Tuesday, November 26

Asad Rizvi

It was quite a mixed day in the foreign exchange market with US Dollar making gains against Japanese currency, but after gaining against Euro, Aussie and Gold, US Dollar move was halted.

It seems that global Central Bankers have have come up with a new strategy, which is commonly practiced by their other fellow Bankers. First it was the slogan of easy monetary and quantitative easing, then came forward guidance and now they are confusing the market about the policy decision through speeches or press release at various levels, which seems to be the latest strategy. 

Same happened yesterday, as one of the ECB official was in disagreement with Draghi last week's statement that ECB has no plan to cut rates or negative deposit rates. Germans are furious with the ECB policy stance. Such behavior clearly suggest that economies are struggling, mending is no more working in their favor and this is because even the global unconventional monetary policy tools have failed to respond, which is a dangerous development.

Well back to market, it was almost a dull trading day due to lack of release of any major economic data that could not provide guidance. Recently, US Dollar made excessive move against JPY, which has come to halt probably in line with NIkkei that fell today due to its inverse relationship with the Japanese currency that I warned in my yesterday's weekly post. I think the US Dollar upside momentum against JPY has slowed down or may have halted for now.

Meanwhile, today in US session focus should once gain be on the release of housing market data that has slowed in recent months because of rising home prices caused by higher mortgage rates. Release of Consumer confidence data would be another guideline, as it captures the confidence level of individuals reflecting economic active to a certain extent that should show improvement as compared to previous that was dampen by the shutdown.

GMT 3:16 - GOLD @ $ 1252 = Gold could once again make a move towards $ 1256-58 levels. $ 1265 remains key on the upside that should not crack. Support is around $ 1245 if fails to hold could dip to test $ 1238.

GMT 3:20 - EURO @ 1.3533 = Upside could be tough around 1.35.55-60 zones and only break would encourage for 1.3580-90. However, a push below 1.3495-00 is required to test 1.3450-70 zones.

GMT 3:24 - GBP @ 1.6153 = See downside risk as long as 1.6198 holds and upside should hold around 1.6165-70 levels, but needs to fall below 1.6120-25 for 1.6090 or else could make another up move. 

GMT 3:31 - JPY @ 101.47 = Japanese currency is likely to trade in a 101.15 - 101.80 band for the rest of the day, a Yen gains may exhaust around 101.20's and unless 100.80 is challenged there is no threat of JPY making recovery. However, 102 may not be easy hurdle to cross.

GMT 3:34 - AUD @ 0.9182 = Top should be around 0.92 levels and unless breaks 0.9240 risk for a test and break of 0.9150 for 0.9120-30 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, November 25-29

Asad Rizvi

By the end of the week, market focus shifted from US economic performance/policy and tapering talk to Europe after ECB President Draghi made an effort to end market speculation about the chances of negative deposit rate by punishing Commercial Banks not lending to consumers and parking their funds with Central Banks.

Earlier in his press conference on Nov 7, Draghi spoke of possible softer stance defending his easing policy by adding that the purpose of recent cut was sort of precautionary measure to defend inflation from further side.

ECB’s rate cut decision is faced with severe criticism from German media accusing ECB policy for helping Southern part of Europe, as they believe that the idea of negative deposit rate could backfire without serving the purpose. Depositors/Savers could be the end looser as bank instead of taking the hit could pass the negative return/cost to their respective customers.    

Meanwhile, looking at the developments in USA, Fed may have taken the right decision to delay tapering due to risk of default caused by shutdown, but I still believe that the recent statements by the FED official’s hints that they are under immense pressure to start reducing its bond purchase program, as it has become too costly that possesses huge risk to the economy and not producing the required result.

Therefore, FED is simply looking for an appropriate reason/timing to act and this is one factor that recently we have seen shift in the stance of FED representatives and they sound less Dovish. Last week, Lockhart a FED official though not a voting member has clearly said that tapering should be on the table, he further added that it should not necessarily begin in December. Normally such messages are conveyed through senior and responsible officials.

Furthermore, the ongoing debate on tapering is done with a purpose to mentally prepare the market. The only fear, which is tough to guess/calculate, is what will be the market reaction and the repercussions after the announcement that will depend on the size. Hence, unwinding the whole lot will be the most difficult part to conclude.

This could be choppy in thin market condition due to Thanks Giving Holiday and month end and next week we could be heading for another exciting week as payroll factor due to be released on Dec 6, will dominate the market moves.  

GOLD @ $ 1242.30 = Gold, which is witnessing continued sell off on the rise is unable to retain its lost strength and often find sellers on the up. Demand for gold is on decline and the metal got further blow last week after Swiss government’s decision not to hold minimum 20 pct of gold as asset that may have prohibited SNB from selling gold. The argument for disagreement was based on facts that it would have restricted constitutional independence of Swiss Central bank (SNB) that would have hindered SNB’s Monetary Policy decision, as gold has no connection with price stability and proportion of gold on SBB’s Balance Sheet.

Gold is likely to remain under pressure, as selling interest should dominate. Gold should cap below $1265-70 levels and only breakout will risk for test of $ 1295-98 zones. However, next support is around $ 1220-25 levels. Break will encourage for test of psychological $ 1200 levels.  

EURO @ 1.3555 = Positive release of data specially from Germany and Draghi compelled to make a statement after facing heavy criticism from German media to tone down his earlier European slowdown concern helped Euro’s recovery. Earlier mildly Dovish stance by Yellen during her nomination appearance in front of Banking senate Committee is also weighing on US Dollar. But in comparison Europe has more economic problems, as compared to strong German growth, which could disturb German celebration, since overall Euro region’s economy is faced with bigger challenges.

Euro could benefit, as technically it closed above 1.3480-90, which remain a strong support level and only break would challenge 1.3420-50 zones. However, this rally will find resistance around 1.3590-00 and may exhaust around here, though break will encourage for a test of 1.3640-80 zones. Range for the week 1.3420 - 1.3680.

GBP @ 1.6220 = Investors confidence has helped Cable to main its strength, but the challenge lies around 1.6270-90, which could be tough to crack for another 100 pip gains. Support around 1.6110 is key levels to watch break will encourage further losses to test 1.6050 or next major support around 1.5970. Range for week 1.5970-1.6380.

JPY @ 101.26 = Though I am not sure that how much role Japanese economic data will play in its next move, but since Japanese officials talk a lot about inflation, release of CPI, which is expected to rise may have some role to play on Japanese currency, as weak data will demand for more accommodation.

However, one major area that needs to be focused sharply is the inverse relationship is between JPY and Nikkei. The strength of Japanese Stocks is one of the causes of its currency weakness. There is risk for Nikkei to exhaust that has been on the up since quite a while. Weak Japanese stock market would mean shift from Nikkei to JPY.

It may not be easy to surpass 101.80-00 levels and break will only encourage for 102.50. If JPY could gain beyond 100.40-50 levels 99.70-80 will be challenged. Range for the week 99.80 – 102.60.

AUD @ 0.9163 = Australian Dollar prone to economic events in China was hammered after poor Chinese economic data. It was further clobbered after RBA Governor showed his uneasiness about the currency and therefore AUD may take small breather before making downside attempt, unless there is domestic recovery or external support for the Aussie.

AUD has strong resistance around 0.9260-80 levels and only break will encourage for 0.9350. However, risk for fall will increase on break 0.9010-30 levels for 0.8920-50. Range for the week 0.8920– 0.9380.

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, November 22

Asad Rizvi

Yesterday market witnessed Euro making small recovery after Draghi came to its rescue following barrage of ECB's offiical statement fearing deflation in the Euro-zone region at various forums. Basically this conflicting statement is nothing more than balancing act to arrest any extraordinary currency movement and apply breaks on possible uncertain market condition. It is evident that with the ongoing economic condition Europe cannot afford strong currency. This month Drahi is on record that in his monetary policy follow-up speech he has already shown his concern about possibility of deflation and in Europe and hinting that ECB could consider negative deposit rate and LTRO if necessary.

Importantly it is German economy that is providing breathing space to Europe, minor growth recovery in Spain is a mere book entry and not economic recovery in real sense to overcome the financial mess. France remains a bigger threat and Italy is unpredictable that can tilt o the worst. Banking sector reforms, growth, jobs and deficit are all unsettled European issues. In such an uncertain condition thinking of positive economic condition makes no sense. Europe is brittle.

Whereas, US economic numbers suggest that the recovery may have been delayed/slowed, but the overall performance is not too concerning. Jobs claim fell and this should encourage Payroll data due in two-weeks time. I think anytime market mood will suddenly turn Bullish for US Dollar.

Meanwhile, Pound Sterling continues to enjoy its ongoing strength, as economic condition continues to support British currency. UK borrowing has declined, which is a healthy sign indicating increase in revenue collection, two-major parameters of economy housing and manufacturing are providing enough support to push the confidence level high. 

GMT 3:14 - EURO @ 1.3471 = Euro should hold below 1.3492-98 levels and is required to break 1.3430-35 to test 1.3405-10 levels. 1.3555 is the key level to watch on upside.

GMT 3:21 - GOLD @ $ 1244.60 = Today, I suspect $ 1238-40 may hold and unless $ 1234 breaks on the downside, see risk for upside test, break of $ 1251-53 will encourage for a move towards $ 1258-60 zones.

GMT 3:32 - GBP @ 1.6185 = Investors confidence level is still too high and Cable is required to fall below 1.6080 to slow down the pace of rally. However, 1st support level is around 1.6140 that may hold for a test of 1.6215-20 zones, but may exhaust, as it needs to make a clear break for 1.6250-60, which mat not happens if it finds earlier resistance.

GMT 3:35 - JPY @ 101.27 = A long as 100.50-70 holds the weakness of Japanese currency could continue an may test 101.80-90 zones.

GMT 3:42 - AUD @ 0.9181 = The plunge is caused by large sale of currency but support is at 0.9120-40 should hold for another test of 0.9230-50 zones or else 0.9110.

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, November 21

Asad Rizvi

A quick glance of FED FOMC meeting minutes tells for sure that tapering is going to happen and will happen soon. It could be announced any moment. It does not matter whether December, January or March because one should not ignore that the meeting took place on Oct 29-30, which means that FED scaling down of bond purchase was a serious discussion that took place soon after US shutdown and they paid no heed to the government shutdown. Interestingly FED members avoided discussing shutdown during their meeting. I would put this meeting ending in a Hawkish note.

Furthermore, during their speeches this week, the two FED officials, Chairman Bernanke and James Bullard have clearly hinted that December reduction in bond purchases was on the table. I think the real concern for the FED is how to begin tapering that should include both size and calender, once FED has a firm start-up plan, then when to begin tapering, should not be a problem. 

Many economist link minor economic data with tapering, which is my view is rubbish. It is nothing more than a filler to included in their daily posts, as they do not have enough substance to jot down their notes. There are more worrying factors for FED, as it is aware that after almost 6-years of quantitative easing it is now becoming hard to justify the cost and FED cannot continue to print money for ever and expand its balance sheet, which has almost exhausted. 

Fed members are aware that question of money printing will be raised and someone has to be answerable for this ongoing mess that does not produce desired result. Yellen in her nomination speech in front of the Senate Banking Committee said that FED knows the cost, but she did not tell if the cost is justifying Fed's friendly monetary policy stance nor it will never be easy for FED to justify injection of over couple of trillions of US Dollars, as the flow of money went into such pockets that it may it not be willing to disclose the details. 

Coming back to economics, form the perspective of US economic performance, for next couple of months there is very little to worry about the health of economy, as the US economy should prosper because of holiday sales and it will be sending positive signals. Hence, as we approach next payroll data due to be released in next 15-days, the temperature will rise in support of reducing the size of balance sheet  in anticipation of better jobs number. 

Meanwhile, in the Euro-zone talk of possible negative deposit rate inflicted injury to Euro. In my yesterday's post I did warn that growth in Europe is sluggish and strong Euro does not serve the purpose, as deflationary condition remains high. Various ECB officials are vocal on the subject, as the Euro-zone has overcome the threat of turmoil, at least for the time being and they will happy to see Euro trading in a 1.20 -1.30 band.

However, market sentiment will be driven by the release of economic data's that would continue to provide guidance for trend, as financial market is data dependent and today again we could see some more firework after the release of economic data from Europe and USA.

GMT 3:23 - GOLD @ $ 1248 = After break of key levels $ 1260 gold dipped to teat $ 1242 and now has support around $ 1238-40 levels, needs to break to enter $ 1230-35 zones or else failing to test lows would encourage for a test and break of $ 1260-65 zones and if moves higher the rally could expend up to $ 1270.

Initially, we could see a move towards $ 1252-55 zones before another downside attempt towards $ 1244, if fails to move beyond.

GMT 3:40 - EURO @ 1.3428 = Euro could stretch up to 1.3450 levels but unless breaks 1.3490 downside risk is high for test of 1.3390-00 zones. However, break of 1.3370 is required for dip to extend towards 1.3330-35. 

GMT 3:46 - GBP @ 1.6086 = Cable is awkwardly placed as the currency is sandwiched between strong US Dollar and investors buying interest due to confidence in UK economy and BOE policy stance. 1.6024-30 will be tough to crack and a quick up move towards 1.6110-30 zones is possible. 1.5970 is the key level on the downside. 

GMT 3:47 - JPY @ 100.38 = 100.60-80 would be touch to crack, failing to move beyond would see another move towards 100 zones.

GMT 3:4:49 - AUD @ 0.9308 = Support at 0.9270, break risks for 0.9240. Resistance is around 0.9350-60.

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, November 20

Asad Rizvi

Global Financial market remained clueless, as everyone kept on guessing about the next direction. Speeches by the various FED officials does not give hint about its plan, but tone has surely turned mildly Dovish, as Bernanke spoke same language almost repeating what Yellen had said in front of the Banking senate Committee with little bit of twist and turn that the policy will remain highly accommodative for long period of time, labour market needs to improve and wants growth to improve, inflation needs to pick-up in medium-term, etc.I think there was nothing new in Bernanke's speech.

I think with mixed bag of things happening in recent past, today's FED FOMC meeting minutes will be interesting, Assuming that the weak picture painted about the US in October until now the minutes language should support the view. I would still bet that if the language is neutral or no concern is shown market sentiment will start shifting towards Fed's plan of scaling down and focus will shift towards next month's job data that should gradually erase Dovish sentiment. During this period US economic data will provide better guidance's. What we should ignore is that Gold and US 10-year Bond yield negates all Dovish ideas.

Euro could be heading for last up-tic, as it gains is more related to US factor than its own strength. US economic activity will gather momentum as we are close to holiday season. Strong German ZEW could be good for a 50 pip trade, but it is not the trend setter because the growth levels in Euro-zone region remains sluggish, strong European currency does not serve the purpose, deflationary remain high and various ECB officials spoke for the need of further easing. So with current Euro strength it has  entered a dangerous zone that may not suite ECB plan. 

Meanwhile, today trading activity should gather momentum due to release of BOE & FOMC minutes. Prior to release of FED FOMC minutes, barrage of data will be released in USA that should keep traders on their toes.

GMT 3:09 - GOLD @ $ 1275.80 = During the day gold is likely to trade within $ 1268-82 band. However, in a broader picture break out of $ 1260 and $ 1295 could bring bigger moves.

GMT 3:16 - EURO @ 1.3560 = Euro has support around 1.3510, it stays above risk for test of 1,3585-05 zones, break would encourage for test of 1.3625-40 levels. However, a fall below 1.3470-80 will confirm more losses. 

GMT 3:23 - GBP @ 1.6125 = Choppy trading is expected, as key will move beyond 1.6180-90 zones, needs to break for test of 1.6250-00 zones. However, fall below 1.6050-70 will challenge 1.5970-80 levels.

GMT 3:29 - JPY 100.04 = Break of 100.30 is required to challenge 100.80-90 level where Japanese currency ha strong support. A push beyond 99.40 will see JPY making gains to test 99.10-20 zones.

GMT 3:33 - AUD @ 0.9421 = Aussie is likely to make another feeble upside attempt and should exhaust beyond 0.9450-60 and may struggle to move towards 0.95. However, on dip it has strong support around 0.9370-80 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.

Tuesday, November 19

Asad Rizvi

Once again in the absence of any major economic data, speeches by the FED officials dominated the market, but there is nothing very clear or impressive, as market awaits for more clues about the direction. US Dollar is gradually easing, as market is sensing delay in tapering after Yellen spoke in favour of attaining more growth and better job conditions in front of the Banking Senate Committee.

In the absence of release of any major US economic data, I do not have too much to add today. RBA in its minutes had nothing much to add as it kept balanced approach on its next move. It will probably wait for more Fed clues on tapering. 

While, German & European ZEW that measures institutional investors economic sentiment is expected to be released today and is likely to show improvement should give boost to the Euro-zone currency looking for breakout because better data will also help to reduce pressure on ECB easing stance. But disappointing number could backfire that may add to easing sentiment.

GMT 3:01 - GOLD @ $ 1273.80 = Gold may test $ 1277-78 zones in Asia before easing. If support $ 1269 surrenders, fall could extend up to $ 1264-65 zones. Unless gold clears $ 1287-90 levels, there is threat of bigger fall.

GMT 3:02 - EURO @ 1.3512 = Euro may exhaust before reaching 1.3535-45 zones and unless break 1.3560-70, risk is for downside. Needs to break 1.3470-80 for deeper fall towards 1.3440-50, which is a strong support zones.
GMT 3:07 - GBP @ 1.6111 = We could see identical move in Cable as of yesterday, as initially cap around 1.6145 could see a a fall extending towards 1.6080-90 zones. However, buying on further dip will be preferred, as support lies around 1.6040-50 for new highs. Break below 1.6010 confirms more losses.

GMT 3:14 - JPY @ 99.75 = Two things that is driving the currency is weak Nikkei & US 10-years bond yield gains. Yesterday I have frequently pointed out that barrier 100.15-20 needs to be cleared. Failure saw Yen gains. If if the Japanese currency gains beyond 99.40-50 it will not be threatening, as Yen should be sold around 99.10-20 levels with Stops 98.70 for 150-200 pip profit. 

GMT AUD 3:22 - @ 93.72 = If Aussie holds 93.40 could test 94.20-30 zones or else 93.10-20. 

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, November 18-22

Asad Rizvi

Janet Yellen’s nomination for FED chief was the biggest event of the week, as market paid no heed to the European economic report (3^rd Quarter 2013) confirming slow growth. Earlier ECB President Draghi in his press conference said that ECB was forced to cut interest rate due to exceptionally low inflation and economic slowdown. Dragh also spoke about the possibility of negative deposit rate if economic condition does not improve in the Euro region.

Since it was her nomination appearance, Yellen was probably given enough space to speak and answer Senate Banking Committee queries at will. She was not countered for change in FED thoughts, as she avoided tapering talk. Whereas, Bernanke in his last two presentations clearly hinted that FED will reduce the size of its asset purchase, which could even be over by March 2014.

Nominated FED chairwoman in her Q & A session was more focused and specific about faster growth and economic recovery, emphasizing the need to achieve long-term unemployment target rate ranging between 5 pct to 6 pct.  

While, answering to questions relating to banking sector regulations and about the possibility of asset bubble, Yellen seemed too confident that FED can easily deflate the bubble through its tightening measure and further added that the Central bank cannot become hostage to the market. This is why to endorse her Dovish view in support of adding more liquidity she may have said that strong recovery will allow FED to do away with its unconventional easing policy and reduce monetary accommodation.

Overall conclusion of her 1^st appearance remains Dovish, as she gave impression that she would prefer to wait for economic recovery rather than rushing earlier towards tightening as inflation poses no risk. But one must not overlook at her answer to a query that she had voted 27 times her FED career and had never formally opposed to rate hike. It means that she has the ability to make quick adjustments according to the economic need and does not necessarily mean that she will remain a Dove forever even if the economic condition demands, especially after taking over as FED chairperson she has to act in more responsible manner.

My take on the overall development is that market may start the week with Dovish note and it may take about a week or two to settle down, because by next week onwards sentiments will shift to US economy, which will gradually start picking up. Whereas, European economy is not in a shining mode that will start to spill more trouble and by December market mood will gradually shift to strong US Dollar sentiment.

However, there are quite a few economic reports due to be release this week will provide further guidance. But on Wednesday, the release of FOMC (October 29-30) meeting minutes, which will cover report of US shutdown should not be ignored. A casual report that does not point any concern will be positive.    

GOLD @ $ 1289.20 = Recent release of report for world gold demand by the World Gold Council data has shown fall in demand from investors. But initially gold should get support from Yellen’s remarks that she favors stronger growth before considering withdrawing of her unconventional policy accommodation stance.

The expected down move did occur, but $ 1265 levels was held before bouncing back. This week, break of $ 1298is likely to pose 1^st challenge for a test and break of $ 1305-10 zones. Failure to hold could see extension of move towards $ 1325. On the downside, $ 1275-77 is support barrier. Break would help gold to test $ 1250-55 levels.
EURO @ 1.3492 = Recently it has been noted that despite concern shown by quite a few ECB officials and warning that Euro zones economy is heading for softer growth European currency is in good demand. Record suggests that the currency inflow indicates demand for Euro is mainly due Central Banks and investors buying of currency that negates negative European data. But signs are not very encouraging because of low inflation and slowdown that may force buyers to refrain from further buying of European currency or could encourage investors to offload their holdings that may add pressure. Economic data will provide further guidance about Euro-zone economy’s future trend.

Despite being bearish for currency in medium-term, in short-term currency could potentially make small gains and could possible move towards 1.3580-00 zones on break of 1.3550, which should be ideal selling area. However, Euro needs to fall below 1.3420 for resumption of down move. On the up, next levels to watch will be 1.3680. Range for the week 1.3350 - 1.3680.
GBP @ 1.6113 = It has been noted that Pound Sterling often makes sharp up moves on any mildly positive statement from BOE official or on positive data and mostly hangs around support level. This is mainly because of belief that BOE may not add further liquidity through its asset purchase and may exit sooner from its easy policy due to improving jobs condition and easing of inflation pressure. However, I believe it is still too early to celebrate, as UK economy poses many risks. Higher Pound Sterling will surely discourage exports. UK trade is too dependent on Europe and therefore, European woes will not help the cause, instead it will add to gloom.

For this week, bias will be mildly on the upside. Cable has strong support around 1.6020-40 zones may hold for a test and break of 1.6180-00 levels, which will encourage for a push towards 1.6280. However, break below 1.5970 will discourage new highs. Range for week 1.5950-1.6280.
JPY @ 100.15 = Japanese currency will provide strong resistance around 100.90 and unless surrender test of 101.40-50 levels will not be possible. It may challenge 90.50 to test 99.101-20 zones. The currency is likely to trade in narrow range unless band is broken. Range for the week 98.80 – 101.50.
AUD @ 0.9364 = Aussie could surpass 0.9380-90 levels, but real challenge is around 0.9550-80 zones, which may not be easy to clear. Risk for down move will increase once 0.9270-80 surrenders for test of 0.9201-20 zones. Range for the week 0.9150– 0.9580.

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, November 15

Asad Rizvi

So Yellen is done with her presentation, which was in line of Bernanke's stance. The approach was similar and her argument was no different. There was no element of surprise in her statement, which is fair enough and understandable. Overall all it was a balanced approach on her first appearance in front of the Banking Senate Committee. Her emphasis was on growth and she showed her unwillingness to compromise until certain target is achieved, which is obviously a Dovish comment.  

I think will now market will start focusing on economics for clues. Despite US shutdown, recent release of US economic data did not disappoint the market. Data due to be released for next couple of months could produce enough substance to debate on Fed reduction of its bond purchase.

While, European data was once again very disappointing. Growth fell in France and in Germany, economic slowdown is a matter of concern that clearly supports ECB's accomodative policy stance stance, which is why policy makers of Euro-zone are openly supporting soft stance. Yesterday's release of Euro-zone economic report gave further blow to the sentiment as growth was revised down. Do keep a close watch on the release of European CPI numbers, weak data will add pressure on further easing.

Meanwhile, to my surprise weak retail sales data did not bother Pound Sterling, probably because its impact will be short lived, as drop was due to fall in household appliances for which warmer weather is blamed. Whereas, on a broader perspective the growth pace in UK is higher than expectation. We are also approaching year end and normally during this period demand for goods rise and job condition improves. However, If Pound can another 70-100 pip gain, I see that as good selling level, because Cable will make correction before making another up-move.

    

GMT 3:19 - GOLD @ $ 1289.50 = Gold could be probing top around $ 1290-93 for a fall needs to break $ 1278-80 for $ 1260. Only break above $ 1298 delays down move.

GMT 3:24 - EURO @ 1.3453 = Euro should struggle to move beyond 1.3475-85, break will encourage for test 1.3510, but 1.3550-55 is the crucial levels that should not surrender as see dip to test 1.3430-35, break is required to to hit 1.3410. Bias remains on the downside.

GMT 3:28 - GBP @ 1.6068 = Cable has support around 1.6030-40 zones, may hold for test of 1.6090-00 zones. Only break risks for another 25-30 pip surge. 1.5980 should not surrender.

GMT 3:32 - JPY @ 100.22 = Japanese currency has strong support around 100.55, which may not surrender. Break of 99.80 will see gains for JPY extending towards 99.50-60 zones. Or else 100.80. 

GMT 3:36 - AUD @ 0.9345 = The behavior could be very similar to yesterday's move as the Australian currency may struggle to move beyond 0.9380-90 levels. Risk remains for a dip towards 0.9310, breaks would encourage for 0.9280. Or else 0.9410.

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, November 14

Asad Rizvi

Yellen has giving 1st economic lesson by telling Senate Banking Committee that US economy must improve before FED tapers QE, as unemployment at 7.3 pct is still too high and current rate of inflation is below FED's 2 pct target that will remain low for sometime and hence strong recovery is required to reduce accommodation, which is why FED is using its unconventional monetary tool such as asset purchase . 

This is surely is a clear message that she may want some more time before FED begins to taper, unless economy responds by showing unexpected high level of growth in a very short span of time. But this does not guarantee that FED would continue to buy bond worth USD 85 billion a month, as Bernanke is still FED boss until January 2014.   

Market has surely responded after listening to Yellen's speech that gave some life to Doves in a hope that FED may delay tapering. US Bond yield made small recovery, gold has so far benefited by over 1.5 pct and US Dollar is soft. This is immediate market reaction after Yellen's 1st appearing in front of the Senate Banking Committee as a chief of Federal Reserve. 

Everyone is aware that she is extremely Dovish in her approach, but this time it is going to be a different ball game for her, as she will not be talking to university students or make presentation in front of FED members. The real challenge will be that she has to respond to the Senate members query with sensible and balanced answers and will have to frequently defend FED stance.

Meanwhile, in the foreign exchange market we have seen some unexpected volatility. Euro wobbled after one of the ECB official spoke of negative deposit or more accommodative monetary policy, but Euro recovered sharply on Yellen's Dovish approach. Euro rise should be temporary as market will soon start looking at the economic numbers and therefore, around 1.3525-50 levels Euro should be a good sell.

However, Pound Sterling that fell a day earlier of soft inflation report made quick gains purely on economic factors, as BOE in its quarterly report said that jobs condition will improve at a faster pace. Today's positive retail sale could give more life to GBP, which means before the release of UK Retail sales data, Cable is a good bet to buy on dip and profit should be book before data announcement.

GMT 3:25 - GOLD @ $ 1284 = Choppy trading is expected in Asia. Support is around $ 1277-80 levels as this move could extend up to or beyond $ 1287-88 for $ 1290-92 zones, but this rally should exhaust later in the day, unless $ 1296-98 surrenders which is not a favoured move. 

GMT 3:39 - EURO @ 1.3465 = We may have seen the top and Euro should hold below 1.3485-90 levels for a dip to test 1.3415-25 zones or else 1.3510-20. 

GMT 3:44 - GBP @ 1.6031 = Prefer buying Cable around 1.6000-10 levels for 1.6060-65. Break of 1.6095 will encourage for test of 1.6140-50 zones. However, move below 1.5965-70 risks for 1.5910-20.

GMT 3:50 - JPY @ 99.68 = Japanese currency has good support around 99.95, break could see another 20 pip loss, but I still do not expect major change in sentiment, as break of 99.40-50 resistance would see   test of 99.15-20 zones.

GMT 3:56 - AUD @ 0.9348 = Aussie made some gains on back of weak US Dollar. the up move should be short lived unless move beyond 0.9385, which should not happen as I am looking for a dip, but needs to break 0.9305 for 0.9280. 

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, November 13

Asad Rizvi

In the absence of major economic data market is trying to find reason to trade. Yet again, today there is no major US economic data except for the Mortgage for Bankers Association mortgage applications data , which is not the market driver. 

Few of the FED officials spoke on economy and they tried to maintain a balance on tapering talk by preparing for Fed tapering, which was shift on their stance as they did not sound Dovish. But they failed to get attention, as market is now focused on Yellens nomination and her speech due tomorrow in front of the Banking Senate Committee, which is the most talked subject that how she will present herself and her views on economy in front of the Committee.

US Dollar is making gains against almost everything and the pressure due to withdrawal of Fed stimulus package is visible. Gold is on the decline fearing pullback of funds, oil is down as scaling down by Fed will have an impact on speculative oil trades , although higher oil production could be added factor. Similarly currencies of emerging economies too are under pressure.

Meanwhile, Japanese currency found support around 99.80 and has frequently struggled around 100 levels due to lack of continuation of promised stimulus support from Abe's government. Rising US yield and Japanese stocks are two other factors that does not help Japanese currency. Similarly Pound Sterling got clobbered due to weak inflation report that had slowed down earlier interest hike expectation. Weak jobs report could add more woes for GBP that room for more losses.

But Euro is one currency that has moved against all odds. This could be due demand from global Central Banks and investors for Euro, as the currency flow suggest that they are still good buyer of currency. However, despite yesterday's ECB official Asmussen press release that ECB is not ruling out negative rates. 

I think the statement clearly suggest that ECB does not have liking for strong Euro that hurts its exports and encourages import. Talks by ECB official to push inflation higher and negative deposit rate does not support currency and hence the European currency still has enough room for correction. One thing that can go against the Buck is possibility of uncertainty that can be caused by US Budget negotiation, which is due to start soon.

GMT 3:24 - GOLD @ 1269.50 = In Asia and early Europe gold is likely to hold around $ 1266-68 levels for a move towards $ 1273-75. Beyond that selling is preferred around $ 1276-80 zones, as should cap below $ 1286 for a move down towards $ 1260-62 zones. Further drop in coming days is intact.

GMT 3:29 - EURO @ 1.3446 = Euro could make a move towards 1.3470-80 zones and is likely to exhaust, but needs to break 1.3405 for a test of 1.3380. Upside break of 1.3525-50 in a bigger scenario could be threatening.

GMT 3:33 - GBP @ 1.5890 = Up move should exhaust around 1.5930-50 zones, if seen top should be picked to sell. Only break of 1.5998 will be threatening, as fall below 1.5840 will exert pressure for test a of 1.5800-10 zones. 

GMT 3:36 - JPY 99.44 = There is no major change in view, as 99.80-00 poses big challenge. While 99.10 is the resistance level and only break risk for test of 98.70-80. However next support is around 100.25-30.

GMT 3:41 - AUD @ 0.9306 = As long as 0.9350-60 remains capped, Aussie will gradually drift down. Break of 0.9280 will open gates for 0.9240-50 or else 0.9380. Trading activity is expect5ed in narrow band.

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, November 12

Asad Rizvi

It was a slow start of new week due to Veterans day holiday in USA. Overall this is not going to be a choppy week witnessed recently because of less important economic events in USA due to lack of tier one data. Though UK and Germany will be releasing some important data that will provide hint about the economic progress in two-countries. 

The trend is likely to continue, but on Thursday, market will be more focused to see that if Yellen gets a nod from the Senate Banking Committee on her nomination as FED's new Boss. This could turn out to be a very important event, if she fails to get the passing marks on her 1st attempt. 

The timing is very important due to many unsettled factors in the pipeline and hence, any type of disappointment could once confuse the market. In October, US economy after a long spell of shutdown due to disagreement between government and the opposition was faced with uncertainty and cannot afford more such delays as the economy is struggling for growth and better job condition. 

The immediate matter of worry for Doves is FED's seriousness to reduce it asset purchase. Recent release of jobs data was extremely supportive of Fed's tapering plan, which brings it closer to decision making and gives little to room for argument after job condition showing improvement. History suggest that November and December are strong months for the economy to show healthy performance and Yellens approval by Congress will be one step forward. Behaviour of bond market and gold price is another trend indicator. Therefore it does not matter that if Fed will start reducing its stimulus package in December, January or March. It is the size that will matter most.

GMT 2:25 - GOLD @ $ 1279.80 = Immediate support in Asia is around $ 1275-77 and may hold, but should exhaust around $ 1285-87. Break of of support level will encourage for a test of $ 1273 levels, as test $ 1266 is a possibility. $ 1292 should not surrender.

GMT 2:32 - EURO @ 1.3393 = The real challenge is to surpass 1.3425-30 levels, failure would see a fall extending towards 1.3360-70 zones, break will encourage for a test of 1.3340 levels or else 1.3455.

GMT 2:38 - GBP @ 1.5968 = Risk for further drop intact as long as Cable holds below 1.5995. If 1.5940-50 breaks GBP could see a fall extending towards 1.5915-20 zones. Or else 1.6020.

GMT 2:42 - JPY @ 99.52 = I will stick to my weekly view that 99.60-80 is the level to watch, as only break will encourage for a move towards 100.30-50 zones. However, there is a possibility of minor losses for Japanese currency that can extend or get close to 100 levels, but risk for correction is possible 99.10 remains an important support levels for JPY.  

GMT 2:49 - AUD @ 0.9331 = I can see more suffering for Aussie and the Australian may struggle to move beyond 0.9350-60 levels for 0.9270-80. The fall could extend as long as AUD holds below 0.9390.

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, November 11-15

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.

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 3^rd 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 1^st 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 3^rd 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.