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18/5/2010 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, May 18, 2010.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The single currency has faced strong resistance today at 1.244 versus the greenback. The equities market selling off has calmed down with the single currency stability and retracing across the broad but this sentiment could not hold further with the single currency inability to gain further momentum today bringing back the gloomy worries about the debt crisis and the single currencies assets backed securities domination again. In the beginning of this week, the royal bank of Scotland warning during the weekend that the single currency can reach parity with the greenback could contain the market sentiment deepens the single currency loses across the broad reaching 1.2235 versus the greenback before finding the support which brought it back again above 1.24 today.
    There was a panic in the markets after the massive falling of the single currency versus the greenback recently and Trichet's reference to similarity of the current exacerbating situation to the conditions by the falling of Lehman Brothers which forced it to open this week below 1.233 which was the formed main bottom of October 2008 amid the credit crisis while it was trading above 1.3 versus the greenback after the announcement about reached agreement with the IMF to provide 750 billion euros in a rescue package plan under the request of the European countries which are facing debt problems opening the door for the ECB to start discussing and buying European bonds by the volume which it sees suitable after the market has been disappointed by Trichet's comments about not discussing this issue in the ECB previous meeting and it is now waiting for any new announcement from the ECB about its plans details for buying these bonds in the future which is looking effecting negatively on the single currency again currently after the market had digested the news which could calm down the investors quickly focusing on the impacts of this announced package over the long term at the current low economic growth rates in the Euro zone which has risen by just .2% in the preliminary reading of the Q1 of this year which is not yet negatively impacted by the debt crisis and the requested austerity measures from IMF, the ECB and the European governments which will cap the governmental spending affecting negatively as well on the GDP of the EU countries which are actually struggling lagged behind US encouraging underpinning the greenback from another side.
    After the strong opening of the single currency last week above 1.2875 which was its previous support of April 2009 getting momentum to continue its rally to reach 1.31 after the rescue package announcement before losing it falling back again below its psychological level at 1.3 in a continuous selling could break its recent low at 1.252 closing last week just above 1.233 which was the formed main bottom of October 2008 amid the credit crisis at 1.233 and by god's will, the breaking of it after today inability to get back above 1.244 can lead to the main support level of the pair at 1.16 whereas the pair has started its rally to 1.604 before falling to 1.233 and rising back forming a lower high at 1.515 in the beginning of last December.

    As long as the current market sentiment is still dominated by the debt crisis in the Euro zone and its consequences which can effect negatively on the growth outlook in the Euro area which is already struggling, the risk aversion can continue containing the current market sentiment driving the European equities markets down helping the gold to creep up again above 1200$ breaking its previous recorded high on the third of December 2009 at 1226$ after it had been exposed to profit taken with the strong falling of the oil prices but it could come back again easily to its uptrend getting back above 1200$ finding support above 1150$ closing as it is still the well-chosen option to the investors who are looking for the best safe haven with the current global missing trust in the bonds attractiveness and increased worries about its rewarding as a fixed income option to the investors who are looking for a saving option of their money value and that's rather than the increasing of the commodities and energy prices which are still pushed up by the current low accommodative levels of interest rate across the broad which is lowering the cost of borrowing from a side and the value of the currency from another side.

    Best wishes

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

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