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6/4/2011 - The current market sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Apr 6, 2011.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The gold has started its correction which has ended at 1410$ getting back above its previous high at 1447 to reach 1456 ahead of testing 1500$ psychological level as the tension is still on in Libya with no clear victory to each of the rebels or El Qaddafi's troops supporting the oil prices and the investors looking for safe haven stance.
    In this same time, there is no clear direction for hiking the interest rate ending the Fed's stimulating easing stance for containing inflation in US expecting the rising of oil and commodities prices to pass with no implication on the underling inflation over the medium term to effect negatively on the demand as what has been announced earlier this week from the Fed's Chairman Mr. Bernaneke who is expecting these rises of oil and commodities to be transitory with no effect on the long term inflation and this conclusion has been obvious in the recent meeting minutes of the Fed too with no signal for hiking the interest rate until now which refer to available room for rising prices to come with no transaction from the Fed to tackle this rising which supports the gold as a hedge against inflation and even Europe as the ECB is expected to hike the interest rate by .25% this week for containing the prices, it is not expected to be by the way that can contain the inflation firmly as most of the European economies are in need of the low interest rate for stimulating their struggling economic growth while there are other ailing countries by their budget deficit which can suffer further from the rising of their bonds issuance high yields because of this tightening action Like Greece, Ireland and Portugal while BOE is still unable until now to take a tightening action against the rapid rising of prices suffering from the stagflation pressure after UK GDP has shrank by .5% q/q in the last quarter of 2010 and even if the MPC decided finally to take an action to hike the interest rate, it is not expected to by the required way to contain the inflation which reached to 4.4% yearly in February and it can reach to 5% as the recent MPC minutes have shown.
    The gold next support is expected to be at 1410$, 1393$ then 1380$ which has been reached after the Japanese earthquake on asking for liquidity 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.
    While the silver after it has ended its correction at 36.45 it has crept up to 39.3 heading for 40 psychological level well-supported by being above the trend line support extended from 26.39 to 33.66 and also the supporting level at 37.06 and 38.04.

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

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