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Short GBP – EURO & GOLD Upside Rally a Possibility before fall – June 14

June 14, 2013
Before we approach next week’s crucial FED FOMC meeting, market was peeping elsewhere to look for reasons to trade. It mostly concentrated on Economic events in Europe and USA, US Treasuries and Global Stock Market, but this week’s major market mover was Japanese Yen and Japan’s Stock Market, as currency gained substantially, whereas stocks plunged almost 20 pct from last month’s peak.
The volatility seen in Japanese market was caused after BOJ making no announcement in its monetary policy against market expectation of adding stimulus, as PM ABE government initially talked of hyper easing policy, it neither extended bond buying maturity period. Combined with couple of other factors such a non-implementation of market reform and delay in tax relief to the corporate sector may all have given space for massive correction that was long overdue, as market has the habit of looking for excuses to make big moves.
Meanwhile, before next week’s FED MPS announcement, market has started guessing Bernanke’s stance. This week there was no depressing US data, as most of economic indicators suggest that so far, though slow, but US economy is on track, which should make FED Chairman’s job easier to explain the economic progress.
Market is confusing by attaching US bond yield correction and US Dollar weakness with next week’s FED announcement. I think we are in a correction mode and Doves are taking advantage of this situation. Let me remind that last week everyone was talking that if market can sustain 10-year US Treasury yield above 2 pct., today we comfortable above 2 pct, which means correction is taking place and secondly the weakness of US Dollar is more to do with the recent performance of economies of Europe, UK and Australia. USD weakness against Yen has more to do with market factors in Japan rather than US economy.
Do not ignore the behavior of Asian market, as its stocks are slumping and currency weakening. It is melting on fear of  liquidity constrain, if US starts reducing its bond purchase program. But nothing is for sure until Ben Bernanke pulls a trick out of his sleeves.
Twitter  @asadcmka           for Currencies & Gold Update
GMT 3:02 – EURO @ 1.3352 = I would prefer to buy Euro around 1.3320-30 zones with STOPS 1.3290. Break of 1.3398 will encourage for a test of 1.3415-20 levels. Or esle 1.3260.
GMT 3:09 – GBP  @ 1.5705 = As long as 1.5650-60 holds, we could see Cable making an attempt towards 1.5760-70 zones. But I would prefer to to pick the top to sell GBP around 1.5780-90 for a big fall with STOPS 1.5840.
GMT 3:18 – JPY @ 94.88 = JPY could behave disorderly, but should hold around 94.05, as break of 95.60 will target 96.10-20 zones. However, move beyond 93.70 will accelerate gains for Japanese Yen towards 92.95.
GMT 3:22 – AUD @ 0.9587 = Aussie will remain jittery and will find seller on the rise around 0.9650, though could stretch if up move occurs. Risk is that fall below 0.9530 will see losses extending towards 0.9470.
GMT 3:32 – GOLD @ $ 1384.50 = There is minor risk that if $ 1388-90 level breaks we may see a move towards $ 1395. However, I would prefer to wait to pick the top to sell as risk for sharp down move exist. Break below $ 1375 will encourage for a fall extending towards $ 1360-65 zones. On the up $ 1405 remains a crucial level to watch.
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