gOLd uP uSDoLLaR dOwN - jULy 30-AuG 03

Last week, surprise combined statements that were followed one after another by the Euro-zone leaders and financial manager to protect European market lifted market from further fall and gave much needed boost to the financial market that helped sharp recovery of European bond market, it gave 300 pips lift to the ailing European currency.

Global stock market rallied. Oil and gold prices surged. US treasury prices dropped most in 4-months on optimism that Euro-zone debt crisis will now be well managed helping 10-year US treasury yield to rise by 11 basis point to 1.55 pct.

It all happened in a combined act initiated by ECB chief promising ECB will do whatever it takes to protect Euro and following day his was endorsed by another ECB official followed by Friday’s press release about telephonic talk/commitment made by Merkel/Hollande pledging to go to any extent to protect European currency.

Now, market will be keenly waiting to see that if this is a just talking or ECB have enough ammunition in their sleeves to act and protect the market from further fall. Thursday could be the 1^st occasion when ECB President Mario Draghi faces the press after the announcement of monetary policy, he may have to give some evidence or provide substance to ensure how committed European policy makers are to defend the Euro-zone from collapse.

ECB in a desperate move have tried quite a few things such as bond buying, quantitative easing, LTRO, rate cut and now desperately trying for ESM banking license that may take some time. All earlier moves were good enough to provide temporary support that was short lived.

The biggest hurdle faced by ECB is to obtain permission for its bond purchase, which is opposed by German Central Bank (Bundesbank), but interestingly its two major vocal opponents have left German Central Bank and it yet to be seen that if this will help in German policy shift.

However, this is just the beginning of another serious defending by the European official of its currency and bonds. Previously Angela Merkel made quite a few futile attempts to defend Euro, but failed to obtain desired result, as Euro-zone has numerous problems. Last week IMF showed its concern against Spain, said it is economy is vulnerable and its outlook is difficult. Italian problem too could pop out any time and TORIKA is due to give its assessment on Greece. So market should not be very complacent.

Let’s take Japan suffering from decade of recession, which is a good example as BOJ and its government have been making desperate effort to halt strengthening of Yen but has failed to succeed despite intervention, quantitative easing and low interest rate.

Europe is a different story with many strings attached faced with contagion effect and every member countries are faced with wit different types of multi internal and external factors. Time will soon prove that words/verbal interventions are enough and European policy makers will have to deliver by action.

My experience suggest that in such a situation market always throws challenge to the authorities and I will not be surprised if Euro-zone is faced with more difficult situation because if the policy makers fails to deliver speculators and investors will waste no time to make best use to this heavenly opportunity.

Meanwhile, recent European development shifted market sentiment from US economy, as last week’s US economic data was not as bad, which should allow more time and space to FED to watch economic event in the coming months and hence, on Wednesday’s FED FOMC it may not go easing.

GOLD @ $ 1622.70 = I am still not sure about this gold rally that has surged on believe of Quantitative Easing (QE) coming, although last week’s economic number was good enough to give time to FED to think, so will the gold drop by another $ 100 if FED refrains from easing. Interestingly India’s purchase fell by 35 pct in July. China’s economy is not enjoying its best, so who is buying gold? Another possibility is that it could be carry trade investors versus Euro due to slash of European interest rate.

However, since gold closing is on the higher side, technically bad US consumer data on Tuesday could give further boost to the yellow metal, so initially bias for couple of days could be on the up. Should hold above $ 1602 and a break above $ 1635 will encourage for a test of $ 1648-50 zones. Surprise QE would certainly give enough space to test $ 1690. But break below $ 1588 will halt gold’s current surge.

EURO @ 1.2315= One thing is for sure that you cannot fight the authorities, so better join the bandwagon unless the picture is clear. We are certainly heading for a volatile week. Current strength of Euro can stretch if surpasses beyond 1.2390 levels and could challenge 1.2470-20.

However, I will be cautious on a break below 1.2210 and will be looking for 1.2140 to crack, which will confirm resumption of down move. Range for the week 1.2050 – 1.2550

GBP @ 1.5740 = UK economy is in shambles, Cable’s up move will surly fizzle out for a big drop in the days to come, though it may enjoy some more good moments as break of 1.5840 is required for last leg of its up tic, which could exhaust around 1.5970-00 zones. A fall below 1.5580 will ease of the current rally. Range for the week 1.5520 – 1.5920

JPY @ 78.46 = Yen should hold above 78.10 and break of 78.90 will encourage for a test of 79.50 or else 78.70. Range for the week 77.900 – 79.70

CHF @ 0.9745 = Swiss Franc has resistance around 0.9770, which may hold and Swiss currency could weaken further to test 0.9910, a break here would risk for a test big figure or else 0.9710. Range for the week 0.9680 – 0.9995

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

4 members like this

Comment by Peter jcp on July 29, 2012 at 10:01am: Hi Asad - always enjoy reading your fundamental based updates. One comment regarding the UK and the pound -- our economy atm is as you say "is in shambles" - BUT - so is the US most of Europe and the majority of the World economies were there are Governments and Banks :-)

To me its "the ugly and liars" contest - and the ones that can "lie" the most without being caught out might still be OK

The World now is a comparatively small place compared to 50 or 100 years ago - due to fantastic communications and advanced travel etc - and so all countries are so much more dependent on each other for trade, support , borrowing , etc etc. The banks have taken full advantage of this and have been milking it for far too long.

As we enter a further banking crisis - with the real major problems still to hit the fan - it does not look to encouraging.

Lets hope common sense and the "truth" prevail so that we can all start moving forward again.

That's purely my own thoughts

Have a great week

Regards

Peter

Comment by asad rizvi on July 29, 2012 at 10:09am: Peter, good and realistic comments.

My point probably needs elobration.

I think fun time for traders will be over after the Olympics as it happened in China.

Its time to consider to picking the top and sell Cable for a sharp fall in coming days.

Hope you are enjoyng the Olympics.

Thank you for being excellent host.

Cheers and good luck for next.

Comment by Honest Sarjono on July 29, 2012 at 12:01pm: Dear Mr. Asad,

I'm always enjoy your fundamental prespective and indeed I expect gold prices fell over again because I was in need of physical gold.

Especially at the price of gold, is currently able to test in 1640-45 because Asia is now being speculative buy gold after seeing European developments (such as the Draghi's commitment) and the U.S. in the last week.
Both technically and in my perspective after a see-through 1640-45, then gold prices could reach 1670 before turning sharply to 1630.
We must still consider as the real U.S. economy has not improved for sure, but Europe looks worse that caused the market is still hesitant to take a definite decision. So the trend has been more a result of speculation.

We expect the economy's solutions can be improved in this year, because if not it will impact the world like a domino effect. I'm sure everyone in this world do not expect something bad will happen.

And maybe we should also give attention to the Silver :)

Have a good day and keep posting, Mr. Asad.

Regards,

Honest

Comment by Peter jcp on July 29, 2012 at 12:08pm: Yes really looking forward to the games and even this next month. They are reportedly costing the UK - 7-9 Billion pounds ( over $12 billion) and it is estimated we will see approx £13Billion back - through tourism spend etc etc. The Government is taking advantage of have so many World leaders and influential big business players in "town" and are actively trying to generate extra business for our economy.

That might be one reason the Pound as been on the up again - but technically its is due to fall again soon -or in August. If we can "steal" a lead on Europe through using the Olympics as a "feel good and business tool" then we might see some more up in September - but then I just hope the winter is not bleak and the Euro and the Pound don't fall heavily again.

PS - I did think the Opening Olympic Ceremony was really good - especially our Queen and James Bond parachuting into the stadium ;-)

Comment by D U Eddie on July 30, 2012 at 8:20am: Hi peter n asad. Olympic input to GDP 0.03% , past performance on host currencies 3 mnths post end of games. China 0% ; Greece 5%; Australia -5% ,

To para-phrase asad

Could go up or down buy on break of ? for 20 pips or on break below for 20 pips

be honest Asad if you dont know .... just say dont know

TakeS A loT LesS TypinG

Comment by asad rizvi on July 31, 2012 at 5:48am: Why people like D U Eddie should not be taken seriously?

Financial market is beyond currency trading and giving percentage on host countries currencies behavior further exposes his knowledge and readers should pay no heed to such statistics or post unless the person is creditable and should have the habit doing own research.

Let me ask him if that based on GDP output of 0.3 pct GDP then what is the GDP based on 0.3 pct? How did you arrive to China’s 0 pct impact when Yuan in is revaluation mode? Leave aside Greece and Australia.

China’s spending was over USD 40 billion, which yearly averaged 0.3 pct based on 4-years of Olympic related spending. But do you know soon after that BOC was forced to hike make 10 RRR hike to 17.5 pct and during this period Chinese Central Bank had to make 6-interest rate hike resulting property price collapse, and corporate profits were slashed that had smacked its share market, which is still paying the price and could not recover.

Based on Peter’s stats for London Olympics, it roughly represents 0.8 of the GDP, which will surly surely rise.

I have gone through D U profile and now I know his level of understanding of Global financial market.

To answer you about your complain pertaining to my post that “Could go up or down buy on break of ? for 20 pips or on break below for 20 pips”

The Central Bank intervention is done because even CB’s fail to maintain their desired level.

You do not become a hero by shouting or making noise. The number provided by you has no meaning. It is sheer distorted statistics provided by you that has no substance.

Now I am leaving for the readers to decide that who is talking rubbish ;-)

Comment by victor charles on July 31, 2012 at 6:43am: i'm with u sir Asad. clearly u have pointed out all

Comment by D U Eddie on July 31, 2012 at 7:18am: asad

firstly learn to read 0.03% not 0.3 and figures regurgitated from CNBC research.

credible enough for u.

Comment by asad rizvi on August 2, 2012 at 5:03pm: GMT 13:54 - In Draghi's press meeting he had nothing much to offer. Now keep a close ey on Spain's 10-years bond yield that had started to rise. It will soon surrender 7 pct mark that will further weaken EURO

EURO @ 1.2208 = Likely hold around 1.2240-50 and should move beyond 1.2285 for 1.2150-6060

GOLD @ 1694.30 = Prefer selling around $ 1697-99 STOPS $ 1602 for re-test of $ 1590 or $ 1582-84

GMT 13:31 - EURO @ 1.2190 = Take profit if long Euro and pick top to Sell

GMT 12:57 - EURO @ 1.2210 = If you went short Euro around 1.2390 take profit and go long Buy Euro STOPS 1.2170

GMT 11:56 - After DRAGHI 2-scenarios......
Break of 1.2210 will push for 1.2050 & $ 1555
OR
Break of 1.2390 will see test of 1.2480 & $ 1640

GMT 11:46 - GBP 1.5664 = If you are still long Cable suggest profit taking....GL

GMT 9:47 - GOLD @ $ 1604.50 - Gold could test $ 1608-10, if holds above $ 1601

GMT 9:38 - EURO @ 1.2290 = if went Long suggest prfoit taking around 1.2290-95.

GMT 7:23 - AUD @ 1.0488 = If went long, suggest taking profit around 1.0488-93.

GMT 1:00 - AUD @ 1.0445 = Aud should hold around 1.0410 and the fall should not extend below 1.0370 levels for re-test 00f 1.0490-95 zones

GMT 0:52 - GOLD @ $ 1600.50 = Gold should hold above $ 1592-94 levels in Asia and break of $ 1605 could push it towards $ 1608. Only fall below $ 1588 could extend more losses

GMT 0:40 - GBP @ 1.5525 = Cable should find support around 1.5495-05 zones, which is the prefered buying area. Only break below 1.5470 could be threatening, as I am looking for a push above 1.5565 for a test of 1.5590-95 zones

GMT 0:34 - Euro @ 1.2229 - The current fall should exhaust around 1.2180-90. But if the decline extends 1.2140 levels should not surrender . However on the upside only break of 1.2250 would pave way foe a test 1.2280-90 zones. A break will encourage for a test of 1.2330-40 zones.

gOLd uP uSDoLLaR dOwN - jULy 30-AuG 03

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