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25/10/2013 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Oct 25, 2013.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The single currency is still little changed trading around 1.38 versus the greenback which is still depressed unable to get back what it has lost recently on increasing anticipations of having no close cut of the Fed’s current QE stimulating monthly scale of buying because of the gradual pace of the labor market recovery and the uncertainty about the results of the political negotiations for raising the US debt ceiling and their impacts on the US economy.
    While the gold could have the ability to break now another resisting level at 1352$ and further rising can be met by another resistance at 1375$ has been formed as another lower high at 1400$ psychological level before 1418$ which can be followed by 1433$ which has been reached on the previous worries about imposing US military action against the Syrian regime which fueled the energy prices while retreating again can be met by supporting level at 1310$ which could stave off its correction following last week jump on the Chinese credit rating agency Dagong Global’s downgrading the US governmental debt to A- from A maintaining a negative outlook to increase the worries about making diversification out of the US treasuries by China which is holding what worth about $1.28b of them and this allocation can lead other countries to do the same hurting the USD and its backed securities in favor of other currencies and also gold which is looking better as a hedge against inflation too with low interest rate levels in several emerging countries facing high commodities and energy prices.
    USDJPY could have a brief dip below 97 level before rising back currently with the continued improving of the market risk appetite as it came under pressure during today Asian session on the release of the Japanese national CPI coming by the Asian session to show new highest yearly rate since October 2008 rising by 1.1% in September with constant rising since last May from the negative territory it has been in from June 2012 to May 2013 suggesting with this current pace of prices recovery that the next step of BOJ is to cut its monetary base widening pace not to widen further.
    But anyway, the Japanese yen is still considered well-supported until now after it could find strong demand following the yields rising in the Chinese money market this week with no sign of intervention by PBOC until now as this rising of the borrowing costs in China can threat the global recovery and that directs the investors to load more risk aversion positions.
    For this same reason the Aussie dollar came under pressure to b trading now well below 0.96 after it has reached previously 0.9754 on rising of CPI in Australia by 1.2% q/q in the third quarter while the market was waiting for 0.8% from 0.4% in the second quarter to increase the probability of having an end of the current RBA easing cycle
    From another side The Aussie Dollar came under pressure by the Australian Treasurer Joe Hockey’s decision to offer $8.8 billion to expend its ability to execute foreign exchange operations in a better flexible way can also help it to intervene easily in the forex market to trim the Aussie dollar appreciation when it sees that it should do.
    But generally with this current uncertainty about the future of the US debt limit and the economic consequences of the US governmental shutdown, the greenback can be under pressure as the Fed have many reason to wait even for a later time behind the 7th of next Feb to figure out the economic growth outlook in a better way following the end of talking about hiking the debt ceiling as it has done last month waiting for this month negations results which ended to temporary agreement for reopening the government.
    So, even if the economic stance in several major industrial countries suggesting maintaining of the Easing stance if they are not to widen it by their central banks, the debt ceiling problem and the political conflicts about budget adjustments in US put more pressure on the Fed to maintain this stance which usually weigh down on the Greenback while the Fed’s have no worries as it looks about the inflation pressure which is still tame in US as we have seen recently the release the PCE which is the Fed’s favorite gauge of inflation coming down in August to 1.2% yearly from 1.4% in July has been revised down to 1.3%.
    These prospects of having the easing stance maintained unchanged in US could be confirmed also this week to bring the US 10 years treasuries yields down below 2.5% by the dovish Sep non-farm payrolls figure which has been added to the political risk to show the need of supporting the US economy further with the labor market gradual way of recovery persisting to be the Fed’s concern and that has been highlighted by Federal Reserve Bank of Chicago President Charles Evan in his talking in the beginning of this week at CNBC by saying that we need a couple of good labor reports and evidence of increasing growth, GDP growth and it’s probably going to take a few months.

    Kind Regards
    FX Market Strategist
    Walid Salah El Din
    Mob: +20 12 2465 9143
    E-Mail: mail@fx-recommends.com

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