Monday Oct 28 - Nov 01

Asad Rizvi

We saw an interesting end of the week, as market sentiment shifted from US shutdown to other global events such as writing-off of China’s largest bank bad loan that had tripled forcing Chinese Central Bank to tighten the liquidity. Another big topic of discussion is ECB stress test of 130 banks that may require providing 8 pct of the Capital, as the move will help to get closer to European Banking Union.

Though release of US jobs data, which is considered an important economic barometer that normally is a market mover did not have much impact on the market, as data uncertainty looms. Market has already priced in gloomier US economic numbers, as US government’s partial shutdown will not only distort the economic numbers, it is likely to have negative impact on US 4^th quarter GDP growth, which is likely to fall short by nearly 0.5 pct.

This week, there is release of heavy batch of economic data’s from all over the world. But market will be keenly waiting for FED statement that will be followed after the Fed decision on interest rate to get clue on its tapering stance.

Though all indicators are clearly pointing that FED will maintain its easy monetary policy and would continue with its asset purchase program due to softer economic growth in third quarter, but nothing is firm on tapering until it makes final announcement. However, the key to the FED statement will be hint of possibility of December tapering, which many believe that it will once again be delayed at least until 1^st quarter of 2014.

Current softness of US economy and with hint of further delay by FED to reduce its asset purchase amount would weaken US Dollar. US bond yields will gain and encourage commodities price to rise. Yen could also benefit from the news of tapering delay. But any hint of tapering coming soon will have adverse impact.

  

GOLD @ 1351.90 = In my last week’s note I have cautioned that the upside rally in gold would continue and this week too there is no change in my view, as uptrend to continue. Dip would opportunity to buy, but this week trading could be choppy with possibility of big move corrective moves.

Support for gold is at $ 1335 only break could see fall extending towards $ 13320-25 zones. However, see risk for a test and break of $ 1362-65 that would pave way for $ 1375-80, as rally could extend up to $ 1390-95 zones and only break risks for $ 1420. But break of major support levels means gold heading further down to test $ 1275.

EURO @ 1.3800 = Softer economic condition in 3^rd quarter and recent partial US government shutdown have strengthen the view that FED will delay tapering due to fiscal problems. This reality has given safe haven status to Euro, as it is also enjoying Capital inflows, which is one big factor helping Euro to make comeback after minor correction.

Last week’s call have been absolutely on the dot, as Euro did enter the 1.3825 before exhausting. I am expecting continuation of Euro’s upside rally, but would like to caution, as the European currency needs to surpass a major resistance levels of 1.3890-00 for 1.3950 or 1.4020. Failure to break resistance levels would see a down move and break of 1.3770-90 is required to test 1.3710, as 1.3640 is the next key support level that should hold. Range for the week 1.3640 – 1.4050.

GBP @ 1.6162 = The up move was in line of my expectation and as suggested Cable got exhausted below 1.6280, which needs to be cleared for the next up move. There is a possibility of dip, but 1.6080-90 should hold or else as strong challenge is around 1.6040. On the up GBP needs has next resistance at 1.6325, break would encourage for 1.6380. Range for week 1.6040-1.6410.

JPY @ 97.36 = Japanese currency is stuck in a range, but demand for JPY is likely to persist. As long as JPY offers resistance and fails to break 98.60, see risk for more gains. Break of 96.50 will encourage for a move towards 95.60-70 area. Range for the week 95.40 – 98.90.

AUD @ 0.9581 = Aussie have been struggling due to various unfavorable factors and needs to hold 0.9510 for stability. However, a move beyond 0.9680 for resumption of up move or else break of support levels would challenge 0.9440=50 zones. Range for the week 0.9440– 0.9750.

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.