GoLD tO GaiN, EurO RallY tO FizzLE OuT - Mar 26-30

It turned out to be unstable week, as global financial market struggled to find direction after last Tuesday’s release of China’s economic data confirming slowdown of its economy.

However, as market was looking for clues, it was late weekend rumor that came to the rescue and gave boost to the world market and this time again it was China in the news headline that gave glimmer of hope that it may slash its Cash Reserve Requirements (CRR). To boost to its slow economic growth, since December last year, China has cut its rate CRR on two occasions.

I am not too convinced that CRR rate be will slashed in short-term because what market is overlooking is that last week China had already announced that to boost its rural credit, effective March 25 it will selectively cut reserve requirement that could benefit more than 500 branches and is expected to release/free Yuan 23 billion (USD 3.7 Billion).             

Meanwhile, during the week Australian Dollar became the first casualty that succumbed to the news of weak Chinese numbers, as its economy is heavily dependent on trade with China being the largest trading partner. News of slowdown later dragged down the global financial market, as China, which is the 2nd largest world economy is presently considered as a major global economic driver.

During the week, Bernanke gave another jolt to the market with his statement to the House Government Reform Committee that European sovereign debt crisis is not over and more work needs to be done. Such statement further confirms that European woes are not over and there are more hurdles to come.

But it was not all over yet, as weak Chinese Purchasing Managers Index (PMI) announcement was the second blow of the week that again unsettled the market. This time Global equity market, oil and gold were hammered badly.

There are quite a few economic numbers due this week, but market will be focusing on German IFO announcement on Monday that may give some idea about business sentiment.

On Tuesday, UK quarterly GDP will provide guideline about the economy, though UK’s budget seemed to be a balanced one despite extremely tough conditions.  Notorious US Durable good order is due on Wednesday that will tell about the economic activity, market will be keener to know the growth in consumer sector.

Thursday’s US economic data will tell more about US economic gains as jobless claim will give some idea about the progress in US Job market and quarterly US GDP data will tell about overall growth picture. But more importantly market will listen to Bernanke’s speech. He will surely choose his words before he utters a word because he knows that one loose sentence can rattle the financial market.

GOLD @ $ 1661.50 = There are some interesting developments that favors gold. Although, Indian Bullion and jewelry traders protest is not over as yet, but the Indian government has decided to reduce tariff value of gold import, which is the base price on which customs duty is determined. This may ease tension to some extent. In 11-months until February, India’s gold import surged by almost 40 pct to around USD 56-58 billion. India’s fiscal year ends in March.

While China CRR cut rumor and US Bond gains also helped gold to make USD 20 recovery. More importantly, any word or no word on QE3 from Bernanke on Thursday could once again spark the market and drive trades crazy.

This week bias for gold will be on the upside and therefore, strategy will be buying on dips around $ 1652-55. It has support around $ 1645, which should hold or else $ 1636, which is not a favored move. Break of $ 1668-70 will pave way for 1.678-80, but only break here would encourage for $ 1687. Range for the week $ 1642 - $ 1690   

EURO @ 1.3269 = This week’s preferred strategy would be sell Euro on the rise. Euro could make an upside attempt but needs to crack important resistance level of 1.3325 - 40 for 1.3390, which may be easy and failure to surpass resistance level could push Euro down. Break of 1.3180 will test support level of 1.3110, if fails to hold could test 1.3010. Range for the week 1.3010 – 1.3390

GBP @ 1.5868 =  I would prefer buying Cable around 1.5810-20, but will keep a close watch on 1.5750 or else 1.5680 before up again. A break of 1.5930 is required for more gains that would encourage for a test of 1.5990. A move beyond would push for a test of 1.6045. However, beyond 1.5950 I will remain cautious because as we approach 1.60’s level, risk will increase for GBP’s fall. Range for the week 1.5720 - 1.6045  

YEN @ 82.33 =  For the last 5 week’s our view on Yen has been quite accurate. Last week I warned Yen sellers to refrain from further selling as will make sharp gain. After hitting 84.07 JPY gained 210 pips, but is unlikely to make further sharp gains, as the Japanese currency has good protection around 81.40. Break of 82.80 will push the currency down to retest 83.40-50 zone. Range for the week 81.40 – 83.80

CHF @ 0.9078 = Swiss currency has strong resistance around 0.9020-40, should not surrender. Only break of this level could test 0.8990. But risk is for a drop from resistance area to 0.9120. A break would encourage for a test of 0.9170. Range for the week 0.8970 – 0.9210   


EurO – GoLD BiaS UpSidE, MarcH 19-23

Views: 1560

Comment by Gordon Gekko on March 24, 2012 at 6:22pm

Dear Mr. Risvi, thank you for this most elaborate weekly update. Will we be seeing any update of Monday morning as well



Comment by asad rizvi on March 24, 2012 at 6:44pm

Mr.Zaid, it depends, if see change or my input necessary I will provide my feed back or whenever I get time I will answer the queries on this BOLG. Thanks

Comment by Gordon Gekko on March 24, 2012 at 8:51pm

Dear Mr. Risvi,


Re your trade recommendations, would you say that the time frame you advise upon would be 4H or mainly daily, iow, from what I noticed, most of your recommendations when they are filled, would probably usually have a 4 to 8 hour time frame.


Am I assuming correctly?


Thank you.

Comment by asad rizvi on March 25, 2012 at 5:44am

Mr.Ziad, Weekly outlook means trend for full week. Have a look at my last week’s Gold & Currencies write-up and note last week’s movement, which is available on the blog below. Keep reading my post for new moves/developments as and when necessary. Thanks

Comment by Mohamad on March 25, 2012 at 6:08am

 Thank you for the update Mr. Rizvi

I know you don't focus a lot on the AUD .. do u think it's a good opportunity to short after the bounce back it made ?


Comment by asad rizvi on March 25, 2012 at 6:49am

Hi Mohamad, It is a known fact that since good part of Australian trade is with China, it largely depends on Chinese economy. The bounce back that we have seen on Friday night is on belief that China is going for another slash of CRR. You may have noted in my weekly BLOG that I have mentioned that to boost its economy China had already acted by announcing CCR cut for banks dealing in farm loans which will become effective from Monday.

Therefore, I do not believe that China will take another quick decision to slash its CRR and waste its monetary tool for no reason. However, despite my logic of using monetary tool in more effective manner if China is quick to act then in my view China is surely sensing more trouble and is in trouble.

So in all probability to trade in Aussies watch Chinese economy. This does not mean that Australian economic has no meaning. AUD is also becomes favorite currency because of its high interest rates that provides carry trade opportunity and is more liquid than KIWI or NOK.

Technically I believe 1.0480-90 is the resistance level, which should not surrender and on the downside needs to break 1.0410 for a dip to 1.0380. On the upside major resistance is at 1.0550-60…Cheers      

Comment by asad rizvi on March 26, 2012 at 2:22am

Gold @ $ 1663.40 = Gold has hit 1st target of the new week $ 1669.55. Now I am expecting $ 1658-60 to hold for another test of $ 1670, clean break would encourage for a test of $ 1674, or else $ 1654 before up again.

Comment by asad rizvi on March 26, 2012 at 2:35am

EURO @ 1.3264 = Jason, Euro once again made an upside attempt in the Asian session, but failed to test 1.3290-95, could see small slide to around 1.3220-40 before making another upside attempt…GL  

Comment by Gordon Gekko on March 26, 2012 at 6:09am

Dear Mr. Risvi -


Re Gold , is the strategy to buy on dips arounds 52-54 valid?



Comment by asad rizvi on March 26, 2012 at 6:11am

Yes, that is weekly outlook


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