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FaULtY PoLicY AnD AuSTeriTY MeAsUrE tO BriNg mOrE GLooM

December 2, 2012


GMT 4:45 – JPY @ 82.41 = Watchout JPY may not be able to fall below 82.70-75 support levels, as I see risk for sharp gain of Japanese currency and it could possibly push beyond 81.40-50 support zones…………….More later
GMT 8:25 (Subscriber) sir shall sell gold at 1719!!
GMT 8:29 – Gold @ $ 1719.50 = I am expecting test of $ 1721-23
GMT 13:13 – (Subscriber) sir shed some light on usd/chf!!
GMT 13:46 – Credit Sussie has set Negative SFR deposit rate, which means that it will charge to hold CASH Swissy. Basic idea is to discourage investment is Swiss Franc or in Swiss intrument that offers negative or no return or to have “Capital Control”. This is also to discourage investors shiifting funds from Euro to SFR. This should weaken SFR against US Dollar and gives mild support to Euro as well. It is one of the resaon for minor jump in Euro prior to Spain’s formal request for bank loan……….Cheers
GMT 14:12 – (Subscriber) gold where to book profit
GMT 14:16 – GOLD @ $ 1714.20 = Book your profit around $ 1712-14. Only break of this could push it dowm to $ 1708-10 levels or else could bounce back tio $ 1718 zones
GMT 15:03 – GOLD @ 1721.50 – sell around $ 1721.50-23 – STPS $ 1727
GMT 15:10 – OK pals, fine start to the week. Currency and Gold moves was in line of projeced levels. No chage in View, suggest either book your profit or sqaure you positions
Cheers until tomorrow……….

MONDAY Dec 03-07……………………
Greek deal is not very surprising, as I did mention in one of my last week’s post that since German parliament and Euro-zone policy makers have no other choice they will have to approve bailout package or else European financial system could lead to global financial collapse.
Such friendly stance by the European financial administrators is unavoidable though it will not reduce the misery, but will bless all the defaulting Euro-zone nations to limp on for longer duration with the help of innovative window dressing methods until Germany that has a bigger stake decides to halt its support. Book entries and rollover of maturities to a longer period may help to buy time, but it does take the world closer to the financial dooms day scenario rather than reducing the problem, as neither of the two is source of earning.
Furthermore, with unemployment in Euro region reaching historically high of 11.8 pct and with over 25 pct unemployment rate in Spain and Greece, donors demand to impose strict austerity measures to reduce debt is pointless and futile exercise that may only cause damage to the economy rather than doing any good. Greece is excellent example to quote, as its unemployment rate surged by over 12 pct to 26 pct in last 18-months after the imposition of so called austerity measure resulting unrest in the country.
Demanding extraordinary austerity measure is eyewash and is a damaging strategy, it is not a result oriented proposition, it is an excuse by the TROIKA and IMF to make bailout funds available to buy more time because of the inability of governments and financial managers to come up with a constructive proposal. Common sense would never allow such type of hostile policy that does not help to stimulate industrial and manufacturing sector growth, it slowdown exports and reduces job opportunity resulting fall in revenue.
Surprisingly, when the global problem is debt and deficit, the biggest debate all over the world should be how to generate income for governments to reduce the burden. IMF and the donor’s current stance have been fully exposed as they carry dual policies and biased policy. Their stance towards developed economies is extremely friendly, but their approach towards underdeveloped economies is too harsh. Prior to lending funds, IMF has a history of demanding higher interest rate and easing of exchange through its stand by agreement known as (SBA). In Europe’s case, coordinated and forceful effort is being made with the promise to inject billions of Euro to lower interest rate by flooding market with easy money. A very similar policy is followed in USA despite record rise of oil, food and metal prices, inflation does not occur and is well managed. My question is that where is the demand and supply factor? A sermon commonly preached Central Banks.
Furthermore, my question is that how would higher tax rate reduce incentive to invest? If the authorities are really serious, plug all the loophole by introducing highest taxes so that elite and rich of the society are unable to park their funds. Funding and loan facilities should be stopped to all business houses that have surplus money, as such businesses does not require quantitative easing money. Discourage or charge businesses or individuals with surplus funds heavily, if they want to avail funding facility for their own requirements so that they are forced to invest from their own pocket. Balance sheet or credit report will reflect true picture of the borrowers.
Meanwhile, this week Euro could struggle to make gains, as there are quite a few factors that supports US Dollar. Though Chinese PMI rose to 7-month high, but it may not be not enough to give the required kick. Greece excitement is almost over. Moody’s seems to have inflicted injury to the Euro-zone currency by lowering that ratings of European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF) to Aa1 from triple-A and this could hit European bond. market will be watching bond yields.
Other major major events of the week will be Central Banks policy announcement, apart from Reserve Bank of Australia (RBA), which may announce a surprise rate cut, BOE and ECB are expected to keep rate unchanged.US non-farm payroll due on Dec 7 is another major event of this week that can be distorted due to hurricane Sandy.

GOLD @ $ 1714.80 = Bias is on the downside as long as gold stays below $ 1735. Initially gold should not penetrate beyond $ 1725 levels, as break of $ 1702-04 support area will encourage for a test of $ 1688-90 zones. Next major support is at $ 1675-80.
EURO @ 1.2986 = Euro has strong resistance around 1.3050-80. Unless it break, risk is for a test of level 1.2910 and needs to push below 1.2850 for more losses. Only break of upper band could push euro towards 1.3110. Range for the week 1.2870- 1.3110
GBP @ 1.6008 = Though Cable may have slightly stronger bias, but Euro weakness could drag the currency down where buyer should emerge. 1.6090 is the challenging levels that needs to be penetrated for test of 1.6125-40 zones. But see risk for a drop to 1.5910. However, strong support around1.5870-80 should not surrender. Range for the week 1.5870-1.6140
JPY @ 82.47 = Weaker tone of Japanese currency will to persist and buyers of USD will be seen. Strong resistance is around 81.40-50 and JPY should find selling of currency around 81.70-80 levels. But unless make a clean break of 82.98, Japanese currency may not hit 83.25, as weakness could extend up to 83.70. However, there is small risk that break of resistance could see sharp gain towards 80.50, as we get close to weekend. Range for the week 81.40-83.70
AUD @ 1,.0425 = Aussie has barrier around 1.0480-90, unless breaks threat of gain is mild. Break below 1.0320 will encourage for a test of 1.0250. Break of upside resistance could see a AUD exhausting around 1.0550. Range for the week 1.0220-1.0580

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