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Currency market review (weekly) after 25th November, 2011.

This week EURO touched a 7 week low against the US$. The cost of swapping EURO funds into US$ rose to highest level (like Lehman brothers time in end of 2008), which is not a good sign for financial market. Many experts are saying that this is the good time to exit EURO on each rally. EURO dropped for 4th consecutive week, what I think that if in coming days Bond yields increase in this fashion then we can see more drops in EURO. USD gained this week because investors were taking shelter in US Treasuries, one of the important causes is the failure to reach an agreement on US deficit cut.
11/18/2011-11/25/2011 (%)
11/11/2011-11/18/2011 (%)

S.African RAND
Brazilian REAL
Mexican PESO

Like Brazilian REAL and Mexican PESO, Asian currencies dropped for 4th consecutive week, Indian RUPEE is making things hard for local importers. RBI are taking many steps like, they hiked the interest rate on deposit for Indians living outside so that they can improve the position of the RUPEE. I am getting some hints that Indian RUPEE may not weak more from this levels, I think central bank may act if needed.

Currency Market forecast for coming week
EURO was dropping more in later periods of this week. 1.34 was the crucial level, which it is trying to break. Now if it breaks that then it can drop more, may be around 1.30 level. On the upside it may face resistance at 1.38-1.39 level. At past I told that very very long-term chart of EURO reflects that it will be going up in future. If we see the chart of shorter tenure, then that reflects that EURO is going down from here may be around 1.15 level. Why I am saying 1.15 level, because if it crosses that level then it will negate that very long-term pattern. I think situation in Euro-area permits now to give emphasis in EUROs short to medium term chart, which indicates more drop.
USD is trying to break 80 level, if it able to break that then it will be out of that broader zone of 73.5 – 80 level. On the upside it will get resistance at 82 level. Situation in Euro-area and last few day’s move of USD says that it has more chance to go in the upside. Now if it drops from here then it may face support at 77.5 level.
I am still holding last week’s view about AUD, unless it breaks around 0.94 in the downside I think it will move in the upside from here. If it somehow breaks that level then it can drop up to 0.88 level. In the upside it has initial resistance at 1.02 level.
Japanese YEN has target 78 in the upside; it has support at 76.5 level in the downside. If Swiss FRANC continues its move then it will get initial resistance at 0.93 level then it has good resistance at 0.97 level. It has support at 0.895 and then at around 0.86 level.
Brazilian REAL is trying to break crucial 1.88 – 1.90 level, which it did not able to break convincingly during last 3 years. So I think here it will face lot of resistance, during last few days its move was quite big but last days move was not good. I will not surprise if it test 1.80 level again in the downside. In the upside if it somehow able to break 1.90 then it will face resistance at 2.05 level.
Mexican PESO has initial resistance at 14.4 and solid resistance at around 15.4 level, in the downside it has support at 13.70 level. At last South African RAND broke 8.20 level, now it is out of that pattern of lower highs and lower lows. It has support at 8.10 – 8.20 levels and in the upside it has resistance at 9.00 level.
What will be the situation if in future bad news starts to come from Germany!  As we have already tested some bad bond selling events. I think if situation goes this way then in future investments will leave the Euro-area and that will be the worst case…..

[Rise and drop in currency (under heading currency forecast for coming week)  means rise & drop in chart figure, not currency’s rise & drop.]

NOTE :  Please see the disclaimer of this blog .


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