The greenback could add to its gains early in the European session breaking below 1.33 despite the germane IFO historical recorded high of November which has not been seen since 1991 reaching 109.3 while it was expected to be just 107.4 easing from 107.7 in October but the worries about the debt outlook inside the Euro area are still putting pressure on the single currency which is still under technical selling pressure after inability to break above 1.3775 in the beginning of this week drawing down breaking 1.35 psychological level which triggered stop losing orders adding to the downward momentum which lead the pair to be traded below 1.33 today while the pair real major supporting area is starting from 1.3030 to 1.297 and the failing there can lead to testing the pair recent bottom at 1.26.
The greenback has been already supported by revising up of US Q3 GDP to 2.5% from just 2% but this could not improve the market risk appetite which has been affected negatively by the triggered fire between the 2 Koreans which killed 2 south Korean soldiers and unknown damage yet on the northern Korean part which lead to a risk aversion sentiment is containing the markets supporting of the gold and the greenback across the broad underpinned by the demand for the US treasuries from another side looking for the USD dominations as a safe haven again while the gold is looking for getting above 1380$ again right now in squaring fear of risk by the thanksgiving holidays which can spark volatility in the markets this year.
After the market concerns about Ireland have calmed down in the beginning of this week on a reached deal between IMF, EU and Ireland during the weekend for having a bailing out package from 80B Euros to what's below 100B Euros as the Irish government has announced later this week to be the second after Greece this year but this acceptance has exposed the Irish government to a stronger criticism can threat its existence for having to impose further taxes adopting new austerity measures under this new debt conditions while it is still stick to its 12.5% corporate taxes which is the lowest in Europe currently and this new unclear political position could effect negatively again on the single currency stability across the broad fearing of spreading out of this stance in Europe and in any new countries can take from this IMF and EU 1 trillion Euros prepared package this year even with its lower interest than the normal bond markets for facing its debt stance deterioration especially after the credit crisis 2 years ago which caused strong loses of their banking system and Ireland was one of the first countries to support its ailing banking system carrying of its loses to suffer severely after the credit crisis in the recent years which weighed negatively on its budget which is in need to this new loans to refinance its current exacerbating deficit gap after its Department of Finance was coming out denying the need for it but the current slow rate of growth which can get down further following the US economy slowing growth and weak labor market in the second half of this year after it was running above 10% in the 90s before adopting the Euro forced it at the end to sign for it accepting further tightening pressure on its budget which should be announced later this week and in need to be accepted on the 7th of next month which can keep the pressure on the single currency which has really suffered this year from the unsustainable debt positions of its countries which made the ECB to warn earlier this year about the long term debt refinancing in Europe which looks in need of 800 billions euros by the end of 2012 suggesting that the European banks are in need to be ready for facing bad loans following the debt crisis which can reach 123 billions euros for 2010 and 2011 to reach 105 for 2011 and for facing the bad loans from 2007 till 2009 they should be ready with 238 billion euros and the financing problems seems to be ahead from showing a serious need for storing stability and injecting funds into the nerves of the European banks too as the European governments which can transfer the problem to the balance sheet of the ECB threating the single currency credibility.
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FX Consultant
Walid Salah El Din
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