The US equities Markets came back under pressure after Bernanke's try to redirect the markets which cheered by the existing possibility of supporting the US economy by another quantitive easing plan as he said that can be on circumstances we do not face currently and he has added clearly that the fed is not ready to take such a step currently in his second day of hit semiannual testimony in front of the financial services committee on the house after saying the first day that everything should be on the table.
The greenback could be supported after these comments which hurt the risk apatite which has been pressure by another new warning of downgrading the US credit rating maintaining its negative outlook which has changed from stable in last April and this new warning came following Moody's warning of downgrading the US credit rating to contain the markets sentiment highlighting the risk of not raising the $14.29 trillion ceiling of US debt which has been already reached on 16th of May as what has been announced by the Timothy Geithner.
In this same time, china which has more than a trillion of US debt has announced its concerning too asking for raising up this limit while this request is still not approved by majority of the republicans of the house who are asking for cutting the governmental spending by at least 2 trillions before accepting this request which can be the market worrying issue in the coming future with the worries about the debt rising up globally weighing down on the business sentiment which can find difficulty in have new support from the Fed which can find difficulty too in buying more bonds for stimulating the growth which has actually shown signs of weakness recently and weak performance of the labor market and cutting the governmental spending currently will have a direct negative impact on the US GDP which has been already downgraded by the Fed following its recent meeting to be from 2.7% to 2.9% y/y in 2011 and to be from 3.3% to 3.7% in 2012
And from another side, the prices upside risks can be another obstacle in the face of any new easing action by the Fed with the US CPI rising in a continuous way in the recent moths from worrying about the deflation in last November supporting the Fed to take it's Q2 plan with CPI rising by just 1.1% yearly but this rising has started to speed up by 1.5% in December, 1.6% in January, 2.1% February, 2.7% in March, 3.2% in April and 3.6% in May while we are waiting it to show again today 3.6% in June.
So, It looks now with this current inflation pressure that solving a debt crisis can be harder than solving the credit crisis which is one of the important reasons of the debt crisis which is facing Euro zone strongly currently and can face also US which has adopted strong easing stance for keeping the economy up in the most possible fast way but this was on the account of its financial position again by the way of spending and buying as much as you can hurting the US balance sheet for bailing out too big financial institutions of it in order to driving up the markets confidence and getting out of the recession and now with the worries about the economic growth increases again, the debt issue has risen up containing the markets sentiment which can lead the US economy to stagflation risks which can cap the Fed from taking new decision as what has been done in UK capping BOE from taking new decision since November 2009.
The gold surely could get use of these worries about the debt problems which included the Italian financial position this week too and as a strong options to the investors' who are looking for a hedge against market risks and inflation too, it could get over its previous high at 1574 reaching 1593 yesterday supported also by rising of the Chinese CPI to 6.2% y/y from 5.5% while the market was waiting for 6.2% last Saturday to start this week strongly underpinned and by God's will, further rising up from here can be met by resistance now at 1593$ again, while there can be another expected resistance at 1600$ per ounce psychological level while getting down from here can be meet now supporting levels at 1540$, 1523$, 1509$, 1493$ then 1477$ which has been reached under the pressure of not giving hints about new Fed's Q3 plan following its recent meeting on 22nd June.
God willing, we will be waiting today for the release of the stress tests results of 91 European banks and if we are to have weak results this can add more gains to the gold despite of the discrepancies about the efficiency of them since the falling of succeeding Irish banks of these tests on 2010 few months after them!
Kind Regards
FX Market Strategist
Walid Salah El Din
E-Mail:
mail@fx-recommends.com
http://www.fx-recommends.com