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Repatriation of Funds & Investments in Equity is Helping Euro – Sept 2-6

September 2, 2013
Last week trading active have been mixed caused by Syrian tension, thin activity was noted due to illiquid market condition that helped US Dollar to gain strength. But Gold, OIL, JPY, Swiss Franc and US Bond gains eased, as market sensed that strike on Syria could be delayed due to lack of support from UK Parliament voting against support of military attack. Stiff resistance from Russia and UN report due to be released after 10-days, on the Syrian issue have also helped Greenback to maintain strong tone.
Recent development suggest that US could possibly go for a short military strike on Syria and if this happens to be true, market will have short negative reaction. Emerging market could face another pounding before easing of Geo-Political condition that may bring sigh of relief. However, prolong conflict will have adverse impact on the overall financial market.
Release of Economic report from USA was mixed too, as it showed sharp revision in growth, but data also showed that consumers was spending less and sentiment dropping. Market must be wondering that despite better showing of US economic numbers and close call on tapering why US Dollar is unable to make good gains?
This is surly because of improved performance by the Euro region’s economy though Spain, Italy, Portugal and few others countries remains a suspect. Germany has taken the lead in helping region’s economy to prosper. Despite consistent economic growth in recent months, there is a fear of softer ECB stance if economy slowdowns, as European Central Bank cannot afford to take the risk of another recession. ECB approach on its policy stance on Thursday will provide further guidance, as market will try to figure out that if its maintains its Dovish stance or not.
But investor’s confidence level in Euro-zone is high due to economic stability and meltdown in emerging market, as recent data suggest that in last 3-months repatriation of funds and investments in the regions equity market is heavy reaching nearly Euro 150 billion or USD 200 billion. This is one big factor that has created demand for the European currency. Now, unless there is fear of contagion or spillover effect after FED tapering or European economy further deteriorates, Euro may give resistance to USD though may struggle to retain strength, but Euro will certainly remain strong against crosses currencies though may not have enough courage to show muscles against FED tapering.
We are heading for an important week, as news from Syria will be dominated important economic events that will include decision on interest rates by RBA, ECB & ECB. Some of the other major economic events of the week are release of data’s from Europe and USA, but Friday’s release of US job data will be the key driving factor that will guide market for FED’s next policy stance schedule to meet on Sept 17-18. However, since New York is closed on Monday, therefore thin activity is expected, unless there is news of unusual activity in the Middle Eastern region.
GOLD @ $ 1394.55 = It was another excellent week in terms of our call for gold to exhaust around $ 1430, as it did fall to test $ 1392 levels, holding above $ 1380-85 levels.
For next week the bias should be on the downside, as any up move should be opportunity to sell. The level that needs attention is $ 1415-20 zones, which is less likely to happen, as $ 1408-10 should act as barrier for a test and break of $ 1380 that should pave way for $ 1365. A fall below would confirm a move towards $ 1338. However, upside break would risk for a test $ 1458.
EURO @ 1.3219 = Euro saw a perfect minor up move to hit the target 1.3410 before falling to test the given level of 1.3240 and breaching the downside.
This week I am expecting stiff resistance around 1.3260-80 zones and only break would encourage a move towards 1.3320 or 1.3390. However, a clear break of 1.3140 is required for a move towards 1.3085 or 1.3050. Range for the week 1.3020 – 1.3390.
GBP @ 1.5494 = The expected move did occur, as Cable could not surpass resistance level of 1.5650 and saw a fine hit of target 1.5450.
This week initially Cable is likely to hold around 1.5410 levels for a gradual up move towards 1.5520-40, but unless breaks 1.5570, Cable could dip again to re-test and break 1.5410 for 1.5350. Breach of resistance could see a push towards 1.5640. Range for week 1.5320-1.5680.
JPY @ 98.10 = Japanese currency did break on the downside and briefly tested 99.09, but the move was not very impressive as the currency made sharp gains to breach the higher side of my weekly band to test 96.87.
However, since there are many factors driving the currency, this week once again Yen will remain choppy. The level to watch is 97.20-40 should not surpass or else could test 96.70-80. I am expecting a move and break of 98.80-90 for 99.60. Range for the week 96.40 – 99.80.
AUD @ 0.8893 = The pressure on Aussie is likely to continue as long as 0.8980-90 levels hold for a move towards 0.8830. Break risk for 0.8750 or else 0.9050. Range for the week 0.8720 – 0.9050.
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