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Fed’s message is clear that it’s accommodative policy is temporary – May 23

May 23, 2013

GMT 3:23  – EURO @ 1.2840 = Fed’s message is quite clear that they want to get rid of QE. The difference in Fed’s approach between past and now is that this time FED is clear about the next direction by stating that it will gradually reduce the size of its asset purchase and does not want to take decision in hast because it may spoil the hard word that could harm economy recovery and fears that immediate tightening will push interest rate higher that could cause inflation to dip. But the message is clear that it’s accommodative policy is temporary.
Fed’s exit policy has more clarity, as release of economic numbers will have greater say in driving equity market, bond market yields, commodities and currencies. Bernanke has certainly given a direction and the baton is now in the hands of US Dollar Bulls, because they now know that all they need is good economic data for a long stretch, as signs are clear that US economic growth is robust.
Earlier, Pound Sterling received bashing after surprisingly poor retail sales number, as BOE minutes showed vote for asset purchase was “status quo” 6-3. With continuing poor economic trend in UK the chances of adding more liquidity increases, which may not help Cable. Today’s UK GDP announcement will provide more information about the economic performance. I do not see any surprise element. but poor data will give reason for sharp drop below 1.50 levels. 
Meanwhile, Europe has a big list of Purchasing Managers Index data that will be released today and since manufacturing sector depicts business condition and as it covers large part GDP, it will give a sense of economic performance. While Draghi will also deliver a speech in the earlier European hours, as always he could be exciting, as market will try to pick his tone that if continues with his Dovish approach.
Later in US session release of initial jobless claims could add more spice, specially after listening to Bernanke that suggest tapering would largely depend US economic gains, which will be followed by PMI in next 30 minutes.

Catch me on Twitter for FX & Gold Updates              @asadcmka
 
 

GMT 3:29 – GBP @ 1.5029 = Likely to cap below 1.5070-80 and fall below 1.4990 may see sharp drop towards 1.4910-20 zones. However, break of resistance level will encourage for 1.5130.
GMT 3:41 – GOLD @ $ 1368 = Asian move should exhaust around $ 1372-75 zones, as I am expecting test of $ 1360. Break of $ 1357-59 later in the day for more losses. Or else $ 1385-88.
GMT 3:46 – JPY @ 102.95 = Only break of 102.70-80 will encourage for test of 102.50-55 zones. Break here could see deeper correction towards 102.20. However a move towards 103.80-90 is possible.
GMT 3:51  – AUD @ 0.9639 = Its a Chinese Rock & Roll for Aussie, as it is too dependent on China and world commodity prices. Bother are under pressure, as next support level is around 0.9570-80, which could hold or else 0.9540-50 before sharp bounce back is possible. On the up 97.10-20 is the challenging levvel.
GMT 3:23  – EURO @ 1.2840 =  As long as support 1.2815-20 holds, Euro will make a move towards 1.2865-70, break will encourage for 1.2895-98 zones. However needs to clear for 1.2935. But break of support level will challenge 1.2795 for a move towards 1.2750-60 zones.     
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