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25/3/2011 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Mar 25, 2011.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    Despite the germane IFO Business climate getting down marginally in March to 111.1 from its all times high in last February at 111.3 while the market was waiting for it to come down to 110.6 negatively impacted by the tension in the middle east and the rising of energy prices, the single currency come back under the continued pressure of the debt downgrading falling on its budget deficit ailing countries as we have seen recently Moody's downgrading of the Greek sovereign debt 3 notches to B1 and Spain's debt to Aa2 triggering further worries about the debt risks evaluation in the Euro area while the markets are preparing for a tightening cycle to be entered by the ECB for containing the prices which should increase the cost of borrowing for covering the bonds auctions in Europe lowering the bonds and stocks prices after they have been underpinned by the adopted easing stance of the ECB after the credit crisis until now and the pressure has renewed again on the single currency which has fallen again versus the greenback to 1.4055 by the weekend with focusing rising on Portugal which suffers from the rising of covering its debt costs currently getting new downgrading to its long term debt by S&P to BBB from A- after another downgrading of it by Moody's 2 notches to A3 to increase the probability of having a share of the supplied bailing out plan which has been extended recently from 250B Euros to 440B Euros and it looks it depends now on the new government in Portugal to take this decision which can put pressure on it to take further austerity measures for capping its budget deficit to be the second country to take a share of this offering package after Ireland which added worries to the market by the release of its yearly GDP which shrank in 2011 by .7% while the market was waiting for rising by 1.2% after shrinking by .3% yearly in the third quarter of last year but it looks that the governmental cuts and the worries about the countries budget deficit have taken it toll on growth in Ireland which was doing double digits rates of growth in the 1990s.
    The British pound has closed the week just above 1.6 psychological level versus the greenback negatively impacted by the release of UK retails sales of February falling by .8% monthly while the market was waiting for getting down by just .4% after rising in January by 1.5% while it has been already under another pressure since the release MPC minutes which have shown the same status of the MPC members as Mr. Dale has given his vote again to hike the interest rate by .25% like Mr. Martin Weale and Andrew sentence has repeated his calling for hiking by .5% while Possen was the same only vote for increasing the buying bonds plan by another 50b Stg while the other 5 MPC voting members including BOE president Mr. Mervin King preferred leaving the interest rate unchanged at .5% keeping BOE 200b Stg buying bonds plan unchanged as taking any direction will cause emerging of the other direction risks as we have seen recently with the down revision of UK Q4 GDP quarterly from -.5% to -.6% and the rising of UK Feb CPI to 4.4% yearly which underpinned the cable to reach 1.6399 ahead of 1.6471 resistance which can be followed by 1.6883 while the main resistance is still far away from here at 1.7062 which is the reached top after the credit crisis but these minutes release came again as usual to dampen the interest rate rising speculations weighing negatively on the sterling which rises when it finds signs of inflation and quickly gets back under pressure with the signs of economic weakness and both directions signs are existing containing the sterling movements forming a stagflation pressure on the BOE to keep watching! And the best to figure out this stagflation case facing the BOE was the release of confederation of British industry's monthly retail sales growth poll of February which has fallen to 6 from 37 in January to ensure the market worries about the growing pace of the demand which is moving the growth up and in the same time the figure of the selling prices inside the retail sales sector has shown strong rising from 43 in January to 73 in February which shows the need of tightening too.
    The precious metals have been exposed to profit taken wave also last Thursday as the gold has broken 1444 to 1447 and the silver has taken out 36.74 to 38.16. The precious metals have been underpinned by the beginning of military operations in Libya last week underpinned by the beginning of the military operations in Libya to cap EL Qaddafi forces and the aviation in Libya which has been answered back by opening his weapons stores to the people in Tripoli announcing the Mediterranean sea as a region of military operations opening the gate for any immigrations to Europe without any intersection which can extend the period of instability in Libya and tackle the land military operations against him but it looks that France and from the first moments of this action insisting in hitting him sand his land military facilities strongly as a reply of his words about funding the election campaign of Sarkozy and France asking for aids from Libya.
    The gold has started to rebound from 1380$ after the intervention to weakening the Japanese yen which has been passed by an agreement from the G7 for restoring the lost confidence in the markets which has been hit by the Japanese earthquake and its implications which caused increasing of the nuclear radiations scales in Japan triggering selling asking for liquidities and specially for the Japanese yen which is well-used as a funding currency as its very low interest rate for lowering the investments costs and this action could brought back the hope for using it again as a funding currency as the direction is now for devaluating it after reaching these recent worrying rates which do not tackle the Japanese exports only but also the investments spending sentiment in the assets and stocks markets broadly. So it was a must to do for encouraging the markets confidence again while the criticism from the European countries are expected to be at the minimal level while the Japanese exports are depressed from different sides with the yen recording its all times high versus the greenback and the Japanese products are exposed to the radiations tests all over the world.
    The Gold has opened the past week on a gap at 1423$ after closing last week at 1418$ after making a bottom at 1380$ which has been reached under increased technical pressure coming from breaking the trend line support extended from 1307$ to 1412$ at 1428$ and getting over 1447$ as the current new resistance can increase the buying momentum of it to test the next psychological waited level at 1500$.
    While the silver is stronger technically as it is still above the trend line support extended from 26.39 to 33.66 and on a shorter time frame it has just come down below the trend line support extended from 33.67 to 35.73 but it is still above its previous broken resistance at 36.74 while this recent profit taken wave has dragged it down just above it to 36.84 and it could close the week trading back above 37 at 37.25 trying to get back above this trend line support extended from 33.67 to 35.73 but making a lower high out of this trend line can expose it deepen the profit taken wave to what's below 36.74 meeting another support at 33.66.

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

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