The greenback has been underpinned by the US stocks giving back its opening gains after the news about another gradual step from China for re-evaluating its Yuan during the weekend could contain the market sentiment pushing its Asian counterparts stocks markets up and helping the commodities currencies which gets benefits from the Chinese buying to have a strong opening this week across the broad supporting the market risk appetite which has been already improved recently weighing on the greenback versus the single currency which made a new 4 years low at 1.1875 2 weeks ago to open the week above 1.2452 after closing above 1.234 by the end of last week.

The market is cautiously waiting now for the release of the Germane IFO business climate of June which is waited to come at 101.2 from 101.5 in May today after the disappointing release of May ZEW economic sentiment which has fallen last week to 28.7 from 45.8 while the market was waiting for 42 which can effect negatively on the Germane IFO and the single currency which could gain momentum recently with no new shocking news from Europe and Trichet's recent assurance that the single currency is a very credible currency after the ECB decided to keep the interest rate unchanged again at 1% which solidified its correction as it was not reasonable enough to the market to keep pushing the single currency down selling it again below 1.2 versus the greenback before even a correction to bring it back above this psychological level versus the greenback after it had been under strong pressure earlier this month with the increased worrying about Hungarian financial situation because of the debt crisis and the exposure of the European countries banks to its debt especially after the release of the ECB report which has warned about the long term debt refinancing in Europe which looks in 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 financing problems have seemed ahead from the ECB report showing a serious need for storing stability and injecting funds into the nerves of the European banks too as the European governments which can transfer the problem to the balance sheet of the ECB threating the single currency again.

The pair next resistance should be again at 1.2452 after failing to hold above it yesterday and then 1.2598 then 1.2685 which was the recorded previous high of last May and from it the pair fell breaking 1.2143 while the next support should be at 1.224 then 1.2165 then 1.2044 and 1.1954 which was the pair low after falling from 1.2073 and it could protect the pair from making a newer low again below 1.1875 which has become the pair main support right now before 1.16 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.

Best wishes

FX Consultant

Walid Salah El Din

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