Monday, Aug 12 - 16

Asad Rizvi

Last week US economic data have once again showed healthier growth, but release of Euro zone economic numbers depicted better picture of the region’s economy, as orders came from Paris show that gave boost to Germany’s manufacturing sector. Similarly, Euro zone’s manufacturing PMI entered growth zone, as German and Italian factories/industries performed well.

We may witness a very similar condition this week if the release of European data show continued trend. The expectations are that after the recent release of positive European data Euro-zone GDP Q2 could be revised upward. Some of the German economic indicators are also pointing towards healthier growth and hence, German ZEW data is also likely to do well.

But this does not necessarily mean that Europe will lead the market. Release of US economic numbers will counter European data. Consumer spending has been encouraging that should help retail sales. Averaging softer gasoline prices during the month and drop in food prices should not see jump in PPI numbers, which point towards softer CPI number. All eyes will be on US initial jobless claims, which should once again reflect better economic conditions. Overall release of economic data this week from USA should provide better sense about economy.

However, though focus should be towards economic performance, it is preferable to keep a close watch on FED official’s statement that can potentially increase market volatility.

GOLD @ $ 1314.21 = The move was quite in line of projection hitting the bottom of the range, but failed to break $ 1275 and later bounced back to move beyond $ 1300 on the news of China’s July industrial output of 9.7 pct. Such reasoning is temporary and hence, up moves provide opportunity to catch the top and offload expensive gold holding, as it does not change the trend. Risks for bigger fall exist.

Initially we could see gold making gains, but the crucial levels to watch is $ 1325-30, break is required for a test of $ 1350-55 zones and technically if gold surges, it should exhaust around there levels. Weekly close above is required to hit $ 1370-75. If seen, I would prefer selling around $ 1350-55 zones. A fall below $ 1295-97 will open doors for a test and break $ 1280-85 that will help gold to test $ 1250-55 zones.

EURO @ 1.3336 = The expected move did occur hitting and toping 1.34 levels before easing. This week too, the trend is likely to continue and should hold above 1.3250-70 levels. Break of 1.3410-20 will encourage for a test of 1.3460 zones. But may struggle to move beyond 1.3520-40 levels and could see a 150-200 pip drop. Range for the week 1.3220 – 1.3550.

GBP @ 1.5496 =  Saw a perfect up move in line of my forecast stretching a bit and this trend will be short lived before exhausting. The levels to watch is 1.5580 that needs to surpass for 1.5640 or else risk for down move will increase if 1.5410 surrenders for 1.5320-50 zones. However, I will not be comfortable long around or beyond 1.5580 if seen, as Cable is suspect to quick economic revovery and may drop sharply on any poor economic news. Range for the week 1.5250- 1.5650.

JPY @ 96.15 = The strength of Japanese currency is caused by delay in action by the Japanese government to implement proposed tax measures, which may not happen anytime soon. Expectation of adding further stimulus did not happen is also providing strength to JPY. This has given enough space to JPY to correct. Furthermore, to halt current surge, JPY needs to ease beyond 97.90 for 98.50, else risk is that break of 95.50 could see this correction extending towards 94.80. Range for the week 94.50 – 98.50

AUD @ 0.9193 = Last week, I warned that despite half percent rate cut, Aussie is looking ripe for correction and is likely to bounce back. The expected move did occur, hitting comfortably the top of my given target 0.9180.   

This move could extend up to 0.9290, but may not have enough legs to make bigger strides. Break could see extension of move towards 0.9340, but another drop is unavoidable. Fall below 0.9150 will encourage for a test of 0.9170-80 levels. Range for the week 0.9050 – 0.9450.

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.