The US stocks ability to cover their loses after a dovish opening yesterday weighed on the greenback helping the European stocks to have a green opening today but the investors' worries about the negative impact of the European debt crisis on the Spanish banking sector this week are still looking weighing on the market sentiment with growing tension in the semi Korean island. Dow closed today below 10000 at 9974 and the single currency came under pressure again trading just above its previous low at 1.2143. The single currency could have footing at this level last week 1.2143 after falling from 1.2665 last Friday to have the first green week after 6 weeks of losing closing at 1.2572 after getting back above 1.244 finally. The pair could not even 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 after it had failed to get above 1.24 again today 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.
Only the fear of an intervention by the ECB against the single currency recent rapid falling can support it in the case of breaking this level with no serious rebound in the equities market can hold yet and no new news from the EU Fin ministers to support the markets or even an announcement from the ECB about its plans of buying bonds. 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 from the ECB which has been criticized recently about its reacting towards the debt crisis which is affecting on the liquidity in the markets currently weighing on the investing sentiment pushing the interabanking key interest up in the Euro zone.
In the recent few months, the credit rating agencies have downgraded the creditability of some of the Euro area countries which are exposed to the debt crisis such at Spain and Portugal putting the markets eyes on the financial sectors of these countries after focusing on Greece in the beginning of the crisis and this week news about the need of emerging 4 banks in Spain could quickly contain the market sentiment. The royal bank of Scotland has warned earlier this month 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 their plans to hold amid the current low growth rates in Europe which could encourage them to sell 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 that it can add a competitiveness feature to their exports.
The market sentiment toward holding the single currency is 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 which is having a very slower pace of growth in the euro came at just .2% in the preliminary reading of 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 this new crisis in Europe which came as a result of the credit crisis negative impact on the EU economies which were forced to push the governmental spending up for spurring investment and growth on the account of their budget deficits which are threatening the market confidence and the recovery itself right now forcing the European governments back to cut their budget deficits with the market focusing on the consequences of the debt in Europe like what had been announced this week from UK.
The gold has weakened easing from above 1200$ with the oil prices sliding below 65$ last Thursday after low inflation rates released 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$ but with the oil falling below 80$ and the fed's repeated downplaying of the inflation upside risks, the gold has been dragged down finding support at 1156$ which has not been even tested this week making a higher low at 1166$ to creep up again above 1200$ trading at 1210$ currently while the gold main support level is still holding at 1124$ which was the bottom of the ascending wave to 1249$.
Walid Salah El Din