Friday, Jan 24

Asad Rizvi

Yesterday's move in the foreign exchange market that weakened US Dollar was quite surprising after the reports emerging from China that its economy is contracting. Australian Dollar took thumping, but other markets did not react, instead gold made surprise up move. Though data released from Euro zones was encouraging to a certain extent, as growth in the manufacturing and service sector in France showed minor improvement, because in recent times, it's economy had some turbulent moments. German PMI surging to 32-month high once again encouraging. 

But the move in FX market was excessive due to mixed signal coming from other parts of Euro region, as Spanish unemployment rate continue to rise. USD got further thrashing in US session after the release of US PMI number that fell to 53.7 in January. Although Home sales rose by 1 pct in December, helping 2013 sales to a 7-year high, which was ignored.

There is no reason to believe that FED will re-consider its tapering strategy after fall in US PMI numbers. They surely have a plan and a target and if have decided to further reduce the tapering amount then nothing can stop them and I do believe that do have a plan. If FED decides to make second time reduction announcement then this should be a message and disaster for gold and bond market. 

This a joke that gold is surging on hopes that India will lift its import band on gold. India may delay its gold import plan because this week it had already announced to withdraw its currency notes issues before 2005. This will become effective from April 01, 2014, which will help to curb black market and corruption. This is big news and market is yet to react. Do not forget that smuggling in this part of the world is very common and gold purchase against old currency notes will become difficult. And most interesting part is that gold that would always rise due to China's economic performance is gaining despite cracks appearing in Chinese economy. 

Conclusion, this is mini-trap set before FED meeting, so that gold does not fall before FED meets and if FED does not announce  2nd tapering this will give another opportunity for gold to surge. My further reading is that gold will fall next week due to profit taking and selling by nervous weak buyers that will try to offload their holdings. Any increase in tapering amount will push gold to new lows.

GMT 3:31 = GOLD@ $ 1260.60 = Likely to hold around $ 1253-55 for another upside attempt, break of $ 1265-68 would risk for a test of $ 1275 zones. However, fall below $ 1245-48, will easy upside rally.

GMT 3:40 - EURO @ 1.3685 = This upside rally should be completed around 1.37 levels, as only break above 1.3750 could be threatening. Break of 1.3640-45 will encourage for 1.3625.  

GMT 3:45 - GBP @ 1.6631 = Cable has reached a dangerous levels and looks threatening around 1.6650 and is most likely to exhaust. A fall below 1.6565 will encourage for 1.6520. Upside break will see a push towards 1.6680-90 zones. Prefer picking top to sell.

GMT 3:48 - JPY @ 103.30 = JPY needs to move beyond 103.60-80 zones or else Yen gains will push it towards 102.90.

GMT 3:53 - AUD @ 0.8764 = The fall should hold around 0.8720-40 levels for a move towards 0.8780-90, break will encourage for 0.8810 or else 0.8705. 

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.