production fell. With Europe already under ECB watch risks more easing pressure if its economy fails to recover. This week’s European data though of minor nature expect for the CPI will set the tone for the European currency.

Pound Sterling could be choppy with sharp both side moves possible, as it could provide mixed bag of reports.  Unless weak CPI, it is expected that strong inflation data could give boost to Cable, which could be opportunity to sell on the rise because this time Dovish Mark Carney replacing Mervin King, as new BOE Governor will be a new voting member that should extend the voting gap to 7:2 from 6:3 except there is change of heart by another BOE voting member. But do also keep a close watch for any demand to add Pound 25 billion liquidity through asset purchase that could give additional bashing to GBP.

GOLD $ 1284 = In the absence of aggressive Central Bank buying, weak Chinese and Indian growth, gold does not possess any strength of its own, it is more dependent on QE money and speculative buying. Any announcement such as complete withdrawal of asset purchase could be demise for the Yellow metal and its holder, though this is not a preferred scenario.

Its move this week will larger depend on release of US economic data and Fed Chairman’s response to semi-annual monetary policy report to Congress. Any gold bias stance would be ideal opportunity to pick the top, as another fall will be unavoidable that could happen in short span of time. Though, I remain bearish for gold.

Gold on the upside needs to clear $ 1298 for a test and break of $ 1310 for $ 1335-40. However, I am expecting pressure on the downside. See risk for a break of $ 1260 that will open doors for a test and break of $ 1240-45. Break of $ 1202 is required to test new lows.

EURO @ 1.3067 = Euro has resistance around 1.3115, break will encourage for a test of 1.3180-90 zones. However, I do not see big move beyond, as see risk for a drop, but needs to push below 1.2960-70 for larger move towards 1.2765, or else 1.3280 and beyond. Latest Range for the week 1.2750 – 1.3280.

GBP @ 1.5101 = Cable is likely to hold around 1.5010-40 and a move beyond 1.5180 is likely to encourage for a move towards 1.5225-50 zones.  Break would encourage for 1.5310. However, see risk that upside should exhaust for a drop. Watch for a break of 1.4950 that should see a move towards 1.4825. Range for the week 1.4825- 1.5350.

JPY @ 99.18 = Yen should hold 98.00-20 zones for an move and break of 99.95 that will encourage for a test of 101.20, break would encourage for 101.80, or else 97.50. Range for the week 97.50 – 101.80.
AUD @ 0.9043 = Aussie to have weaker tone and should hold below 0.9190 levels for a possible test of 0.8910-20 zones. However, break of resistance level would encourage for a test of 0.9250 zones. Range for the week 0.8880 – 0.9280.

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.

Friday, July 12

Asad Rizvi

Market continued to debate Bernanke's Boston speech. It seems that there is no consensus yet on Fed's next line of action and this is Fed's achievement, as they look successful in mentally preparing the market for it's next move. Fed members will continue to through their idea's on the possibility of reducing its asset purchase plan until it announces it's plan to act.
Such a strategy should help Feds cause, as it may not have larger impact in the market and may simultaneously help in reducing the volatility. So be prepared for more statements from FED officials and try to catch/stay with the trend because all Fed members do not carry identical written notes and will not speak same language and therefore, views will differ. Remember its the final vote that will counts, rests is all talking. Though my count for Fed votes shows tilt towards tapering.

The stock may have jumped, gold took a breather and the US Dollar may have fallen, but 10-year bond yield is still hovering around 2.58 pct, despite poor US initial jobs claim numbers. In my yesterday's note I said to keep a close watch on 10-year US Treasuries and the maturity gap between short/long for more guidance. If yield fails o fall below 2.50 pct, the bearish spell will be short lived.

Meanwhile, Euro regions economy that is showing signs of nervousness and remains shaky due to economic misery in the Euro zone and if industrial production falls today, this may not bode well for the ECB planners working on the possibility of easing rate could help in halting the short Euro rally that also got boost after minor rise of US initial jobless claims.   

GMT 2:20 - EURO @ 1.3087 = I would still like to a break above 1.3110-20 for a move towards 1.3160 or else failure will encourage for a test and break of 1.3040-50 zones will threaten to challenge 1.3005-10 levels.

GMT 2:29 - GBP @ 1.5178 = The key is 1.5140-50 levels. If holds, Cable could test and surpass 1.5210-20 levels for 1.52540-40 zones. Or else 1.5090.

GMT 2: 34 - JPY 99.04 = It looks difficult to break 99.40-50 zones, which increases risk for a test of 98.25levels. Break could mean larger Yen gains or else .99.70.

GMT 2:39 - AUD @ 0.9174 = At moment 0.9220-40 looks difficult to crack, as Aussie may not surpass 0.92 levels, increasing risk for a test of 0.9110 levels, break will encourage for a move towards 0.9040.

GMT 2:46 - GOLD @ $ 1284.70 = Strong support around $ 1278-80 may hold and and risk for test of $ 1295-98 zones, Unless fall below $ 1274-75. Bias is on the upside before exhausting.  

DISCLAMER : The commentary/information presented is not intended for trading purpose. The idea is to exchange views with the members/readers. Therefore, I accept no responsibility or liability for any losses incurred due to position taking.