29/6/2011 - The Current Market Sentiment

[walid]

Despite the British conservative governmental choice to take the direction of lowering the budget deficit by placing austerities measures since it has started to rule after the labor government amid the debt crisis in EU, Fitch credit rating agency has changed the outlook of the British long term debt to negative from stable which means that there is 50% chance to lower its AAA rating in the coming 2 years by God's will.
Fitch has said that this step has come from its side because of it has addressed very limited fiscal space to absorb further adverse economic shocks amid the current debt crisis risks which weighing down on the economic growing pace of the Euro zone.
Fitch's decision has come last week even before the new budget announcement of 2013 which could be criticized too if it is to have stimulating plans because of the current high levels of debt or even if it is to have more austerities measures because of the current economic slow down!
While the inflation easing pressure in UK can help BOE to add more funds to its assets purchasing plan this year by God's will, after the inflation yearly rate had come under pressure in UK this year after diminishing the impact of the standard rate of VAT increasing to 20% from 17.5% on 4th January 2011 which has contributed in raising the inflation by about 0.75% yearly over all the months of 2011 to not be less than 4% yearly in any month of it, while the yearly inflation target of BOE is just 2%.
We have seen also last week significant drop of the wages in UK which can undermine the inflation upside risks too as UK Feb labor report has shown last week that UK ILO unemployment rate is still at 8.4% in the previous 3 months to January which is the highest since 1995 while in this same period, the average earnings excluding bonus have grown by 1.7% while the markets were waiting for easing back to just 1.9% from 2.0% and also the average earnings including bonus have decreased to 1.4% from 1.9% in the previous 3 months to December showing that's there is no worries about building inflation pressure, in the case of taking more easing steps by BOE.
The release of the MPC meeting minutes on the 9th of last February have shown also tendency of adding more funds by both of the MPC's members Posen and Miles who have voted in favor of increasing BOE's assets purchasing plan by Stg 75 Bln while the other 7 members were preferring increasing by just Stg 50 Bln to not increase the current markets worries about UK economy and the current pressure on it amid the easing of the global economic growth pace and the EU debt crisis negative impacts on the economy which dampened the confidence in the business spending and consuming spending which means that there is still chance for adding more funds to this plan by God's will in May after consuming the recent Stg 50 Bln added in that meeting next month as it is planed for spurring investment stimulating the economy which has contracted in the last quarter of 2011 by 0.2% growing yearly by just 0.7% on falling of UK quarterly total business investments by 5.6% which were expected to show decreasing by just 0.7% after rising by 1% in the third quarter of last year following strong rising in the second quarter by 11.6% referring to the strong need for the current QE policy while UK CPI is still heading down on the economic slowing down pressure which dragged the inflation rate down to 3.6% y/y in January from 5.2% in last September and we are waiting ahead tomorrow by God's will for the figure of February which is expected to show further easing to 3.4% yearly.
God willing, in the case of rising, the cable can meet now resistance at 1.5885 after breaking it previous resistance at 1.5745 by the end of last week after the data had come from US showing receding of the consuming confidence in March and monthly cooling of the industrial production in Feb beside continued easing of the inflation pressure over the consuming level after the producing level has shown also previously last week easing of the pricing power.
And in the case of breaking above 1.5885, it can meet another resistance at 1.60 psychological level after failing to break it by the end of last month making top at 1.5995 whereas it has started setting back to 1.5601 whereas it has formed its recent bottom which pushed it up to this current levels and in the case of declining, it can meet now supporting levels at 1.569 before 1.5601 again and breaking it can open the way for another supporting level at 1.5515 which can be followed by 1.5449 before another one at 1.5319 before its bottom at 1.5231.

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

[walid]

By God's will, the single currency is waiting now for what the EU Fin Min Meeting in Copenhagen can end to today while the speculations are increasing for emerging the current EFSF plan and the ESM which is awaited to work in the middle of this year as there can be put together in one package containing the 240b euros which is the lending capacity of the EFSF and the 500b which is the current planed value of the ESM.
This request has been highlighted also by the IMF managing director legarde but there was opposing from Merkel who looked much more convincible recently for adding more efforts for getting over the debt crisis even by enlarging the current bailing out plan as it has been asked by US, Japan and China in the recent G20 meeting for giving the IMF the role their supporting in the face of the crisis and current global economic slow down.
While the greenback is still suffering from the persisting conservative position of the Fed's Chief Bernenke toward removing the current accommodative easing policy worrying about the employment sector performance downplaying the inflation upside risks which can result from the current rising of the energy prices over the medium term.
The data from Europe has shown today that the Germane retail sales of February have rose by 1.7% monthly like what it has don in January while they were expected to rise by just 0.1% but EURUSD is still facing hardness to get over 1.34 and God willing, in the case of getting over it the pair can face another resistance at 1.3489 whereas it has formed its recent top which dragged the pair to 1.3003 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 is still unbreakable since the end of last October and after several tries to break it in last November while getting down from here can face supporting level again at 1.3251 which was this week low and breaking it can be followed by other supporting levels at 1.3133, 1.3048, 1.3003, 1.2973. 1.2930, 1.2874 before 1.2631 which was the pair formed bottom on 13th of last January to these current levels.

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

[walid]

The single currency could get over 1.33 versus the greenback again with improving of the market sentiment after it has come under pressure yesterday on increasing worries about the Euro zone economic slow down which open the way for taking further easing steps by ECB for reviving the economy which is negatively impacted by EU governmental efforts for underpinning its revenues by hiking taxes and cutting its spending for having a stabilized financial situation in the face of the debt crisis risks which are still looming threating its creditability.
Yesterday, Mar EU Manufacturing PMI has come at 47.7 as expected and as the preliminary reading of it from 49 in February and also Feb EU Unemployment rate has come at 10.8% as expected from 10.7% in January but by the end of last week we have seen EU CPI flash reading of March coming at 2.6% y/y while it was expected to ease further to 2.5% from 2.7% in Feb and Jan which is well above the ECB 2% inflation target showing that there is still inflation upside risks as the ECB president Draghi has maintained recently because of the rising of the energy prices despite the economic slow down in the Euro zone.
God willing, the pair can face now resistance at 1.3384 which could stand in the face of it last week and breaking it can open the way for 1.3489 again whereas it has formed its recent top which dragged the pair to 1.3003 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 getting back down from here can face supporting level at 1.3251 which could cap the pair falling supporting it to get over 1.33 again and in the case of breaking it, this can open the door for testing other supporting levels at 1.3133, 1.3048, 1.3003, 1.2973. 1.2930, 1.2874 before 1.2631 which has been the pair formed bottom on 13th of last January.

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

[walid]

The worries about the US labor market have renewed again today with the rising of US initial jobless claim of the week ending on 7th April to 380k while it was expected to fall to 355k from 367k a week earlier.
The greenback has fallen across the broad as this figure pushed up the speculations of having another QE3 later this year and also lowered the possibility of hiking the interest rate in the beginning of 2004
The gold looked the most gainer of this data and jumped above 1670$ again in a similar reaction following the release of Mar US NFP which came adding only 120k Jobs while the market was widely waiting for 200k from 240k in February.
The single currency also could get over the current looming worries about the Spanish debt and it could get over its previous resistance versus the greenback at 1.3163
While the US equity market is trying to get more of its lost ground recently by this increasing prospective of having further easing steps by the Fed which always cares of the labor market performance which was worrying the Fed's chief Bernenke even before these recent data which highlighted to the market the vulnerable to deterioration stance of the US labor market while the market will be closely watching tomorrow for the release of Mar US CPI which is expected to show easing to 2.7% y/y from 2.9% in Feb by God's will to know more about the inflation pressure in US over the consuming level after the producing level have shown today falling of US PPI in March to 2.8% while it was forecasted to decline to 3.1% from 3.3% in Feb.
God willing, the gold can face now another resistance at $1684 resistance before the psychological level at $1700 per ounce which can be followed by another resistance at $1726 before $1790 whereas the it has started to fall by the end of last Feb to reach its recent bottom at $1612 in the fourth of this month and in the case of retreating back again from here, it can meet supporting level at $1650 before meeting this bottom again and breaking it too can open the way for another supporting level at $1592 before $1523 again which could contain previously its falling from $1920 driving it back up to these current levels.

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

[walid]

The worries about the US labor market have renewed again today with the weekly US initial jobless claim of the week ending on 14th April coming at 386k while they were expected to fall to 370k from 380k a week earlier have been revised to 388k. So, the US equity market has opened in a mixed stance negatively impacted by this figure but cheered by the successful Spanish bonds Auctions today.
The greenback has under pressure after these weak data about the labor market performance which raised the speculations of having another QE3 later this year by the Fed lowering the possibility of hiking the interest rate in the beginning of 2014 to help the British pound to stand above 1.60 psychological level versus the greenback which has been surpassed yesterday after the MPC recent meeting minutes release yesterday which have shown that there was only one voting from Miles in favor of increasing the assets purchasing plan of BOE by Stg 25 Bln to Stg 350 Bln against 8 voters for making no change as Posen has finally joined the majority which is preferring keeping it at Stg 325 Bln.
The minutes have also shown BOE's worries about the inflation outlook because of the energy prices and the substantial contribution of BOE's assets purchasing programs for stimulating the economy in raising the prices in the same time showing that BOE believes that the inflation is to continue holding above its target in the near future by God's will.
We have seen this week that UK CPI has grown in March by 0.3% monthly to be up 3.5% y/y from 3.4% in February and this was the first rising after five consecutive drops since September 2011 when its formed its peak at 5.2% yearly and also over the producing level, we have seen recently that the prices have come higher than expected as the input prices rose by 5.8% yearly while they were expected to rose by just 4.7% from 7.8% in February and also the output prices have rose by 3.6% y/y while they were forecasted to rise by just 3.4% from 4.1% in February while the wages inflation upside risks are still easing as UK average earnings including bonus have decreased to 1.1% in the previous 3 months to February from 1.3%.
The yearly inflation rate had come under pressure in UK this year after diminishing the impact of the standard rate of VAT increasing to 20% from 17.5% on 4th January 2011 which has contributed in raising the inflation by about 0.75% yearly over all the months of 2011 to not be less than 4% yearly in any month of it, while the yearly inflation target of BOE is just 2%.
God willing, in the case of rising, the cable can meet now resistance at 1.6091 then 1.6128 before its recent top at 1.6164 which has been formed by the end of last October before setting back again reached its recent bottom at 1.5231 whereas it has started to rise again to these current levels and in the case of falling again the cable can have psychological support 1.6 before 1.5892 which can be followed by other supporting levels at 1.58, 1.5769, 1.569, 1.5515, 1.5449, 1.5319 before 1.5231 again.

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

[walid]

The worries about the manufacturing sector performance in EU could contain the market sentiment in the beginning of this week with mysterious political outlook in France after the first round of the presidential elections which have shown greater than expected possibility of the social candidate Francois Hollande to win Nicolas Sarkozy and this political uncertainty in France can weigh on the Single currency in the coming days by the second round on 6th of May as the social candidate can confront imposing further austerity measures preferring supporting the growth putting aside containing the budget deficit making split in the core policy of the EU which is formed by Germany and France.
So, it looked to the market as a public referendum in France about this austerity policy and from another side, April EU manufacturing PMI flash reading has come down persisting of this sector weakness by sinking deeper into the contracting territory below 50 reaching 46 while the market was waiting for rising to 48 from 47.7 in April undermined by the germane manufacturing PMI preliminary reading of March which has fallen to 46.3 from 48.3 in March while the consensus was referring to rising to 49.
The Single currency has opened the week on a gap brought it below 1.32 versus the greenback and after the release of this weak data, it is trying hardly currently to stand above 1.31 while the greenback is getting momentum across the broad by the risk aversion sentiment which dampened the equities markets in EU and US.
God willing, further falling of the this pair can meet now support at 1.3056 before the psychological level at 1.30 which can be followed by other supporting levels at 1.2973. 1.2930, 1.2874 before 1.2631 which has been the pair formed bottom on 13th of last January while getting up again can face resistance at 1.3223 which has been reached by the end of last week and breaking it 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.

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

[walid]

With the rising of the market risk appetite again, the sterling could keep its place above 1.61 versus the greenback after the debt data which has shown rising of the total debt in March to Stg 1.02 trillion as the governmental deficit has rose in March excluding the banking support by Stg 18.2b and including it by Stg 15.87b from Stg 9.938b in February pushing the total debt to GDP ratio to 66% excluding the financial interventions highlighting the threat of credit downgrading again and the need of avoiding it.
As Fitch credit rating agency has changed previously last month the outlook of the British long term debt to negative from stable which means that there is 50% chance to lower its AAA rating in the coming 2 years by God's will and it has said that this step has come from its side because it has addressed very limited fiscal space to absorb further adverse economic shocks amid the current debt crisis risks which weighing down on the economic growing pace of the Euro zone while the British economic growth is still struggling growing up hardly by just 0.1% in the first quarter of this year quarterly from 0.3% in the last quarter of last year.
The British pound has been supported recently by the release of the MPC's meeting minutes which have shown BOE's worries about the inflation outlook because of the energy prices and the substantial contribution of BOE's assets purchasing programs in raising the prices which has shown rising yearly in March over the consuming level by 0.3% y/y from 3.4% in February and this was the first rising after five consecutive drops since September 2011 when UK CPI formed its peak at 5.2% yearly and these minutes have shown also have shown that there was only one voting from Miles in favor of increasing the assets purchasing plan of BOE by Stg 25 Bln to Stg 350 Bln against 8 voters for making no change as Posen has finally joined the majority which is preferring keeping it at Stg 325 Bln.
From another side, the British pound could find strength b y the end of last week by the release of UK retail sales of March which have rose by 3.3% y/y while the market was waiting for rising by just 1.4% from 1% in February.
God willing, in the case of rising, the cable can meet now resistance at its recent top at 1.6164 which has been formed by the end of last October and breaking it can open the way for higher resisting levels at 1.6206, 1.6251, 1.6332, 1.6452 and 1.5670 before its previous top at 1.6616 while the way down can be met by psychological support 1.6 before other supporting levels at 1.5892, 1.58, 1.5769, 1.569, 1.5515, 1.5449 and 1.5319 before 1.5231 again.

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

[walid]

The greenback came under pressure again versus the Japanese yen following the release of March US consuming spending of March which came up monthly by 0.3% while the consensus was referring to rising by 0.4% after rising by 0.9% in February showing easing of US consuming pace after US consumer confidence of April came last week at 69.2 while it was expected to rose to 69.7 from 69.5 in March increasing the speculations of having more Fed's stimulating steps as its inflation preferred gauge PCE came today down to 2.1% y/y in March and it was expected to slide to 2.2% from 2.3% in February showing easing of the inflation pressure in the same time.
The greenback is trading now again below 80 psychological level versus the Japanese yen has been underpinned after BOJ had raised its JGB purchase by just Y10 trillion extending its 2 years maturity purchase of them to three years extending in the same time the deadline of its asset purchasing plan 6 months to June 2013 buying more 3 years corporate bonds showing its belief in reaching the short term inflation target which it has placed at 1% y/y last February.
The Japanese yen could get use of the dovish sentiment as a low yielding funding currency following this weak consuming figure too and God willing, USDJPY can meet now other supporting levels 78.97, 78.17, 77.35, 76.47 before 76.01 whereas it has started rising to 84.16 underpinned by the recent BOJ easing steps for fighting deflation and stimulating the economy which weighed down on the Japanese yen versus the greenback and in the case of rising of this pair again, it can face resisting level now at 81.76 and this can be followed by 83.37 before 84.16 again.

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 facing difficulty in getting over 1.32 again after Draghi's press conference which has reflected the sack of confidence in the euro zone economy amid the debt crisis negative impacts on the governmental spending and on the demand for borrowing in the same time with the current inflation upside risks which are resulted from the high energy, commodities prices and the imposed taxes for supporting the EU governmental resources weighing down on the EU labor market which is in a weak stance while the economic pace of growth in US is still struggling.
These elements of missing trust are still capping the EU banking sector from taking full advantage from the ECB's LTROs despite its effectiveness in underpinning the liquidity in this sector avoiding collapse of it in the recent months after 2 rounds of giving loans for 3 years with just 1% yearly interest rate for reviving this sector with easy collateral rules could open the door for the small banks too to get use of them.
These loans which passed 1 trillion euros could give buffering for capital restructuring in this sector but it can be a given chance also for carrying risky assets longer or loading higher riskier assets getting use of the low yielding offered loans by the ECB which can lead to stronger unreliable exposure to toxic assets specially, if the growth pace held on this struggling situation in the face of the ongoing downside risks.
The ECB president looked worried also yesterday about the labor market in EU which carries the negative impact of debt crisis and the negative impact of the governmental efforts for getting over it by cutting its spending and hiking the taxes with rising of March EU unemployment to 10.9% showing persisting difficulty facing this sector called him for asking for restructure reforms and spending on the infrastructures for supporting demand in this market.
While the demand in the EU manufacturing sector has managed to fall further in the last month as we have seen also this week April EU manufacturing PMI coming at 45.9 deeper into the contracting territory below 50 from 46 in March from 49 in February and it is important here to mention that this index has not find a place above 50 in the expansion territory since July 2011.
He has avoided talking about the French election and its expected results impacts while it is still seen in the markets that winning of the social candidate can confront imposing further austerity measures making split between France and Germany who are the main policies markers in the Euro zone in the face of the crisis.
But anyway the single currency could have a place to close above 1.31 yesterday as he has not signaled a close interest rate cut or new LTROs or hinting to do as what was discounted to some extent in the markets and God willing in the case of falling further, this pair can meet now support at 1.3056 before the psychological level at 1.30 which can be followed by other supporting levels at 1.2973. 1.2930, 1.2874 before 1.2631 which has been the pair formed bottom on 13th of last January while getting up again can face resistance at 1.3281 whereas it has managed to come down this week and breaking it 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.
God willing, the market attention will be paid today to the release of US labor report of March which is expected to show rising of the US non-farm payrolls by 170K after adding 120k in March with no change of the Unemployment rate which is expected to be steady at 8.2% after April US ADP employment came earlier this week adding just 119k while the market was waiting for 175k from 201k in March.

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

[walid]

The presidential elections in France and the parliament elections in Greece results are still putting pressure on the single currency as they looked to the market like a referendum on the austerities measures like this which has been asked by the previous Greek PM George Papandreou which lead to his resignation last year after retreating back of doing it amid strong criticism from EU core funding countries of the Greek debt as it is obvious that the streets in the countries south of Europe which are suffering from debt crisis are against these measures.
These measures included cuts of the public sector wages and jobs and cuts of the governmental spending and in the same time increasing of the taxes to dampen the growth in the same time they cut the deficit of these debt ailing countries budgets.
But the situation is different surely from France to Greece as it is not allowed to this last one to say no these measures and there is no leeway to go through without the European strict following up specially after announcing the second bailing out plan of Greece which counted this expected change into its account in its structure.
While the case in France is another thing as it will be required from the wealthy people to pay much with this new social president who promised to make a change in the EU fiscal pact in the benefit of the current struggling EU growth and this stance has effected negatively on the French stocks market as Germany can not accept this change easily and this can cause a split between these 2 countries who are the main EU policies markers in the face of the crisis which can lead to cracks inside the Euro zone which is suffering strong downside growth risks and weak labor market as what has been highlighted recently from The ECB president who looked worried last week after the ECB decision to keep the interest rate unchanged about the labor market in EU which carries the negative impact of debt crisis and the negative impact of the governmental efforts for getting over it by cutting its spending and hiking the taxes with rising of March EU unemployment to 10.9% showing persisting difficulty facing this sector and this pushed him to call for restructure reforms and spending on the infrastructures for supporting demand in this market for adding more jobs.
The ECB is still looking for positive changes by its recent LTROs 2 rounds in the European economy as they have done in the banking sector inside the EU which has been saved by this program but its impact on the European economy is still looking lagged behind and the sack of confidence in the euro zone economy can move it forward to take more steps in stimulating this economy which is giving weak signs and this prospective is putting pressure on the single currency versus the greenback from another side as it is not looking crucial to be done by the Fed as it looks currently in the euro zone so, it looks now that the ECB is the closer one to these measures than the Fed.
The ECB has not given last week hinting of a new LTROs or an interest rate cut decision which has not been discussed in the last meeting of its member as what has been announced in the press conference after it showing appreciation of the current inflation upside risks which are resulted from the high energy, commodities prices and the imposed taxes while the downside risks are pushing down by the economic slowing down expecting the inflation to stance above the ECB 2% y/y target in 2012 before easing below it in the beginning of 2013 by God's will.
God willing after opening this week below its previous support at 1.3056 falling below its psychological level at 1.30 reaching 1.2953 in the beginning of the week, this pair can meet another supporting level at 1.2930, 1.2874 before 1.2631 which has been the pair formed bottom on 13th of last January while getting up again can face resistance at 1.30 63 whereas it has failed to recover further this week to fall again below 1.30 and in the case of breaking it, it can meet a higher resistance at 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.

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