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Market Nervous due to US Debt Limit Expiry & European Uncertainty – Sept 27

September 27, 2013
The uneasiness in the financial market is clearly becoming visible following the announcement by the US Treasury Secretary that US will reach its allowed debt limit on Oct 17, after that US government will be disallowed to honour payments unless US President uses his authority under 14th amendment.
Meanwhile, after listening to FED officials speeches, there is clear divide divide over the issue on US Central Bank’s bond purchase policy. Basically they look/sound nervous because some of them are probably fearing ciaos after the announcement, as it is also likely to have adverse impact economy. But many of them have real concern that FED cannot continue with its ongoing bond buy purchase for decades , as the time is running fast and has to apply brakes somewhere, as delay also means more damage and more problem at the time of unwinding. I would call delay a death wish by all the financial big wigs.
Though FED has given a clear message that taper is connected to economic data, the market did not react to the news of fall in US jobless claims that support FEDs unwinding plan. Instead US Dollar made minor gains due to cautious approach by the investors/market players.
Following developments in Europe, specially with political uncertainty in Italy and despite Merkel’s victory she has compromise with her party’s agenda to form a collation government. Tension on US fiscal issue is growing, as US debt limit will soon exhaust and with unclear messages from FED officials on its tapering plan, trading volumes have certainly have thinned down narrowing ranges due to piling up of of bigger issues. In thin market condition there is always risk of volatility and and one negative/positive news could swing the market either way. However, today’s release of European and US economic data will surly have a role to play and should help in determining the market trend.

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GMT 3:13 – EURO @ 1.3484 = Euro is now much close to bearish zone. Unless it surpass 1.3525 comfortably to break 1.3580, there is bigger risk for a fall. Break 1.3410-20 will be 1st sign of exhaustion of European currency for another big fall. Euro should find strong support around 1.3440-50 zones.
GMT 3:26 – GOLD @ $ 1324.50 = We could be heading for another choppy day. Today gold can potentially surge in two-sessions, one in Asia and the other in US session. As long as support $ 13171-19 holds break of $ 1327 will encourage for move towards $ 1330-32 that may extend up to or beyond $ 1340. However, dip towards $ 1312 or below could be possible, but I am expecting a bounce back if the fall occurs. $ 1303-5 should not surrender.
GMT 3:31 –  GBP @ 1.6043 = Cable is still enjoying firmer tone, but needs to push beyond 1.6095-00 for a test of 1.6120-40 and has support around 1.5980-90. Risk for drop will increase if 1.5940 surrenders.
GMT 3:35 – JPY @ 98.80 = Japanese currency has resistance around 98.40-50. It may not surrender, but needs to move beyond 99.10-15 for a test of 99.40-50 zones or else 98.10.
GMT 3:48 – AUD @ 0.9344 = I am expecting Aussie to trade in ranges between 0.9310-0.9390. Only break will see another 30 pip move, both ways.

 

 

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