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GOLD – EURO – GBP to Gain – YEN to Suffer – April 8-12

April 8, 2013

In my Thursday’s note I have already pointed out that higher claims and weak ADP private payroll data may not be friendly news for the US labor market. Drop in March job number to 88.000 is certainly a very disappointing number for the US economy, which is the smallest gain since June 2012. It is also shocking because the economy requires over 225.000 jobs per month to meet 6.8 pct employment target by 2014 and 6.5 pct by 2015. Similarly economy is expected to grow around 3.5 pct by 2014 and 3.7 pct by 2015. However, keeping in view the past history of revision of payroll data, I will not be surprised to see upward revision of jobs data next month.
Interestingly/Surprisingly despite weak NFP unemployment dipped down to 7.6 pct from 7.7 pct, as it is thought that fewer American citizens may have applied for jobs. Some argument suggest that fall is caused by shift in demographics due retiring baby boomers that had reduced workforce or in simple terms more people may be retiring, which is again debatable. Whereas data also showed drop in demand for jobs from low age group, which was very low, it all leads to low participation that may have helped unemployment rate to fall.
One thing is for sure that one single bad job data does not spoil all the hard work, FED wants quick and better growth result and it may refrain from quick unwinding  of QE and may continue to experiment with its asset purchase program for some more time. Yes, if economy gathers momentum then FED may do so by reducing the size of its monthly asset purchase from current USD 85 billion per month.  
In another major development ECB opted to keep mum and did not lower interest rate despite recession and rising unemployment in Europe to record all time high of 12 pct, though Draghi when questioned by press hinted that they did discuss policy rates and may act if required. He did show some concern about the economy, but was also posing to be at ease. European economy is in no good shape, nor Germany considered engine of growth in the Euro-zone region is able to do enough to pull the European train out of woods and the ongoing declining trend could bring more misery if the slump does not halt.
Japanese monetary policy meeting under its new Governor was another major event. There was long waiting, as market wanted to know that if BOJ will act to counter deflation and they did by announcing to make aggressive shift in its policy stance to inflate its balance sheet. Since BOJ’s extraordinary easing policy has received official stamp, it will exert pressure on the Japanese currency, which should remain weak.
Economic data as usual will play key role in determining the global growth trend, but Wednesday’s FOMC minutes will be watched with interest to get the feel of FED members. But, be on your toes, as news from Europe could always bring surprise due to pending problems in the region. 

GOLD @ 1581 = Saw a small pullback after fall in NFP, but it lacks genuine buying demand for gold. I still believe that selling pressure could mount on the rise of gold because aggressive buyers will remain absent from the market. Hedge funds are less eager to take risk. It has been noted that buyers get cautious when gold moves beyond $ 1600, probably there is also a fear that FED’s unwinding of its asset purchase program could see liquidity constrain.
On a broader prospective gold has to break above $ 1665 to enter Bullish territory and I do expect breach of $ 1630-35 levels. This week levels to watch is $ 1610-12 and only break will encourage for a test $ 1620-25 zones. However, we could initially see gold gaining strength and 1st barrier is at $ 1598 for above move to occur. On the downside protection is around $ 1568-70 that should hold for mild up move. Failure to hold support level will once again challenge $ 1560-62 for test of $ 1545.
EURO @ 1.2985 = Initially buying interest will seen, as strong support is around 1.2820-40- zones only if 1.2920 surrenders. I am expecting up-side break of 1.3080 that will encourage for a test of 1.3180-20 zones. But I would remain cautious beyond 1.3150, as Euro could come under selling pressure, once it reaches to upside resistance level. Range for the week 1.2820 – 1.3240.
GBP @ 1.5325 = I see demand for Cable to continue, as support is around 1.5240 and buying on dips will be seen preferred. Break of 1.5390 will push GBP towards 1.5440-50 zones. Or else deeper correction could see a test 1.5185. Range for the week 1.5170 – 1.5580.
JPY @ 97.50 = I see resistance for the Japanese  currency around 96.10, only break risk for 95.50. However, bias is for further weakening of JPY and break of 98.50 will open gates for test of magic number 100 Yen per one USD, which could only be possible on break of 99.50-60. Range for the week 95.50 – 100.
AUD @ 1.0373 = Aussie did not have enough muscles to move beyond 1.05 and now push below 1.0310 is required to open gates for a test of 1.0250-70, which is a strong support level. However, only break of 1.0450 may provide some upside momentum, but 1.0510 will remains a challenging level. Range for the week 1.0250 -1.0475

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