Earlier, concern shown at the IMF meeting in Tokyo over the state of global economy forcing to slash growth forecast for second time since April this year and continued slowdown of Chinese economy added to the worries slowing down the pace of Bull run. Crude oil is the only beneficiary because of two factors. Ongoing tension in Middle East especially between Turkey and Syria helping the Bullish sentiment is surely supporting higher oil price that has inched up to a two-month high pulling US WTI above $92 per barrel and Brent oil cursing well above $115 per barrel, but recent announcement of positive US economic data has also contributed to the surge in oil price.
With housing section showing signs of gradual recovery, it was worth taking a note that initial jobless claims fell to four-year low suggesting that though no new or few hiring may have taken place, but it clearly indicates that layoffs has halted to a greater extent.
Bounce back of consumer sentiment data for the second consecutive month to 83.1 is the highest level in 5 years was the added factor giving boost to the US growth. It will encourage spending as improved consumer spending data will help in pushing the economy towards positive territory.
This week market will initially be watching the US corporate sector earnings as other key data that could spurt trading activity are US retail sales and CPI, but news flash from European zone could always be exciting as there are quite a few pending burning issues.
EU leaders will be meeting on Thursday and Friday and they will surely try to push Spain to go for a bailout package request, while Spanish delegation will be expecting some more goodwill gesture from its European partners in shape on concession and relief for the Spaniards.
Apart from EU summit, other factors that could influence the trading activity this week is US 3rd quarter earnings. Chinese GDP will be keenly watched after barrage of recent disappointing data.
GOLD @ $1753.50 = In my last week's note I have clearly mentioned that though Gold did not respond to positive jobs data, but this could be bad news for the yellow metal. Continued improved US economic data has started to weigh on gold, as the surge in gold price is caused by quantitative easing, which is 3rd time conditional as FED injection will depend on poor growth, whereas recent economic numbers are encouraging. Spanish delay for bailout request is also causing rally to fade.
Gold rally beyond $1,800 is totally dependent on two factors, deteriorating US economic data and Spanish bailout request. Delay in both will see gold taking further clobbering though news of bailout and ECB bond purchase could push gold prices higher by another $100-150.
In medium-term gold needs to break above $1,798 to visit new territory. However, this week only move above $1,767-70could encourage bulls to re-consider testing $1,780. But, I am of the view that gold will test and try to penetrate below $1,744-46 levels and break risk for further fall to test $1,735 or possibly $1,715-20 zones, if not this week then probably dip could occur next week.
EURO @ 1.2952 = Bias for euro will remain on the upside after initial drop, as I am expecting buying interest to emerge on dips. But for further euro gains it needs to push above 1.3040-50 zones. I am expecting zigzag trading activity by which I mean we are going to see a dip to 1.2880 and a bounce back, but I will not be surprised to see dip extending to 1.2740-80 zones Range for the week 1.2740- 1.3150
GBP @ 1.6073 = Cable will remain in narrow range and is likely to have neutral behaviour. Requires break above 1.6120, which looks difficult for 1.6175. Risk will increase for fall is 1.5950 surrenders for test of 1.5850-70 zones. Range for the week 1.5850 - 1.6180
JPY @ 78.42 = We saw a prefect move in line of my last week's projection failing to penetrate beyond 78.80-90 zones. I see a very similar behaviour this week with mild softness in the tone of Japanese currency and we could see some selling of JPY around 78.10-20 zones. Yen should not break resistance level of 77.70. On the upside break of 78.90 will encourage to test 79.20, but 79.50 will be though to attain. Range for the week 77.70 - 79.50
CHF @ 0.9330 = Swiss Franc gained mildly against euro in crosses, but is likely to remain tagged with the European currency. Swiss currency will find resistance around 0.9250 and is unlikely to make further gains unless we see euro rally. Break of 0.9370 could see further easing towards 0.9398. Ranges for the week 0.9170 - 0.9410
AUD @ 1.0231 = Aussies is too dependent on Chinese data and this week's Chinese GDP data will provide further direction about the economy. As per last week's post AUD could not surpass 1.0320 levels and is looking under severe pressure. Indication of rate is evident after the release of poor economic indicator and endorsement by RBA official of difficulties faced by the Australian economy. Therefore, another bad Chinese could clobber the Australian currency. However, any up move could be good opportunity to pick the top. 1.0340 is the upside level to watch. A break below 1.0150-70 will encourage challenging 1.0070-80 levels. Range for the week 1.0040 - 1.0350.