As market sentiment throughout the week remained bearish for the European region, but lack of positive data from USA did not allow US Dollar to make further gains.
Late weakened news of IMF announcing increase in its commitment to new funding to USD 430 billion against market expectation of USD 400 billion for the Euro-zones that will increase the regions risk taking ability was cheered by the market. This does not include BRICs money, so the IMF backed firewall could add another USD 50 to USD 75 billion by June 2012.
The big question is that how will this increase help Europe or what difference the increase in IMF amount will make because the quantum of damage to the European economy is so huge that despite LTRO amount of Euro 1 Trillion (lending at nearly 1%) the latest Spain’s doubtful or bad bank loan figure since February, jumped to 18-years high to Euro 143.8 billion or (USD 190 Billion)
Although news from Europe is likely to dominate the world financial market, as initial reports are suggesting that Sarkozy and ruling Greece party could struggle to survive, which is bad news for Euro.
But this week’s two-day Federal Open Market Committee (FOMC) meeting to be followed by Fed Chairman’s speech is the major event of the week. It is once again the Fed’s language that will matter the most, as last couple of week’s soft US data has raised few hopes of liquidity injection through bond buying, which is weak case.
On Monday, there are couples of European data’s, which may not matter a lot, but Tuesday’s US new home sales could bring some excitement, which will indicate housing market trend as it also help in determining the strength of consumer related sales such as furniture and home appliances.
Wednesday is the most important day of the week, as UK will be releasing its GDP data and since recent release of UK figures have shown signs of improvement and hence, reducing the chance of quantitative easing, better economic number would further confirm that Britain has avoided recession. However, disappointing data could see correction of GBP against all currencies.
But after the release of UK data market focus will soon shift towards USA for the notorious durable goods data, which will be followed by Fed’s decision on interest rate, which is currently 2.5 pct.
On Thursday, there is no major data, but market could react on FED’s monetary policy statement that may keep global financial market on its toes and on Friday, there are couples of German data, which may not be enough to create volatility, as market will be looking for some bigger news or excuse to act.
GOLD @ $ 1644 : Gold could not benefit despite end of protest in India by the gold traders and beginning of the Indian wedding season as buying is far below expectation. Initially gold could make some gains in anticipation of next week’s Indian festival and some may be buying in a hope of further QE due to disappointing US data last week. But I still believe that gold’s up move will be short lived due to lack on investors interest and sellers will continue to clobber the yellow metal in US session.
I will not be surprised to see a break of $ 1655 for a test of $ 1662, but gold needs to break above $ 1668 for more gains. However, on the downside a break of $ 1637 increases the risk for a rest of $ 1628. Before the close of week if Gold makes a New York close of $ 1625, we could see a test and break $ 1600 levels.
EURO @ 1.3205 = Euro will initially make minor gains, but has any strong resistance at 1.3298. European currency should be capped below 1.3275 and once 1.3120 surrenders, Euro should dip below 1.3080. Break of 1.3350 could be threatening. Ranges for the week 1.2940 – 1.3350
GBP @ 1.6113 = Basically GBP will continue to have strong tone, but major resistance is at 1.6190 and if breaks could see a surge towards 1.6255. Only break below 1.6040 threatens for more loses probably 1.5940. Ranges for the week 1.5940 - 1.6260
YEN @ 81.39 = The level to watch 81.90-95 where the Japanese currency has strong support and I do not expect this level to surrender with ease. But a push below 80.80 would encourage for 80.10 and break of this level should see a test of 79.60. However, if support level surrenders Yen could weaken to test 82.98. Ranges for the week 79.60 – 82.50
CHF @ 0.9082 = Swiss Franc’s strength may be a worrying factor for the SNB, but market will continue to test the nerves of Swiss Central Bank. However, I am expecting 0.9020 to hold and 0.9040-50 will be hard to crack. A move beyond 0.9195 could weaken SFR to test 0.9160 possibly 0.9190. Ranges for the week 0.9010 – 0.9220.
UsD uP - GoLD DowN ApR 16-20