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FX & GOLD WEEKLY OUTLOOK – November 26-30

November 25, 2012

Nov 26 GMT 6:25 – JPY @ 82.15 – After hitting the highs of 82.62, Yen is firming a bit. If you have noted in my weekly updated I had mentioned that Yen would make occasional correction and today’s release of minutes gave enough reason to correct and now after reports of disagreement or rift among BOJ board members, this will surely halt Yen’s one way traffic on the downside. After this new development I would rather be choosy selling Yen and would prefer to buy USD at the support levels. For the moment see risk for more Yen gains if 82.40-50 holds for 81.70-80

NOV 25 – In one of my daily post I was very clear about the currency direction and clearly wrote that Euro will bounce back despite Moody’s downgrade of France and in my Friday’s closing remarks I did warn to close all positions, as I could smell a rat. We are heading for another eventful, but uncertain week, as market will take clue from news flashes and I am expecting choppy trading to continue.
Despite loads of economic data announcement this week, Europe and Fiscal Cliff affairs will once again influence the global financial market moves, but Catalonia referendum should add more spice in the market activity.
We could see a cautious start to the week, as hopes of reaching understanding on Greece between TROIKA & IMF that gave strength to Greek bond yields. It has also helped market sentiment to spurt global market to rally on Friday as USD lost its gloss as a safe heaven currency and saw shifting of funds towards equity and gold market. Earlier during the day positive Chinese PMI showing growth in manufacturing sector gave push that turned sentiment mildly Bullish.
Apparently, everything is in pipeline and yet no firm decision has been taken on Greece. Hopes on reaching an understanding on US fiscal issues looks bright, but uncertainty is still looming as the matter continues to linger on. Catalonia’s vote on whether the region should stay or break away from rest of Spain could provide shiver to the market, which will be known this week.
As I pointed out in my Friday’s post that EU budget disagreement could spoil the party, it remains a big threat since quite a few members are against slash on spending that risk job and growth. Unemployment in Europe has already hit the new highs. So in conclusion, in real terms nothing has so far been achieved, its all optimism and this is too risky.
Japanese Yen is another currency that enjoys the status of safe heaven at the time of uncertainty has come under sever pressure. Yen could suffer more losses or may remain weak until Dec 16 Japanese election or unless there are clear signs of LDP’s ABE loosing the grip on its voters. I think Shinzo Abe has clearly taken clue from Mario Draghi to take strong verbal stance that has so far proved to be a very effective and a successful strategy. Japan’s economy already faced with huge current account deficit and with planned increase in sales taxes will add to the deficit. Therefore, we are going to witness new lows with occasional correction, sellers of Japanese currency are expected to take advantage and buy US Dollar on dip.
until then Yen could hover between 81.50-83.50 zones.

GOLD @ $ 1751.05 = The up move was certainly bigger than my expectation as it has been struggling around $ 1735 for quite a while, but break on Friday encouraged buyer to buy aggressively. Next level to watch is $ 1758-60, as gold could make upside attempt if fails to break $ 1745. However, I see strong resistance around $ 1764-65 zones, as gold will find string support around $ 1728-30 levels.
EURO @ 1.2973 = Though bias is on the upside, but Euro has strong barrier at 1.3010 and at 1.3050. I do not see break of upside level that may see a drop to 1.2850 and only push below would encourage for 1.2755. Or else 1.3120.
GBP @ 1.6027 = Cable gained due to softer US Dollar but has strong barrier at 1.6080-90 zones, needs to make clean break for test of 1.6150. But doubt that upside rally should exhaust and GBP could test 1.5910-20 zones.
JPY @ 82.37 = Yen to remain soft unlikely to make gains unless 81,20 surrenders. It should to hold above 81.50 this week and may bounce back from 81.80-90 levels, but has barrier at 82.90. Once it penetrates should test 83.40.
AUD @ 1.0457 = Australian currency has the tendency to bounce back as it has the advantage of offering higher return to the investors due higher interest rate differential and buying by the Central Bank’s for its reserve portfolio. However, Aussies has two big risk that strong AUD makes good argument for further rate cut to provide constant support to to its business community and secondly it has been noted that Reserve bank of Australia has started to built its reserve in foreign currency that should technically weaken AUD. Friday’s move points to some more gains and AUD could test 1.0495, but real barrier is at 1.0560, even if AUD break this level Aussies will remain brittle and will provide good opportunity to short the currency. On the downside break 1.0370 posses bigger threat of more sharp losses.

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