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27/5/2009 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, May 26, 2009.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    As we have mentioned in yesterday analyses the market has paid a serious attention to the consumer confidence figure today. The markets have shrugged off the decline of March case Shiller home price index by 18.7% y/y and by 2.2% m/m focusing on it which came stronger than the market widely forecasts of 42 at 54.9. The number ensure that the worst has become behind of us and there is growing confidence in consuming in spite of the great deal of lost jobs because of the credit crisis which effect negatively on the consumers confidence. The Dow has turned strongly from the red territory by the data to the green territory gaining more than 196 points today to close at 8473. The European equities indexes followed the US ones exactly. The FTSEE 100 could compensate its earlier loses after a long weekend to close today above 4400 at 4412.
    The optimistic market sentiment has weighed on the greenback getting the single back above 1.40 again after reaching 1.3860 on the back of the massive decline of the EU GDP reading of the first quarter which has been revised down to -6.7% y/y and the Germane IFO of May which was expected to show an improving of the business climate to 84.8 from 83.7 in April and it has come in the beginning of the week weaker than expected at 84.2 undermining the single currency.
    The greenback was trading in a tight range as the UK and US markets were closed yesterday 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 has actually met at resistance at 966.80 which was the lower high of this year on March after the formed high of Feb at 1006 and it has fallen to test 940$ as a support by the optimistic US consuming figure which pushed the gold up again above 950$. 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 and this higher bottom and successful test can encourage it to test 966.8 as a resistance.
    By God's Will, We have further US housing data tomorrow with the release of US existing home sales of April which are expected increase monthly by 1.8% a decline in March by 3%. Last week we have seen US housing starts of April slumping 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. The housing data have really shown recently that the recovery of the housing market will be cautious and in a gradual pace to overcome the Sub-prime mortgages loses and the credit crisis and recession negative impacts.
    Best wishes

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

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