The risk aversion could contain the current market sentiment with new worries about the financial situation of the Spanish banks and growing worries about the situation in the semi Korean island. The single currency slumped again below 1.22 after it has found support last week with the market fear of an intervention by the ECB against the single currency recent rapid falling and a rebound in the equities market by the weekend which came with nothing new from the EU Fin ministers to support the markets after last Thursday strong falling. The excessive selling came back to the equities markets again this week pushing the greenback and the Japanese yen up across the broad in a new unwinding wave of carry trades taking a safe side waiting for stability of the financial situation in the Euro area. The equities markets could cover some of its recent loses last Friday waiting for further announced plans from the EU Fin Ministers during the weekend which can store the confidence in the markets supporting the single currency which has been hit in the recent few months by the debt crisis and the credit rating agencies downgrading of the creditability of some of the Euro area countries and the royal bank of Scotland recent warning that the single currency can reach parity with the greenback which worried the investors about the single currency and it's backed securities holding and plans to hold amid the current low levels of growth which can encourage them of selling the single currency to wait for an end of this crisis as they may get back at a lower exchange rate of the euro and higher level of trust which looked the source of the germane worries about the single currency rapid falling in spite of it add a competitiveness feature to their exports as the market sentiment toward holding the single currency is still in a serious need to get that the worst has become behind of us not yet ahead of us to underpin the single currency again which is not materialized yet to the market who is still watching a very slower pace of growth in the euro zone comparing with US after the credit crisis negative impact on the EU economies which pushed the governmental spending up for spurring investment and growth on the account of their budget deficits which are threating the market confidence and the recovery itself right now with market focusing on the consequences of the debt building in Europe as the markets have digested the package which could calm down the investors quickly and it is now focusing on the impacts of it over the long term at the current low economic growth rate in the Euro zone which has risen by just .2% preliminary in the first quarter of this year which is not yet negatively impacted by the debt crisis and the requested austerity measures from IMF, the ECB and the European governments which will cap the governmental spending affecting negatively on the GDP of the EU countries which are actually struggling lagged behind US which can be exposed to a double dip recession after strong recovery in the recent quarters because of it.
The single currency has opened this week trading just below 1.255 versus the greenback and with market focusing again on debt crisis and its negative impacts in the future which are not realized yet especially after last week decision of capping the naked short selling of some of the financial sector stocks by the germane government and the mixed European situation after it which weighed on the market confidence which was already depressed by Trichet's comments nearly a week ago that the current exacerbating situation is similar to the conditions by the falling of Lehman Brothers and the rapid falling of the European stocks. The market has been disappointed by Trichet's comments about not discussing new buying bonds plan in the ECB previous meeting and it is now waiting for any new announcement from the ECB about its plans details for buying the bonds in the future after the announcement about reached agreement with the IMF to provide 750 billion euros in a rescue package plan under the request of the European countries which are facing debt problems opening the door for the ECB to start discussing and buying European bonds by the volume which it sees suitable which is looking effecting negatively on the single currency again with no clues about these from the ECB yet.
The single currency could have footing last week at 1.2143 having the first green week after 6 weeks of losing closing at 1.2572 getting back above 1.244 finally but it is now trying to find support again above 1.2143 after falling from 1.2665 last Friday. The pair could not test 38.2% retracement level of this recent falling from 1.3688 to 1.2143 at 1.2725. the next support now is this previous low at 1.2143 and the breaking of it can lead by god's willing to the main support level of the pair at 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.
The gold has weakened easing from above 1200$ with the oil prices slide below 65$ last Thursday with low inflation rates releases from US as April US CPI core index which was expected to be 1%y/y from 1.1% in March and .1% m/m from 0% in March but it came at 1%y/y and 0% again monthly while the broad figure which was expected to be up yearly by 2.4% and monthly by .1% came at just 2.2% lower than march which was 2.3% yearly and - .1% m/m which could effect negatively on the gold value as a mirror of inflation and lowered the market estimation of the inflation outlook upside risks however the gold can get back up as it is still the well-chosen option to the investors who are looking for the best safe haven 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. The gold could creep up above 1200$ making a new high at 1249$ after finding support at 1156$ with the oil failing below 80$ and it is now trying to do the same basing on this same support which has not been even tested this week after sliding from above 1200$ last week while the next main support of it is at 1124$ which was the bottom of the ascending wave to 1249$.
FX Consultant Walid Salah El Din
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