The market sentiment is still possessed by the growing expectations of having tapering decision next week by the Fed after 2 consecutive non-farm payrolls figures above 200k and falling of the unemployment rate to 7% which is the lowest level since November 2008.
The US blue chips continued yesterday session in the red territory with more talks from Fed’s officials about considered existing probability of having a cut of the Fed’s monthly scale of buying which is still unchanged at 85 since 12th of December 2012.
From the other side, the continued easing of the prices pressure in US which has been highlighted last Friday too by another falling of Oct PCE to 0.7% y/y from 0.9% in September and 1.2% in August can make the Fed in no rush to taper and give it also enough time to wait for the political debate results about the debt ceiling hiking which should be ended by 7th of next Feb by God’s will.
The Fed has done the same last September and chose the leeway when there were growing speculations referring to tapering decision but it has decided to wait for the political stance which has been actually miserable and lead to partial governmental shutdown before reaching hardly a decision for delaying the talking.
The markets currently are pricing on easier talks than last October can avoid another governmental shutdown but there can be a deal containing steeper governmental spending cuts for passing Obama care or higher taxes for financing the budget can threat the current growth pace in US.
There is no sign of having a major change of this current market sentiment till the FOMC meeting next week while the US major stocks indexes are at these current records high supported the recent economic date from US which suggest solider pace of recovery next year By God’s will.
Last week the markets have actually started to watch clear reduction of the worries about the economic situation can be joined by the Fed too by these recent data which have shown growth in third quarter by 3.6% from 2.8% in the previous reading from 2.5% in Q2 and 1.1% in Q1. Both ISM manufacturing and also non-manufacturing are running in the expansion territory easily with no downward surprises and over the consuming performance, the housing market improving is still keeping its momentum. The consuming pace has started to show better signs again and November preliminary reading of University of Michigan consuming sentiment survey has shown rising to 82.5 from 75.2 in October while the market was waiting for only 76 and even the last release of US weekly initial jobless claim has come below 300k.
The gold has been negatively already negatively impacted by lower levels of inflation across the globe and with rising the prospects of having a sooner than later tapering decision by the Fed following the release of Nov US labor report the non-farm payrolls, it has reached 1211$ per ounce again but it could creep up yesterday with easing of the treasuries yields to get over its previous resistance at 1257$ and it is now trading near 1260$ and God willing in the case or rising up further, it can meet another resistance at 1279$ which can be followed by 1294$ before 1300$ psychological level and it can meet above it other resisting levels at 1327$, 1361$, 1375$, 1400$, 1416$ before 1433$ which has been reached on previous worries about imposing US military action against the Syrian regime fueled the energy prices while going down again from here with the gold below its 200 H4 Moving average can be met by supporting level at 1211$ whereas it could rebound last week before 1200$ psychological level which can be followed by the lowest level of this year at 1180$.
Kind Regards
FX Market Strategist
Walid Salah El Din
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