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Mario Draghi could buy time with Dovish Comment – March 7

March 7, 2013
 
GMT 3:27 – EURO @ 1.2989 = Bias on downside, pick to to sell as Euro should hold below 1.3030 and unlikely to move beyond 1.3060 until Draghi speaks. See risk for test and drop below 1.2945. Key levels to watch after Draghi’s press appearance is 1.2870-80 and 1.3120-40.   
GMT 3:41 – GBP @ 1.4999 = Cable should find top around 1.5030-40 prior to BOE announcement and should not surrender 1.5080 levels. But needs to break 1.4960 for test of 1.4920-40 zones.
GMT 3:44 – AUD = 1.0241 = Aussie has strong support around 1.0220, should hold for test of 1.2060-70 zones. Or else 1.0205.
GMT 3:51 – JPY @ 93.85 = Do see a move beyond 94.15-25 levels, but needs to push below 93.40-45 for 93.20.
GMT  3:59 – GOLD @ $ 1584 = Likely to hold $ 1578-80 for a test and break of $ 1586-89 zones. However, I will prefer to pick the top to sell and gold. Do not see a move beyond $ 1595. Downside risk intact.
 
It was positive ADP data that showed addition of 198.000 in the private sector turned traders mood positive. But FED Beige Book depicts even better picture of the economy further confirming that the overall performance of US economy is comparatively in better shape indicating housing market recovery as real estate demand is strong. There is funding demand from across all districts, which means consumer are willing to spend. Manufacturing business too is showing growth. Purchase of automobiles is is on the up. It all suggest that more jobs are created, but interestingly Beigh Book did not hint inflation worry, which should be good news for the Doves.  
Well, today ECB & BoE will be announcing its monetary policy. I have mentioned quite a few times in my post that in present economic condition, strong Euro does not suite the Euro region. How would strong Euro benefit Euro-zones economy when minus Germany almost all the member countries are faced with high deficit due to austerity measures and are not willing to impose new taxes. The policy makers past support for stronger Euro had more to do to protect its currency rather than anything else and with shift in global stance towards weak currency stance (talk of Currency war) to help its exports strong Euro does not serve the purpose, as it threatens exports and tourism, which could mean less revenue collection.  
In my view, with uncertain political condition in Italy that could once again erupt fire in the Euro-zone region and with inflation within the ECB target, this may not be the appropriate time for ECB to use its best ammunition. Mario Draghi is cunning and smart too, he could buy time with his Dovish comments that may serve the purpose.
Similarly, BoE should wait for Canary to arrive in next 3-months. GBP has already lost almost 8 pct of its value, which should be good enough to attract businesses. and let Canary decide the future line of action. However, liquidity addition could see another Pound Sterling fall, but I will not be surprised if GBP after the fall makes 2 to 3 Big Figure recovery.            
       
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