Monday February, 17-21

Asad Rizvi

It was not a very unusual week, as effect of cold weather in USA is having sever impact on its economy. Signs are obvious that the weather condition will remain abnormal for sometime that will bother US economic growth. The big question is that if this prolonged period of poor weather condition hitting US economy will be tolerated by FED or not.

FED has taken a huge decision to halt sharp growth of its balance sheet size and may not want to reverse its decision, instead it may look for an opportunity to halt liquidity injection as early as possible that will depend on future economic performance. 

In her last week's testimony, Fed Chairwoman Janet Yellen has already shown her confidence in economy, as she knows that weather related economic hurdle is temporary. She had already hinted that  FED has no intention deviate from its current tapering plan. 

This week market will once again focus on economic report, though there is no major US data due to be released that could move the market either way, but poor release of economic data could snub the market and further weaken the sentiment. FED minutes due to be released on Wednesday may not have big impact in the market after Janet Yellen's testimony.  

In Europe, German growth is the dominating factor. There are signs of mixed economic activity in other European region that still needs to perform. Recent gains in European GDP number is based on strong German growth that was helped by surprise rise in French growth, as the two-economies are considered backbone of Euro-zone economy. But low inflation still remains a matter of grave concern that will bother ECB policy makers, which does not combine well with strong Euro. Therefore, it is still too early to think that ECB gets ample of time to breath that still faces many challenges.

GOLD @ $ 1318 = The current rally in gold is a perfect call in line of my last week's forecast. The trend may continue before exhausting due to lack of US economic gains because of bad weather condition. However, this move will be short lived, as FED is unlikely to deviate from its tapering plan. With gold surging sharply, the risk has increased that profit taking will see sharp fall of gold in coming days/weeks. 

Gold could gradually inch up towards $ 1230-35 zones, but should become vulnerable beyond $ 1340-45. On the downside, break below $ 1305-10 will encourage for a test of $ 1290-95 zones.

EUR @ 1,3690 = Euro is required to pierce through 1.3725-30 zones to attack 1.3790-95 and only break of this levels would encourage for 1.3865, but failure to test the top would encourage for a dip to  test 1.3610, as 1.3550 is the key support level for Euro.

GBP  @ 1.6644 = Pound continues to enjoy its strength of expectation of better future growth prospects that should encourage buying on dips, As long as support levels 1.6520-50 holds, upside test and break of 1.6790 risks for a test of 1.6850-80 zones.

JPY @ 101.79 = JPY is trading in a tight range looking for clearer direction. Only break of 101.20-40 resistance will encourage for 100.40. But JPY is required to penetrate 102.90-95 for 103.50.

AUD @ 0.9027 = Aussie is enjoying strength, which could be short lived, as this upside rally may exhaust if fails to move beyond 0.9090-00 and only break will encourage for 0.9140. Risk for fall will increase if 0.8930-40 levels surrender for 0.8880. 

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.