Good German IFO number failed to lift the traders/investors sentiment for Euro, as worry over Spain’s high deficit number and Italy’s deteriorating economic condition failed to give boost to the European currency. Market will be watching Spain’s Friday budget as its deficit is a worrisome factor. Market will also be watching Bond auction/price of Spain and Italy for more direction.
However, it was once again Bernanke’s speech that guided the market on belief that he will continue with his soft interest rate policy. He was targeting unemployment rate, as he said that he is not sure if improving job condition is sustainable and hence, wants faster growth rate to counter slowdown and improve job market. Fed Chairman clearly stated that he wants accommodative monetary policy to create jobs.
I think Bernanke does not want to take the risk, as he knows that global oil prices is not going to ease in near term due to ongoing geo political condition specially with reference to development in Gulf, which is not going to ease inflationary condition anytime soon and hence is trying to maintain a balance between inflation and growth as both are key to job market.
Therefore, to me Fed Chairman’s strategy is to combine both near term with long term goal in such a manner that growth can be achieved and unemployment can be reduced. Inflation is his near term concern as inflation could hinder growth that may impact job market in long term.
Hence, in such a situation, continuation of easy monetary policy could be the best statement that could offer to the market, which may not be the case in next six months time if oil prices rise by another $ 10-20.
Overall, development points to more US Dollar losses with chances of Euro hitting 1.3440-50 zones, but I am very uncomfortable buying Euro at current levels and hence, will adopt cautious approach. I prefer to sell currencies from top side of the range, as this could be a trap because USD from around 1.34 levels could make sharp gain.
Euro @= 1.3349 = Before European opening Euro could test 1.3335-40 before moving up and should hold 1.3305. Prefer waiting to Sell EURO around 1.3370-80 with Stops, if 1.3410 surrenders for 1.3325
GBP @ = 1.5960 = There is a small risk that Cable could fall and may test 1.5935-30 zones before making another test of 1.5970-70 before European opening. If 1.5940 breaks, Cable may test 1.59’s, I would prefer waiting to buy around a.5910 that may happen European time zone, before making up move, but needs to break 1.5990-95 which is tough for 1.6045. Apply Stop is 1.5870 surrenders.
GOLD @ = $ 1686.50 = Buying on dips is the preferred strategy of the day around $ 1683-85. Watch $ 1678 should stay above for $ 1694 or $ 1698
GoLD tO GaiN, EurO RallY tO FizzLE OuT - Mar 26-30