The pressure has got off the single currency after the Finnish prime minister's comments that Finland will not be a reason of failing European rescue plan to Portugal which seem to be necessary currently. The markets have reacted positively to this declaration which eased the worries about funding the recent Portuguese request of funding its debt through the IMF/European Financial Stability Mechanism which is called (EFSM) which has been extended last month by 190 billion euros to be 440 billion recently from 250 billion for aiding European ailing of debts countries
the European rescue plan to Portugal putting pressure on the European bonds yield after the market worries about the debt contagion in Euro area could contain the market sentiment in the beginning of this week pushing the 10 year yields of the Greek bonds up to 14.4% and also the Portuguese 10 year bonds yields have surged to 9.1% and the Irish 10 year bonds yields have risen to 9.8%
The single currency has come under strong pressure earlier this week on rumors about new preparing request from Greece to restructure its debt plus the worries about the new Finnish government participation in funding this mentioned Portuguese request which accelerate the selling pressure breaking 1.4241 which has been accompanied with breaking the trend line support extension of the rising from 1.2873 to 1.3751 to reach 1.4155 before it could rebound above this trend line support again trading currently above 1.45 again breaking its earlier resistance at 1.4519 reaching 1.4546 today ahead of its previous lower high at 1.4578 which came after making the top following the credit crisis at 1.5143.
From another side, the greenback came under pressure earlier this week by the shocking lowering of S&P rating agency to the US economy to negative from neutral and today by the psychological breaking of 1500$ by the gold which could get use of the current market worries about the inflation outlook since the release of March strong inflation figures of china as a hedge versus inflation while situation in Libya is still mixed threating the oil supplies from the middles east to be cut. The gold which is still well-supported by being above the trend line support extended from 1307$ to 1380$ has supporting levels at 1450$ then 1410$, 1393$ then 1380$ which has been reached after the Japanese earthquake.
While the Fed's adopted quantitive easing policy is still weighing negatively on the greenback driving up the prices of the commodities and energy specially as it is still looking to the Fed that it is too soon to end this policy on the current economic situation as what has been said recently clearly by the Fed's Vice president Yellen which came inline with the recent statements of Bernenke which downplayed the risks of rising the energy prices over the long term referring to that the rising of the oil and commodities prices can be transity and this direction has been obvious in the recent meeting minutes of the Fed too with no reference to hike the interest rate until now and this direction can be maintained as long as we have seen no implication to be mentioned on US ISM manufacturing index which has come at 61.2 in March while the markets were waiting for just 60.5 from 61.4 showing no easing of the demand in the sector despite the rising of the commodities and oil prices which can give the conclusion that the easing period can be extended undermining the greenback having more rooms for prices to grow up with no tightening action to be taken against them underpinning the demand for the gold as a hedge against inflation.
Kind Regards
FX Market Strategist
Walid Salah El Din
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