UsD uP - GoLD DowN ApR 16-20

It was bad end to the week with US stock market suffering its worst weekly fall in the calendar year, European financial market once again faltered, China’s economic growth was very disappointing, though Australian job condition improved reducing the odds for next month’s rate cut. But the size of its economy is not good enough to boost global sentiment.

Gold moved both ways trading in a $ 50 band and currencies traded in a narrow band. Oil prices eased after talk between couple of world leaders to us oil reserves to cool down prices, China’s economic slowdown further pushed oil prices down.

From financial market perspective, it was a busy week with events all over the global. Europe is once again showing signs of nervousness as Spanish and Italian bond yield gave jitter to the market reminding that the European sovereign debt remained a big unresolved issue.

Bank of Spain Governor added more fuel to the fire by adding that Spain’s banks needed more capital. Spain’s banking problem got the endorsement when its Central Bank confirmed that its country’s bank borrowing from European Central Bank almost doubled in March to Euro 316.3 billion from 169.8 billion in February.

The behavior of Italian bond too is very dubious, which is not an encouraging sign. Signs are becoming quite obvious that the two major European economies may struggle to take strong fiscal measure. Their banking industry is already in hot water so the two-economies will gradually slip towards recession

These are some of the crucial factors that will act as a weak link and will exert pressure demanding more money that will force ECB to consider further quantitative easing. Hence, European currency may once again come under severe pressure.

During the week in USA, Fed’s 12-voting member spoke on different occasions and all of them spoke freely. Fed vice Chairman Janet Yellen’s approach was Dovish like Fed’s Chairman Bernanke, but the remaining members were hawkish is their approach.

My observation is that they all were talking on the same wave length support lose monetary policy. Fed’s top priority is to bring down the unemployment number and if job condition deteriorates and inflation is manageable then accommodation will be recommended or added and if US economy continues to prosper and inflation becomes a monster they may consider reversing their action.

The message is clear that they will not act in haste. Fed voters will be keenly watching future data’s before deciding their next line of action.

Finally, much awaited China’s Q1 GDP data of 8.1 versus last quarter growth of 8.9 pct is very disappointing confirming slow export growth and low domestic demand. But easing case looks difficult because last week Bank of China in its report stated that in the month of March, Chinese bank lending jumped to Yuan 1.01 trillion (USD 160 billion) and was up by Yuan 332 billion, which could mean no more easing and no rate in near term. There are reports of China’s Central Bank allowing one percentage cut to some of the rural financial institutions that became effective from April 01.

Meanwhile, right from the 1^st day of the week all eye will be on the US economic data, as retail sales is considered a key data that cover good part of consumer spending i.e., durable and non-durable of consumer spending, which covers almost two-third of the GDP. Retail sales also account for one-third of the aggregate economic activity. It is good for currencies and stick market but bad or bearish for US treasuries.

On Tuesday, German ZEW economic sentiment is important German data that has so far risen for the 4^th consecutive time and another rise will be considered positive as it will lend minor support to the ailing European economy. Bad number could further clobber EURO. This will be followed by US building permits, housing starts and industrial production data that may provide more clues about the American economy.

Wednesday activity will be based on European and UK data.

Thursday should be a quieter day with no major global data.

On Friday, IFO is considered a leading German indicator which reflect better picture of the economy and its future trend.

GOLD @ $ 1657 : Three major factors are the driving force behind the gold boom scenario in most recent times, they are Central Bank buying, quantitative easing and excessive demand from China and India. All three seemingly have been pushed to the wall. Major CB buyers are Indian, South Korean, Russian, Thailand, Turkey and Middle Eastern countries. Minus M/E economies others are choosy with their funds, as they were aggressive buyers at lower levels.

China will never come in open market for its gold shopping and is mostly acquiring the metal from its own mines. Reports are suggesting that China’s gold production has almost doubled.

Indian protest has ended, which was more for the sake of face saving as prolonged strike embarrassed Indian government and bullion traders and jewelers were not only losing business they had to pay the incurring cost.

Quantitative easing is the last hope, which is gradually fading. US economic data in the coming days is likely to provide more clues. In a nutshell, I do not see any solid reason to buy gold which is a non-interest bearing asset.

So with prospect of free money in shape of quantitative easing diminishing and with new duty on gold imposed by the Indian government remained an unsettled matter, gold will struggle to make new gains, as selling interest will be often seen.

Gold has strong resistance around $ 1675, which could only be tested on break of $ 1668. However, key on the down side will be break of $ 1648 that will encourage for slide towards $ 1638. Only break would risk for crucial of test support around $ 1628-30. There high probabilities of yellow metals further fall towards $ 1600-10 in the month of April unless it is able to penetrate beyond $ 1690. Range for the week $ 1625 - $ 1675

EURO @ 1.3075 = Euro is likely to remain under pressure and any up move should be used as opportunity to sell Euro unless it clears 1.3250. A break of 1.3150 would risk for test of 1.3190, but Euro should be sold up moves. The level to watch will be 1.2940 a break here will encourage for sharp slide towards 1.2820. Range for the week 1.2820- 1.3250

GBP @ 1.5844 = Cable will have mildly bullish tone against Euro and may not dip at same pace against US Dollar. On the up break of 1.5898 will encourage for test of 1.5940, where it will find strong resistance, though not a preferred scenario. However, on the down side break of 1.5775 risks for a test of 1.5710. But Cable is preferred currency to buy in dips around support area. Ranges for the week 1.5710- 1.5950

YEN @ 80.88 = I do not expect Yen to remain too volatility as seen during last 4-6 weeks. However, as long as the Japanese currency is able to hold support area of 81.90, the currency will be bought on dips. A break of 80.20 will see the currency making further gains towards 79.70. Range for the week 79.40 – 82.50

CHF @ 0.9191 = Swiss Franc has strong support around 0.9120, which should hold for 0.9260, break risk for 0.9350, or else 0.9090. Range for the week 0.9075 – 0.9350

UsD uP, GoLD uP BuT LateR DowN - ApR 09-13

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5 members like this

Comment by Peter jcp on April 14, 2012 at 9:42pm: Mohamad - For the last 6 + months I have been going into the chat room at least 4 hrs a day catching falling knives and scalp selling at tops. Not just me - but a few talented chartists who know what they are doing. Unfortunately, its as now got to the that too many new traders ( ie under 6 months) just want free calls / alerts and cant be bothered to go through the proper ways of becoming a trader. I have never minded helping the genuine new trader who knows what is required - but this last few months i have been inundated with guys who believe forex trading can be learnt in a month and a few indicators and tips is the difference between losing $100 or making $100k.

I believe there should be a 3 or 4 yr "degree / MBA " type course required to become a full time trader. Unfortunately, the market makers would never want this to happen as it is far better for them to have 70-80% of all traders losing money. I reckon I could short cut my 8 yr forex trading knowledge down in to a 2 or 3 yr "intense " trading course. The course would cost between $10-15k per annum and would require a minimum 10 ( suitable 70% would not make the grade) participants to even be cost efficient.

Now Mohamad please tell me how many would want to take that course ? Remember to become a doctor or lawyer is takes 5-7 years and in the UK cost the government 100's of thousands to train suitable candidates- with them not be able to recoup all of that money.

I still plan to visit the chat room and participate occasionally - but not to the amount i use too - as there are too many demands and the guys asking them seem to lack basic Forex understandings - so how they expect to learn advanced methods is beyond me.

Count yourself lucky whilst Mr Rizvi is assisting all of you and make sure all the followers dont abuse his helpfulness by demanding more and more.

Have a great week .

Comment by Mohamad on April 14, 2012 at 10:21pm: That's quality Peter .. keep it up

Comment by talisman on April 15, 2012 at 1:41am: what defines fully trained? your account balance?

Comment by Jason on April 15, 2012 at 2:02am: hi talisman.
Think it is impossible to define. In these treacheous markets, we have seen 'experts' with years of experience getting it all wrong. Like what peter posted here before which i totally agree, successful traders need an edge whichj differnetiate them from the markets. This will increase your chances if survival.
Take it from me who have worked in the markets and also traded on my own, it is really not easy. Sometimes, people who you think are well trained will flop...and sometimed people with limited experience will do very well. The successful trader must have done something right which others most probably cqnnot determine what is it. Like what china's paramount leader Deng Xiao Ping used to say - ' the colours of the cats do not matter as long as they can catch the rats'.
So bottom line is it doesnt really matter whether you are 'fully trained' or 'half trained', as long as you are doing something that you can survive and stay afloat in this market, you must be doing something right.

Comment by talisman on April 15, 2012 at 2:25am: @ jason-good response. i like pings comment. being self taught at everything i always get my back up when i m told i need a specific education to succeed. i am basically uneducated but have somehow managed to create a world where i get to live on my own terms. your response was neutral, logical. and unopinionated. i could learn something from you.

Comment by Jason on April 15, 2012 at 2:53am: hi talisman.
Well we can all learn from one another.
When i joined this forum many months ago, i am totally humbled by the knowledge of many, i.e. peter,, sir gissa,, spiro, lisa, pixta, yourself, raj patel and now mr rizvi.
Thats why i respect everyone here as my teacher as i never failed to learn sonething whenever i logged on here.
I believe that without humility, we will totally fail in these markets.
Thats why i am very appreciative of all who made postingS.
Me got to go now. Need to pick up kids and wife. Its 1030 in singapore...so will most probabaly catch up again tonight(mid london time).
Take care.

Comment by Mohamad on April 15, 2012 at 2:55am: "managed to create a world where i get to live on my own terms ".. that's raw .. i like this .. Knowledge is knowledge shared .. respect

Comment by asad rizvi on April 15, 2012 at 7:11am: Jason, AUD @ 1.0365 = since there is no major Australian or Chinese economic data this is a positive news for AUD. Despite Friday’s disappointing Chinese GDP, AUD kept on bouncing back as market could not witness real selling interest.

AUD has another huge advantage of interest rate differential. This is one big factor that often helps the Australian currency to make quick recovery. So in my view buying of AUD on dip at support level should prove to be a safe play.

One thing that that can drag AUD down is the strength of US Dollar, which could happen due to Euro’s weakness. But make best use of the opportunity if seen.

On Monday morning, I am expecting AUD to hold around 1.0350-55 levels for test of 1.0385-90, later a break of this resistance level would encourage for a test of 1.0425. However, on the downside 1.0325-30 is the support level for the Australian currency to watch....More later if needed

Comment by Jason on April 15, 2012 at 7:32am: hi sir.
Thank you so much for your view on the aud.
I was looking at the technicals over the weekend and i realised that the aud has broken out of a falling wedge pattern and it appeared to be the strongest major pair vs the usd.
Furthermore, the aud has been the first pair to be sold off on a sustained basis since march 2012...whereas the other majors have traded sideways.
Without any major negatives against and positive differentials, it may just be the pair to lead rebounds vs the usd if there is any.
Think your view just further reinforce and confirm the technical picture.
Thank you so ,much sir for your very insightful opinion.

Comment by Jason on April 15, 2012 at 7:47am: hi sir.
Just to further add on to what i mentioned on the aud, it appears to me that the gbp seems to be in the same camp as thE aud. The technical picture in the gbp and aud looked different from that of the euro. It appears that gbp and aud are stronger 2 pairs vs the usd. That is something i cannot correlate so far. If the usd is strong across the board, it should be exhibiting its strength against every thing. But so far, the usd is strongest vs the euro but not so against the gbp and aud. This could also be euro aud ro euro gbp play as well contributing to the confusion.
With so many problems in europe but euro cannot make a sustauned break below 1.30 and with aud and gbp showing signs of strength, i am a little wary about being too bearish against the euro. There has to be some form of corelation between all the majors vs the usd. Thats why i feel it has been so difficult to trade the last few months..
Furthermore with london olympics in june, i wont be surprised if the gbp suddenly staged a reversal and make a sustained upside rally.
Well, just my personal view on all this pairs which are just adding confusion to the markets without any sustained strength in their directions.

Comment