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Did Larry Quit for Ben Bernanke’s extension ! Sept 17

September 17, 2013

It was an interesting start to the new week, as Larry Summers decided to withdraw himself from Fed Chairman’s position for a possible replacement of Bernanke who is expected to step down on completion of his term in January gave hope that Dovish Fed Vice Chairman Janet Yellen stands better chance, as replacement and market reacted accordingly.

Basically the joyous moment was for the Doves looking/pleading FED not to scale down tomorrow. I am not sure that if this is a genuine wish, because if FED dose not announce tapering tomorrow it still has 3-more months to make a tapering call and how can we be sure that Bernanke is leaving, there could be a possibility that Larry Summers withdrew because Ben Bernanke may get an extension. But this how market gets confused and reacts.
Meanwhile, another big event after tomorrow is the German election that could still rattle the market. Though Merkel’s CDU and SPD, two of the main German political parties could reach an understanding and Merkel is expected to be re-elected, but until agreement between two parties is fully reached, uncertainty will prevail in the European financial market, as Europe is too dependent on Merkel that suits Euro-zone’s policy. It is said that inside lot of bickering takes place in German politics, as question of European bailout could once gain raise many eyebrows in Germany and this could be the real threat to European currency and regions financial market.
GOLD @ $ 1325.05 = Saw another perfect hit of my weekly target $ 1335, as fall extended to test $ 1306. During this week, we could see some choppy trades prior to FOMC announcement. Top around $ 1360 should hold, as bias to remain on the downside. Therefore, preferred strategy is to pick top to sell, as see risk for a move down to test $ 1280. On a broader prospective the crucial level to watch is $ 1375-80 on the upside and $ 1210.
EURO @ 1.3292 = Euro did break 1.3280 for a test of 1.330, as overall tone remains strong. However, this week’s crucial level is 1.3395-00, unless makes convincing upside break, risk for losses will increase. A fall below 1.3210 will open gates for 1.3150 or 1.3070. But upside break of resistance level encourage for a 150-200 basis point move. Range for the week 1.3050 – 1.3580.
GBP @ 1.5866 = Upside move was quite in last week’s projection, but the rally extended gains unexpectedly hitting 1.5882. Bias to remain on the upside, as with tone against cross currencies will remain firm. Break of 1.5925 is required to test 1.60 or else a move below 1.5740 will threaten to challenge 1.5650. Range for week 1.5620-1.6040.
JPY @ 99.35 = Nikkei and US 10-bond market are two indicators that should be watched closely. Sharp fall of Japanese stock will encourage heavy buying of Yen and surge in 10-year US bond would weaken JPY. On any JPY weakness, I would still keep a close watch on 100.70-90 levels, as Yen may find buyers dip below 98.70 will open gates for test and break of 98.10 for 97.10-40 zones.
Range for the week 97.10 – 101.50.
AUD 0.9241= Upside momentum has surely broken and now 0.9350-80 is the barrier. AUD needs to break 0.9150-70 zones to extend losses and is likely to trade in a given range. Range for the week 0.9080– 0.9410.

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