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Rate Cut & LTRO Is Useful For Economy, But Avoid Funding Carry Trades – Nov 07

November 7, 2013
Surely, market will be waiting for Draghi’s follow up speech if ECB does not cut rate, which may not happen today. Though Euro-zone inflation is low and minus Germany, rest of the economies are in a struggling mode, rate cut may not be enough to repair the damage that requires mending at various levels, which is still not properly addressed./corrected. Draghi is smart, hence, like past he may once again use is verbal warning tactics and may avoid wasting his useful monetary tool that may backfire and could buy more time and may probably end up with Dovish tone.
Another reason for delay could be to have better feeler/sense about FED’s mood on its tapering plan that could have sever impact on the global financial market if FED tapers and if the size is larger than expectation it could create lot on uncertainty in the market.
Further reduction in European interest rate will reduce the cost of ongoing business, but it does not guarantee increase in new business activity due to liquidity crunch and clogged balance sheets. Bank Capitalization is a troublesome issue, which requires funding. Banks in Euro-zone requires emergency funding Long Term Refinance Operation (LTRO) money because in such a situation borrowing privately becomes expensive. Therefore, combine action of Interest Rate cut and LTRO could be very effective tool to stimulate economy if the funding is utilized for genuine business activity instead of money diverting towards carry trade purpose, which goes unchecked and does not bring desired result.
Meanwhile, today we are going to witness release of batch of US economic data, US GDP though having lost its effectiveness will be watched with interest and only big deviation could catch traders attention. However, I would be careful with the release of US Initial Jobless Claims data that measures the strength of labour market, this may give some feeler about tomorrows Jobs data.

Twitter @asadcmka………

GMT 3:18 = GOLD @ $ 1316.50 = Gold should struggle to move beyond $ 13321-23 levels prior to US data, but may find support around $ 1308-10 levels. On broader perspective the levels to watch is $ 1330 & $ 1303.

GMT 3:26 – EURO @ 1.3517 = Prior to ECB announcement i am expecting 1.3470-80 to hold for a gradual up move towards 1.3550 that could later stretch, but unless break above 1.3590-00 levels more gains is not possible. On the downside watch for break of 1.3420-40 that could spark a move towards 1.3320.
GMT 3:33 – GBP @ 1.6077 = Cable should remain capped below 1.6130, only break encourages for a push towards 1.6179-80 zones. However, 1st protection is around 1.6040-50 that may hold, but break of 1.5980 will confirm bigger losses ahead.
GMT 3:36 – JPY @ 98.58 = As long as 98.05 holds bias is towards weak JPY and only break of 97.70 could be alarming. However. 98.90-00 will be tough to crack and 99.25 could be a bigger challenge.
GMT 3:39 – AUD @ 0.9473 = Aussie has resistance around 0.9525-40, which is not easy to crack, break of 0.9440  will extend fall towards 0.9400-10 zones.

Inter–action with my Blog Subscribers……

 5:58 AM  GOLD @ $ 1319.50 = Book your profit around $ 1320-22 and pick top to sell. STOPs if $ 1329 breaks……………….Cheers
7:09 AM   GOLD @ $ 1318.50 = Suspect we have seen the top for now and may dip………..
12:07 PM GOLD @ $ 1313.50 = Book your prfit around $ 1311-13.50…..cheers
12:52 PM  EURO @ 13374 = Buy arond 1.3320. Stops 1.3270, before Draghi speaks…….
12:54 PM  GOLD @ $ 1316.50 = I would sell around $ 1318-20 Stops $ 1326…….
12:55 PM  GBP @ 1.6045 = Buy around 1.600–10. Stops 1.5970………
12:58 PM  If Euro surges around 1.3420-40 sell Seops 1.3490
1:08 PM  Gold @ $ 1326 = Sell around $ 1327-30. Stops $ 1334
1:26 PM  Buying of Euro is not prefered……………….Try to pick top
 1:31 PM  Gold could test and break $ 1300-02
1:33 PM  Gold = Hope you have sold around $ 1613. Stops $ 1316
1:36 PM   Euro may further dip to test 1.3220-50 zone.
 1:37 PM  hold gold position & apply stops if surges to $ 1310 zone………….
1:40 PM   sir where to book gold heavey selling do u see
1:41 PM   GOLD @ $ 1300 = if not comfortable book profit……………
 1:43 PM  JPY @ 99.35 = Buy Jpy around 99.50-60 Stops if 100 breaks, which I doubt…………….
1:45 PM  JPY @ 99.30 = Buy JPY around 99.30-40
1:55 PM  Sir didnt get it. JPY @ 99.35 = Buy Jpy around 99.50-60 Stops if 100 breaks, which I doubt..
1:57 PM  Ealier signal was to buy JPY around 99.50-60 as the move was fast,  I have revised down buying level and now suggest to buy JPY around 99.30-40
 2:02 PM  JPY @ 99.40 is the Prefered level to buy Japanese currency………….Stops on break of 99.80-90
2:04 PM  Gold @ $ 1304 = could still test and $ 1300 for $ 1290 zones. if holds $ 1310………
2:32 PM  GOLD @ $ 1308 = sell around $ 1308-10. stops $ 1316………….
2:52 PM  sir what abt gbp now!! and euro sell at 1.3370!!
2:55 PM  GBP = view unchanged, if sold @ 1.6010 = book profit around 1.6040-50.
Euro prefered selling area 1.3410…………
 3:02 PM  Ok pals, suggest squaring all positions, as market will remain choppy..
Yen could gain to test 98.70-80……..zones
Cheers until tomorrow…………….

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