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25/6/2009 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Jun 25, 2009.

  1. fx-recommends

    fx-recommends Content Contributor

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    The US Q1 final reading came better than expected at -5.5% while the market was waiting for -5.7% to add a relative strength to the greenback which was actualy underpined by The fed's decsion of not adding further easing steps of its quattitive easing policy yesterday. The fed has not mentioned the deflation risks as it has done it its April meeting and the concerns about the US treasuries attractivness amid rising of the comodities and energy prices seemed caping the Fed as By god's will, if these huge Fed's quatitive easing steps could cause the inflation preasure which can hurt the demand for the US treasuries, this can lead to a hike of the interest rate and tackling of further easing steps of the current quantitive easing policy of the fed to add some attractivness to the US treasuries to convince the bonds holders to keep their holding of US debits to prevent a second round effect of the credit crisis by the this current waited halting recovery. The US treasuries notes were the first option of the Fed's quantitive easing policy by offering an exchange of them by the mortgages back securities which caused the financial problem and became known as toxic assets which can poison the US creditability itself and they are still the Fed's preferred way to pump funds and easing by its adopted quantitive easing policy after losing the cutting interest rate tool to afford the required liquidity for the government to clean the banks balances sheets and to spur growth moving in its rescue financial plans for a promising recovery can start later this year and store the confidence in the US economy again to cover its debits worries.
    The Fed had mentioned yesterday that the pace of economic contraction is slowing and the conditions in financial markets have generally improved in recent months. The household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
    The cable which could rally to 1.658 amid an improving of the market risk appetite after the increases of May US durable good orders by 1.8 yesterday came under pressure after the Fed's US assessment and it is not trading above 1.62 again where it has found support several times in the recent 2 weeks. The cable main resistance area currently is still between 1.662 whereas it has fallen on 11th of this month and it could not be broken yesterday again and 1.666 whereas it has fallen on 3rd of this month and the way down is expected to meet the same support level at 1.62 level and the breaking of it can lead to a test of the psychological level at 1.6 and the breaking of it can expose the cable recent main low at 1.58 to be tested again as a support.
    The single currency came under the same pressure versus the greenback to slide from above 1.41 to stand above 1.39 currently. We have seen the beginning of this week the germane IFO of June which was expected to be 85 coming at 85.9 after last week release Germane ZEW of June which surged to 44.8 from 35 in May while the current conditions figure improved to -89 from -93 in May and we have seen also the flash reading of June PMI manufacturing index which was expected to get better to 40 from 39.6 coming at 40.5 and PMI services index of this same month which was expected to be 45.6 from 45.2 in May coming at 44.5 but these data could not make a major change of the single currency direction this week.
    The gold eased last week with the easing of commodities and energy prices amid the correction of the equities market. After sliding from 960 and closing below it for 2 consecutive weeks. The gold has come under further technical pressure to decline below 942.8$ reaching 925.88$ last week failing to be sustained again above 940$ resistance this week too. The falling of May US CPI Index by 1.3% y/y broadly and the core figure excluding the food and energy decreasing to 1.8% y/y could cap it last week could add further pressure on the gold which is the mirror of the inflation as the market was waiting for a slide by just .9% after April slide by .7% broadly and was waiting for the core to be as the same as April at 1.9%. The recent US inflation data shows that the inflation pressure is still tamed negatively impacted by the recessionary pressure.
    Best wishes

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