The forex market was trading in a mixed way last Friday after the stress test results of 91 European Banks which told the market that only 7 of them failed in these test and the Spanish banks are struggling currently on the debt crisis 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!

There was no a crucial change in the single currency exchange rates too which is still facing resistance again at 1.3 psychological level versus the greenback and crossing this level should lead to a harder test of this pair to cross the area between 1.3096 whereas the pair has fallen making another lower high on 10th of last may after breaking it as a support and tested it back as a resistance and 1.3114 which is the 38.2% Fibonacci retracement level of the falling from 1.5142 to 1.1874 while the next major support is at 1.2735, 1.255, 1.2452, 1.2165, 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.

The Asian equities markets have opened this week at a higher degree of risk appetite pushed up by the US stocks to hold its gains by the end of the week unfazed of the weak earning reports of the second quarter which triggered worrying about the credit market last week with the market waiting for US slow down of growth in the second half of this year and weakness in the labor market as Ben Bernenke has assured to the markets too last week in his testimony. The Dow could close last week with weekly gaining by 326 points and Nikkei is trading up currently by more than 115 points. The US equities market could get over its owes after a red opening last week despite of the disappointing earning of Goldman Sacks which shrank by 82% in the second quarter because of the fraud settlements after accusing it of hiding the real financial position of some sub-prime mortgage securities from the investors who have been exposed to defaulting later because of this misleading position of it subtracting 550$m from its earning beside 600$m from Britain new imposed taxes on its bounces. 78 cents a share from $4.93 a share a year earning of Goldman Sacks last quarter could not help the market to forget the weak earning of Bank of America and Citigroup but joined them to add more doubts about the credit market earning ability.

Recently, we have seen the greenback hurt by weak economic data putting doubts about the growth solidity in US suggesting a weaker than expected interest rate outlook as the fed will face difficulty in withdrawing it's accommodative easing policy steps while the growth is still struggling and the economy losing back jobs which can exacerbate the consuming and business sentiment again turning back down as the worries about the housing market performance in US have increased after the pending home sales of May 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 God willing, after June housing starts units coming at 549k from 593k and the market was waiting for 570k last week, we are waiting today for the new home sales of June again which are waited to be 320k up by 6.7% this time to figure out the new development of the housing market and whether or not to continue this deterioration which has been started in May with the US economy turning back to lose 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 and the slowing down of the consuming pace as we have seen July University of Michigan consuming sentiment preliminary reading falling to 66.5 from 76.0 in June while the market was waiting for declining by just 2 figures to 74 to increase the worries about the moving consuming pace of the economy after the slide of US consumer confidence of June to 52.9 which was waiting to be 62.9 too and June US retail sales have declined by .5% giving more worries about it and even on the business spending direction, we have seen US July Empire State Manufacturing which was forecasted to be 18.95 from 19.57 in June and it has fallen to 5.08 and also US July Philadelphia Fed Business Survey which was waited to be 11.5 from 8.0 in June and dropped to 5.1.

Best wishes

FX Consultant

Walid Salah El Din

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