God Willing, the market sentiment will be contained by tomorrow Fed's meeting waiting for any new probable adding to its quantitive easing policy after the recent disappointing release of US labor report of November which has shown rising of the unemployment rate to 9.8% from 9.6% in October and lower than the market expectations non-farm payroll added just 39k while the market was waiting for about 150k which shown that the US labor market is still struggling and there can be further existence of the deflation pressure on it which is fearing the Fed and may lead to further easing steps which can hurt the greenback pushing the commodities and energy prices globally up while US has not get out from these risks of deflation forcing other countries and especially the Asian to curb the investment and cooling their economies as we see in Korea and China which increased its banks reserve requirements six times this year by 0.5 percent for curbing the inflation upside risks as the most preferred way to the Chinese until now than hiking the interest rate or letting the Yuan to appreciate further criticizing this US quantitive easing policy of US which is causing a devaluation of the greenback hurting their economic growth and their exports and in the same time helping to tightening the US trade deficit which came down in October to 38.7b$ from 44.6b$ in September while the market was waiting for 44.8b$ and as long as the US labor market is still in need of supporting, there will be no clear end of this easing policy and tax cuts in US which kept these cuts which have been decided during Bush's presidency in another way of easing can hurt the US budget and treasuries prices driving the US treasury yields up as we have seen by the end of last week.
The greenback could find support on a profit taken wave across the broad has been triggered by better than expected release of US non-farm payroll of October in the beginning of November which has come better than the market expectations of just 60k after losing 41k in September encouraging the investors to take profits covering their greenback selling after the decision of the Fed has actually taken on the third of last month to add another 600B$ to its adopted quantitive easing policy of buying US treasuries till the end of June 2011 pushing the greenback down to remarkable levels especially versus the single currency from nearly 1.3030 to 1.4281 but this was just a beginning as the greenback has continued its rising across the broad fueled by the market worries about the tension of the semi Korean island which tempered the markets pushing the inventors to square further their carry trades buying back the greenback which was underpinned by the concerning debt situation of the European countries again contain the market sentiment hitting back the single currency last month driving it below 1.3 psychological level before finding finally new buying at 1.297 on successful Portuguese and Spanish auctions with announced ECB supporting of the bonds prices lowering their yields and giving stability to the markets which have been in a turmoil recently helping the Single currency to retest 1.342 level last week despite the rising of the costs of covering these auctions which is still high relatively but Trichet could come back to declare the ECB readiness and sticking to its previous pledges of buying more bonds restoring more confidence helping the European stocks markets. Now, The single currency is still under technical pressure after failing to get over the area from 1.3385 to 1.3425 versus the greenback which can open the way to 1.359 following by the recent previous top at 1.379 and this can be a stronger level as breaking it can open the way again to 1.4 psychological level while the way down should be met by supporting level at 1.306 then the recent supporting level at 1.297 whereas the pair has met new buying interest recently and where the pair has formed a previous intermediate bottom of its rally which has ended to 1.428 and breaking it can lead to 1.26 as the main bottom of this previous ascending rally which has ended at 1.4281
Best wishes
FX Consultant
Walid Salah El Din
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