US Dollar continued with its morning gain due to worsening economic condition and uncertainty in Spain. Its high borrowing cost and strike in the country further dented Euro that pushed European currency. Today’s (FRIDAY) budget could provide clearer picture that if Spain can seriously impose austerity measures to reduce its high deficit or will it succumb to the public pressure and will have to face similar situation/condition faced earlier by Greece.
Friday’s US economic data that mixed signal about US economic recovery initially gave further boost to the USD that proved to be short lived and by the close of day USD after hitting day’s high of 1.3253 lost its shine.
Bernanke’s presence during the week helped market to trade on his sentiments based on his speech, but in real terms the conclusion was that he tried to maintain a balance and did not allow guessing correctly. My pick is that he gave a correct assessment about the US economic that it is going to be a long struggle and still has long way to go. He will not take/make any risk/decision to spoil years of hard work that can blow up the recovery.
Since it will take many more years for the economy to get back at its normal pace, hence FED Chairman seems willing to act and mend accordingly, as and when necessary, which means that inflation is a matter of grave concern but quantitative easing (QE) is more important to stimulate the economy. Inflation number could surge but rate hike may not be affordable.
UK is a good example that despite over 5 pct inflation BoE kept its bank rate at 0.5 pct, so it’s workable. Another e.g., BUBA, German Central Bank famous for not compromising on issues is happy to see European’s money printing machine active and makes no fuss. The world has learned that do whatever is necessary to protect the rich and make sure that rich class of the society does not lose money.
GOLD @ $ 1663 = No word on QE and India consuming less gold as protest enters 13th day does not make gold very attractive. Prefer continuation of strategy sell on rise.
Down trend to remain intact as long as Gold stays below $ 1676. Prefer selling around $ 1665-67. Stops $ 1672 for & 1656 or $ 1652
GBP @ 1.5975 = Unlikely to break 1.60 in Asia any cable up move should be a sell with STOPS 1.6025, for test of 1.5940-50 zone, watch this level, as GBP could dip to 1.5925, buy GBP if seen as it could later attack and break 1.60 for 1.6060. Downside break of 1.5880 will delay up move.
EURO @ 1.3352 = Initially I see a drop towards 1.3300-10 zones before making another upside attempt. Prior to European opening if Euro climbs toward 1.3370 prefer selling, as I do not expect a break of 1.34 in Asia. But on dips Euro can be bought with Stops 1.3270 for 1.3390’s
RangE TradinG UntiL NYK – GoLD BiaS DownSidE - Mar 29