The markets are curiously waiting for the earning reports of the second quarter and the impact of the debt crisis in the Euro zone on them with growing prospects of growth slow down in the second half of this year in US after the recent dovish economic releases from US which could contain the market sentiment weighing negatively on the equities markets as we have seen the slide of US consumer confidence of June to 52.9 while the market was waiting for 62.9 and June US ISM manufacturing index which was expected to be 59 from 59.7 in May coming last week at 56.2. That's beside the increasing worries about the housing market performance in US which has deteriorated in May as the pending home sales have fallen by 30% while the market was waiting for decreasing by just 10% after the disappointing new home sales of May which were awaited to be 470k from 507k in April but they have shocked the market with just 300k falling by 32.7% and finally, we have returned to the losing of jobs in June by another 125k of the non-farm payroll after adding 413k in May while the market was waiting for losing just 100k.

The markets are anxiously waiting also for the EU banking stress tests which are expected to give a clarification about the current financial situation of the banking system in EU by the end of this month to know further from the banks itself to how far they are exposed to the unsustainable debts of the struggling small countries inside the EU and outside of it to know its right needing for further funding to sustain their financial position as the market is still worrying about this position after the ECB had announced last month that the long term debt refinancing problems in Europe highlighted the need of 800 billion euros by the end of 2012 suggesting that the European banks are in need to be ready for facing bad loans following the debt crisis which can reach 123 billion euros for 2010 and 2011 to reach 105 for 2011 and for facing the bad loans from 2007 till 2009 they should be ready with 238 billion euros.

The single currency is trying again currently to have a place above could 1.26 after easing back again yesterday with the equities markets paring of its gains during the US session but it could find support at 1.255 today versus the greenback. Last week, the pair could get momentum with the breaking 1.2452 and now, the next expected resistance should be at 1.2685 which was the recorded previous high of last May and from it the pair fell breaking 1.2143 recording this year low at 1.1875 while the next major support should be at 1.2165 then 1.2044 and 1.1954 and 1.1875 which has become the pair main defending line before 1.16 whereas the pair has started its rally to 1.604 before falling again to 1.233 amid the credit crisis and rising back forming a lower high at 1.515 in the beginning of last December.

Best wishes

FX Consultant

Walid Salah El Din