Asad Rizvi
Surprisingly strong US Payroll data against market expectation proving every economist wrong as there was no lackluster increase in hiring, instead 204.000 jobs were added in October that further strengths FED’s case of tapering in the coming months. Last week we have already witnessed a gradual shift in the tone of various Fed officials, as they were sounded less Dovish. It certainly gives more space to the Hawks to celebrate.
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.
Surprisingly strong US Payroll data against market expectation proving every economist wrong as there was no lackluster increase in hiring, instead 204.000 jobs were added in October that further strengths FED’s case of tapering in the coming months. Last week we have already witnessed a gradual shift in the tone of various Fed officials, as they were sounded less Dovish. It certainly gives more space to the Hawks to celebrate.
They
have frequently spoken in favor of reducing bond purchase amount correlating
with growth and improving job conditions. Surge in unemployment rate to 7.3 pct
from 7.2 pct should not be matter of concern because of October US shutdown
causing layoffs in government sector or else unemployment rate should have
shown dropped.
The
timing of strong payroll data will be extremely helpful because economic
activity in USA in the month of November and December always happens to be is
strong. Prior to US jobs data, release of strong US 3rd quarter GDP
growth data was another big positive surprise that should lend further support
to the scaling down idea.
After
2-consecutive weeks of some important/exciting release of economic reports
market may not have too much to focus
Meanwhile,
ECB gave shocker to the market by announcing cut in Refi rate by 25 basis
point. There is rumor in the market that Germany was against a rate cut, which
is understandable because at present, German economy is enjoying growth,
whereas other Euro-zone economies are in a struggling mode. Hence, despite
positive growth signs emerging from Germany, it cannot alone drag European
economy upward and had to compromise on rate cut. French downgrade is a good
example of overall European slowdown, though majority of the French may
disagree with Fitch’s decision. But at the end of the day this is the price
that Germany has to pay for its love affair with the European integration.
I
think ECB was looking for an excuse to cut rate and drop in inflation below 1
pct was good enough reason to act. Strong Euro does not suit the global
economies to buy expensive European goods, though Draghi was quick to point out
in his press conference that the rate cut wasn’t linked to the strength of
Euro.
I
am not sure that linking Europe’s economic problem with deflationary condition
in Japan is an appropriate/sensible comparison or not, as Europe consists of 28
member countries, 17 of them adopted to use Euro as a common currency, but they
all have different economic structure/problems, which differs from each other.
Japan has aging problem and its older population cannot support its domestic
market, as it cannot use modern gadgets. Japans domestic debt is highest in the
world at 223 pct of the GDP, so where is the similarity. The size of Japanese
banks is the largest in the world, though it has numerous problems with 7 pct
bad loan it needs to be deregulated ob urgent basis.
While,
European Central Bank surly has a plan in pipeline, as LTRO is next in line,
which cannot be avoided. One of the ECB Executive Board Member Coeure signaled
another rate cut is possible if needed, which means ECB has decided to provide
liquidity. This could also be proactive ECB stance as a measure to counter FED
tapering which is on its way, as any sizable amount of cut in purchase of bond
will definitely have spillover effect on global economy. The cut is an extreme
measure that has exposed ECB, as it was compelled to use its one of the major
monetary tool and is now left with very little option.
GOLD @ $ 1287.50
= The
expected down move has occurred nearly hitting target $ 1280. This week we remain
bearish for gold and do not expect crack beyond $ 1306 unless $ 1318 breaks. Pressure
will remain on the downside. A move below $ 1270-75 will open gates for a test
of $ 1250-55 targeting $ 1230-35 zones.
EURO @ 1.3369 = Euro has little
reason to celebrate, as the currency has been sandwiched between strong US
growth and ECB deciding to chop Refi rate by 25 basis point without any further
delay, as there was some urgency.
Though
European currency did manage to survive sharp dip the downtrend is intact and
is likely hold below 1.3450-75, as any upside rally should be capped. A break
of 1.3250-80 levels will be 1st hint for more losses and Euro could
dip down to test 1.3080-20 zones. However, as the European currency is getting
close to 1.30 zones occasional up side correction will be frequently seen that
should provide good trading opportunity on both sides. Range for the week 1.3020
- 1.3490.
GBP @ 1.6018 = After weak trade
data that was caused due to fall in exports and rise in imports Pound Sterling was
unable to maintain its ongoing strength though it remained strong against Euro.
Anyhow, the key data this week will be release of BoE quarterly inflation report
that will determine future trend. Release
of Employment and Retail Sales report could add fuel to the fire, which will
result volatility in currency.
Immediate
challenge for Cable will be to surpass 1.6090 levels, which encourage for a
move towards 1.6150, which looks difficult. Risk is for a drop and break of
1.5940-50 zones could see a fall towards 1.5820-40 zones. Range for week 1.5780-1.6180.
JPY @ 90.05 = As per
expectation Japanese currency traded in a narrow band and I do not see 3rd
quarter GDP data having major impact on the currency. I will be keenly looking
NIKKIE and 10-Year US Bond for guidance. Nomination of Janet Yellen, as FED Chairman
is almost a done deal, but any obstacle could give spin to the currency that
could make gains despite all odds.
Japanese
currency has support around 99.60-80 and break could spark a move towards 100.30-50,
which may not surrender. A move beyond 98.10-20 would encourage challenging
97.50-70 levels. Failure to hold will result sharp gain. Range for the week
94.80 – 100.50.
AUD @ 0.9384 = Aussie did move beyond 0.95 levels but could not
surpass 0.9550 levels. I do not see AUD making big gain unless moves beyond
0.9490-20 levels as downside risk would increase if 0.9250-80 breaks for a test
of 0.950-80 zones. Range for the week 0.9150– 0.9520.
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.
GOLD @ $ 1286.50 = Pick top around $ 1287-89 to sell Stops $ 1293.................
ReplyDeleteAsad Sahab, which position u recommend on gbp right now, buy or sell??
ReplyDeleteGBP @ 1.6013 = My preffred level to sell would be around 1.6030-40 zone..........
ReplyDeletesir what abt euro and aud for intraday positions!!
ReplyDeleteIts going to be slow day due to NYK Holiday.
ReplyDeleteEuro should not supass 1.35 levels and may exhaust aroyd 1.3480-90
Similarly Aud range bound trading is expected within 35 pip (+ -)
GOLD @ $ 1287 = No Chnage in view.
ReplyDeleteStill prefer selling gold around $ 1287-89 for test $ 1278-80 zones. Stops $ 1293
GOLD @ $ 1279 = Book your Profit around $ 1277-79...................Cheers
ReplyDeleteEURO @ 1.3492 = Sell around 1.3492-98. Stops 1.3535............
ReplyDeleteHowever, keep in mind that market condition will remain thin..........
I just saw my Big Finger Mistake.
ReplyDeletePlease read Eueo @ 1.3392 instead of 1.3492.
Selling level is 1.3392-98 and not 1.3492-98
Simiarly STOPS 1.3434 & not 1.3535.
Sorry if I have confused you all.............
GOLD @ $ 1287.50 = Prefered Selling around $ 1288-90. Stops $ 1295.............
ReplyDeleteGBP @ 1.5970 = Book your profit around 1.5965-70..........................
ReplyDeletesir hold gold sell position where to book profit wait for ur signal
ReplyDeleteGOLD @ $ 1283 = Book profit profit around $ 1281-83, as I was waiting for a break of $ 1281 to test $ 1277-78 levels, which did not happen....cheers
ReplyDeleteEURO @ 1.3400 = Close Euro position around 1.3395-00, as only break of 1.3385-90 will encourage for another 20 pip dip. But again trading activity dull is thin market condition.....
ReplyDeleteOk pals, despite dull tarding activty, it was was profitable day.........
ReplyDeleteCheers until tomorrow.......................