EurO & GoLD RalLY tO ExHausT MaY 21-25

Despite mild economic data announcement it was probably one of the most difficult weeks of the year, as signs of global slowdown combined with Europe’s financial and political uncertainty kept financial market choppy and nervous. World stocks are under pressure, European banks are suffering, European bond and Credit Default Swap (CDS) market is on declining trend and Euro is taking the beating since last couple of weeks and gold making some recovery after hitting 2012 lows. Gold after hitting all time high in September 2011 lost 20 pct of its value in last 8-months when it touched the lows of USD 1527 last week.

Europe is having difficult times because of its harsh austerity policy resulting constant change in their political leadership that has so far toppled Italian, Greek, Dutch and French governments.

Angela Merkel’s party lost badly in a state election, which is bad indicator. In future German parliamentarian that supported Merkel’s policy despite have opposing views will not dare to support her policies risking same fate.

Spanish Prime Minister is fast losing his popularity due to austerity drive and with Greece, yet undecided about its political leadership until June fresh election. Europe’s financial system is in dismay.

In Europe, Trillion Euro LTRO or global pledge to increase the size of IMF’s firewall plan could not clam the market sentiment. It has only helped the banks faced with capitalization issue to avoid collapse/closure/takeover, as the money did not flow to the corporate sector to stimulate the economy.

Greece that has no choice but will have to give another try next month for its new leadership is faced with a threat of bank run. There is a growing fear that appointment of anti austerity leader would finally end up with exit of Euro and re-introduction Greek Drachma. Estimates suggest that depositors had so far withdrawal and transferred roughly around USD 1.3 billion abroad.

Europe’s banking system is faced with huge risk as Spain’s banks are faced with big trouble that could have contagion effect in region. Rating agencies have already chopped banks credit ratings on Spanish banks.

Meanwhile, since last two-weeks US economic data is constantly showing signs of slowing down forcing many market players to interpret that quantitative easing QE3 is unavoidable, which also means buying of more bonds from the market. I do not support this view of FED opting for QE3. I think FED will go for Operation Twist.

However, there is still some time left for FED to decide next course of action. Expectation of QE3 strengthen after the FED’s minute that has revealed that in the last Federal Reserve meeting question was raised about the confidence in the outlook for US Economy suggesting that some of the FOMC members are not too confident of the economic recovery that could also mean that US interest could remain low for longer duration. But simultaneously some of the optimist members wanted to ensure to keep grip on the economic gains.

From market perspective, G8 nation meeting has been keenly watched because seemingly at present Europe is entangled with numerous types of problem that includes financial and as well political, due to change in voting trend as the European leadership minus Germany is tilting towards anti-austerity stance.

There are some hopes that US President Obama presence could help to introduce the balancing factors, as newly elected European leaders are divided over growth and austerity stance. Obama clearly supported pro-growth policy in Camp David on Friday gathering, probably aware that how much damage lingering European crisis can inflict to the US economy, which is may not be affordable at the time of US elections.

Such discussion may be temporarily good to calm the rising temperature in Europe, but in past there has been many such uncountable discussions that could not produce result. Calmness prevailed for couple of months after injection of Euro 1.1 trillion LTRO money, as most of the funds were utilized by the banks to meet their capitalization requirement.

But this injection of liquidity could not bring stability in Europe, nor helped in creating jobs that got from bad to worse reaching 10.9 pct. Banks are struggling to survive and corporate earnings have been slowing down.

On Friday, in the last the trading hour of the day currencies made sharp gains versus US Dollar. There are two versions about this sudden surge. One is that USD weakened due to Brazilian Central Bank intervention in thin market condition and second factor could be due to talk by G8 leaders to support growth, which means more spending.

Shift in policy towards growth may have been discussed as G8 leaders may have realized the high price after the voting trend caused by the ongoing austerity policy. But fate of Europe is not in the hands of G8 leaders. It is for the European policy makers to decide the future if Europe. Therefore, next European leaders meeting will provide better clues as challenges are unending, resources are limited and mostly unknown and change in leadership is a cause of concern due to disagreement with the ongoing austerity policy.

Some of the major economic events of this week are Tuesday’s existing homes sales, which is important economic housing indicator to measure the economic strength and is expected to have sold 4.6 million existing residential buildings. On Wednesday, UK’s retail sales will provide major economic activity and the change in the total value of inflation adjusted sale in real value. But all eyes will focus on US New Home Sales which measures the annual single family home sale in the previous month and is likely o have sold 335K.  On Thursday, there is a long list of European data, but Germany’s GDP will provide widest range of economic activity and after next 2-hours time another crucial data IFO will be released, which is Germany’s business climate index that will give hint about the business activity expected in coming next 6-months time. Later in US morning session, US Durable goods and Initial Jobless claim will be released that will provide further evidence about economy. On Friday, mild data will be release from Europe, with no data to be released in USA.

  

GOLD @ $ 1592.90 = Gold recovered sharply after receiving plenty of hammering for the last couple of weeks hitting and breaching my given target of USD 1546 to test USD 1527 to close at USD 1593. The up move gained momentum after the release of FED minutes as expectation of QE3 gained strength after some of the FED members showed discomfort with current wave of data.

Market should keep in mind that this was not an outright one sided view in FED’s minutes, as some of the FOMC hawks wants to maintain growth, which means strong US data could disappoint the doves.

If gold surged on belief that QE3 is coming, which means more liquidity in the system that could lead to inflation. This also means FED will expand its balance sheet then why USD has not weakened, so keep an eye on US Dollar.

However, overall gold sale is not too encouraging because in China 1st quarter gold sale is up by 10 pct to 255.2 tonnes, but signs are that Chinese economy is slowing down in 2nd quarter. Whereas, gold sales dropped in India by 29 pct to 207.9 tonnes and in this quarter Indian Rupee has taken lot of bashing. The two nations are the major gold buyer and demand is unlikely to pick up in such environment, which means gold could be short lived if the economic condition does not improve.

Gold needs to break $ 1598 for $ 1610-15 zones where it should exhaust, but needs to break $ 1630 resistance level to maintain its bullish momentum. However, still looking for a test of USD 1575, a break would push Gold towards USD 1558.  

 

EURO @ 1.2778 =  Euro saw another perfect move dropping nicely to hit target my target 1.2665. This week all eyes should be on 1.2870 on break of 1.2820 and only break of this level would encourage for a test of 1.2980 not a favored scenario. If Euro moves beyond 1.2820 I will be looking for levels to pick the top to sell on the downside break of 1.2650 should challenge 1.2580. Ranges for the week 1.2550 – 1.2980

GBP @ 1.5814 = This week Cable should retain its stronger tone and unlikely to fall below 1.5760. Break of 1.5880 is required to test 1.5975, but may find resistance around 1.6050. Buying on dips will be the preferred strategy. Ranges for the week 1.5760 - 1.61

 

YEN @ 79.00 = The move was in line of my forecast finding support around 80.50 and nicely dipping down to hit target 79.20 comfortably. Yen’s gain should exhaust around 78.50 and should not break below 78.20. Expecting a move towards 80.10 and break would encourage for 80.60 or probably 80.95. Range for the week 78.20- 81.20 

CHF @ 0.9396 = Swiss Franc could make small gain to hit 0.9330 on break of 0.9350. 0.9280 is the level that Swiss Franc should not breach. However, I am expecting SFR to ease off later in the week to test 0.9490. Range for the week 9250 - 9520

 

http://www.forexstreet.net/profiles/blogs/pick-top-to-sell-euro-gol...

PiCk tOp To seLL EuRo & GoLD – maY 14-18

 

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Comment by asad rizvi on May 23, 2012 at 2:16pm

Bye BYe QE3 !!!!!!!!!!

 

Hope you found today's comments valuable and made good money on all Currencies and Gold !!

Cheers

Comment by Andrey on May 23, 2012 at 2:33pm

Thank you, excellent

Comment by asad rizvi on May 23, 2012 at 4:28pm

VIEW UNCHANGED............... 

GMT 14 : 41 - Gold @ 1535 Target met = Next Target $ 1525
GMT 14:38 - Euro @ 1.2582 = Shold hold around 1.2540-50
GBP @ 1.5695 = Should find support around 1.5660
GOLD @ $ 1540 = will catch the top to sell
GMT 13:11- Sell Gold around $ 1552-54, which may not be seen today and will await for break of $ 1546-47 for $ 1538-40. Only $ 1558 would be surprise for me.
GMT 12:25 - recently US players have been very tricky if fails to break $ 1554-55 we are likely to see a test of $ 1564 levels. So patience please, I will provide signal at an apporiate time.
GMT 09:37 - GOLD @ $1556 = Sell around $ 1558 with S/L $ 1562 for $ 1551-52
GMt  08:48 - GBP @ 1.5701 = has hit the traget 1.5680, now after the retail sales figures, it could come under pressure should exhaust around 1.5720-25 for break of 1.5680 that push the currency further down to 1.565060 zones
GMT 07:48 -  Gold @ $ 1562 = View unchanged...in my morning note I had specially mentioned to book profit and apply STOPS as market will remain choppy
GMT 06:20 -We are in the middle of the range I may consider around $ 1550 as top looks around $ 1562-63. It has tested the top. Today I am bearsh on gold.

Comment by asad rizvi on May 24, 2012 at 7:40am

VIEW UNCHANGED......................

GMT 02:21- EURO 1.2571…..Potentially Euro could correct up to 1.2625, but technically its needs to break above 1.2650 for bigger correction. With the ongoing developments and body language of European leaders I am unable to pick a positive point in support of European currency. General consensus is that everyone wants Greece to stay, but they all want Greece to behave, which means that it has to meet its promised/given targets.  This also means Greece will not be allowed anymore because Spain and Italy may be next to demand waver. Common sense tells me announcement of Greece exit will be sudden though not immediately, probably after the elections in Greece. Ever country is preparing its contingency plan, as no country would risk for the last moment.But I am expecting Hollande to come out as a winner. By winner I do not mean that we should expect some sort of positive result or Hollande’s spending/growth demand will be met, by winner I mean he may not agree to the terms and condition set by Germany that is French President will not compromise on austerity demand, as he has to show his face to his voters.He will persist with his demand for floating joint Euro Bonds that creates disequilibrium between countries have two different credit ratings, which means a highly rated country will face the pressure of maintaining high interest rate that may unnecessarily disrupt its domestic business condition and allows country with high deficit rate to spend more. Therefore, we may hear a weak European announcement trying to give an impression that all is well. Why would they officially make an announcement destroy the financial market, though this could be true? Meanwhile, German economic number could initiate the damage. Hence, keeping picking the top and watch for a break 1.2520 would threaten test of 1.2425-50 zones.
GBP @ 1.5690 = Cable continues to show its muscles but has strong resistance around 1.5725 and needs to clear 1.5750 for more gains. However, break of 1.5670 risk for fall to 1.5630-40 zones where it may find good support, but if surrenders GBP could plunge to test 1.5570-75
GOLD @ $ 1562 = I will still not hesitate to sell around $ 1564-65 as long as $ 1570 is protected since looking for a break of $ 1554 for $ 1548. A push below $ 1532 will encourage for more losses.
Comment by ratheesh kerala on May 24, 2012 at 1:22pm

please add me to  your blog my mail id: retheeshp123@gmail.com

Comment by TONY on May 24, 2012 at 11:25pm
Good stuff, Mr Rizvi :)
Comment by asad rizvi on May 25, 2012 at 2:09pm

 

Friday May 25 - BIG MOVE OF THE DAY COMING !!!

GMT 12 : 52 - EURO @ 1.2518 = unless break 1.2480 as per my morning post, European currency has the ability to bounce back for small correction
GMT 12 : 51 - GOLD @ 1562 = could not break $ 1559 convincingly break of $ 1565 risk for test of $ 1569-70 zones or esle $ 1552
GMT 12: 49 - AUD @ 0.9075 = AUD may test 0.9750-60 before 0.9820, but break beloe support risk for 0.9720
GMT 11:11 - GOLD @ $ 1563.50 = If gold fails to break $ 1559-60 Risk is for a test of $ 1568-69"GMT 09:44 = Buba's statement has softened the tone of currencies and Gold. US Dollar is likey to make more gains
GMT 09:01 - GBP @ 1.5659 = Saw fine move to hit the top and now down promised 30-35 pip, if short Cable take profit, as next support is at 1.5640-45 zones
GMT 07:44 - GBP @ 1.5680= Cable probing the top likley to remain capped around 1.5690-95 for 30-35 pips, upside break would encourage for a test of 1.5715-20 zones
GMT 07:34 - EURO@ 1.2574 = Target met take profit a sell around 1.2590-95 if seen with S/L 1.2625 for 1.2550
GMT 07:28 - GBP @ 1.5677 = If you went long Cable suggst book profit around 1.5680
GMT 07:18 - AUD 0.9772 = Saw dip in the early hours, now looking for a test and top around 0.9790, before dropping down to test 0.9756-60 zones. However, upside break could encourage for 0.9820 a less likely scenario ranges until NYK 0.9740-85
GMT 07:01 - GOLD @ $ 1561 = Prefer selling around $ 1562-63
GMT 02:22.........Euro@ 1.2536 = Euro will remain in 1.2510-80 band until European opening, as bias could be mildly on the upside, but the European currency could come under attack if it reaches 1.2570. Euro has support around $ 1.2515. However, surprise break of 1.2480 could risk for a test 1.2440, on the upside 1.2625 remains a key level to watch.

GBP @ 1.5656 = Cable should find top around 1.5685 and as long as it stays below 1.5720, risk is for a test and break of 1.5625-30 break here could challenge 1.5570.
GOLD @ $ 1556.50 = Gold volatility to continue, with bigger moves to be seen in US time zone. Until New York I am expecting a move to hold around $ 1563, a break here would risk for $ 1567 with possibility to see a test of $ 1552. However, keeping in view the current trend the broader range could see fall extending to or below $ 1545 in New York session, while on the upside break of resistance level could see a test of $ 1573

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