The pressure on the greenback has continued during the Asian session after the market focusing had been shifted to the weakness of the US labor market and the possibility of having more easing steps from the Fed to stimulate it from the EU debt crisis and the problems which are facing the Spanish banking sector and the mixed political situation in Greece.
The single currency could rise again over 1.25 psychological level versus the greenback despite the current market risk aversion sentiment which always underpins the greenback and the Japanese yen by unwinding of the carry trades as low yielding currencies.
God Willing, The market is waiting now for the release of Fed's Beige Book and the testimony of the Fed's Chief later this week to know more about the fed's appreciation of the current economic pace of growth specially after the recent manufacturing and industrial data which have shown further losing momentum as May US ISM Manufacturing index has come at 53.3 by the end of last week while the market was waiting for 53.9 from 54.8 in April and in the beginning of this week we have seen US factories orders of April down monthly by 0.6% while the market consensus was referring to rising by 0.3%after falling by 2.1% in March.
The market is also waiting tomorrow for the ECB's interest rate decision and the press conference of Mario Draghi which is awaited after it to know more about the stance amid the current exacerbating economic conditions in the EU to know whether there are new injection of cheap money into its struggling banking system for reviving the economy or not with the current market worries about Greece's departure out of the EU.
We have seen also easing of the pricing pressure in the manufacturing sector by the falling of US ISM manufacturing prices paid index into the contracting territory to 47.5 while the market was waiting for easing to 56.8 from 61 in April showing easing of the inflation pressure accompanied with the recent falls of energy and commodities prices giving distance to the Fed's to take such waited steps to stimulate the economy with no worries about the inflation upside risks.
God willing, the single currency can meet now resisting levels at 1.2626, 1.2757, 1.2867, 1.3063, 1.3180 and this can be followed by 1.3281 which its breaking can open the way to 1.3384 again before 1.3489 whereas it has formed its recent top and in the case of breaking 1.3489 the pair can meet other resisting levels at 1.3546, 1.3613, 1.3808 before 1.387 which has not been broken since the end of last October and after several tries to break it in last November while its way for falling again can be met with supporting levels at 1.2357 before 1.2286 which could hold by the end of last week and the breaking of it can lead again to 1.2151 which its breaking can open the way for 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010 which drove the pair later to reach 1.4939 on 4th of May 2011 whereas the pair has managed to ease back again.
Kind Regards
FX Market Strategist
Walid Salah El Din
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