The markets are waiting for having more information about the US housing market today with the release of US housing starts of June which are expected to be 0.58M in June from 0.56 in May and also US building permits which are expected to be 0.61M in June from .612 in May while the equities markets seem to be rebounding this morning after strong selling in the recent days because of the markets growing worries about the US debt following warning of downgrading the US credit rating by S&P and Moody's last week without exceeding the $14.29 trillions ceiling of US debt which has been already reached on 16th of last May as what has been announced by the Timothy Geithner.
These warning could contain the market sentiment with no reached deal yet between Obama and the majority of US Congress republic party senators 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 containing the markets sentiment weighing down on the business sentiment, while the US economy is easing currently with no expected new easing support from the Fed soon as Bernenke has tried to hint in the second day of his semiannual testimony in front of the financial services committee of the house that the Fed isn't ready for injecting new funds in the form of QE3 and also the economy has not reached these bad conditions which can lead the Fed to take such an action which its possibility has grown to the markets after his saying that everything should be on the table in the first day of this testimony.
From another side, the Fed can find it difficult too in buying more bonds for stimulating the growth at these bad debt conditions which argue decreasing the US debt soon and taking austerities measures for maintaining its financial position and this has been seen in the Fed's recent statement after its meeting on 22nd of last month that there should be a plan over the long term for decreasing this debt lowering its forecast of US GDP to be from 2.7% to 2.9% y/y in 2011 and to be from 3.3% to 3.7% in 2012.
That's beside 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 and in June as we have seen by the end of last week with no easing back until now despite the easing of the growth which can lead to stagflation risks capping the Fed from taking new decision as what has been done in UK since capping BOE from taking new decision since 5th November 2009 when it raised its buying assets plan to 200b Stg keeping the interest rate unchanged since 5th Feb 2009.
While the gold is still shining rising above 1600$ per ounce supported by the worries about the US treasuries specially and the global bonds broadly with the debt crisis in EU too which are making the gold much more attractive to the investors who are looking for a safer haven stance and also as a hedge against inflation, the gold could find strong buying since the release of the Chinese CPI of June which rose strongly to 6.4% y/y from 5.5% while the market was waiting for 6.2%.
By God's will, the gold next supporting levels are now at 1575. 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, the markets will be waiting also today for BOC interest rate decision and it is widely expected to decide to keep the interest rate unchanged again at 1% as it has since September of last year as the US growth slowdown can effect negatively as well on the Canadian economy which depend of the US demand of commodities from it despite the recent signs from Canada showing good economic performance with inflationary pressure as we have seen recently the Canadian capacity utilization of the first quarter of this year surging to 79% from 76.8% in the last quarter of 2010 and also Ivey PMI of June which was expected to be 62.5 but it came at 68.2 from significant rising in may to 69.1 from 57.7 in April and also the Canadian non-farm payroll of June which came at 28.4k from 22.3k in May while the market were waiting for easing back to 11.3k that's beside rising of the prices as we have seen May Canadian CPI rising to 3.7% y/y while the markets were waiting for 3.3% as the same at April and we are waiting for this figure by this weekend to be 3.5% in June.
However the Canadian dollar is still finding support from being a good safe haven option during these worries about debt and the tensions in Libya which are supporting the oil prices too and God willing, further falling of the US dollar versus the Canadian dollar can be met now by supporting levels at 0.9512 then 0.9444 which the pair has ascended from it following the turmoil which hit the commodities markets after the labor holidays in the beginning of May helping the pair to reach 0.991 before getting back down forming a lower high at 0.9773 which is forming the pair nearest important resistance currently.
Kind Regards
FX Market Strategist
Walid Salah El Din
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