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Central Bank’s Policy Rate & Data to Dominate the Week – July 29 – Aug 2

July 29, 2013

Last week, in the absence of major key economic data announcement, some of the minor data’s released from Europe and USA suggested few positive signs that brought stability, reducing the volatility that helped market to trade within narrow band. Japanese Yen and Gold made gains by stretching an extra mile. Yen still in a consolidating phase after huge one sided move seen in previous months. Gold recovered on hopes that Fed could delay its unwinding plan.

We are heading for a volatile week, due to FED’s policy announcement on Wednesday and release of some of the major US economic indicators that includes Consumer Confidence, GDP, Initial Jobless Claims, Manufacturing PMI to be followed by US Non-Farm Payroll and Unemployment data.
The big question in everyone’s mind is FED’s stance on tapering. I think combination of release of various US economic data this week may give more confidence about FED’s next move. I am expecting improved economic data this week, as unemployment rate will surely fall because last time since it was 7.55 pct US labor department had to announce 7.6 pct.
Prior to NFP and policy announcement, US GDP data release on Wednesday is expected to fall around or below 1 pct, but watch out for a surprise better number, as market is discounting poor data, better data release will surely catch many wrong footed, as sentiments will once again tilt towards tapering.
Following Fed decision on interest rate, BOE and ECB will announce its monetary policy on Thursday. Release of economic data from UK and Europe is likely to keep market on toes. Though do expect shift in policy stance, BOE minutes due two weeks later may provide better outlook for Sterling.
However, if we take a deeper look at the performance of European economy, since ECB’s last policy announcement presently it stands is in a better shape. Previously it was thought that after Draghi’s emphasis on forward guidance ECB could be heading for prolonged softening stance.
Recent releases of batch of European economic numbers have shown recovery in the Euro zone region. This should give ECB time and space, but Draghi’s opinion will provide further guidance. He may avoid talking decline in borrowing cost, but sudden change in his thoughts on forward guidance may not that easy. Overall, ECB policy should remain unchanged.
In currencies, Yen was the major beneficiary benefiting for bond weakness. On Monday, BOJ Governor is due to speak and market will be taking queue from his speech about Japan’s Central Banks ongoing hyper easy policy stance. This week’s release of non-farm payroll could be another driving factor for the currency.
Overall, I remain optimistic about growth picking up in USA in next quarter. But there are signs of economic recovery in Europe too. Therefore, initially we could see some USD weakness, as expectation of better Spanish GDP data and positive comments from Italian economic minister about possible exit from recession in 4th quarter should give boost to Euro. But US Dollar is expected to rally back, as we approach crucial Fed policy announcement on Wednesday. Ideally, I would prefer to pick Euro top, Yen is another currency that should ease and Gold gain should be short lived.

GOLD @ $ 1329.90 = Saw a prefect move in gold last week, which was in line of my expectation. It remained soft though unable to fall below $ 1308. Prior to Fed policy announcement gold after making small gin will lose its sheen.
A move beyond $ 1338 will help gold to test $ 1350-55 zones. But I would prefer short as $ 1370 should not surrender for a fall. Break of $ 1312 will encourage for a test of $ 1295-00 levels, if surrenders drop to $ 1258-60 will a good possibility.
EURO @ 1.3276 = Initially Euro will have a stronger tone and should stay above 1.3180 for test of 1.3340-50, break risk for 1.3390 before exhausting. Fall below 1.3140 risk for a test of 1.3050, or else 1.3450. Range for the week 1.2950 – 1.3470.
GBP @ 1.5375 = Cable will find support around 1.5240, which may hold for a test 1.5480. Break risk for 1.5550. But fall below support level will push pound towards 1.5020-50 zones. Range for the week 1.5020- 1.5590.
JPY @ 98.15 = Yen’s next major resistance is around 97.10-20. Japanese currency will soon get exhausted. Break of 99.75 will see push towards 100.20-40. Or else 96.50. Range for the week 96.40 – 100.90.
AUD @ 0.9255 = Aussie is gaining some of its lost momentum, but is unlikely to make big strides. On the downside only break of support 0.9150 levels will see further losses. But prior to down move another upside test of 0.9320-50 is possible before resumption of down move. Range for the week 0.9080 – 0.9380.

 

Interaction with my Subscribers during the day…………

 

6:01 AM   sir should euro buy at 1.3280
6:07 AM   EURO @ 1.3278 = I am expecting Euro to trade in 1.3250-1.3320 range until US data release……..
 6:57 AM    about gold sir where to buy
7:07 AM  GOLD @ $ 1324 = I am not too optimistic about gold’s up move. As long as $ 1327-30 more losses will be seen. Break of $1318-20 will encourage for $ 1312. Try to pick top to sell………  If you are keen to buy try around $ 1320…..
7:33 AM   sell gold at 1327 ok sir n sl
7:38 AM   Do not jump to trade and loose money. Always enter at apprioate levels so that you can benefit. At times I give you levels so that you can have feel of the market…………..
You will always benefit from if you make a watchful and comfortable entry at proper levls. It does not matterif at times you loose opportunity. My job is to protect you and give me best………….Thank you……………
8:09 AM   sir shall go long aud at 0.9230-40??
9:45 AM  GOLD @ $ 1332 = OPrefer Selling around $ 1334-35. Stops $ 1340…………..
 1:07 PM   GOLD @ $ 1329= Suggest taking profit around $ 1327-1329……
 2:05 PM   GOLD @ $ 1328.75 = Could retest $ 1335-40 zones if hold above $ 1320-22, likley to bounce back from $ 1325-28
2:07 PM   EURO @ 1.3248 = may find support aroudn 1.3220-30 zones for 1.3290 or esle 1.3205……..
 2:09 PM   GBP @ 1.5339 = Range 1.5310-80……….
2:09 PM  Ok pals,
Cheers until tomorrow…………

 

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