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26/5/2009 - The Current Market Sentiment

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

  1. fx-recommends

    fx-recommends Content Contributor

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    The greenback was trading in a tight range as the UK and US markets were closed today and there was no key direction from the equities markets performance. However the greenback was not tied to the equities markets movements in the recent few days of last week as the market has focused in the US quantitive easing policy inflation impact. The greenback is still undermined by the US quantitive easing policy measures of injecting funds into the markets which can cause an inflation pressure on the first months of the recovery which is expected to start later this year and if there is no recovery soon these funds can cause a stagflation pressure. Last week Fed member Plosser has indicated his concerns about inflation which can reach 2.5%y/y in 2011. The demand of gold has increased after his comments pushing it above 940$ as a mirror of the inflation keeps the value of the investors' wealth.
    This new sentiment in the markets can put the greenback under further pressure and drives the gold strongly higher above 1000$ and it can be one of the best options to the investors in the coming period.
    The gold is expected to meet a resistance at 966.80 which was the lower high of this year on March after the formed high of Feb at 1006. The gold could form double bottoms last month at 864.90 and 864.50 and then started to make higher lows at 878.85 then 914.95 before breaking out 945 last week.
    The Germane IFO of May which was expected to show an improving of the business climate to 84.8 from 83.7 in April has come weaker than expected at 84.2 dragging the Single currency below 1.4 versus the greenback before compensating these loses and creeping up above it again.
    Last week the British pound has been under the pressure of the S&P downgrading the British economy from stable to negative. But it could get back what it has lost across the broad and versus the greenback when the markets have seen that the US economy and other economies who followed its same quantitive easing policy can be subjected to the same downgrading amid the credit crisis and the struggling global economy. The Cable has support recently from improving the current risk appetite of the investors which weighed on the greenback and the recent UK data of April which have shown the UK RICS house price index of April improving to -59.9 from -72.1 in March and the market was just waiting for -70 also the trade balance deficit has shrunk in March to 6.8 Billion pound from 7.3 Billon pound in Feb and also March UK manufacturing productions output have shrank by just .1% m/m and they were expected to be by -.9% m/m and UK industrial productions of March were expected to come down by .8 but they have shrank by slower pace by. -.6%.these data come after U.K. retail sales figure of British Retail Consortium survey of April which have surged by 4.6% in April y/y from declining in March by 1.2%. The cable could gain momentum from the breaking of 1.535 then 1.572 and the next major resistance is standing now currently at 1.6672 and it was recorded at the end of last October after the sever declines which started by the end of last September.
    The US housing data are to continue this week after last week release of US housing starts of April which slumped to 458k y/y and they were expected to be 520k from 530k in March and the building which stagnated below .500M at .494M m/m and the market was waiting for improving to .530M from .510M came in March. These housing data have come after the release of May US NAHB new home which have increased to 16 from 14 in April and we wait this week for the release of US existing home sales of April which are expected increase monthly by 1.8% a decline in March by 3%. We wait today for the release of US consumer confidence of MAY which is expected to improve again this month to 42 from 39 in April. The market is really sensitive to the consuming data as they reflects the current demand forces which should spur growth again and depressing data can effect negatively on the risk appetite and the equities market and finally, we wait by the end of this week for the preliminary release of the US Q1 GDP figure which is expected to show another yearly shrinking by 5.5% after the last quarter of 2008 shrinking by 6.1%.
    Best wishes

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