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.