GENERAL MARKET CONDITIONS

U.S. business bankruptcy filings in April increased 49% from a year earlier, the biggest gain so far this year, as the slowing US economy prompted more companies to shut down. Signs of distress, such as bankruptcies and foreclosures, are rising as economic growth has slowed to its weakest pace since the last recession in 2001. Foreclosures and bankruptcies alike are rising as falling home prices make it harder for those in the U.S. to refinance before adjustable-rate mortgages reset. Median prices for existing homes fell in 22 metropolitan areas in February, down 7.70% from a year earlier. Business gloom along with higher commodity prices is eating into real income. As long as this continues gold will maintain its medium term bullish trend. The US dollar will benefit as other countries/economic zones also slowdown due to higher commodity prices and firm interest rates.

There is hardly anything to comment on metals as crude oil prices seem to be dictating everything. The US dollar is off yesterdays lows but still not out of the woods yet. Markets will be looking forward to the European Central bank meeting (ECB) and bank of England meeting for direction. If the ECB explicitly says that they will raise interest rates to ward off inflation then there will be another round of gains for the euro. If the ECB says that higher commodity prices along with a stronger currency is hurting growth then there will be another round of sell off in euro.

SILVER -- JULY FUTURE -- INTRA DAY PIVOT $1712

Intra day as long as $1666 holds downside will be limited and silver will target $1728 and $1772. A consolidated fall below $1666 will result in $1636 and $1600.

INDIAN RUPEE (USD/INR)

The Rupee weakened to new seven month low of 40.98 yesterday on the back of a continued rise in the crude oil price and volatile stock markets. A weaker rupee will only add to inflationary pressure. The Reserve Bank of India’s (RBI) stance on the rupee will be crucial at this juncture as the sole aim of the government in an election year is to control headline inflation. In 2007 a stronger rupee had a role in controlling inflation. Markets will be looking forward to clues on RBI intervention to check rupee weakness through state run banks. In our view RBI should be happy to intervene as intervention takes away excess liquidity from the money markets. Technically 41.18 is the key medium term resistance and only a close over 41.18 for three to four consecutive days will result in another round of weakness else the rupee will have topped out and near 40.25 once again.



HAPPY PROFITABLE TRADING


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