The risk aversion sentiment has accelerated containing the markets following the falling of June personal income to 0.1% monthly revising down the figure of May to 0.2% from 0.3% while it was expected to be 0.3% and also monthly falling of US personal consumption expenditure by 0.2% while it was expected to rise by 0.2% in June with down revision of the figure of May from 0.2% to 0.1% in July.
These new dovish data about the US economy has supported the demand for the gold to reach a new all times high at 1641 per ounce recovering the falling to $1606 because of the reached deal between the republican party and the democratic party of cutting the US governmental spending by $2.1 trillions over the next 10 years for having an agreement for raising the US debt ceiling avoiding defaulting but the rising worries about the US growth outlook have come back supporting the gold following the falling of July US ISM manufacturing index to 50.9 while it was expected to be down to just 55.1 after rising in June to 55.3.
The worries about the US economy have started to emerge again last Friday with the down revision of US annualized GDP of Q1 to 0.4% from 1.8% in the previous reading and weaker than expected growing in the second quarter by 1.6% while it was foreseen to be 1.9%. That's besides the declining of July US Chicago PMI to 58.8 from 61.1 in June while it was forecasted to get down to 60.2 and also the falling of US UN. Michigan consuming sentiment survey of July to 63.7 from 71.5 in June highlighting the possibility of having new quantitive easing steps from the Fed which has referred in its recent beige book release last week about 12 US districts to the period ending on 15th of July to the weakness of US housing market and also the US labor markets showing that 8 of these 12 have shown signs of growth slowing down.
The Japanese yen also as a low yielding funding currency could get use of this dovish sentiment getting USDJPY down below 77.15 and further easing down from here can be met by supporting level at 76.88 and the falling of it can be followed by 76.41 which has been reached on the subsequences of March earthquake by the Japanese intervention which can threat the Japanese yen ascending for helping to the struggling Japanese exports at these current hurting levels of the Japanese yen exchange rates.
USDCHF has fallen too to 0.7705 because of the investors who are looking for a safer haven stance out of the US treasuries notes amid worries about the debt in US and in EU weighing down on the markets sentiment while this pair is still under continued technical pressure by being below its trend line resistance which is extended from 0.9338 to 0.8945 and over a longer range from being below the trend line resistance extension from 1.1729 to 0.9773 and God willing, its next resisting levels can be at 0.8076, 0.8276 then 0.8551
By God's will, it is important to wait next Friday for the release of US labor report of July which is expected to show rising of US non-farm payroll by 90k jobs with the unemployment standing at 9.2% and weaker figures than these expectations can increase the market worries about the US growth outlook and raising the possibilities of having further funds to be injected supporting the US economy from the Fed which always shows its special care of the labor market.
FX Market Strategist
Walid Salah El Din