10/5/2010 - The Current Market Sentiment

By IBTimes Staff Reporter | May 10 2010 1:49 AM

The selling in the equities market has continued last Friday although the better than expected release of US non farm payroll of April which added 290k while the market was waiting for just 175k from 165k in March but the unemployment rate of April has increased to 9.9% on new requests asking for jobs showing a gradual pace of recovery in the US labor market as the Fed has mentioned recently in its recent assessment after keeping the interest rate unchanged between 0% to .25%. The US stocks could not stave off their loss again today as the gloomy pictures coming out from Europe is still effecting negatively on the market sentiment with the Dow falling below 11000 and the market focusing on the debt crisis consequences in Europe. The investors have lost some of their trust in taking risk at the current uncertainty last week preferring to take profits after more than a year of continuous rising in the equities market since the 9th of March 2009 when Dow got down below 6650 pushing the greenback up across the broad and also the gold as a better safe haven option with the current global missing trust in the bonds attractiveness and increased worries about its rewarding as a fixed income option to the investors who are looking for a saving option of their money value and that's rather than the increasing of the commodities and energy prices which are still pushed up by the current low accommodative levels of interest rate across the broad which is lowering the cost of borrowing from a side and the value of the currency from another side but it has opened down below 1200$ with market seeing the European tries for bringing stability to the bond market and the trust in their financial system. The gold has exposed to profit taken last week with a strong falling of the oil prices but it could come back again to its uptrend getting back above 1200$ finding support above 1150$ closing. The next resistance is expected to be at 1226$ which was its previous recorded high on the third of December 2009.

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The aggressive selling in the equities markets and the worries about the financial European system amid the debt crisis has weighed strongly on the single currency last week underpinning the greenback and the risk aversion sentiment. The Single currency loses versus the greenback have reached 1.252 last Thursday but it could open up on a gap above 1.29 this week with market optimism about a close joint European reached deal for staving off the debt crisis spreading in the Euro are. Currently, the market is talking about an European plan for affording not less than 400 billion Euros for saving their financial system but the talking between the financial ministers is still on and there is no new clarification yet. But the market has seen in their meeting a considerable try for calming down the market after the turmoil of last week which brought down the European stocks down affecting negatively on the market confidence. The single currency is trying now to stay well above 1.2875 which was the low of April 2009 after breaking it last week increasing its selling off momentum after falling below 1.3 psychological level versus the greenback and failing in holding above it can lead to 1.252 again and expose 1.233 to be broken which was the formed main bottom of October 2008 amid the credit crisis and over the medium term you can find the main strong level is at 1.16 which was the main support level whereas the pair has started its rally to 1.604 before falling to 1.233 and rising back forming a lower high at 1.515 in the beginning of last December.

God Willing, it is important this week to wait for any new reached deal announcement details by the European and any new deal can clarify the future of the coming government in UK besides US trade balance of March which is awaited to be -40b$ from -39.7b$ in Feb and US retail sales of April which are expected to increase by .3% from 1.9% in March and by the end of the week, it is important to wait for the preliminary release of US Michigan consuming sentiment survey of May which is expected to come at 73.2 from 72.2 in April.

Best wishes

FX Consultant

Walid Salah El Din