After last week release of US jobless claim raised the expectations of having tapering of the Fed’s QE next month, yesterday minutes of the last Fed’s meeting have brought back the dependency on the economic improvement as it has left the door opened for everything.
So, the focusing is expected to be back on the economic indicators and specially the unemployment data with the next release of US weekly jobless claims and August labor report after July report which came with fewer than expected added jobs out of the farming sector by adding 162k while the market was waiting for adding 184k to dampen the optimism which resulted from the substantial progress of US ISM manufacturing index of July which rose to the highest level since April 2011 to 55.4 from 50.9 in June after falling into the contraction area in May by coming at 49.
From another side, we have seen in August rising of US yearly consumer price index to 2% y/y which is the highest since last Feb showing another growing pressure on the Fed to reduce its 85$b monthly buying of QE as the fed’s yearly target is 2% and it has repeated in its recent statements that it is to be tolerant watching this rate to grow 0.5% above this yearly target before start cutting this cheap money monthly pumping.
The greenback has found strength across the broad after these minutes which have shown no rush to cutting the Fed’s stimulating plan giving higher probability to the market of keeping the QE as it is in September too by God’s will.
The single currency has eased back to 1.3330 and the cable is still retreating to1.56 area during the Asian session while the greenback is trying to find away to 98 versus the Japanese yen despite the losses of the equities markets in US and Japan which usually dampen the demand for it.
The gold has managed to test back the area of 1350s$ as a supporting zone again after failing to have a place over1380$ several times this week with no clues yet from Jackson hole to direct the market which is preparing to look into the next economic data to come out from US by God’s will.
So, God willing the market sentiment is expected to be contained today by the release of US initial weekly jobless claim which has fallen to 320k last week and further falling can trigger more prospects of having a cut of QE in US next month while the single currency is waiting for the release of the preliminary figures of EU PMI of the manufacturing sector and service sector of August.
By god’s will, The single currency can meet now its way of easing versus the greenback a supporting area between 1.3322 and 1.331 which could hold since last week and breaking it can be followed by meeting a lower support at 1.3205 before 1.3064 and its breaking can lead to 1.2992 again while rising again from here can be met by a resistance at 1.3451 which the highest recorded level this week and since it has started to rose from its recent bottom which has been formed at 1.2754 on 9th of last July while getting over 1.3451 is expected to open the door for meeting higher resisting levels at 1.3515, 1.3595 before 1.3709 which is the top of this year until now and it has been reached in the beginning of last February.
Kind Regards
FX Market Strategist
Walid Salah El Din
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