Asad Rizvi
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.
As
we get closer to the important coming event of the week when Fed is due to meet
on Sept 18 and is expected to give its verdict on tapering after the conclusion
of FOMC meeting. Release of weak US Retail Sales and Consumer Sale data on
Friday gave another blow to the scaling down sentiment following previous weeks
drop in August payroll data. But decision will not be based on weekly economic
report. The other positive factor that supports FED’s idea of tapering is that
inflation is too low, which needs to slightly pick-up within the manageable
level. Low inflation endorses FED Dovish view on interest rate, as it assured
earlier to maintain low interest rate and will emphasize on forward guidance.
I
would stick to my June view that bond purchase amount will be reduced and initial
tapering amount should range between $ 10-20 billion that should help in
providing quick stability and confidence to the market. Any delay could a
temporary, as I still see tapering happening before Ben Bernanke’s term end in
January 2014.
FED
Reserve Chairman in his 1st tapering hint in June has clearly said
that it could begin to taper its purchase of bond later this year if the
economy continues to improve as FED wants. He further added in his follow-up press
conference that FED could end bond buying completely sometime in the middle of
next year, if all goes well according to plan. If we assess the over overall
economic condition, it has definitely improved.
Initial
FED announcement in June was surely made after the final decision on tapering was
taken by its members, which could be subject to delay, only if the US economy
goes burst, which did not happen. Though FED did not give eventual timing of its
tapering plan, but during this period FED gave enough time to the market to prepare
and adjust accordingly. The yield up-move in bond market is obvious because the
size is huge and similar unrest was seen in the emerging market that began
losing its charm after June policy announcement, as it is too dependent on
foreign borrowings. The estimated liquidity injection by FED is $ 2.75
Trillion.
There
is lot of talk that tapering will cause US 10-year bond yield to surge sharply,
which is already hovering around 3 pct and once made a brief test. In my view,
whenever FED decides to taper market will have face volatile session after the
announcement. But let’s not forget that during last three months huge amount of
money from emerging markets and elsewhere was parked in Europe, which is still
in a struggling mode. I think if FED decides to scale down its bond purchase plan
that may give another 50-100 basis point surge in bond yields that could be too
attractive for funds to shift towards US market. This in turn will create demand
for US Dollar and more bashing of Gold could be seen. However, any delay in FED
decision will allow market to correct.
GOLD @ $ 1325.05
=
Saw another perfect hit of my weekly target $ 1335, as fall extended to test $
1306. During this week, we could see some choppy trades prior to FOMC
announcement. Top around $ 1360 should hold, as bias to remain on the downside.
Therefore, preferred strategy is to pick top to sell, as see risk for a move
down to test $ 1280. On a broader prospective the crucial level to watch is $
1375-80 on the upside and $ 1210.
EURO @ 1.3292 = Euro did break
1.3280 for a test of 1.330, as overall tone remains strong. However, this week’s
crucial level is 1.3395-00, unless makes convincing upside break, risk for
losses will increase. A fall below 1.3210 will open gates for 1.3150 or 1.3070.
But upside break of resistance level encourage for a 150-200 basis point move. Range
for the week 1.3050 – 1.3580.
GBP @ 1.5866 = Upside move was
quite in last week’s projection, but the rally extended gains unexpectedly
hitting 1.5882. Bias to remain on the upside, as with tone against cross currencies
will remain firm. Break of 1.5925 is required to test 1.60 or else a move below
1.5740 will threaten to challenge 1.5650. Range for week 1.5620-1.6040.
JPY
@ 99.35 = Nikkei and US 10-bond market are two indicators
that should be watched closely. Sharp fall of Japanese stock will encourage heavy
buying of Yen and surge in 10-year US bond would weaken JPY. On any JPY weakness, I
would still keep a close watch on 100.70-90 levels, as Yen may find buyers dip
below 98.70 will open gates for test and break of 98.10 for 97.10-40 zones.
Range for the week 97.10 – 101.50.
AUD
0.9241= Upside momentum has surely broken and now 0.9350-80
is the barrier. AUD needs to break 0.9150-70 zones to extend losses and is
likely to trade in a given range. Range for the week 0.9080– 0.9410.
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.
EURO @ 1.3270 & GOLD @ $ 1330 = The current weakness of US Dollar is caused by withdrawal of Larry Summers from FED Chairman's position that increases the chances of Janet Yellen to replace Bernanke. Since Yellen is considered very Dovish in her approach this has weaken US Dollar in a hope that tapering could be delayed. But I do not buy this theory because Bernanke will leave in January 2014 and tapering is expected in September or if delayed it can happen before Ben leaves.
ReplyDeleteI am expecting US Dollar to recover. So the levels given in my weekly post is valid. Pick top to sell Euro & Gold around 1.3380-90. Stops 1.3440 & Gold around $ 1333-38 Stops $ 1345
Hi there, I will be away for 2-hours for a 50-minutes Live Tv talk show as a guest to talk on monetary polcy and 100 days of Nawaz Sharif Govt on Business Plus Channel.
ReplyDeleteI will join you soon...
Views unchanged US Dollar will make gains......
GOLD @ $ 1317.80 = book your profit arpind $ 1315-18..........
ReplyDeleteVire on currencies unchanged....................
sir what about gbp now??
ReplyDeleteUS market may have different view and if it does ot follow Asia, we could see USD buying......
ReplyDeleteMy morning view is good we have seen the top..............
so for now next in gold where to sell
ReplyDeleteI hate entering at this hour because NYK is always difficult to read.
ReplyDeleteAnyhow, $ 1322-25 is the key level that should hold fo test of $ 1310-12 levels or esle $ 1332.........
sir shall go short aud now??
ReplyDeletenext in gold
ReplyDeleteGOLD @ $ 1318.50 =no change in view, though we seen a test and a samll bounce back that could extend up $ 1322-25, but should hold below $ 1330 for another doen move..........
ReplyDeleteOK, hope you have sold Euro around 1.3385 levels. moring strategy unchanged.
ReplyDeleteCable made sharp jump this morning. I would noy suggest buying around currenct levels. 1.5980-90 is the crucial level on upisde..........
ReplyDeletePatience pick top in gold.............
ReplyDeleteshould sell gold sl 30
ReplyDeletearound $ 1327-28....Stops $ 1332
ReplyDeleteok sell around $ 1323-25 stops $ 1330.......
ReplyDeleteOk pals, US Dollar will make some more gains. Do book your profit & do not hold your positions for long..........
ReplyDeleteCheers until tomorrow.....................
GOLD @ $ 1310 = Book your profit around $ 1308-10.......
ReplyDeleteOk pals, Cheers until tomorrow.............
ReplyDelete