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Geo Political Tension Cause of Volatility -Gold-Oil-JPY & CHF up – Aug 28

August 28, 2013
It is a bit different story today due to Geo political factor that has been brewing for the last few weeks, as main driving force behind the global financial market is Syrian conflict that has forced market to look for safe heaven opportunities, fearing US military action investors sentiment towards Swiss Franc, JPY, Gold, Oil and US bonds buying. Global stock market is under pressure and so are the currencies of emerging markets fearing liquidity crisis. Further, flaring up of the situation can cause excessive volatility and safe haven demand may stay unless there is clarity, but once there is a hint of situation getting back to normal, market will take sharp u-turn.
Odds do not favour too much strength for the Japanese currency due to economic reasons, which has gained, as it still enjoys the safe haven status. Aggravation of Gulf conflict could temporarily do more good for the currency, but from trading prospective from medium to long term Japanese currency could potentially losses substantially, once there is a hint of situation getting back to normal.
Meanwhile, I do not see any other factors driving the currencies today, which could mean US Dollar should remain in demand. Euro could find sellers at higher levels, as it could be nearing the top. Cable is likely to come under pressure. Choppy trading in gold at current levels could be a possibility, as current strength is based on paper demand and not driven by physical demand, as cash remains dearer. Delay in settlement of conflict will certainly make things worse.
However, market should be prepared for price distortion, as unusual moves cannot be ruled out in present Geo-political environment.

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GMT 2:46 – EURO @ 1.3392 =  Though 1.3420-40 should be top of the range, but rally could extend towards 1.3468-70 due to unusual condition. 1.3598 should not surrender, as I am expecting another fall towards 1.3320 zones.
GMT 2:53 – GBP @ 1.5540 = GBP may not have enough strength to surpass 1.5570-90 zones, as break of 1.5480 will pave way for a test of 1.5440-50 levels. Or else 1.5625.
GMT 2:59 – JPY @ 97.11 = Further gains for JPY is possible on break of 97.50 that may open gates for 96.10. Break would risk for 94.10. however, move beyond 97.60-80 zones will encourage for 98.50 and beyond.
GMT 3:03 – AUD @ 0.8954 = Unless Aussie is able to break 0.9025 levels risk is for a test and break of 0.8910 for 0.8870-80 levels. Or else 0.9070.
GMT 3:09 – GOLD @ $ 1416 = As long as $ 1400-06 levels hold risk is for a test of $ 1425-30 zones is possible with minor chances for a test of $ 1445-50. However, fall below $ 1390 would mean end of upside rally.

Inter-action with my Subscribers during the day…..

 

5:36 AM  GOLD @ $ 1427 = if went long in gold suggest taking profit around $ 1428-30 levels……………………..
7:47 AM     sir i want to ask u one thing what going in india what happening to india currency going worst that also very spedly gold silver fall heavely can understand its a metal buy currency is a contry is sitition in indiaa willl follow economic crises plze if u have any little idea plze
8:35 AM   Manish, basically it all started after the news that FED will start tapering. This has hurt emerging markets Brazil, South Africa, Turkey, Indonesia & India too. Though we not hearing new names but if FED tapers and if the tapering size is huge, say around $ 30-40 billion this disease will spill over.
The fear is that tapering means tightening that will cause liquidity crunch. India has a deficit problem and has balance of payment problem, which means its imports more against funds available. It has been managing through various source/type of borrowing, foreign investments such as investment in SENSEX. The problem multiplies when oil price rises because Indian annual oil purchase is over $ 135 billion. Gold import is another huge problem because due to domestic demand, as you know Asians are crazy about physical gold buying. Despite imposing various types of taxes raising tax up to 10 pct, gold is still in demand. Last year Indian gold purchase was worth nearly $ 60 billion.
INR that has so far plunged by almost 25 pct is struggling as it has structural problem, news about imposing curb in outflow did lot of damage. Other issues are fall in growth, high deficit and inflation.
Yesterday’s passing of food security bill is another negative factor as the cost of subsidy will be $ 20 billion that will add pressure on the Exchequer. The problem is multiplying as Oil prices is too high and gold is almost up by 20 pct.
One strong observation that I would like to add is about global politics, which is not discussed at length. I have not seen any analyst/economist discussing the halt of Indian Oil purchase from IRAN. India was purchasing nearly 30 pct of oil on easy payment terms from IRAN. After the sanction India has to buy from open market that has also exerted pressure on its Foreign exchange. this is why intervention is not working. Next RBI strategy should be to sharply hike short term rates to make Rupee more dearer, which is an expensive exercise as borrowing cost surges.
Keep an eye on FED tapering, it is the size that could cause huge damage to all the deficit/borrowing/debt ridden economies
9:32 AM    There is no change in view.
-Gold has surged, it is likley to hold $ 1416-18 levels and we could see another upside attempt….
-GBP, we the have seen move towrads target, which remains intact.
-JPY, saw a fine dip after hitting 97.60 and likely to make more gains.
EURO View in unchanged……………….
9:35 AM   AUD, did hit the target 0.8910, this correction should hold around 0.8970-80 for another dip…….
10:40 AM    GBP @ 1.5465 = Book your profit around 1.5460-65……….Cheers
1:20 PM    what about gold view unchanged
 1:22 PM    Nothing new to add markt will be choppy. we have seen test of $ 1430. Keep ann eye on $ 1416-18, break could see $ 14010-12 but up gain…………………….
1:25 PM   buy gold n sl
 1:32 PM    Yes buy on dips prefered unless Syrian issue cools down. I am expecting moer gains………………………
1:44 PM     GOLD @ $ 1420 = prefer buying aroun d $ 1415-17. Stops $ 1410……………
1:45 PM  EURO @ 1.3313 = Prefered buying level around 1.3300-05.Stops 1.3265……..
1:47 PM   AUD @ 0.8893 = If short square around 0.8887.93………..
3:03 PM   Euro @ 1.3337 = needs to clear 1.3355-65 levels for 1.3390 or else 1.3320-25
GOLD @ $ 1419 = Needs o lear $ 1422-24 to test and brea $ 1430-32 for bigger gains or else test of $ 1412-15………
Cheers until tomorrow……………….

 

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