Friday, December 2014

Asad Rizvi

This time it was bit unexpected, as ECB President sounded less worried about deflation.Though he said ECB revised down 2014 inflation to 1.1 pct from 1.3 pct and in 2015 from target expectation of 2 pct to 1.3 pct, fearing risk to economy persist and justifying earlier rate cut action that takes time to reap positive result. The statement saw Euro reeling almost 50 pip drop.

However, Euro made sharp recovery despite his answer to a query that ECB is open to option of negative deposit rates and another round of LTRO. Euro may have gained strength for two or three factors, as Draghi said that ECB in 2014 sees Euro zones growth at 1.1 pct against previous estimate of 1 pct and on the question of exchange rate he once again said that ECB watches Euro, but it is not part of policy. Though his statement on exchange rate is debatable, as this subject of exchange rate is not discussed in public. Central Banks cannot sit on sidelines leaving exchange rates at the helm of speculators. His endorsement that that there is good inflow in the Euro-zone reason was third supportive factor for Euro. The end, result was as per expectation as there was no rate rate.  

Today's US payroll data is considered one of the most important event of the week, as it could once again open the debate that if FED will be considering tapering on its December 18 gathering or not. This should not be a big issue as it will largely depend on the jobs data. Earlier release of US economic data's especially ISM and ADP point to better better jobs condition this time, but quite a few things are unclear and distorted due to US government shutdown that does not depict clear picture. 

However the possibility of FED's considering scaling down its asset purchase program or not will be based on facts that if the Non-Farm Payroll data is somewhere around or below 150.000, it will reduce the chances of tapering this year. But a number close to 200.000 or beyond that looks a good possibility will increase chances of December or January (next year) tapering. Fed is surely looking for a solid reason to act and we could be close to tapering because December-January economic numbers are generally healthier in two months due to holiday season.

Bottom line is that poor Payroll data will give US Dollar downside spin and hence, Currencies, US bond and Gold could rally, but strong jobs data will give Hawks opportunity to cheer and celebrate.  

GMT 3:21  - GOLD @ $ 1226.60 = Gold is likely to remain in a $ 1212- $ 1235 band until NYK. The levels to watch today is $ 1202 and $ 1248. Breakout on the downside will open gates for $ 1152, but is required to clear $ 1193 and on the upside break of $ 1248 could challenge $ 1268.  

GMT 3:30 - EURO @ 1.3668 = Euro may hold below or around 1.3690 levels prior to US payroll data and could possibly dip towards 1.3635-40 zones. However, on the upside break of 1.3725 risks for a test of 1.3845. While, a fall below 1.3610 will once again challenge the strength of European currency for 1.3530.  

GMT 3:38 - GBP @ 1.6331 = Pound Sterling could make gains despite USD weakness. 1.6380-00 still look tough and break may encourage for another attempt towards 1,6450-80 zones. However, a dip and break of 1.6305 will encourage for 1.6250-70 zones, a move below 1.6220 is required for deeper fall. 

GMT 3:42 - JPY @ 101.87 = Yen gains could continue against USD as it may find support around 102.20-40 zones. Test and break 101.50 is possible for a visit to 101.20-30 zones. However, failure to hold support levels will see JPY moving towards 102.90.

GMT 3:45 - AUD @ 0.9063 = I do not see much respite for the Aussie beyond 0.9080-90 levels and only break will see a move towards 0.9130. AUD requires clear break of 0.9005 for 0.8970 or 0.8940.

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.