Superstar Trader Savio’s Weekly Global Market Update – 3rd July 2011

Hi Friends,

Last week I had pointed out that the S&P500 was headed for a pullback while the nifty too would probably continue its pullback. At the same time I had mentioned that in coming weeks (short term) the euro would head lower in a corrective manner although in the medium term (3 months) it would head higher. Now what has happened during the week gone by has been a bit abnormal. Here’s the reason  http://online.wsj.com/article/BT-CO-20110629-715034.html  Apparently China has been buying huge amounts of euro .Now when a country is buying a particular currency while the others are selling implies that there is strong support in-spite of current negative sentiment due to which prices are going to move two ways in a volatile manner. This is not Market volatility, rather this is price volatility. Market volatility occurs when there is uncertainty and usually signifies prices moving towards the longer period (daily/weekly) means, which is also referred to as mean reversion. However when most participants are selling a particular currency due to negative sentiment and a big buyer supports prices from falling it leads to price volatility where prices move down swiftly and then again find support and moves up in an almost equal or higher velocity. The last weeks movement in the euro not just wiped out the losses sustained in its immediate previous week but created a weekly bullish candle. With the momentum clearly shifted upwards it seems the target of 1.5150 before September based on the weekly impulse could be achieved while the downside will be limited to 1.3800. This also means that the downside in emerging markets is limited due to return of risk appetite as the dollar may not get much stronger in coming months unless economic data surprises on the positive side. The maximum downside for the Nifty seems to be 4800 and this probability too is getting lesser with each passing day.

What Are The Markets Saying?

US markets

S&P500

The pullback was expected but the move has been much more than a mere pullback .The target for the current upmove is 1365. A reassessment needs to be done if this target is achieved.

Currency Markets

EUR/USD

For the next week the target for the upside is likely to be 1.4650 after which there could be a retracement.

GBP/USD

The pair could head to 1.6150 if data on Non -Farm payroll disappoints.

AUD/USD

Pair likely to head to 1.0845 after which a retracement is likely

Indian Market

Nifty

The up move could target 5784. While concerns of inflation remain the index is unlikely to go below  4800

Happy Trading!!!

Savio

Share on Facebook

Tags: forex, nifty, SP500, SPX, Standard and Poors