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EURO will have Uppish Tone – YEN to Gain – GOLD buy on dip, Sell Later – April 17

April 17, 2013

After heavy fall pounding of commodity prices specially gold that had impacted the financial market, conditions are getting back to normal, stocks and oil making some recovery, safe heaven buying of Japanese Yen seems to over and Euro gains is largely based on latest release of economic data.
There was some speeches made by FED officials that gave mixed signal to the market. Dudley thinks that current level of quantitative easing is appropriate, but Yellens major concern is financial stability and wants FED to consider risks from higher rate, which means someone at FED is to vocal to unwind asset purchase and may be prepared to tilt towards tightening if necessary. Evean’s is expecting big improvement in the Labour market next year.
While, Kocherlakota in past seen with mildly Hawkish approach wants investors to take more risk but simultaneously wants FED to keep a close watch, looks cautious and undecided and is fearful about inflation. Bottom line, my understand is that QE to stay for next 4-6 months, but in coming MPS, market will try to read FED’s language to get more clue on its asset purchase policy.
Meanwhile, Euro’s up move is in line of my expectation as per my weekly call, but FED Beige Book should provide important guidance about the US economy as each of FED’s 12 districts economist, business community and experts will give opinion on growth prospect.
I think yesterday’s ZEW number was disappointing and Draghi showed no optimism about European economy in his speech, so I do not see US Dollar loosing too much from current point. Neither I see Yen sliding in a big way, as finance ministers of G-20 countries will be meeting on Thursday and Friday in Washington and there is a fear that some countries may show their concern about Yen weakness, though discussion on Fx is not made public, but at times such information is leaked purposely to keep a check on currency.
Gold should see reduced volatility after CME increased margin. I think market may try to push it higher, but interest could be seen later if FED Beige Book shows return of confidence in US economy.

GMT 3:18 – GBP @ 1.5353 = Seems to get support around 1.5310-20, but 1.5390 is looking tough to crack and only break would encourage for a test of 1.5425-30 zones. Break of support levels could extend fall towards 1.5270-80 zones. 
GMT 3:21 – JPY @ 98.20 = I do not see break of 98.50-70 levels. Suspect another test and break of 97.70-75 could extend move towards 97.20 zones.
GMT 3:24  – AUD @ 1.0360 = Buying interest will emerge on dip around 1.0320, but needs to break 1.0390-95 for test of 1.0410-20 levels. Protection is around 1.0290.
GMT 3:45 – GOLD @ $ 1379.50 = Initially I am expecting gold to trade in $ 1374 -1386 range, but on the downside protection is around $ 1360 levels and only break risk for $ 1340. However, I will not be surprised to see upside break of $ 1395-98 levels for a test of $ 1410-15 zones.
GMT 3:12  – EURO @ 1.3173 = For the rest of Asian and European session, I see a move towards 1.32 before making small correction, should hold around 1.3130-40 levels before another upside move, needs to clear 1.3220 for 1.3270-80 or else drop and test of 1.3070-90 in NYK could be a possibility.

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