EurO & GoLD to TesT NeW HigHs - Feb 29

LTRO announcement will be the big even of the day and there are lot of guess work, talk and analysis about the number and possible impact on the market. The December LTRO tranche did work well in the sense that it gave some sort of stability to European banking system that helped in stabilizing the bond market to a certain extent, though Portugal and Greece CDS are still record high.

There is lot of pressure from G-30 to put extra funds in IMF kitty and expectation is high that this time LTRO could be bigger than the 1^st one. In my December write-up I mentioned that this move by the ECB is quantitative easing (QE) and injection through LTRO is yet another QE stance by the ECB. It’s a virus that came from USA and has now spread all over the globe, for which a price has to be paid in future.

I am myself not too sure that how should the react. But my immediate reading says anything over EURO 500 billion will considered positive that will give more space to EURO and GOLD. Anything around EURO 400 billion or below will give market enough reason to go for EURO and GOLD correction.

Until LTRO announcement sentiment for EURO and GOLD should remain positive, so buying EURO and Gold on dips close to chart support levels may not be bad idea, but watch out for rumors and news flashes and be quick to act.

However, market will remain choppy.

EURO @ 1.3372 = Buying Euro on dips around 1.3450-60 is preferred. Jumping in the middle of the range could be risky proposition. Prior to LTRO announcement we may see a test of 1.3520-40. STOPS is 1.3420 surrenders. On the upside 1.3580 is the crucial level to watch.

GBP @ 1.5923 = Cable buying around 1.5905-15 looks good, with STOPS if 1.5870 breaks for 1.5965-70. Next level to watch would be 1.6065

GOLD @ $ 1786 = Buying on dips preferred. Should find base around $ 1780-82 for a break of $ 1793, a break here could push Gold to $ 1798. Crucial level to watch is $ 1810. A break of $ 1770 will see sharp selloff.

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FEB 28 - EurO & GoLD – CaT & MouSe GamE to ContinuE

http://www.forexstreet.net/profiles/blogs/euro-gold-cat-mouse-game-...

Tags: http://asadcmka.blogspot.com/

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Comment by Tahir Khan on February 29, 2012 at 9:29am: or you could plot extremes point to enter the positions depending whether u want to sell or buy..

GL..

Comment by Husain Abbas Doriwala on February 29, 2012 at 9:31am: Hello Mr. Asad, don't you think post announcement of LTRO, traders would close their long positions and turn towards shortening their trades. This is my personal understanding that this rally occurred already due to LTRO being due (before it being announced).

Also, as it has occurred in Dec'11, post announcement the rally faded and went downwards.

I could be wrong?

Comment by naivetrader1 on February 29, 2012 at 9:35am: The question is: How much is 'Priced in'?

Comment by Tahir Khan on February 29, 2012 at 9:37am: I think if the buy frenzy continues and the yield won't go higher then this to be taken positive and not to match it with QE of US. They simply printed money. more buying would lead to confidence in EU and perhaps investors not bother whether Greece situation will deteriorate more or not..

Just my 2 cent and I'm not good with fundamentals..

GL..

Comment by asad rizvi on February 29, 2012 at 9:38am: That depends. A brave trader with a firm view may hold the position. Traders having small limit will avoid entering the market even after the LTRO unless they get a clear trend. Trader struggling for profit will also avoid trade and must be sitting with a square position .But position taker must be sitting with a view….

Comment by naivetrader1 on February 29, 2012 at 9:39am: Thanks for that advice Tahir. I'm quite good at identifying Extreme Points..... Only the direction goes a bit wrong!!! I was Short @ 2658...... That's a Naivetrader 4 U!!!

Comment by asad rizvi on February 29, 2012 at 9:57am: How much "Priced in" naivetrader

That’s all guess work. The view on size of LTRO varies from Euro 400 billion to Euro 1 trillion. I best guess is around EURO 450 billion that could inject roughly EURO 200 billion of new cash liquidity, which means Euro 1 trillion LTRO will inject roughly Euro 600-750 fresh cash money. With bigger size LTRO I have reduced the cash money because that also means that more money is required or old transactions. Euro I trillion injection means bigger problems, this could be good news for gold but bad for Euro…..

Comment by naivetrader1 on February 29, 2012 at 10:01am: Can u plz explain: If LTRO is in effect, equivalent to QE & actually flood the market with more money (greater supply of EURO, in this case) how EU can go up?

Comment by Tahir Khan on February 29, 2012 at 10:05am: wow. don't want to rub in but 2976 i have a buy and im holding...

we looking in 3525-27 has a breaker for an upmove to 3595-3605.

3400 have buying interest..

3345-55 concludes the main supp.. 3368 in b.w 3345-55 to 3402.........

prefer an upmove..

Extreme points 3400-04 and 3525-27...........

GL..

Comment by asad rizvi on February 29, 2012 at 10:05am: Please read last line agaian that says "Euro I trillion injection means bigger problems, this could be good news for gold but bad for Euro"....…..Repeat I said "BAD news for EURO", which means EURO DOWN not up;-)

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