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Fiscal Drag to Create Uncertainty – Sept 26

September 26, 2013

From tapering market focus is gradually shifting towards US debt ceiling after Jack Lew announcing October 17, as a possible date that could hit the debt ceiling limit. This is likely to keep traders on its toes, as stock market is nervous. The news could bring more pain for the emerging market, as fiscal drag would probably lead to tighter condition to obtain US Dollar that will make funding cost more expensive.
Similarly in Europe, German economic gains may not be enough to bolster regions economy, which is why Draghi couple of days ago hinted of considering another LTRO. The measures taken by ECB is not helping enough to push growth higher so that remaining economies of Euro-zone is able to improve job market conditions. One of the ECB official has already showed his concern about Euro’s strength. German economy may be doing OK, but strong European currency will do no good to the remaining European economies, as it makes European goods less competitive.
Meanwhile, Japanese news agency KYODO flashed “headlines news” hinting that Japan could go for much needed and ABE’s promised Corporate Tax cut on October 01 that saw Yen taking a short plunge. But JPY could struggle around 100-101 levels until the final announcement, unless US 10-year bond yield moves up, if yield it moves towards 2.50 pct, Yen may find support.

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GMT 3:39 – GOLD @ $ 1330.50 = Gold will be choppy and has support around $ 1320-22. I am expecting god to hold above $ 1324 in Asia. a move towards $ 1338-40 is possible, only break could see a move towards $ 345-48 Or else $ 1310-12.
GMT  3:45 – EURO @ 1.3521 = Likely o find top around 1.3550 zones, but should hold 1.3480-90 or else 1.3450. Any up move should exhaust around 1.3590-95.
GMT  3:55 – JPY @ 98.88 = Japanese currency could witness choppy trading, but bias is for weak Yen, 98.30-40 should hold. Break of 99.20 would see a move towards 99.40-50 or else 97.80.
GMT  4:00 – GBP @ 1.6077 = Bias is on the upside until London opening should hold around 1.6040-50 levels for a move and break of 1.6095-00 for 1.6120-30 levels. break of 1.6010 risk for 1.5980.
GMT  4:03 – AUD @ 0.9368 = Aussie has support around 0.9320-30 levels, but may find strong resistance around 0.9390-00. If support break should see a dip towards 0.927080, before another sharp up move.

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