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Dovish Draghi could Drag Euro Down – July 4

July 4, 2013
Despite holiday in USA and with thin market condition, two major events are monetary policy announcement by Bank of England and ECB. BOE may not act by adding liquidity due to recent release of UK economic data showing signs of improvement. Later ECB is due to announce its policy stance. Condition differs in Europe, as the region is loaded with combined economic and political problems. Though there has been minor economic gains in the Euro zone, but it is not enough to stimulate economy into positive zone.
Following ECB policy announcement Draghi will surely face tough questions on economic and political condition. Yesterday in one of his appearance Draghi said that debt crisis in weighing on Euro, he also pointed to the flaws of European financial system causing difficulties, suggesting that there may not be any shift in ECB’s current stance and rates may remain unchanged, but even if he sounds Dovish that could matter. Market will be more keen on the language he uses. I am sure that he will be asked to comment on FED’s tapering and his comment will be keenly watched.
After BOE and ECB announcement there could be some volatility in thin market condition, which could last an hour as USA is closed. However, soon after the European rate announcement, market will start thinking about tomorrow non-farm payroll, which is the biggest event of the week. Recent release of US economic data suggest that overall performance of US economy attained acceptable level and hence, should not be disappointing.
Today, despite USA is closed and activity to remain thin, I am expecting Euro to wobble and should decline. Pound Sterling may have stronger tone due to recent positive data and selling could be a risk proposition, although BOE’s new Governor carries reputation of having Dovish approach.
Meanwhile, gold got some respite from Middle Eastern development. As situation gets normal in Egypt, gold should fall, as oil has already taken the lead.
Twitter for Currencies & Gold     @asadcmka
GMT 2:48 – EURO @ 1.2995 = Top around 1.3030, only break risk for 1.3065, as I am expecting gradual dip towards 1.2935-45 zones. Break of 1.2910 will encourage for test of 1.2850-60 levels.
GMT 2:53 – GBP @ 1.5255 = Cable should hold around 1.520-30 levels for a possible up move towards 1.5290 or 1.5310. Break of support level risk for 1.5180.
GMT 2:58 – GOLD @ $ 1254 = Gold should not move much beyond $ 1260, as break of $ 1240-42 will encourage for another test of $ 1237. Or else $ 1275.
GMT 3:01  – JPY @ 99.83 = Break of 99.60 may challenge 99.40 before moving towards 99.95. break risk for 100.20 Or else 99.15.
GMT 3:04  – AUD @ 0.9091 = Should hold around 0.9115 for 0.9045, break would challenge 0.9010 or else 0.9135–40 before down again.
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