Friday, November 08

Asad Rizvi

Lowering of ECB's benchmark Refi rate to 0.25 pct was certainly surprise for me like many others, but it further confirms that the current European economic recovery is not enough, as it poses further risk to the region. Another factor could be that low level of Euro-zone inflation gave good reasoning to slash rate. Surely, despite refusal by Mario Draghi that the slash was not linked to strong Euro. The European currency becomes less attractive after the rate cut. 

Since, exports from Europe minus Germany is weak, unemployment remains a matter of concern, which is at the highest level, weak Euro will make European goods more attractive. ECB rate cut decision brings it closer to switch to negative interest rate scenario for the depositors if the economy fails to pick-up. Though Draghi said that they did not discuss LTRO in any significant way, but with cheap funding facility it will become more effective and more importantly it will provide enough breathing space to the borrowers when offered.

Today's US job data is another important event. But let us not forget that despite all the negative talking, US economy grew by 2.8 pct in 3rd quarter that should support overall annual growth figure when all four-quarter figures are being added, though there can be a debate that the high GDP is caused by build up of inventories. It is not easy to calculate the non-farm payroll, which can have wide range from  50.000 to 140.000 and unemployment at 7.5 pct. After shutdown drama, poor data is already priced in and traders will start talking of March 2014 tapering, but anything above 125.000 and unemployment rate below 7.4 pct will give Bulls big smile on their faces. However, if the headline numbers are too disappointing it will have limited impact because every trader/investor knows that the number is not real and therefore should be temporary.  

GMT 2:59 - GOLD @ $ 1309 = Prior to Jobs data release I am expecting Gold to hold below $ 1318 and may exhaust around $ 1311-13 for a dip to test $ 1305 possibly $ 1302-03.

However, in a broader picture a move beyond $ 1332 is required for $ 1350. On the downside break of $ 1285 will confirm further losses that can extend to test $ 1250-55 zones. 

GMT 3:09 - EURO @ 1.3408 = Euros top stop should be around 1.3440, with support around 1.3370. But data could drive the market either way. Poor jobs number could push European currency towards 1.3490, break will encourage for more gains before dropping. However, fall below 1.3310 is required for more losses.

GMT 3:13 - GBP @ 1.6092 = Buy in dip is preferred, only break of 1.6065 will encourage for test of 1.6040 zones. Though 1.6120-50 will be tough to crack. Ob a broader prospective 1.5970 should not surrender, but needs to clear 1.6190 for more gains.

GMT 3:18 - JPY @ 98.21 = To give you a feeler about Japanese currency, non-farm payroll below 100.000 will bring it closer to 97 levels and anything above 130.000 will weaken JPY to test 99.20. A number beyond 150.000 may challenge 99.70-00 zones.

GMT 3:23 - AUD @ 0.9457 = Bias is on the downside and should hold below 0.9480 for a gradual move towards 0.9420 or 0.9405. Apply Stops if 0.9510 breaks.

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 07

Asad Rizvi

Surely, market will be waiting for Draghi's follow up speech if ECB does not cut rate, which may not happen today. Though Euro-zone inflation is low and minus Germany, rest of the economies are in a struggling mode, rate cut may not be enough to repair the damage that requires mending at various levels, which is still not properly addressed./corrected. Draghi is smart, hence, like past he may once again use is verbal warning tactics and may avoid wasting his useful monetary tool that may backfire and could buy more time and may probably end up with Dovish tone. 

Another reason for delay could be to have better feeler/sense about FED's mood on its tapering plan that could have sever impact on the global financial market if FED tapers and if the size is larger than expectation it could create lot on uncertainty in the market.

Further reduction in European interest rate will reduce the cost of ongoing business, but it does not guarantee increase in new business activity due to liquidity crunch and clogged balance sheets. Bank Capitalization is a troublesome issue, which requires funding. Banks in Euro-zone requires emergency funding Long Term Refinance Operation (LTRO) money because in such a situation borrowing privately becomes expensive. Therefore, combine action of Interest Rate cut and LTRO could be very effective tool to stimulate economy if the funding is utilized for genuine business activity instead of money diverting towards carry trade purpose, which goes unchecked and does not bring desired result.

Meanwhile, today we are going to witness release of batch of US economic data, US GDP though having lost its effectiveness will be watched with interest and only big deviation could catch traders attention. However, I would be careful with the release of US Initial Jobless Claims data that measures the strength of labour market, this may give some feeler about tomorrows Jobs data.  

GMT 3:18 = GOLD @ $ 1316.50 = Gold should struggle to move beyond $ 13321-23 levels prior to US data, but may find support around $ 1308-10 levels. On broader perspective the levels to watch is $ 1330 & $ 1303.

GMT 3:26 - EURO @ 1.3517 = Prior to ECB announcement i am expecting 1.3470-80 to hold for a gradual up move towards 1.3550 that could later stretch, but unless break above 1.3590-00 levels more gains is not possible. On the downside watch for break of 1.3420-40 that could spark a move towards 1.3320.

GMT 3:33 - GBP @ 1.6077 = Cable should remain capped below 1.6130, only break encourages for a push towards 1.6179-80 zones. However, 1st protection is around 1.6040-50 that may hold, but break of 1.5980 will confirm bigger losses ahead.  

GMT 3:36 - JPY @ 98.58 = As long as 98.05 holds bias is towards weak JPY and only break of 97.70 could be alarming. However. 98.90-00 will be tough to crack and 99.25 could be a bigger challenge.

GMT 3:39 - AUD @ 0.9473 = Aussie has resistance around 0.9525-40, which is not easy to crack, break of 0.9440  will extend fall towards 0.9400-10 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.

Wednesday, Nov 06

Asad Rizvi

Market focus is gradually shifting towards two major events this week ECB's MPS announcement and Friday's US Payroll data, though US jobs data may get little attention due to US government shutdown that will not help in providing true picture. Tomorrow's Euro-zone monetary policy could spring surprise with further easing or Dovish ECB stance after sharp fall in Euro-zone inflation number. 

Yesterday's European Commission report of further Downgrading of its region's GDP to 1.1 pct and painting more deteriorating economic condition have further dampen the sentiment, increasing chances of further easing. However, ECB may not announce rate cut tomorrow and may wait for developments in USA, but may keep tilt towards softer stance to keep market on their toes before it makes next move.

Meanwhile, US data continues to impress and with the release of strong ISM non-manufacturing numbers hinting healthy activity in US service sector further endorses FED's confidence in economy. I think lot of people are expecting payroll to dip towards 100.000 or worse and rise in unemployment number to 7.4 pct, anything better than the projected member will strengthen the tapering case and this is why US bond market is nervous and US treasury yields are surging. Today's release of US 3rd quarter GDP data should be kept in mind. Another observation about the recent speeches given by FED members are sounding less Dovish and the change in tone is obvious.   

While, release of UK PMI Index gave big surprise to the market by rising sharply to 6-year high, as the index rose to 62.5 in October indicating surge in new business activity, which is a positive news for the UK economy. Continuing tend will push growth higher and employment condition will improve. Today UK industrial production data will be released and another good data will give more comfort to the market unless activity has slowed down, which may not be the case.

GMT 2:53 - GOLD @ 1313 = Initially I am expecting $ 1307-09 levels to hold but needs to break $ 1317 for test of $ 1322-24 zones before correcting. However, break of  $ 1302 is required for a a push down to test $ 1290-93 zones.

GMT 2:59 - EURO @ 1.3485 = Euro is likely to consolidate and hold around 1.3460-65 levels for small up move and unless break below 1.3420, it should 1.3510-20 zones and only break will encourage for test 1.3540-45 zones before dropping to test lows.

GMT 3:03 - GBP @ 1.6070 = Cable will hold around 1.6040-50 and unless fall below 1.6000-10, it its likely to test and crack 1.6095 to enter 1.6120-40 zones.

GMT 3:06 - JPY @ 98.48 = Bias remains towards weak JPY an should hold 98.05 for 98.80-90. Only break will encourage for test of crucial levels 99.10-20 or else 97.70.

GMT 3:11 - AUD @ 0.9506 = Aussie should hold 0.9470-80 for a move towards 0.9550-60 zones, but may not find easy to surpass, as risk for corrective move could pull it down towards 0.9450 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 05

Asad Rizvi

It was once again a dull start to the new week, which is now becoming a common practice in the global financial market. This a new trend witnessed in recent times, which indicates too much of uncertainty or loss of confidence, as market probably wait for someone to take the lead or either wait for direction before taking risk. 

It is true because Europe, USA, Japan and others are loaded with financial problems, which frequently pops up after short intervals. World financial managers look for temporary solutions as do not have the capability/ability to fix them permanently. To avoid collapse they are mostly looking for ways to inflate the economy through artificial methods that causes the reoccurring of problem and this will remain an unending trend. 

Legislative changes through Parliamentary, regulatory changes at domestic levels, amending accounting rules, expanding of balance sheets through artificially means and gathering of world leaders is not the cure to the problem unless addressed in true sense. Regulators and rating agencies will have to take honest and timely decision. Law makers at every levels will have to be give fair opinion/decision or else the world financial will witness more such happenings that will often lead to uncertain market condition.

Meanwhile, European economic data was in a comfort zone. Germany growth data was once again hinting that the economic pick up is not shying away and the confidence level is on the up. But overall it is European slow growth rate, which needs to push higher that is exerting pressure on the European currency. Thursday's MPS will give further clue about the seriousness of economy in the Euro-zone region. Today's release of European economic data will help in building up sentiment.

While, yesterday's release of positive ISM and US factory orders did not push US Dollar higher. Today's ISM Non-Manufacturing PMI may provide some spark, which will indicate growth in service sector industry. Similarly, in UK Charted Institute of Purchasing and Supply will be releasing Markit Service PMI and a positive number is likely to support Pound Sterling after yesterdays PMI Construction Index that rose to 59.4 from 58.9. 

GMT 3:02 - GOLD @ $ 1317.50 = Today during Asian and European session gold should hold around $ 1312-15 levels for a move towards $ 1322-25 levels break will encourage for a test of $ 1328-30 zones, or else $ 1307. 
GMT 3:09 - EURO @ 1.3504 = Euro may not break 1.3460-70 levels and move beyond 1.3535-40 will encourage for another 30-40 pip up move before down again or else 1.3440.

GMT 3:14 - GBP @ 1.5975 = Before data Cable should hold around 1.5950-60 levels for a move towards 1.6010-15 on break of 1.5990. But real challenge is at 1.6050. Else watch 1.5910, break risk for test of 1.5880-85 zones. 

GMT 3:18 - JPY @ 98.30 = JPY is likely to remain in a narrow 98.05 -98.60 band. Only break of band risks for another 25 pip move both way.

GMT 3:23 - AUD @ 0.9497 = Aussie has support around 0.9470-80 zones, as long as it holds, a move and break of 0.9540-50 is a good possibility or esle AUD will test 0.9410-20 levels.

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, Nov 4 - 8

Asad Rizvi

FED policy announcement was the major event of last week. It did not give any surprise, as it avoided altering the language from its previous monetary policy statement and did not commit to reduce its monthly bond purchase of USD 85 billion. Instead it added a positive note with a firm tone about US economy, pointing that the US economic recovery is moderate.

In my previous weekly post, I did mention that the problem faced by the US Central Bank is that it has been maintaining easy monetary policy since 2008, purchasing bond through liquidity injection that has inflated the size of FED balance sheet to USD 4 Trillion. There has to be a stop and in return, injection needs justification at same proportion.

The two FED officials that spoke on Friday did not sound Dovish as they were more concerned about inflation picking up, which also gives hint of change in over sentiment.

The overall conclusion is that FED seems eager to start reducing its asset purchase, but it may be fearing risk that even small amount of tapering could trigger negative sentiment, which needs to cool down a bit.

This week sentiment could shift towards Europe, after drop in inflation rate. There is a desperate need to push growth rate higher and to create more job opportunities. German growth is OK, but may not be enough to maintain stability, as growth in remaining part of Euro-zone region is still low and alarming. ECB may be forced to offer stimulus package.

I have frequently argued and show my reservation about the strength of European currency, which does not suit European economy, because strong EURO makes European goods less attractive and current European growth is not sustainable because banks are not lending on constantly to expand the base of business. European bank are still faced with liquidity issue, Bank Capitalization problem has not been resolved.

European inflation that unexpectedly fell down below 1 pct should provide space to Draghi in his press speech after monetary policy statement may talk of forwards guidance or could hint of discussing rate cut if there is no surprise rate cut. LTRO discussion could also be part of his agenda. If he does not talk of the issues he will surely be challenged in this press Q&A session.  

However, despite all the drama and economic distortion about US economic report, focus will not shift from developments in US, as this week US non-farm payroll, an important US economic barometer will be released on Friday. Weak jobs data is already priced in by the market, better than expected numbers will surely help Fed’s stance on tapering. US quarter 3 GDP data will important economic number to watch.

     

GOLD @ $ 1315.50 = This week gold is likely to remain under pressure as $ 1330-35 will pose challenged if tested, which is not a favored move. However, risk is on the downside, as break of $ 1295 will extend losses towards $ 1275-80 levels, with next major support at $ 1250-55. On the up resistance would be around $ 1345-50.

EURO @ 1.3485 = The fall is sharp and deep. Euro needs to push beyond 1.3525 for a move towards 1.3590-00 zones or 1.3640, which is a major resistance levels. However, initially selling pressure is likely to continue and fall below 1.3410 will open gates to challenge 1.3350 or possibly 1.3280. Range for the week 1.3240 - 1.3640.

GBP @ 1.5923 = Cable after strong 3^rd quarter performance has lost its upside momentum due to weak release of recent economic numbers. Market will once again start concentrating on growth in manufacturing, industrial and housing sector, which is the backbone of the economy and could suffer if fails to recover.

Cable has strong resistance around 1.6040-50 and break of this levels is required to test 1.6150. GBP could come under pressure and if 1.5840 breaks, it could potentially challenge 1.5780.    Range for week 1.5750-1.6180.

JPY @ 98.61 = Japanese currency will continue to trade in a narrow band unless it breaks major support of resistance level. The currency will give strong resistance and may not surrender 97.40-50 support zones. A move beyond 98.95-00 will help to test 99.30-40 zones or probably 99.80 levels. Failure to surpass initial support levels will encourage JPY to regains its lost strength. Range for the week 96.80 – 99.90.

AUD 0.9439 = Care is suggested as Aussie may find support around 0.9350-70 zones for potential correction and move towards 09550-80. Only break will encourage for 0.9630. However, failure to hold support levels would see a drop extending towards 0.9280. Range for the week 0.9250– 0.9650.

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 01

Asad Rizvi

It seems that the market is now mentally prepared for reduction in FED's asset purchase, amount and the timing of tapering does not matter anymore, as it now looks a done deal. This is probably the final conclusion after going through the policy statement that I mentioned in my yesterday's post that the language used is clearly less Dovish with a note of optimism, which increases the possibility to reduce the bond purchase amount in near-term. Price pressure in Gold, 10-year US Bond yield and equity clearly indicates the trend.

After the release of MPS, market will now be more keen to listen to FED official speeches for clues on tapering. More importantly the release of US economic data should play bigger role in helping to determine the trend. Though it is priced in that October economic numbers will be distorted due to government shutdown that was caused due to disagreement on debt issue. Release of October economic numbers could be confusing as quite a few events are not registered, but history suggest that November economic data is often encouraging that should give boost to the sentiment.

Meanwhile, in the foreign exchange market, excessive downside move in Euro was witnessed due to change in sentiment, as currency dealers suspect that ECB may have to adopt for even more softer stance and may choose for a quick rate cut to support regions economy to push growth higher and create more jobs opportunities, which is at a record high. Release of low inflation numbers further supports argument of ECB rate cut.        

GMT 2:56 - GOLD @ $ 1324 = Pressure on gold to continue and is likely to stay below $ 1328-30 levels for test and break of $ 1312-14 zones. Fall below $ 1303 will encourage for a sharp drop towards $ 1285-90 zone or else $ 1338-40. 

GMT 3:05 - EURO @ 1.3555 =  Euro is likely to hold below 1.3580-90 levels and should not surpass 1.3625 for a move towards support levels 1.3505-10 zones. However, support levels may hold for mild correction. If breaks, risk for more downside will increase to test 1.3450.  

GMT 3:12 - GBP 1.6030 = There are few risk for sharp move and Cable could be vulnerable. We may see GBP holding above 1.5970-75 levels and needs to break 1.6080 for further gains. However, break of support levels risk for a test of 1.5920-30 zones.

GMT 3:18 - JPY @ 98.22 = Japanese currency is a sell as long as 97.75 holds for a move towards 98.60-70 zones. But needs to break for 99.25 or 99.75 or else it will test 97.40-50 zones.

GMT 3:22 - AUD @ 0.9474 = I am expecting minor correction but needs to break 0.9498 for a test of 0.9525-30 zones or else break of 0.9450 will see fall extending towards 0.9420-30 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.

Thursday, October 31

Asad Rizvi

It seems that the market could not get clearer direction from FED FOMC statement, which apparently looks as if  it was almost repetition of its previous policy stance. This could be intentional due to all the confusion caused by shutdown that distorted the US economic numbers and hence, FED may have avoided giving tapering hint, as the timing may not be appropriate. There could be minor delay, but no shift in its strategy/policy.

Since US Central Bank did not alter its previous policy statement and by sticking to its earlier (September) sentence that the economy is improving at a "Moderate Pace". FED's tone is surely firm and confident, which could mean that FED may still be considering to initiate its winding program this year (Fed meeting on Dec 17-18). If we go by the FED statement, Fed certainly looked less Dovish this time.

Fed's problem is that it has been maintaining its short-term zero interest rate policy since December 2008 and so far the injected amount is close to USD 4 Trillion that has inflated its balance sheet, but the economic growth does not justify recovery matching the size of monthly liquidity injection in true sense that has numerous risk factor.   

What we should not overlook is that the US economic distortion during recent government shutdown was not caused by FED policy error, it was purely fiscal matter and politician should be held responsible for fiscal indiscipline. Fiscal issue is now a regular feature and would continue to haunt US economy at various intervals unless settled for ever, which is not a possibility and this should give enough reasoning to the FED and it official to start complain/defending at various levels. I think market will be eagerly waiting to hear the follow up speeches by the Fed officials for more clues. However, release of US economic data will surely provide more guidance about the trend.

GMT 2:56 - GOLD @ $ 1339 = Overall conclusion about MPS is that FED look less Dovish that should not help gold to make gains beyond $ 1360-65 and I am expecting big downside move on break of $ 1315-20 levels. However, FED officials taking the podium on Friday and next week will matter a lot and their speeches can influence the market, which needs to be monitored carefully.

During the day I see barrier around $ 1346-48, which should not break for a move down. Break of $ 1328-30 is required for a fall to test $ 1315-20 zones. Or else $ 1358.
GMT 3:02 - EURO @ 1.3730 = Top around 1.3750-60 and may struggle to convincingly move beyond 1.3790. See more downside risk on break of 1.3705 for a test of 1.3680-85 levels. I will not be surprised if 1.3640-50 is challenged.

GMT 3:07 - GBP @ 1.6033 = Only break of 1.6045-50 may pave another 20 pip jump or else unless move beyond 1.6098, Cable is likely to remain under pressure break of 1.5995 will pave way for a test of 1.5970-75 zones.

GMT 3:10 - JPY @ 98.44 = Japanese currency may not gain beyond 98.10 levels, but needs to clear 97.70-75 for a test of 98.90-95 zones or else 97.85.

GMT 3:13 - AUD @ 0.9496 = Aussie may struggle beyond 0.9525-30, but needs to break 0.9470 for test of 0.9440-50 zones or else 0.9550.

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, October 30

Asad Rizvi

Ahead of FOMC decision on interest rate or prior to the release of statement by FED, market may prefer to stay quiet. After a torrid 1st two-weeks of this month, caused by US government shutdown, FED may not afford risk of tapering and would like to buy some more time due to distortion in economic activity, which will be known after the release of October economic data next month. 

FED statement could be of key relevance if it gives time table or hint of its scaling down plan. FED is faced with a difficult task, as tapering soon or delay in tapering, both will impact the market one way or the other. Since market priced in delay, due to recent debt problems, any hint of cut in asset purchase plan this year by the US Central Bank will have bigger impact, as we do not know that Bernanke may would like to start tapering before he says good bye, unlike his predecessor Allan Greenspan who left all the dirt for his successor.  

"Monetary Policy Statement",  What to watch............

-How much is FED concerned about Most Recent Economic Activity

-About recent release of poor Economic Data

-Language about Labour Market

-FED Language not too Dovish or Dovish

-Any Change in overall FED Language

-And more importantly, any hint of timing to begin Tapering

GMT 3:04 - GOLD @ $ 1343 = The crucial levels to watch is support at $ 1320 on the downside, break sees $ 1275-80 and $ 1362 on the upside, break of resistance level will encourage for a move towards $ 1404 on break of $ 1385.

During the day prior to trading should be around $ 1335 - $ 1350. Buy lows sell high. However, we are heading for a choppy day.

GMT 3:16 - EURO @ 1.3740 = Should hold below 1.3890, break of 1.3710 will encourage for 1.3685. Meanwhile, move beyond 1.3825 will encourage for 1.3940 and break of support level will see Euro losses extending towards 1.3620 zones.

GMT 3:21 - GBP @ 1.6040 = As long as 1.6080-90 holds, Cable could dip to test 1.5990-00 levels, fall could extend towards 1.5960-65 levels and has major support at 1.5880. Break of 1.6120-30 is required for more gains.

GMT 3:26 - JPY @ 98.15 = Japanese currency is required to break 98.50-70 zones for more losses, which looks difficult. however it needs to move beyond 97.70 for more gains to test 97.10 levels.

GMT 3:29 - AUD @ 0.9479 = Aussie failed to gain strength and has a challenge to hold 0.9420-40 levels too test and break 0.9550 for more gains or else 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.

Tuesday, October 29

Asad Rizvi

It was quiet and cautions start to the week, as trading was seen in tight and narrow range ahead of FED policy announcement due tomorrow. Distorted data because of the delay in release of  economic numbers with most of the indicators pointing towards slowdown should not encourage FED to slash its bond buying target, which may be extended for a future date and hence, FED may opt for continuation of its extremely easy and friendly monetary policy.

Economic data released on Monday confirms slow growth pace of US economy as growth in manufacturing sector slowed though industrial production showed some improvement. Pending home sales was also disappointing. Housing and labour are two key major areas that FED often mention in its report.

Today's weak US retail sales report could further put dent to US Dollar as all indicators are hinting slow growth in 3rd quarter, but I still believe that any weakness of USD could be a mild one, as currencies and commodities have already risen sharply to new highs and potentially could correct sharply. While tapering could only be delayed for few months and cannot be forgotten for ever.

GMT 2:23 - GOLD @ $ 1360 = Sell Stops $ 1366 for $ 1348...........

GMT 2:27 - EURO @ 1.3780 = Euro could not show enough muscles and may struggle to move beyond 1.3840-50 levels. It is likely to exhaust around 1.38 levels, break of 1.3650-60 will pave way for possible test of 1.3710-20.

GMT 2:31  - GBP @ 1.6094 = Cable is bit tricky right now, as break of 1.6110 will encourage for 1.6130. However, unless move beyond 1.6170 GBP will be under pressure. Levels on the downside to watch is 1.6030-40 that should hold or else crucial levels of 1.5970-80 could be challenged.

GMT 2:35 - JPY 97.62 = There is nothing much to add as 7.90 remains an important level for the next move towards 98.30, which is not a likely move to occur, but gains could be limited as long as 97.10 holds or else 96.80. 

GMT 2:41  - AUD @ 0.9533 = Close to important support level of 0.9500-10, which should hold, but needs to surpass 0.9580 convincingly for some stability. Break of 0.9470-80 levels could could cause more damage to the Australian currency.

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 Oct 28 - Nov 01

Asad Rizvi

We saw an interesting end of the week, as market sentiment shifted from US shutdown to other global events such as writing-off of China’s largest bank bad loan that had tripled forcing Chinese Central Bank to tighten the liquidity. Another big topic of discussion is ECB stress test of 130 banks that may require providing 8 pct of the Capital, as the move will help to get closer to European Banking Union.

Though release of US jobs data, which is considered an important economic barometer that normally is a market mover did not have much impact on the market, as data uncertainty looms. Market has already priced in gloomier US economic numbers, as US government’s partial shutdown will not only distort the economic numbers, it is likely to have negative impact on US 4^th quarter GDP growth, which is likely to fall short by nearly 0.5 pct.

This week, there is release of heavy batch of economic data’s from all over the world. But market will be keenly waiting for FED statement that will be followed after the Fed decision on interest rate to get clue on its tapering stance.

Though all indicators are clearly pointing that FED will maintain its easy monetary policy and would continue with its asset purchase program due to softer economic growth in third quarter, but nothing is firm on tapering until it makes final announcement. However, the key to the FED statement will be hint of possibility of December tapering, which many believe that it will once again be delayed at least until 1^st quarter of 2014.

Current softness of US economy and with hint of further delay by FED to reduce its asset purchase amount would weaken US Dollar. US bond yields will gain and encourage commodities price to rise. Yen could also benefit from the news of tapering delay. But any hint of tapering coming soon will have adverse impact.

  

GOLD @ 1351.90 = In my last week’s note I have cautioned that the upside rally in gold would continue and this week too there is no change in my view, as uptrend to continue. Dip would opportunity to buy, but this week trading could be choppy with possibility of big move corrective moves.

Support for gold is at $ 1335 only break could see fall extending towards $ 13320-25 zones. However, see risk for a test and break of $ 1362-65 that would pave way for $ 1375-80, as rally could extend up to $ 1390-95 zones and only break risks for $ 1420. But break of major support levels means gold heading further down to test $ 1275.

EURO @ 1.3800 = Softer economic condition in 3^rd quarter and recent partial US government shutdown have strengthen the view that FED will delay tapering due to fiscal problems. This reality has given safe haven status to Euro, as it is also enjoying Capital inflows, which is one big factor helping Euro to make comeback after minor correction.

Last week’s call have been absolutely on the dot, as Euro did enter the 1.3825 before exhausting. I am expecting continuation of Euro’s upside rally, but would like to caution, as the European currency needs to surpass a major resistance levels of 1.3890-00 for 1.3950 or 1.4020. Failure to break resistance levels would see a down move and break of 1.3770-90 is required to test 1.3710, as 1.3640 is the next key support level that should hold. Range for the week 1.3640 – 1.4050.

GBP @ 1.6162 = The up move was in line of my expectation and as suggested Cable got exhausted below 1.6280, which needs to be cleared for the next up move. There is a possibility of dip, but 1.6080-90 should hold or else as strong challenge is around 1.6040. On the up GBP needs has next resistance at 1.6325, break would encourage for 1.6380. Range for week 1.6040-1.6410.

JPY @ 97.36 = Japanese currency is stuck in a range, but demand for JPY is likely to persist. As long as JPY offers resistance and fails to break 98.60, see risk for more gains. Break of 96.50 will encourage for a move towards 95.60-70 area. Range for the week 95.40 – 98.90.

AUD @ 0.9581 = Aussie have been struggling due to various unfavorable factors and needs to hold 0.9510 for stability. However, a move beyond 0.9680 for resumption of up move or else break of support levels would challenge 0.9440=50 zones. Range for the week 0.9440– 0.9750.

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, October 25

Asad Rizvi

Sentiment was mixed on Thursday, as tighter liquidity condition in China was painful for most of the the Asian stock market. Though better HSBC manufacturing purchase index data provided some relief improving overall market opinion and hinting revival of Chinese economy. It did help to halt Aussie slide, which made gains, but the rise fizzed out as Australian economy is too dependent on China. Market will once again watch liquidity condition in China, as continued tighter condition will have adverse impact on the economy.

While, European data was disappointing after the release of PMI numbers which gave mixed signal. France Europe's second largest economy is not keeping pace with Germany and is constantly struggling. Although, news from Spain is encouraging as the economy escaped recession this time, but consistency in Euro region is key to stability.

Economic data from USA is once again providing mixed signal and recent shutdown event will cause more confusion as economics numbers are expected to deteriorate and may not give true picture. Market is more keen to know about FED's scaling down plan, which should be dominating factor and will be discussed at length/often.

However, today data from across the the globe will be of key relevance, Germany will release IFO, from UK GDP could be trend provider for the British currency and release of notorious Durable good and Michigan Consumer Sentiment Index from USA could drive some trading activity in the market.    

GMT 1:28 - GOLD @ $ 1344 = Support $ 1336-38 is the key, which could hold but gold needs to break $ 13348-50 to enter $ 1353-55 zones or else $ 1327. 

GMT EURO 1:33 - @ 1.3793 = Euro has a strong barrier around 1.3825-30 only break would encourage for 1.3865. However, I do see risk that failure to break the barrier would challenge 1.3750-60 zone and fall could extend up to 1.3715-20 zones.

GMT 1:39 - GBP @ 1.6194 = Cable needs to surpass 1.6250-60 on break of 1.6230 or else I see risk for correction break of 1.6140 should pave way for test of 1.6050-80 zones.

GMT 1:43 - JPY 97.30 = Japanese currency needs to fall below 97.90 or else a move beyond 97.05 will encourage for test 97.60-70 zones. Break risk for more gains for JPY. 

GMT AUD 1:45 - @ 0.9597 = Suspect Aussie could make gains beyond 0.9640-50 zones or else would challenge 0.9680-90. However, key is 0.9540-50 if breaks 0.9510 will be challenged.

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, October 24

Asad Rizvi

Couple of factors that dented overall market sentiment was after the release of report regarding China's largest bank loan that tripled in bad loans was written off. It may have reminded market of overall position of non-performing loans of Chinese banks, which is already facing huge difficulty because of shadow banking problem. In such environment there is always risk of tighter regulatory control to minimise damage and smooth up the financial activity. China had already tighten its short term lending rate that clobbered Asian stock market. 

This gave shiver to the Australian Dollar investors, which is too dependent on Chinese economy that saw investors scrambling to buy Yen. However, report of better HSBC PMI number in China should help to halt the Aussie decline and Yen gain could ease.

Later in Europe, new about ECB stress test of 130 banks and financial institutions that may require banks to provide 8 pct provision of their Capital, as a hedge to protect loan losses, which was higher than market expectation halted Euro currency and stock market up move. The move will help to get closer to European Banking Union, which is a long pending issue.

Meanwhile, today's release of Euro-zone PMI will be crucial for next direction, a positive flash will help in resuming Euro's upside journey to new highs. But too strong European currency may not be the ECB recipe, so as Euro moves higher, market has to watch out as European official may come up with any sound reasoning to halt/slow Euro's rise.  

while, release of BOE minutes hinted note of optimism indicating better growth condition, which also means better job opportunities in UK, which also means inflation will pick at faster pace. They all support for Pound Sterling.

However, I would not ignore release of US economic data that could still be good enough to dent the current Bearish/Dovish USD sentiment.

GMT 3:16 - GOLD @ $ 1334 = I would still consider $ 1330-32 important support levels, only break risk for $ 1325 or $ 1317. However, I will not be surprised to up move, but needs to break $ 1340-42 for $ 1348. Prefer early buying.

GMT 3:22 - EURO @ 1.3787 = If support 1.3750 breaks, euro could dip to test 1.3710-15 zones before up again or else. 1.3680. Needs to clear 1.3825 or else another dip cannot be ruled out.  

GMT 3:27 - GBP @ 1.6195 = Cable has strong support around 1.6150-60 zones only break would see fall extending towards 1.6115. However buy on dips is preferred as see possibility of GBP moving higher on break of 1.6230 for a test of 1.6255-65 zones.

GMT 3:32 - JPY @ 97.28 = Japanese currency could make small gains but should exhaust around 96.80-90 zones. Needs to push above 97.98 for 98.30 or else. 96.50. 

GMT 3:34 - AUD @ 0.9653 = Aussie could resume its upward journey, but needs to clear 0.9690 for test of 0.9730-50 zones in coming days. Protection is around 0.9570-80, which should not surrender. During the day could trade in 0.9610-80 range, if fails to break the barrier.

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.