9/7/2012 - The Current Market Sentiment

[walid]

Despite it is not expected today to have new clues about the Spanish banking bailing out plan waiting for more reports about its banking sector, the market will be waiting for more details about the banking supervisory of the ESM by ECB and the using of its funds in buying bonds directly too after the recent EU summit agreement by the end of last month.
The EU Fin ministers had mentioned previously in a teleconference before that EU summit that it is important to support the Spanish banking sector releasing their plans to fund it from EUR51 to 62b fearing of more negative sequence in the EU financial markets driving up the bond yields of the peripheral countries to higher rates.
The single currency could raise its head over 1.23 versus the greenback in the European session but it come back to trade below after it had broken its previous supporting level at 1.229 which supported it to rise to 1.2747 last month before easing back again.
The pair had refused to end last week before getting below this level which could hold after May US non-farm payrolls which came at 69k about a month ago highlighting the possibility of further easing measures to be taken by the Fed affecting negatively of the greenback.
But this dovish figure of June US non-farm payrolls which came to show adding 80k while the market was waiting for adding 100k from 69k in May have been revised to 77k was not significant enough to trigger more speculations for easing steps by the Fed pushing up again the greenback which has been supported from another side by the risk aversion to press down on the single currency which looked in the same time still negatively impacted by the increasing speculations of having further easing steps by the ECB after its dovish assessment of the economic status in EU to weigh down on the single currency interest rate outlook differential between it and the greenback following the ECB's recent action to cut all of the key interest rates of the Euro by 0.25% last Thursday.
God willing the market will be also waiting for important events as the German parliament voting on the ESM while it is important to know more about what was behind the recent Fed's decision of extending its treasuries twist operations by 267.5% keeping its same buying monthly rate at 44.4% to detect whether there is a direction for taking more easing steps soon or not with the recent Fed's minutes release next Wednesday.
God willing, EURUSD can have supporting level now at 1.2255 which could hold in the beginning of this week and if it is to be broken, the pair can meet another support 1.2151 and 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 started easing back again while the pair ascending back way can be met by resisting level now at 1.2402 which has been supporting level previously before 1.2543 and its breaking can lead to 1.2693 which has been reached following the recent EU summit before 1.2748 which has been reached after the recent parliament elections in Greece again 3 weeks ago but the single currency failed to continue rising versus the greenback over it while crossing above it can be met by a higher resistance at 1.2822 before the psychological level at 1.30 which its breaking can open the way for more resisting levels at 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.

Kind Regards
FX Market Strategist
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com

[walid]

The risk aversion direction could contain the investors again pushing the greenback up across the broad in the beginning of the US session while the sentiment towards the single currency remains dovish with no major change of the EU Fin Minister Stance of going forward for bailing out Spain by euros100b will be directed basically for recapitalizing its banking sector while the political stance is still not clear about the ESM and the use of its funds in direct buying of bond waiting tomorrow initially for the German parliament voting on the ESM which was supposed to be started in the beginning of this month while there could be voting against it as this parliament always criticizes the direct bond buying by the ECB which will share as a supervisor and agent in the ESM
The EU fin ministers have announced that there will be 30b of the 100b available by the end of this month for Spain while the Spanish government liability is still not clear to the markets which will be waiting for the new company which will conduct managing the assets of the banks which will be shored up by the European bailing out funds while the single banking supervisor is still under construction also and this is in the same time with no clear picture about the collaterals of these funds which will be for loans its maturities from 12.5 to 15 years.
God willing the market will be waiting tomorrow too for the recent Fed's minutes release to know more about what was behind the recent Fed's decision of extending its treasuries twist operations by 267.5% keeping its same buying monthly scale at $44.4b to detect whether there is a possibility of taking more easing steps soon or not.
God willing, After EURUSD has broken today its previous supporting level at 1.2255 which could stave off its recent falling to get back 1.2333 whereas it has managed to fall again it can meet now another supporting level at 1.2151 and the breaking of it too 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 while the pair ascending back way can be met by resisting level now at 1.2332 which can be followed by 1.2402 which has been forming supporting level previously before 1.2543 and its breaking can lead to 1.2693 which has been reached following the recent EU summit before 1.2748 which has been reached after the recent parliament elections in Greece again 3 weeks ago but the single currency failed to continue rising versus the greenback over it while crossing above it can be met by a higher resistance at 1.2822 before the psychological level at 1.30 which its breaking can open the way for more resisting levels at 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.

Kind Regards
FX Market Strategist
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com

[walid]

Despite the risk appetite setting back in the beginning of this week, the British pound could spend the night over 1.56 versus the greenback unfazed of the current jitters about Barclays and BOE keeping its earlier gains versus the greenback above 1. following the dovish release of US retails sales broad figure of June which came down monthly by 0.5% while the market was waiting for rising by 0.2% after decreasing in May by 0.2%.and also the figure excluding the auto sales has shown the same pace of declining of May by 0.4% monthly while the consensus was referring to unchanged figure.

The data highlighted to the market again the possibility of taking more easing steps by the Fed weighing down on the greenback across the broad after US Michigan consumers sentiment index preliminary reading of July came down to 72 last Friday while it was expected to rise to 73.4 from 73.2 in June showing the need for spurring demand after the recent Fed's decision of extending its treasuries twist operations by 267$ keeping its same buying monthly scale at $44.4b till the end of this year by God's will.

God willing, the market will be waiting today for the release of June UK CPI which is expected to decline monthly by 0.1% as it has done in May with the same rate of rising yearly in May by just 2.8% which has been the lowest rising rate since November 2010 to ensure BOE expectation of easing of the inflation up side risks which paved the way to it to add another Stg50b to its assets purchasing program on the 5th of this month to rise to Stg375b.

Now after the British pound could form a base recently at 1.5391 versus the greenback to rise to the current level, it can face now by God's will a new resistance at 1.5722 before 1.5777 which was the highest level it has reached following falling to 1.5266 on the first day of last June while easing back again can be met now by a supporting level at 1.5516 which could hold yesterday and in the case of breaking it, there can be a possibility again for facing 1.5412 before meeting 1.5391.



Kind Regards

FX Market Strategist

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

[walid]

After green opening of the US session the US indexes have retreated back diving in the red territory following dovish assessment of the labor market performance by the Fed's chief in his semi annual testimony in front of the Senate Banking Committee.
The Fed's chief had clarified that the Fed's is ready to take further easing steps to support the economic activity with context of the price stability as the progress in reducing the unemployment is likely to be “frustratingly slow” as he said but he has not delivered again any clear idea about such steps that could be taken by the Fed in the future by God's will to stimulate the growth which is looking negatively impacted by losing confidence and expected to growth by a rate below 2% in the second quarter of this year as he expected because of the debt growth and the slow global economic growth which has been revised down for this year recently by the IMF to be 3.9% from 4.1% in its previous estimation.
He has not forgotten to assure again on the need for “unsustainable path and “ a credible plan" to lower the Governmental deficit over the long term avoiding putting more pressure on the economic activity which is already suffering from slowing down with new spending cuts and tax increases ahead to be implemented with the beginning of next year.
The greenback could press the British pound down following this speech to be traded below 1.56 which held on overnight following the dovish release of US retails sales broad figure of June which came down monthly by 0.5% while the market was waiting for rising by 0.2% after decreasing in May by 0.2% and also the figure excluding the auto sales has shown the same pace of declining of May by 0.4% monthly while the consensus was referring to unchanged figure.
The British pound has faced pressure from another side by the strong declining of UK CPI in June to 2.4% y/y while the market was waiting for 2.8% as the same as last May suggesting further easing steps to come following the Stg50b which has been added to BOE's assets purchasing program on the 5th of this month to rise to Stg375b with no fear of the inflation upside risks which are looking benign with the economic contraction by 0.3% quarterly 0.1% yearly in the first quarter of this year.
God willing, the cable can meet now supporting level at 1.5516 which could hold yesterday and in the case of breaking it, there can be a possibility again for facing 1.5412 before meeting 1.5391 while rising back from here can be faced by a resistance at 1.5678 whereas it has managed to stop rising this week falling to this current level and in the case of breaking it, there can be another resisting level at 1.5722 before 1.5777 which was the highest level it has reached following falling to 1.5266 on the first day of last June.

Kind Regards
FX Market Strategist
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com

[walid]

The single currency is still trying to keep its recent gained ground versus the greenback following Draghi's comments about the euro area current undervalued stance in the markets promising of taking what's needed of measures to shore up the confidence in getting over the crisis.
These comments could help the current market sentiment loading risks driving down the yield of 10 year Spanish governmental bonds below 7% after reaching 7.73% earlier this week after losing trust period because of the worries about several Spanish districts needs of bailing out.
But the pressure can get back on the single currency as the expectation of having more easing steps by the ECB are still strong as the data which are coming out from the EU are still showing persisting weakness as we have seen earlier this week that EU manufacturing PMI Flash reading of July came at a lower level again reaching 44.1 from 45.1 while the market was waiting for rising to 45.3 driving the composite index to stand at 46.4 as the same as June despite the rising of EU PMI Flash reading of the service sector in July to 47.6 from 47.1 while the consensus was referring to rising to 47.2 only and also the germane IFO business index of July which got down to 103.3 from 105.2 in June while the market was waiting for a smaller easing to 104.2 showing that the real economy is still in need of stronger efforts from the ECB which has already cut all EUR key interest rates by 0.25% on the 5th of this month and this current growing expectation of having more easing steps can keep forming pressure on the single currency while the governmental financial role of the debt ailing economies can be capped by the austerities measures which driving down its spending driving up the taxes for underpinning the governments revenues and their critical financial situations.
In this same time, the market is watching in the European efforts since the recent EU summit in June until now serious European efforts for turning to the ECB to have more duty and the power for bailing out the banking sector through single supervising and access to its funds by the ESM which may have a banking license as what has been mentioned by The Austrian ECB member lately for restructuring this sector without loading more burdens on these ailing governments.
From another side, the rising of US durable goods in June yearly by 1.6% like May while the market was waiting for just 0.4% and the decreasing of US initial jobless claim of the week ending on 21st of July to 353k from 388k while the market was waiting for 380k could help pushing up the risk appetite weighing down on the greenback across the broad and God willing, the market will be waiting today from US for the release of US Q2 GDP preliminary reading which expected to show annualized growing by 1.4% after 1.9% in the first quarter and there is also the release of US Michigan consumers sentiment index of July which is expected to be 72 as it came in the first reading from 73.2 in June.
God willing, The single currency can meet now in the case of rising further resistance at 1.2336 before 1.2402 which can be followed by 1.2443 before 1.2693 and 1.2748 which has been reached after the recent parliament elections in Greece again earlier last month while easing back again can bet met with supporting level at 1.2042 which could stave off the pair falling this week and breaking can open the way for testing 1.20 psychological level which can be followed by reaching 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010

Kind Regards
FX Market Strategist
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com

[walid]

The currencies markets are waiting ahead for the release of US Labor report of July which is expected to show rising of the US non-farm payrolls jobs to 100k from 80k in June by God's will as there was no significant change of the market sentiment as both of the Fed and ECB have managed to keep everything unchanged anyway.
The Fed has seen as expected that there can be time to wait following June action of extending its treasuries twist operations by 267$ keeping its same buying monthly scale at $44.4b till the end of this year by God's will.
While the ECB looked confused and waiting for political agreement to move in the EU bonds market lowering controlling the cost of borrowing while the political agreement is still looking unreachable with germane objection of such an action. The ECB looked weaker than expected to the market after Mr. Draghi's hawkish comments a weak earlier which have shown the ECB will do whatever is needed to preserve the euro zone but it seems that this flexibility and freedom of doing does not exist until now to undertake outright open-market operations of a size adequate to reach its objective as he mentioned.
So, it looks as expected that the ECB prefers waiting to work through the ESM as a way of injecting funds while it is still in need for more European working to come out while it is still not yet unknown whether it will have banking license or not than taking the responsibility of taking an action now buying bonds directly and in the same time, the ECB did not want to limit his job and power saying this clearly now. So, the waiting stance overcame again.
The meeting has disappointed surely for who was looking for new action clarify Mr. Draghi's hawkish comments a weak ago sending the single currency up in the beginning but with this confusion and mysteriousness the pressure came back on it again across the broad and god willing, The single currency can meet now in the case of rising again resistance at 1.2402 which could hold again this week and the breaking of it can be followed by 1.2443 before 1.2693 and 1.2748 which has been reached after the recent parliament elections in Greece again earlier last June while easing back again can bet met with supporting level at 1.2134 before 1.2042 which could stave off the pair falling last week and in the case of falling below it, this can open the way for testing 1.20 psychological level which can be followed by reaching 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010 while the market is waiting now by God's will for July EU PMI service sector in July to be as the flash reading at 47.6 from 47.1 in June after EU manufacturing PMI of July came at a lower level again reaching 44 from 45.1 in June earlier this week showing needed distance for stimulation by the ECB.

Kind Regards
FX Market Strategist
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com