Tuesday, December 31

Asad Rizvi

Today is the last trading day of the year and we could be heading for choppy day. JPY is holding below 105, 10-year US bond yield failed to surpass 3 pct levels. Whereas, major stocks are set to close at record high, though Asia has so far made a good beginning, but market remains unsure about the closing trend. 

The real test for the financial market will come in new year, when FED will gradually start reducing its bond purchase amount by $ 10 billion on monthly basis. Initial tone for Euro and Pound Sterling looks strong and we could see more gains. Whereas, gold will continue to loose its sheen.

Trading activity on the last day of the year (Today) is expected to remain thin and volatile too, as momentum should start picking up from next week, when traders will be back from holidays. So watch out for possible exaggerated moves. However, US consumer confidence data, Chicago PMI & Case Shiller Home Price Index may set the tone for new year.

GMT 2:44 - GOLD @ $ 1198 = Gold trend certainly does not bode well for coming year and is surely going to take pounding, as it is too far away from safe level of $ 1225-30 close. I will not be surprised if gold makes an upside feeble attempt, but a close below or around $ 1170-75 today will certainly ring alarm bell for 2014.

During the day in all 3-sessions, support is around $ 1188-90 and break of $ 1205 is required to test $ 1210.

GMT 2:49 - EURO @ 1.3795 = Support 1.3760-70 should hold for a possible move towards 1.3840-50 zones before easing or else 1.3725.

GMT 2:54 - GBP @ 1.6482 = Strong support around 1.6450-60 may hold Pound, with minor support around 1.6435 for another test of 1.6495-00, if breaks could stretch by another 25-30 pips, but break below would risk for a test of 1.6410-20 zones. 

GMT 2:57 - JPY @ 104.90 = gains could extend but needs to break 104.70-75 levels for 104.50 or else re-test of 105.20-25 zones could be a possibility.

GMT 3:00 - AUD @ 0.8922 = Correction is taking place against all odds that could stretch up to 0.8950-60 zones if 0.8935 breaks. However. break of support level of 0.8905 would risk for another test of 0.8875-80 zones.

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.

Monday, Dec 30 - Jan 03

Asad Rizvi

I think after watching impact of market moves in thin condition on Friday that I have frequently warned you all may have realized that how difficult it is to trade currencies in such volatile conditions. This is why it is extremely important to apply Stop loss or to stay away because from abnormal trading conditions.

I have decided not make hasty comments this week, as market condition will remain uncertain/choppy due to factors beyond anyone control except for the Big Daddies that may once again dictate the market.

You may have noted that in my last hour comment I said “ EURO & GBP could make another upside attempt before exhausting and may see sharp drop”. This is what my experience tells me about the risk of trading in thin market, especially during year end.

Therefore, I am simply putting down the technical levels for guidance and will inter-act with you, as I do during the day instead of analyzing the fundamental side, which is ineffective due to holiday season and in the absence of major trading players. We could witness such moves for few more weeks until traders are on their seats.

GOLD @ $ 1212.90 = Gold gains could be possible for next 2 or 3 days, but may struggle to move beyond $ 1225-30, as downside risk will remain intact, therefore selling interest should dominate. Break of $ 1192 will encourage for a test and beak of $ 1182 for $ 1169.

EURO @ 1.3748 = Weekend surprise up move gave hint of excessive volatility in year-end thin market condition, but the move is a sort of guideline for possible upward direction before US Dollar dominates. The confidence in European currency is largely due to better economic condition and improved fiscal condition, positive surplus number is adding to the confidence level. Therefore, unless there is further deterioration of economic condition in the Euro-zone region or there is bigger impact of US economic gains, Euro may find buying interest on dip.

Euro has protection around 1.3620-40, which may not be easy to surrender and if holds we could see another upside test of 1.3875 and break risks for more gains. On the downside, if support break, risk for test of 1.3580 will increase, but Euro could potentially bounce back.

GBP @ 1.6375 = Cable has strong Support around 1.6295-05, which may not surrender for another upside move. Break of 1.6460-80 risks for another test of 1.6570-80 levels. If support level surrenders GBP could test 1.6240 before another upside attack.

JPY @ 105.15 = Though trend for Japanese currency points to weaker Yen, but needs to clear 105.60-80 for 106.25 or else correction is possible. However, break of 104.10 will see more gains for JPY that could stretch up to 103.50-80 before easing.

AUD @ 0.8870 = Aussie needs to clear 0.8960 for test of 0.9020-50 zones, which is not a favorable move, as break of 0.8770 is required for deeper fall towards 08710.

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.

Friday, December 27

Asad Rizvi

US Dollar has been trading in tight ranges and may soon find bottom, as US data this week, New Home Sales and Initial Jobless Claims were better than expectation. Volatility could be caused due to year end book adjustment. There is no release of data announcement today. 

Meanwhile, Cable continued its upside trend helped by strong recovery in Housing & Manufacturing Sector. Investors still believe that the UK economy will perform well discarding current strength of Pound Sterling, which may dent exports and tourism. 

Japanese Yen inched up towards 105 levels against US Dollar on believe of stimulus package. However, there are reports of disagreement on issues between BOJ board members and this be good cause of correction for Yen, so short Yen around 105 could be a risky proposition. Furthermore year end correction/repatriation could b another possibility. So watch out.

GMT 2:06 - GOLD @ $ 1210 = Buy Gold on dip around $ 1206-08. Stops $ 1202, Break of $ 214-16 will push it towards $ 1220. Or else $ 1195.

GMT 2:10 - EURO @ 1.3716 = Euro could test 1.3730-40 zones before making a move towards 1.3685, but needs to break for tets of 1.3665-70 zones or else 1.3750-60 before down again.

GMT 2:15 - GBP @ 1.6432 = Cable could creep up towards 1.6450-60 zones before easing to test 1.6410-15 levels. 1.6495 should not surrender. If makes an early dip should be bought around or below 1.6310 with Stops 1.6370.

GMT 2:19 - JPY @ 104.90 = I would still prefer Long JPY around 105 levels with STOP LOSS @ 105.40. Break of 104.55 will encourage to test 104.20 zones.

GMT 2:21 - AUD @ 0.8880 = Should hold below 0.8910 for 0.8850-60 break risks for 0.8840. or else 0.8930.

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.

Thursday, December 26

Asad Rizvi

Trading activity is very thin due to holiday season. Volumes will remain low until traders are back after the year end. While, financial market is still trying to digest the FED latest monetary policy announcement to reduce its monthly bond purchase starting from January. 

For guideline, release of US economic data will play crucial role, as market indicator after the FED stimulus decision. On the Christmas eve, durable goods showed healthy jump due to sure in aircraft and transport equipment in the month of November that rose to 3.5 pct versus 2 pct expectation. Home sales too climbed, despite higher trend in mortgage rates. Today' release of US initial jobless claims is another key indicator that will give hint of job market condition. 

Meanwhile, gold is hovering around $ 1200 despite release of better US economic numbers. This due to year end valuation, as I have posted in my weekly report that holders will try to push price higher. Though tug of war between the Bears and Bulls may continue, but this time there is a minor risk that Bears that normally dominates at year end closing time may loose the battle due to strong US economic performance draining of liquidity from next year.

Meanwhile, we are probably heading for another very slow day, as Europe is closed. there could be minor/thin activity in US session. Market could be dead or year end order could create volatility. Unpredictable moves is possible so trade with caution.

GMT 2:41  - GOLD @ $ 1204.80 =  Gold may hold above $ 1198-00 in Asian session to test $ 1208-10 or else $ 1194. Meanwhile, a move beyond could risk for a test of $ 1215-20 zones. 

GMT 2:52 - EURO @ 1.3678 = Euro should hold around 1.3680-90 for 1.3560, break will encourage for 1.3615-20 or else 1.3705-10.      

GMT 2:58 - GBP @ 1.6382 = Strong support is around 1.6350 only break risk for 1.6320 or else potentially if Pound   breaks 1.6410 it could make another 50 pip gain. Though may exhaust below 1.6410.

GMT 3:02 - JPY @ 104.75 = Challenge is around 104.90-00. Japanese currency may not surrender for a test of 104.40-50 zones. Break of 105.25 will threaten for more losses. 

GMT 3:07 - AUD @ 0.8886 = Aussie should hold around 0.8850 for a test of 0.88915-20 zones or else 0.8820.

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.

Monday, December 23-27

Asad Rizvi

Bernanke fulfilled his June 19 commitment to begin taper of its bond purchase by end of this year if the economy continues to improve. Interesting since then until FED’s December 18 announcement, there was fierce discussion/battle between the Hawks and the Doves on the tapering subject with Doves mostly vocal and forceful and demanding considering delaying, as they were not convinced about consistent US economic performance and saw risk to the economy. Hawks were not as aggressive and in the end proved to be correct in their assessment about economic gains, as FED has announced to begin scaling down of its bond purchase from January 2014, though in small amounts.

There was a reason for Doves to be too vocal on the subject that may have helped to consider small cut in bond purchase. Dove’s supporters, other than FED members are basically the elite borrowers that have the excess to borrow and have been enjoying hefty profit against cheap funding facility made available to them since last over 5-years that did not benefit the economy as per expectation. Instead last week it had put FED in more awkward position by inflating the size of balance sheet to USD 4 Trillion that will continue to increase in size unless monetary stimulus completely halts. It will never be easy to shrink FED Balance Sheet.

So far financial market did not react to the tapering news that will become effective next month. FED announcing that it will start tapering its stimulus means that it ultimately plans to deviate from its unconventional methods and hence, market will begin to perform in line with the economic fundamentals and here lies the big challenge, when injection of liquidity is reduced and then totally stopped.

Tapering will surely impact risky assets due to position adjustments. It is bad news for the Bond market, as rising yield will also hit all income related instruments. This can especially bring shockwaves for the emerging market and its bond market could badly suffer. It will also lead to unwinding of all carry trade businesses.

During extremely easy monetary policy stance, there is one large segment of the society in majority that suffers most for wrong reason and they are savers that have to subsidize government borrowings and have to pass on the benefit to business community. But unwinding of Treasury Bonds will surely bring relief for the savers in a hope that they will soon get relief from negative return.

Though in coming days/weeks/month’s market will be watching FED stance and the language used for future guidance, but the financial market will start concentrating towards economic performance that will be based on fundamentals. Since FED’s forward guidance has provided clear indication that its policy rate will remain close to present levels for next couple of years. Hence, market will be more focused on yield curves, as risk of low inflation and tapering means steepening of curve or increasing of gap between short-term against long-term treasury instruments. Availability of liquidity will be another key factor that will play major role to determine future market direction.      

GOLD @ 1202.65 = Before I make a comment on gold, one thing is for sure that we are heading for a choppy year end due to holiday season, thin market condition and year end closing. Desperate bears will make every effort to push gold higher, but I consider such up move as opportunity to sell, as gold has no major fundamental and economic support to trade at higher levels. Last week gold made perfect move in line of my forecast to cap below $ 1240 to breaching my weekly target $ 1193 briefly before inching up towards $ 1202.

This week a similar move is expected, but I am expecting fall to extend if holds below $ 1215-20 levels or else gold could move towards $ 1235-40 zones. It needs to fall below $ 1185 for a test of $ 1170-72, with $ 1148 another important support level.

EURO @ 1.3669 = The current strength of European currency is largely based on extraordinary economic performance by the Germany that countered S & P downgrading of European Union, which consists of 28 member states, as most of them has weak credit conditions. Euro neither succumbs to strong US GDP data. The other big factor supporting Euro is large maturities of LTRO, which is draining of liquidity from the European Banking System helped to reduce the size of ECB balance sheet. Overall it has been a good mix for the currency to maintain its continued strength.

This week Euro will have to move beyond 1.3720 for 1.3775. However, Euro may find selling interest on the up and on the downside needs to break 1.3610 for a test of crucial support level of 1.3570-80, but will find buying interest on dip. This is why European currency is likely to trade in a narrow range 1.3540. Range for the week 1.3520 - 1.3810.

GBP @ 1.6327 = Signs of robust UK growth is obvious though recent manufacturing data and deficit showed some hint of slowdown. Overall mood remains Bullish, despite BOE showing discomfort with strong currency was taken seriously by the market. Unless there is more bad news for Cable it will find buying interest on dips.

The levels to watch is 1.6250-70, which may hold for another upside or could 1.6180 levels before up. However, a move beyond 1.6380 may encourage for another test of 1.6220-50 zones. Range for week 1.6180-1.6450.

JPY @ 104.07 = JPY could move to test 104.50-60 zones, but suspect Japanese currency will weaken beyond 105. A move toward 103.20 could be a possibility on break of 103.70. Range for the week 102.50 – 104.98.

AUD @ 0.8919 = Aussie may find temporary floor around 0.8820-50 and only break of this level risks for 0.8750. Break of 0.8809-90 will pave way for 0.9040-50 before correction is over. Range for the week 0.8750-0.9080.

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.

Friday, December 2013

Asad Rizvi

After FED tapering that was necessary, as the size of its balance sheet surpassed $ 4 Trillion mark that grew from $ 871 in 2007 to $ 4 Trillion until Dec 16, 2013 is a hint that how much mending of economy has taken place by window dressing that has caused imbalance in the financial system. 

What is more worrisome factor is that there is no plan or strategy to reduce the size of the balance sheet, neither it was ever questioned seriously by the US Senate Banking Committee that often inter-acts with the FED chairman in regular basis. Shrinking of FED balance sheet could be more difficult task than mending of economy, which may never be possible because as there is revenue generation plan to counter monster financial storm.   

Coming back to market reaction after FED's Wednesday move, Global Stock Market and US Dollar were the immediate beneficiaries. While Currencies, Gold and US Bond Market took the blow. So far impact on the emerging market could not be seen, as effect of liquidity squeeze will gradually filter into the financial system, as thew size of taper increases on monthly basis.

It is interesting to note the odd market behaviour and at time do not comply with the economic moves. US jobs data is a good example that despite unexpectedly strong numbers USD unexpectedly weakened. Previously we saw ECB rate cut having no impact on the European currency. Emerging Markets can be taken as a best case example, because despite most of the economies enjoying surplus, as compared to developed economies laden with high debt, trade imbalance, balance of payment problem, average foreign exchange reserves have been surviving through printing of notes considered economic evil and yet there is plenty of disparity, as emerging market economy is faced with risk of meltdown and investment flow is shifting to comparatively weak developed economies. 

I think overall, as we approach year end, market will remain directionless. There could be some odd behaviour in the financial market moves due to year end demand and window dressing that will lead to choppy market conditions and more importantly thin market condition will add more confusion due to holiday season, hence uncertainty will prevail in the global financial market. So watch out for the sharp scary both way moves. 

GMT 3:21 - GOLD @ $ 1195 = Top around $ 1200 should hold below or else $ 1205-10 could be challenged and any break could delay fall. I am expecting another down move to test $ 1183-85 zones. Clear break will encourage for test of $ 1172, with next $ 1135 levels as my next target. 

GMT 3:32 - EURO @ 1.3644 = I see strong support around 1.3610-20, needs to make a clear break for test 1.3580-85 zones. However, prior to fall Euro may bounce back to visit 1.3660-70 zones, but should hold for another dip.  

GMT 3:38 - GBP @ 1.6368 = Cable may hang around for a moment and as long as support level 1.6340-50 holds. There is a minor risk to get close to 1.6390-00 levels before easing. However, a move below support level will encourage for a test of 1.6270-80 zone. On the up break of 1.6410 would threaten to challenge 1.6445.   

GMT 3:43 - JPY @ 104.40 = As long as 104.80-90 holds, risk of some gains for Japanese currency looks a possibility, requires to break 104.03 for a test of 103.85-90 zones. Or else 105.20.

GMT 3:46 - AUD @  0.8875 = Should around 0.8830-40 levels for a gradual up move needs to move beyond 0.8890-00 for test of 0.8915-20 zones or else 0.8810.

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. 

Thursday, December 19

Asad Rizvi

Finally FED has given its verdict in favour of reducing its asset purchases and did not succumbing to external or Dovish pressure, as it had decided to do away from extremely easy policy that was implemented in 2008 after the financial crisis. Some of the interesting points worth noting is that recently much talked about subject inflation, which is below the target level of 2 pct did not bother FED much, as it did mention in its text of the statement that they expect inflation to remain around or below half-percent for next one to two years, so low inflation should not be matter of concern for reasonable period of time.  

Apparently from the FED statement it appears very clear that it will target labour market to further improve job conditions through economic growth and it is encouraging too that the FED members sees risk to the outlook for economy and labour market looks balanced. This also means that future FED action will largely depend on US economic performance.

Tough USD 10 billion may be token or modest amount in size, but the move has began and market now knows that FED will be done with its QE program Next year (2014). It is worth nothing that Janet Yellen in past considered very Dovish is no more only a voting FED member, as she has a responsibility and has bigger role to play. There was against vote that did not matter. 

Another key point to note is that it's benchmark unemployment remains 6.5 pct and is not lowered as market was guessing prior to monetary policy announcement. 

It is still early to digest or have full grasp of FED's overall move, as market may take some more time to analyse the pros and cons, but for guidance the immediate best indicators could be the behavior of emerging market, 10-years US Treasuries and Stock market.

  

GMT 3:30 - GOLD @ $ 1220 = After last night FED's move gold is set to fall and test new lows next year. Struggling Bears may may to push is higher, which should be good opportunity to sell gold.

I am expecting gold to hold below $1232 levels and therefore sell on up moves for $ 1210-12. Break will encourage for a test of $ 1204-06 zones and a push towards $ 1187-90 could be a good possibility. Or else $ 1240.

GMT 3: 35 - EURO @ 1.3655 = Euro needs to move beyond 1.3690 for 1.3720 or else risk for a test of 1.3590 will increase on break of 1.3615.

GMT 3:40 - GBP @ 1.6370 = Cable is still a hard nut to crack and bias remains on the upside, It has support around 1.6330-40 zones, break of 1.6395-00 will likely to challenge 1.6425-40 zones. or else 1.6300-10 before up.

GMT 3:45 - JPY @ 103.97 = Needs to break 104.35, which could be tough for a test of 104.-80-90 zones. Failure to ease will push Japanese currency towards 103.55-60 before it further weakens.

GMT 3:47 - AUD @ 0.8828 = Aussie could hold around 0.8750 levels for minor correction, but may find resistance around 0.8850-60 or else 0.8720.    

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.  

Wednesday, December 18

Asad Rizvi

Let the Federal Reserve debate end and see what they have to offer through its monetary policy announcement. Market had tried to focus and discuss on all issues related to jobs, growth, price stability, forward guidance, etc. Interestingly inflation, which is off target is the new topic and last hope that is being highlighted/focused by the Doves to come to their rescue, as they are well aware of the price of taper. 

Although I am not sure about the risks, as nothing has hindered the US economic activity. But the last word will come from FED that will matter. Whatever decision FED takes, market is now prepared for move that could be delayed by another 3-months if no announcement is made today. If announced, it is the size that would matter. 

The Maths is simple that if FED goes for taper then the size would initially play key role in moving the market. Though small size may not have sever immediate impact, but it ultimately it will lead to strong USD on believe that finally the move has occurred. No tapering would mean USD thrashing and boon for US Bond, EURO, GBP and Oil too could initially benefit, But Gold will take a big stride and could make $ 100-150 gain by year end. If FED give a future time period for tapering, initially USD may make tiny gain before market will start selling US Dollar and US Bond yield will tighten and Gold will glitter.

Meanwhile, prior to monetary policy announcement it is difficult to determine market direction, but lot will depend on the mood of market and hence, market will tilt accordingly. Ahead of policy announcement, German IFO will be released and some important announcement is due from UK too and ahead of FOMC decision US economic data's will be released.

   

GMT 3:07 - GOLD @ $ 1233 = Fate of gold's next direction will largely depend on Fed's decision. The levels on the upside to watch on break of $ 1260 will be $ 1290, if surrenders a could see gold entering $ 1325-50 band. On the down side a fall below $ 1190 will challenge new lows.

GMT 3:17 - EURO @ 1.3770 = Prior to FOMC announcement, Euro is likely to hold around 1.3740-50, with minor possibility to test 1.3800-10 zones, any fall should hold above 1.3710. But later breakout of either 1.3660 on downside and 1.3880 on the up would matter most (Please refer weekly Outlook).

GMT 3:23 - GBP @ 1.6281 = Choppy day for GBP. Break of 1.6370-80 levels is required for another upside test. On dip protection is at 1.6180, if fails 1.5990 could be a possibility this week.

GMT 3:33 - JPY @ 102.98 = Unless 103.70-80 surrenders, Japanese currency could potentially make gains. Break of 102.10 will encourage for sharper gains as it could penetrate 102.10 levels for a test and possible break of 100.50.

GMT 3:36 AUD @ 0.8911 = Any up move will require to break 0.8990-00 for 0.9050. However, selling interest will be seen on Aussie gains. Break of 0.8820-40 zones could see fall extending towards 0.8770.    

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.   

Tuesday, Dec 17

Asad Rizvi

The pattern in the financial market suggest uncertainty and nervousness, as the direction remains unclear. It is difficult to judge FED's monetary policy stance based on release of data's this week. The market behaviour does not reflect true picture, as opinion is still divided and after the the most recent release of Payroll and Jobs data, FED officials have been less vocal on the subject. Therefore it is tough to get the sense or feeling about the direction.

Everyone, has its own assessment about FED' next stance, as the opinion is still divided about the timing of tapering. Some based on economic reasoning and few of them are dependent on their hunch feeling. Many argue that tapering is priced in, but common sense will tell us that draining out of liquidity on regular basis will have sever impact on the overall financial system that can spill over on the global financial market due to strings attached. Unless FED announces that its one time tapering or FED will see wait to see the market reaction before its next withdrawal/unwinding. 

This may not be as easy as one may think, but if we make an overall assessment of US economic performance, which was the core argument or condition by the FED members during their speeches, then there is no reason to delay scaling down of bond purchase by FED. 

Meanwhile, Euro-zone PMI did reflect better result, but unfortunately it was once again due to the strength of German economy that is pulling the engine versus others that remain disappointing, which is not a very healthy sign. Today's European CPI and Labor cost data will give some hint of inflation in the Euro region. German ZEW could once gain some lead to Euro.  

    

GMT 03:11  - GOLD @ $ 1241 = In Asia and in early Euro, Gold will find support around $ 1235-38 zones for a move towards $ 1246-48 zones. Break of $ 1230 risks for more losses. Beyond $ 1255 will threaten for more gains.

GMT 3:17 - EURO 1.3766 = We witness a very similar pattern as of yesterday if holds around 1.3740 and see a possible break of 1.38 for 1a test of 1.3718 zones before easing Or else 1.3690-00.

GMT 3:21 - GBP @ 1.6313 = Buying interest will be seen on dip around 1.6280, but requires to crack 1.6340 for 1.6270, which looks tough and could dip again. However. support is at 1.6240.

GMT 3:25 - AUD @ 0.8935 = May find resistance around 0.8950-60 for a test of 0.8900-05, break risks for another 20 pip drop. Good selling interest will be seen if move towards 0.90 levels.

GMT 3:32 - JPY @ 103.06 = Yen should find support around 103.20 levels for 102.70-75, break risks for test of 102.45 or else else test of 103.45.

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.    

Monday, December 16-20

Asad Rizvi

This is going to be an important week, as FED will be announcing its last monetary policy for the calender year 2013. Financial market will be anxious to know that if there is a change in its policy stance after attaining 7 pct unemployment rate, which is very close to FED target rate of 6.5 pct and improved economic performance. Though targeted inflation rate dipped. FED officials have been very vocal, linking potential reduction of its bond purchase with the US economic condition.

It is not yet know that if this is going to be FED Chairman Bernanke’s last meeting or not, but after the 2008 US meltdown, he shouldered the responsibility to introduce quantitative easing (QE) by paying a very high price through printing of money against all economic norms. 

FED has so far injected nearly US Dollar 3- trillions to save economy from disaster. It did give breathing space to the economy, which was only possible through introduction of 3-phase of QE in continuation during last 5-years that lacks plan and has no firm backing. This why despite Bernanke’s commitment in June this year that FED plans to do away with the tapering by March 2014. FED is still unsure about its unwinding program. 

After all the progress that the economy is witnessing, my view is that with better US economic conditions the downside risk has reduced to a greater extent that helped in lifting the confidence level. This is why market is pricing tapering. 

However, one fact that should not be ignored is that Bernanke is about to exit and Janet Yellen has been nominated to take the chair. Therefore, if FED wants more time, this could become another good excuse for delay in making tapering decision that gives FED good opportunity to linger on.

This should be the most eventful week of the month, as market will be in a holiday mood from next week onwards until the end of the year. Bias for US Dollar should be on the up and better US economic data will help the sentiment. But if FED does not announce tapering, it will cheers US Bond market, Gold will make sharp gain, US stock market will test new highs and JPY too could correct. US Dollar will be the net looser. However, there could be one more possible surprise that FED gives a January date for tapering.    

If FED decides to taper, then market will be keen to listen to Ben Bernanke’s press conference to get a clue about its future strategy, but if policy stance remains unchanged, then his press conference will be of little interest.

GOLD @ $ 1238.70 = This week, Gold move will largely depend on FED policy announcement. Prior to FED meeting I am expecting gold to trade in a $ 1275 and $ 1202 band, in between the resistance and support levels is $ 1255, $ 1268 and $ 1278 levels. Support is around $ 1218-20 and $ 1198. 

I  will have one reservation if FED remains mum on tapering, because last December closing was @ $ 1687. There are good number of investors still holding gold purchased at much higher levels in hope of bounce back and due to year end closing if FED does not announce reduction in its bond purchase, they will try to push gold higher to support their balance sheets. Whereas, decision to taper will witness more selling pressure. Hence, on the up break of @$ 1288 will open doors for a test of $ 1325-50 zones and I will not be surprised to a move towards $ 1440 in the new year. However, the other possibility is that break $ 1190 will see deeper fall and possibly gold will head for new lows after the US meltdown.      

EURO @ 1.3742 = Euro may continue to show its muscles and is likely to find buyers on dip. This is because expectation of negative rate has receded for the time being. There are quite a few supportive factors, as we often talk of healthy foreign inflows, which means investors confidence in Euro-zone area. LTRO amount is constant decline that indicated healthier ECB balance sheet and reports are that there is a sizable amount of LTRO maturity due this month, it lead towards liquidity constrain. This is why until ECB announces another batch of LTRO, Euro will have the ability to bounce back after every dip or unless Euro-zone’s economy deteriorates. Obviously US tapering will remains on the market nerves and if FED refrains, 1.40 against USD will be achievable.

Initially, Euro will find resistance to crack 1.3825 levels, but is required to fall below 1.3650-70 zones for a dip extending towards 1.3580-00 zones.

On a broader perspective Euro needs to break 1.385 for a test of 1.4080-90 zones and on the downside 1.3540 will encourage for 1.3460.  

GBP @ 1.6295 = There are clear signs that BOE drumbeating for positive UK economy outlook will continue that should give edge to the currency until market realizes that the pace of growth is not sustainable. The real strength of GBP should be based on facts that overall job condition should improves, exports will have to make acceptable level of recovery and trade balance condition should improves. it may take some more time and the economy has to shows consistence performance.

However, with the current pace of in growth in UK, GBP will enjoy demand for investors. Though for upside move Pound needs to break 1.6225 and then 1.6490 for further gains. A fall below 1.6220-30 risks for test of 1.6150-70 zones and only break would encourage for 1.6075.  

JPY @ 103.22 = I have my reservations about JPY weakness, as Japanese currency has solid support around 103.95-00n and at 104.50. Prior to FED announcement any move beyond 104 should by good opportunity to buy Japanese currency with 80 pip Stop Loss, as break of 102.10 will accelerate gains for JPY versus USD towards 101.50-70.

AUD @ 0.8963 = Aussie could not avoid fall after RBA official showing unhappiness with the current levels. We could see another 150-200 pip drop before possible sharp recovery, as market has the tendency to check the seriousness of official statement. RBA can still afford rate cut, which a vital monetary toll unlike other developed nations.

However, AUD needs to surpass 0.9080 to regain its lost confidence, which may not be easy, as break of 0.8880-90 will challenge 0.8820-40 levels for 0.8790.    

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.      

Friday, December 13

Asad Rizvi

Today There is no Commentary as I have some technical problem. Hopefully this is temporary. However, I will provide signal and inter-act with you as usual. Thanks you.

GMT 3:25 - GOLD @ $ 1228 = Should cap below $ 1235 & may exhaust around $ 1232, break of $ 1222-24 is required for test $ 1215-18 zones.

GMT 3:48 - EURO @ 1.3759 = See resistance around 1.3780-90, should hold. Break of 1.3730-40 is required to test 1.3695-05 zones. Or else 1.3820.

GMT 3:55 -  GBP @ 1.6357 = Only break of 1.6380 may give a minor push towards 1.6405-15 zones, where there is strong resistance. However, fall below 1.6325 will encourage for 1.6295.

GMT 4:08 - JPY @ 103.74 = This rally can extend up to 104.05 before profit taking occurs for 103.40-50 or 103.20 or else will make another 25-30 pip gains. 

GMT 4:11 - AUD @ 0.8938 = Minor caution is suggested around 0.8900-05, needs to break for test of 0.8870 or else risks is for a test and break of 0.8860 for 0.8890-00 zones. of $ 1215-18 zones. Or else $ 1243.

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.

Thursday, December 12

Asad Rizvi

The US budget deal continue to haunt stock market on belief that it provides more pace to FED to consider reduction of its bond purchase, as shutdown fear has been eliminated. About few months ago fiscal indiscipline in USA was one one major cause that may have hindered FED to take firm action on its bond purchase. 

If we have a closer look at the market indicators, this is what market is clearly hinting that it is prepared for taper. Look at 10-years bond yield, it is close to 3 pct. Gold is dicey, as it easily find sellers on the up. Oil, despite better global economic condition, which means healthier corporate activity is on decline and Global Stock market too is showing signs of nervousness. Unlike past, there is every reason to believe that this time FED has enough reason to act. 

Lot of people are betting linking tapering on today's retail sales, which makes no sense to me, it is simply economic gimmick used by few analyst/economist, as they are short of reasoning to fill their daily post. Economy is not based on one single factor and if spending for a month has slowed down it does not necessarily mean FED will change its plan. It is simple common sense that it is economic growth and jobs that matter, both have been meeting its target. So Retail sales will only help to derive market sentiment and data good or bad should not bother FED officials to take action based on spending, as Friday's Payroll data have already provided enough room and made FED's job easier.

Other US data's due to today, specially Initial Jobless Claims numbers should not be ignored, which in my view could be another big factor and market mover that should add to market sentiment.  

GMT 3:13 - GOLD @ $ 1254.50 = Gold may struggle to move beyond $ 1257-59 levels, though could hold around $ 1247 levels in Asian session for another $ 5-7 up move before fizzling out with chances of test and break of $ 1241 to test lows. Or else $ 1263-65 before down again.

GMT 3:21 - EURO @ 1.3792 = Euro has support around 1.3760-70 zones and may hold for a test of 1.3815-20 zones. However, as it move up the pace should slow down unless able to penetrate 1.3845, which does not look a possibility. Break of support level will encourage for 1.3730-40 zones.

GMT 3:25 - GBP @ 1.6360 = Cable is surely loosing its upside moment and has heavy top around 1.6385-90 and is likely to gradually dip, but needs to fall below 1.6310-20 for 1.6285. Or else on the up 1.6420-25 remains a barrier.

GMT 3:32 - JPY 102.56 = There is no change in my weekly view, as JPY would continue to make new gains unless pushes beyond 102.98 for 103.38. See risk for JPY gains from 102.75-80 levels for test of 102.10 and may dip further down to test of 101.95-00 zones.

GMT 3:36 AUD @ 0.9017 = We have witnessed sharp drop, but Aussie has strong suppoort 0.8975-80 that should hold gor a test of 0.9055-60 zones or else 0.8955. 

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.

Wednesday, December 11

Asad Rizvi

US Budget deal should provide relief to the US financial market and specially FED. In my view, it was one of the of the major cause of worry, which I had mentioned in my weekly post that was not discussed at length, as tapering talk was the dominating factor, but market was well aware of the issue. Bernanke in his last appearance in front of the Banking Senate Committee specially mentioned about fiscal difficulties. This deal that will slash spending and help in reducing deficit over a period of time will surely provide government and FED some breathing space.

Meanwhile, though no one is sure about the FED's mood on its bond purchase stance. I do not see any reason for FED to hesitate to start reducing its bond purchase, as they are back on target. Reaction shown by US Stock market and bond market players does not necessarily mean every wish will be fulfilled. It is purely a policy matter that will be decided by the FED officials.

While, market trying to find more clues about FED's next big move. The moves seen in foreign exchange market is still very surprising, as quite a few Fx traders are baffled with the weak US Dollar behavior. It is obvious that when all odds are in favour of USD then why Greenback is unable to make recovery. Specially the strength of Euro against USD is confusing the market, as European economy is still faced with numerous challenges. 

The worrying factor is that recent German data has started showing signs of exhaustion, whereas other major European contributors are still in a struggling mode. I can gauge few factors as flow of fund in the Euro-zone region is healthy. Market reacted to anther cut, which was not due so soon. ECB is only comforting the market with the possibility of another LTRO, which could be possible if banks are willing to expand credit through lending. Remember LTRO means excess availability of liquidity in the system, which is not made available. 

However, despite all the facts it is not easy to fight against the market trend, but I still do fear a plunge in Euro & GBP from top, which is yet to be determined that will not be seen for long. I would give another 100 pip upside margin as I cannot go against the market forces, but stops should be followed religiously, as fall could lead to a trap.

Gold is a different story, which is managed by hedge funds/investors rather than demand from any other source, as neither Central Banks are aggressive buyers nor Bulls can play their trumpet about India and Chinese growth, as growth in two of the most populous economies is down by more than 3 pct from all time high. The Geo-Political situation has vastly improved, so there is less tension around the globe. European currency is no more cause of concern. Hence, they are fully trapped, trying to average their buying and once tapering begins then I do not see any reason that why gold should not fall below $ 1000 levels in 2014 to probably $ 800 levels later.   

GMT 3:19 - GOLD @ $ 1257 = There is no change in my Bearish view for gold despite yesterday's up move that stretched beyond my weekly target of $ 1260. I am not expecting big surge in gold though in Asia another round of buying is possible, as gold should hold above $ 1250-52 levels for possible test of $ 1265-68 zones. Beyond the levels to watch will be $ 1275-78 that should not surrender. Break of $ 1240-45 will be extremely bearish for gold.

GMT 3:29 - EURO @ 1.3751 = Euro may hold above 1.3710-25 levels for another attempt and test of 1.3790-95 zones. Clear break is required to test 1.3825-30 zones, which looks difficult right now. Break of support levels will encourage for a test of 1.3670-80 zones. However, unless Euro falls below 1.3640, it likely to make an upside move to test new highs.

GMT 3:40 - GBP @ 1.6440 = Pound may still find buying interest on dip and may hold 1.6400-05 levels for possible upside test. Break of 1.6470-75 will push GBP towards 1.6495-05. Or else 1.6360-70.

GMT 3:44 - JPY @ 102.67 = JPY still looks threatening and if fails to hold 102.48-50 levels, this gains could stretch up to 102.30 unless clears 102.95-00 zones. 

GMT 3:46 - AUD @ 0.9134 = Support 0.9101-05 should hold for a test of 0.9175-80 zones. or else 0.9080.

           

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.

Tuesday, December 10

Asad Rizvi

After going through statements by 3 - FED officials, I have a strong feeling that taper announcement after Dec 17-18 FOMC meeting looks like a good possibility. I think prior of official announcement FED officials will refrain from giving nod individually, as FED decision to reduce its bond purchase will be a big move that has huge risk at various levels  that should be carefully handled.

Last night, Fed's Bullard in his speech has hinted about the possibility of small taper to recognize improvement in labor market. Another FED official Jeffery Laker spoke to discussing tapering in its coming policy meeting next week. Similarly FED Dallas President Richard Fisher, never an ardent supporter of third time Quantitative easing having good sense about the risk of unnecessary inflating FED's balance sheet, which is a risky proposition spoke of withdrawal of its bond purchase plan, as he seemed convinced that there is plenty of cheap liquidity available. Out of three FED officials, Bullard is the only voting member, but others carry equal weight and could be delivering FED's message.

Surely all eyes will be glued towards next week's FOMC meeting, as there will be less support from limited data this week, as release of Retail Sales on the only major US data. 

While, I am getting nervous with the Euro's move, which is heading upward against all odds. The Euro-zones economy is at risk. more LTRO money will be required to support the market, the threat of negative deposit is still looming over the heads and the US economy has flipped on the right direction. With all above factors I will not be surprised to see sharp reversal and one good reason may set the trap.Similarly Pound has entered a dangerous zone and finally Japanese Yen could be the surprise beneficiary. 

GMT 3:03  - GOLD @ $ 1239 = Gold may briefly hold above $ 1235 levels and break of $ 1242-43 may encourage to stretch toward $ 1245048 levels. However, there is risk of big fall and break $ 1228-30 could trigger down move.

GMT 3:07 - EURO @ 1.3760 = Sell Euro around 1.3774-84 with Stops 1.3810 for 1.3720 or 1.3690-00.

GMT 3:13 - GBP @ 1.6452 = Cable should top around 1.6465-70, I would not hesitate to sell with Stops 1.6490. A move below 1.6410-20 is required for more losses or else could re-test and break day's high.

GMT 3:18 - JPY @ 103.22 = There are quite a few support levels for Japanese currency 103.50 may not be easy to surrender, break will find another one around 103.80. On the downside JPY needs to push beyond 102.70-80 for more gains. 

GMT 3:26 - AUD @ 0.9107 = I would give some more margin for correction and prefer waiting to sell around 0.9140-50. Should stay below 0.9190. On the downside if support 0.9080 breaks, risk for a drop towards 0.9050-60 zones. 

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.

Monday Dec 9 - 13

Asad Rizvi

After impressive US Non-Farm Payroll data and Unemployment falling to 7 pct, there is certainly strong case to argue that FED should start tapering, as unemployment is only half-percentage away from 6 ½ pct target rate. Recent US economic performance goes in favor of US Central Bank’s bond purchase plan to reduce the amount.

It is evident that the labor participation is up averaging over 185.000 this year, earnings are up, and confidence in the economy has improved as consumers are looking confident. Earlier we saw sharp surge and upward revision of US GDP.

US mortgage rates are already hinting that the recovery has surely accelerated, though share market is showing unusual resilience and did not react to the tapering threat probably sensing that corporate profit will rise due to improving economic conditions. But do not be too optimistic about the share market growth as FED tapering also means withdrawal of cheap liquidity that should have adverse impact when implemented.

Friday’s reaction to the US jobs data was very unusual, as there was no positive re-action to the US unemployment data. Market chased trend by avoiding economic factor. US bond market is the best example, as 10-year bond yield after a brief surge, fell back to 2.86 pct. Allan Greenspan once warned that “when the bond market begins to move, FED might not be able to control it”.

In my view, we could soon be heading for a sharp move. What may have stopped US Dollar gain is the absence of FED official’s statement on the recent US economic pick-up. In recent past we have seen them defending tapering against jobs condition and growth, both have showed remarkable recovery.

The biggest challenge for US Central Bank is that it has to seriously consider start easing up its conventional and controversial stimulus program that is pumping USD 85 billion a month. Further delay will question FED’s credibility, as it has earlier in June declared that it may end up tapering by March 2014 based on fundamentals, which is as per projection, since unemployment has hit 7 pct and GDP is on the rise. Housing market continues to flourish.

Furthermore, all indications are that next month’s economic data will show better economic performance due to holiday season that should inflate demand. Therefore, there is no reason to further delay tapering. If FED is no rush and decides to continue its bond purchase program, then it should tell the market that why it is misguiding by deviating from its earlier (June) announcement when it is meeting its target and why is Fed unable to implement tapering. Low inflation was never its target and this could be a lame excuse.

It is very surprising that the Dovish FED officials have once again failed to read the US economic trend correctly and have been constantly trumpeting fearing economic slowdown and needs for more liquidity injection. So far estimates are FED has injected nearly USD 3 Trillion.

While, earlier on Thursday, the unexpected did not happen as ECB went for hold, but following monetary policy announcement in his press appearance ECB President Draghi answered with confidence, despite European Central Bank struggling for economic recovery and making poor future projection for the Euro-zone region.

Euro to my surprise did not weaken despite hint if slowdown in European and good economic recovery in USA. I still believe this could be false up move. If market believes that tapering and early rate hike is priced in then this is wishful thinking because once tapering is announced, no matter whatever may the size, market will become nervous and jittery. Remember this is not going to one time tapering, liquidity injection will gradually halt that has many strings attached. One hitch that may have hindered US Dollar’s rally could be the legislative factor that has deadline date for a Budget deal of December 13.

However, keep a close watch on emerging markets that should show signs of nervousness, as prior to any move its stock market will once again start melting and currencies will come under pressure and do not trust US bond market as holder of US treasuries could soon start losing its patience. More importantly, this time speeches from FED official should provide the real lead.  

  

GOLD @ 1229.70 = As per expectation gold did not break the upper band of my target. Tough it had tested new lows of the week before making small recovery by the end of the week, which does not look sustainable. Unlike currencies, gold is presently too dependent on cheap liquidity in the absence Central Bank’s buying speculative buying. Gold will certainly take beating in the coming weeks, as weak demand for the metal should add to the selling pressure. Therefore, any upside move is considered a good opportunity to sell.

Gold should hold below or around $ 1245-50 levels and only break risk for a move extending towards $ 1258-60, which is not a favored scenario. However, a fall below of $ 1208-10 may challenge $ 1193 and break would risk for $ 1158.

EURO @ 1.3702 = The up move is not unexpected as Euro has reached the top of my weekly range. Only break of 1.3740-50 risks for extension of rally this week towards 1.3825. I am expecting this move to exhaust soon and will not be surprised it does not reach the top as my given range. Break of 1.3650-60 will threaten test of support 1.3610. A fall below this support line will encourage for a dip towards 1.3540. Range for the week 1.3410 - 1.3825.

GBP @ 1.6346 = If GBP fails to break below 1.6220 levels there a risk of another test of 1.6440-50 zones and this rally could even stretch up to 1.6510. However, if it fails to move beyond 1.6420, Pound may not be able to avoid downside. Range for week 1.6140-1.6520.

JPY @ 102.83 = Japanese currency may challenge any move beyond 103.25 and only break would risks for a test of 103.60-80 zones. A break of 102.05 is required to test 101.35. Range for the week 101.10 – 103.80.

AUD @ 0.9101 = Initially I am expecting Aussie to make gains and should hold 0.9050-70 levels for a move towards 09150-80 levels. Only break here could see a move extending towards 0.9220-50 before exhausting. On the down side strong support is around 0.8980-00. Range for the week 0.8950-0.9250.

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.