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12/8/2010 - The current market sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Aug 12, 2010.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The Fed's decision to step forward in its quantitive easing policy buying Mortgage backed securities and to roll over the Federal Reserve’s holdings of Treasury securities as they mature could affect negatively on the market sentiment and the risk appetite of the investors who were waiting for holding for keeping the trust in the markets which were not waited from the fed to move over the near term which means that the Fed may have more than modest recovery performance worries which added to the pessimism about the growth outlook in US and worked in the opposite direction. The selling in the equities markets is still on without pausing since the Fed's assessment release and Japanese yen and the greenback have appreciated across the broad while the USDJPY is still under pressure and it has made a new low below 84.87 which has hold since July 1995 for at 84.71 yesterday.
    After last Friday release of the non-farm payrolls of July which lost another 131k which put pressure on the greenback across the broad to reach 1.333 versus the single currency and 1.5995 versus the British pound on increased market expectation of holding the Fed's QE policy and delaying the decision to tighten its monetary stances, the greenback could cover all of its loses of the last week dragging the single currency to reach 1.278 and the British pound to 1.557 today.
    I have said that recently by the meeting that The Fed can show readiness for loading further mortgage back securities which can help resorting confidence in the banking sector which can suffer from the falling of the housing prices but this is an expensive option and in the same time not enough to afford jobs to the real economy sparking demand avoiding recession again although a collapse of US housing sector can bring back the credit crisis impacts on the financial markets last year and how it dragged down the global economy. So, any taken action should work in these both sides for having effects.
    But now, The investors are preferring taking the safe side squaring their risky positions buying back the low yielding currencies as the Fed used softer language than even its previous meeting when it has highlighted its worries about the growth flattering but it looks now that that was the smoothing of this week easing action before the deterioration can have further negative impacts on the consuming and capital spending and to inform the market that the fed will not stand seeing the economy falling back in a second dip recession with no action even with the interest rate near 0%.
    After the single currency could get above 1.33 last Friday for a while touching 1.333 with the weaker than expected labor report of July release underpinned by Trichet's comments in the ECB press conference after its decision to keep the interest rate unchanged again at 1% last Thursday which referred as anticipated to the debt crisis easing effects on the growth in the Euro zone expecting it to be better than what was initially estimated welcoming the stress test results which calmed down the markets relatively recently, the market worries are not about the possibility of the European following of the US growth slowdown which depressed the single currency to fall again below 1.28 breaking 1.3117, 1.3096 and the psychological level at 1.30 making the next major supporting levels at 1.2735, 1.255, 1.2452, 1.2165, 1.2044 and 1.1954 and 1.1875 from 1.1875 which has been reached amid the increased worries about the debt crisis and could cap the pair from falling to 1.16 whereas the pair has started its rally to 1.604 before falling again to 1.233 amid the credit crisis and rising back forming a lower high at 1.515 in the beginning of last December while the major resistances are at 1.293, 1.30, 1.333, 1.3352, 1.3415, 1.3704 and then 1.3885 which is 61.8% Fibonacci retracement level of this same recent declining from 1.5142 to 1.1874.

    Best wishes

    FX Consultant
    Walid Salah El Din
    E-Mail: mail@fx-recommends.com

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