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Market Heading for another Wobbly Week – June 24-28

June 24, 2013

This time Bernanke did not hesitate to inform the market that FED is comfortable with the current pace of growth and is willing to scale down the size of its asset purchases if US economy is able to maintain the momentum. This was enough to given spin to the market that took the dive, stocks were hammered, currencies came under pressure versus US Dollar and bond yield surged.
Market has started to realize that this time FED’s tone is clearly hawkish and it means business suggesting that stronger US data will further support Fed’s change in its stance. Fed is least worried about the inflation, which is expected to remain low. Interestingly we can here lot of noise from the Hedge fund big daddies such as Marc Faber and Bill Gross, as they are surely concerned with the Fed’s move because they know that tapering means good bye to easy money and easy profit. I think this is a big hint to the market about the future direction of the market.
Well, though shift in Federal Reserve’s policy stance will not be immediate, but tapering talk will dominate the market. Do keep a close watch on the speeches of FED officials that can spark both ways rally.
While Euro showed some determination last week after the FED FOMC meeting, as ECB looked undecided about its easing plan and on deposit, but data due to be released this week from Europe will provide more clues about economic performance. Europe will remain brittle and suspect to any bad news, which frequently pops out.
Bottom line for trading purpose will be release of economic data this week from Europe and USA that provide guidance to the market. However, it is very clear that for the next few weeks the bias for US Dollar will remain on the upside and any gains for currencies will be short lived and opportunity to pick the top to sell.

  
GOLD $ 1296.10 = Great move so far, once gain comfortably hitting my medium-term target of $ 1275.  I have been arguing for long that gold does not have enough strength of its own to ove ahead and all odds are against the yellow metal.
FED move has surely given big blow to the Bulls, but this is not over as yet. China looks wobbly, as it has severe liquidity problem and when there is cash problem in China and Indian Rupee hitting new lows what more could have worse for gold. Why does everyone forget that when China and India shy away from the market and with FED insisting on tapering then who would buy gold. So catching the top should be fun as, gold lovers must be frightened enough with some of the recent developments.
I am further lowering top for gold from $ 1385 to $ 1370 and setting up a news medium-term target of $ 1210, with long term target $ 1087.
This week, as long as $ 1315-20 holds see risk for a test of $ 1265-70 but needs to beak for $ 1245 for bigger fall.
EURO @ 1.3117 = Immediate challenge is around 1.3010-30 zones, break here would encourage for 1.2930. Prior to this move, there is minor upside risk and break of 1.3180 is required for a test 1.3220-40 zone, which may be easy to attain. Range for the week 1.2880 – 1.3280
GBP @ 1.5414 = Cable may initially struggle to move to move beyond 1.5550 and may dip to test and break 1.5320-30 zones for 1.5250, or else 1.5610. Range for the week 1.5220- 1.5610.
JPY @ 97.88 = Japanese currency may have a weaker tone this week and only break of 96.40 would encourage for 9550, as I see risk for a move towards 99.20-40 zones. Break would encourage for a test of 100.60-80 levels. Range for the week 95.50 – 100.80.
AUD @ 0.9209 = Aussie easily slipped below my weekly target and is likely to suffer more losses. AUD has strong resistance around 93.80, if 0.9290 breaks. Burt see risk for more losses, s break of 0.9075 will accelerate pressure for a move towards 0.8980. Range for the week 0.8970 – 0.9420
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