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Fed stance should not be surprising – Jan 04

January 4, 2013

GMT AUD @ 1.0431 = I will not hesitate to buy Aussie around 1.0410-20 levels with STOPS 1.0380 for 40-50 pip gain
GMT 3:28 – JPY @ 87.80 = Since quite sometime we are witnessing one-sided move with no respite. Watchout around 87.90 zones for test 87.40-50 levels
GMT 3:25 – GBP @ 1.6065 = Looks tricky around current levels suspect minor recovery from 1.6030-35 zones for test of 1.6085-90, if recahes may exhaust. However, needs to push beyond 1.6140 for more gains or else could see atest of 1.60 levels.
GMT 3:20 – GOLD @ $ 1650 = $ 1642-44 is a key support level should hold for a test of $ 1655-58 zones or else test and break $ 1636 will see new lows
GMT 3:14 – EURO @ 1.3022 = FED FOMC minutes indicating that some of the members wants discontinuation of bond purchase earlier than December 2013 should not be shocking news because nothing is forever. After going through the minutes it is clear now that all members do not carry same opinion and there is clearly a divide on FED’s bond purchase strategy. It seems some of the members are worried about expanding the balance sheet because monthly purchase of USD 85 billion means expanding the balance by another USD 1 trillion. This also means that FED is not as Dovish as earlier thought.
The whole point of this exercise of quantitative easing (QE) is stimulate the economy and create jobs, but at a certain cost and inflation seems big worry for 12-member Fed officials. Interesting to note is that after December Monetary Policy meeting the US economy is still performing at a satisfactory rate and to determine the future trend all eyes should be at the employment, housing and consumer data
Furthermore, it is also worth nothing that since expectation of monthly bond purchase is of nearly USD 85 billion, therefore any deviation in this amount could have greater impact on market sentiments that means there is a greater possibility of reduction on bond purchase amount as increasing the bond purse amount looks less likely.
Today’s weak US payroll data may neutralize market sentiment, but surprisingly strong data will have larger impact on the market.
EURO @ 1.3022 = Around 1.2990-00, Euro should find support and is buy for 1.3055-60, but may not surpass 1.3085 before US job data. Apply STOPS if 1.2970 surrenders

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