EurO & GoLD tO GaiN b4 FaLL - June 11-15

There are two major topics dominating the global financial markets. Europe is taking the lead due to numerous problems in the Euro-zone and weak economic signals coming from USA, which is considered the global economic power. In percentage terms, the total global trade share of Europe and USA is over 70 pct that includes exports and imports.

The problem is that the current size of global debt has reached close to about USD 200 trillion, which is 3-times the size of global GDP. In 2002, it was estimated that the size of global debt was roughly around USD 85 trillion. Weather it’s lending or borrowing, funding or generating of funds, every economic activity is somehow or the other is linked to debt.

Debt is now leading the world’s financial misery. Spain that has sucked in EURO 330 billion funding needs more money for bank capitalization as it still remains a big threat to global economies and if the problem is not temporarily sorted out it will spill over into the Euro region banks that can drag other leading global economies. Some of the estimates suggest that Spain’s banking system still needs around EURO 250 billion to overcome the problem.

On Friday, Fitch rating agencies was quick to sense the problem and downgraded Spain’s long-term credit rating by 3-nothches to BBB, which are 2-notches above “JUNK” with “Outlook Negative”.

I am sure that in their meeting, financial stability will be the key talking point for the European policy makers that needs quick attention and some sort of announcement before June 17 Greece election to avoid spill over that could lead to financial market collapse. Therefore, to accommodate Spain, bailout money has to be made available by once again breaching the

European laws with conditionality attached to save their faces.

Meanwhile, another major event coming is FED’s FOMC meeting in next 10-days time. There is a huge debate going on that if FED will opt for quantitative easing (QE3), which is basically pumping of liquidity in to the banking system through purchase of T/Bills and Bonds, or FED will consider extending USD 400 billion twists, which is swapping short-term bonds with longer duration that helps to keep 10- years and 30-years bonds yield low.

This market will be focusing on speeches from FED officials prior to FOMC announcement for clues about monetary policy. Some of the other major economic events are release of economic data’s. On Monday, main event will be speeches by 2-Fed official. On Tuesday, UK’s industrial and manufacturing production data will tell us about short term growth an important GDP growth component. Later in USA will be releasing quite a few economic data’s, which may be of less importance but will provide feeler about the economic performance. On Wednesday, quite a few economic numbers will be released, but German CPI will be keenly watched. However, USA will release barrage of economic numbers PPI, Retail Sales and Business Inventories that could help in determining next policy direction. Thursday is another active day and the major event of the day will be decision on Swiss Interest Rate followed by ECB monthly report and data. Later, US CPI, Jobless claim and Current Account data will give more clues about the economy. Friday is another bus day in terms of economic data, which will provide more evidence about the global economic activity. The day will start with BOJ decision on interest rate to be followed with UK Trade Balance number, then European Monetary Union will make announcement on trade balance with all eyes on USA for release of quite a few data’s of which, Industrial Production and Michigan Consumer Sentiment Index are important US economic indicators.

LasT WeeK - JunE 04-08

GOLD @ $ 1621.10 = Rally in gold was witnessed soon after the release of extremely disappointing US Non-Farm payroll and Unemployment data, as investors/speculators are too confident of quantitative easing. Gold got further boost on rumor of ECB easing and on expectation of another GBOP 50 billion injection, which broke through a major barrier of $ 1606 to test the highs of $ 1625.

However, the move occurred, as was also helped by investors that were looking for reason to penetrate beyond $ 1600 mark after two recent downside attempts that fizzled out around $ 1530 on belief of Central Bank buying, but again this price hike may not encourage physical gold buyers due to economic slowdown in China and India.

During the week, initially we could see strong buying interest on dips around $ 1610-12 zones for a break of $ 1630 that could pave way for a test of $ 1638-40 and clean break of this level would encourage for $ 1650 with top new band around $ 1675. However, a push below $ 1604 may encourage for $ 1595 and if this level surrenders $ 1580 could be tested.

Preferred strategy would be to buy gold on dips, but this bullish tone will continue to exhaust on the rise and will meet resistance that will encourage correction, so profit taking is suggest at the resistance levels.

EURO @ 1.2434 = Last week Euro fell nicely as per my call almost hitting target of 1.2280 before bouncing back. But this bounce back will be short lived, as market will soon realize that Euro is faced with bigger problems than US economy is currently facing.

Euro is not gold and Euro-zone has much bigger problems, which is like a cancerous tumor that will continue to grow in size, but will find no cure. The surge in Euro is another opportunity for the traders/investors to pick the top and start selling the European currency.

This rally can extend up to 1.2520, but anything beyond will be tempting, as I would prefer to pick the top to sell the European currency. On the upside a further break of 1.2570 is required for more gains, which I do not favor and I would continue to pick the top to sell Euro. Ranges for the week 1.2580 – 1.2280

GBP @ 1.5361 = Pound Sterling was further clobbered despite flash of positive data’s during the week after the weak Purchasing Managers Index data (PIM) that fell to 3-years low of 45.9 against expectation of 49.8. Cable is likely to gradually gain stronger tone as it has very strong support around 1.5220-40 zones, which should not surrender and once it makes an upside clean break of 1.5470, it may test 1.5550 or else 1.5150. Ranges for the week 1.5580 - 1.5240.

YEN @ 78.01 = This week Yen gained more than my expectation to break below 78.20 to test 77.60’s but made small late hour recovery. It has to break 79.10 for 79.80, but fall below 77.30 risks for 76.80. Range for the week 76.50- 80.40

CHF @ 0.9658 = Swiss Franc has strong resistance at 0.9570, where SFR may find the top before easing for 0.9740 or else 0.9510. Range for the week 9480 – 0.9750

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

2 members like this

Comment by Rajendra Panchal on June 10, 2012 at 4:40pm: Sir, What is the range for EUR/USD for this week ? plz add me for your blog . my email id is rushi22@yahoo.com

Comment by Andre on June 10, 2012 at 7:58pm: Thank you sir...as allways your perspective is greatly appreciated.

have a great week

andre

Comment by ceasar on June 11, 2012 at 9:16am: Greetings Mr.Rizvi..gold is currently trading at 1593.60 what can be expected from this level for today...?

Comment by asad rizvi on June 11, 2012 at 10:05am: GMT 09:57 - EURO @ 1.2570 = if fails to break below 1.2565 could bounce back to 1.2595 or esle 1.2535-40. Suggest take profit...Cheers

GMT 08:48 - GOLD @ $1596 = gold may struggle to move beyond $ 1598-99, risk increased for test of $ 1590 zones, break will encourage for more damage or esle $ 1607

GMT 08:05 - there is no change in view I said $ 1590 should break for fall. Now it is for you to decide. i am expecting gold to trade in 1590-1605 ranges for next 3 hours

GMT 05:28 -No Change in View --""If $ 1600 breaks gold could test $ 1605-10. On the downside may hold around $ 1690, needs to dip below $ 1584 for more loses"

GMT 01:37 - GOLD @ $ 1602 = We may have seen the top around $ 1608. However, break of $ 1590 is required for sharp drop that could be seen in New York....More later

GMT 01:03 - AUD - pd, AUD 0.9989 = 1.0020 is the AUD barrier, if holds could test.09940-50 zones

GMT 0:58 - 1.2634 = I am not sure if you are short around my given level of 1.2660. If yes then hold your position with 40 pip S/L you may earn 100 + pip. Market is still unsure about the diection. We may not see the top already seen, in the Asian time zone...GL

Comment by ceasar on June 11, 2012 at 11:50am: Mr.Rizvi ..your inputs are Rock Solid and amazing learning experience ..:)

Comment by ceasar on June 12, 2012 at 6:53am: Mr.Rizvi...the data out of Australia is been very bad off late and the news out of china and Euro Zone is also not very positive yet AUD is hovering around .99 to USD..what can one expect in this pair and Gold ?

Comment by asad rizvi on June 13, 2012 at 1:36pm: COMMENT SOON AFTER THE US DATA............

Its all about how you read the market apperantly Retail Sales data is bad, but the crux of the fact is that the drop is due to 2.2 pct drop in gassoline sales due to sharp drop in oil prices....Hopefully Market will realize this soon....

-Euro @ 1.2555 = will soon fizzle out

Comment by asad rizvi on June 15, 2012 at 4:58pm: GMT 02:05 = I do not see too much happening today as there is no major economic data. Market will prefer to stay quiet due to weekend Greece election. I am sure there is some contingency plan in pipeline and the European and policy makers along with IMF must be prepared to counter any unusual situation. Like Japan Tsunami, Central Banks will be ready for coordinated effort and will be willing to provide liquidity if need arise.

But the recent developments after Hollande’s win suggest that European leader are well aware of the political trend and have changed their stance towards compromising mode probably realizing the price Europe will have to pay if they continue to trumpet imposition of their harsh austerity measure policy.

Hollande too looks soft and Greece’s anti austerity SYRIZA party leader is confident pp that Greece will stay in the Euro-zone despite its win. This has given some confidence to the European currency despite nervousness shown by the bond market. However, the big risk that still exists is that if SYRIZA’s party wins it will bring unrest in the Euro-zone. No result could see another election in a month and more ciaos in the region and in financial world.

Hence, as Greece election is due on Sunday, I am still looking for some currency correction. Euro could make some minor gains during the day, but by the close of the week, European currency should soften, as traders/investors would prefer squaring their position.

EURO @ 1.2625= Have to pick the top today. I prefer selling Euro around 1.2660 with STOPS if 1.2695 surrenders. Break of 1.2570 is required for a test of 1.2530-35 or else 1.2720.

GBP @ 1.5546 = Cable may have a stronger tone and should hold 1.5470. However, during the day I am expecting support around 1.5505-10 for a gradual move to 1.5575-80, but this would be tough to crack only move beyond this level would encourage for attest of 1.5610.

GOLD @ $ 1625 = I would prefer waiting to short around $ 1628-30 with STOPS around $ 1633 and will again go short around $ 1637-38 with STOPS around $ 1645. Break of $ 1618 will see a drop to $ 1611.

Comment by Dipak on June 16, 2012 at 3:00pm: So Mr. Rizvi, What we should do. We should sell euro or buy euro this week????

EurO & GoLD tO GaiN b4 FaLL - June 11-15

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