Comments from china about keeping its investments in the single currency as they are in spite of the volatility in the markets because of the debt crisis could restore some confidence in the Euro and the markets helping the investors to take risks again after a massive selling in the equities markets. Dow could get back above 10000 last Thursday after a dovish closing last Wednesday below this psychological level at 9974 which helped to hold its recent recorded low versus the greenback at 1.2143 unchanged but the selling got back to the markets by the end of the week by the same volatile way keeping the single currency gains below 1.245 to close last week below 1.23 again at 1.227. The US stocks ability to cover their loses last Thursday could help the European stocks to cover some of their loses but the investors' worries about the negative impact of the European debt crisis on the Spanish banking sector after a tight voting results to pass the austerity measures to control the debt in Spain could weighed on the single currency and the market sentiment which has been already hit by growing tension in the semi Korean island by the end of last week driving the investors to sell again taking risk aversion positions.
The single currency could have footing above 1.2143 again after falling from 1.2665 versus the greenback unable even to test 38.2% retracement level of this recent falling from 1.3688 to 1.2143 at 1.2725.until now. The pair recent gains have been capped below 1.245 this time and the next support now is still at this previous low at 1.2143 after it had failed to get above 1.245 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 and only the fear of an intervention by the ECB against the single currency recent rapid falling can support it in the case of breaking 1.2143 making new lows with no serious rebound in the equities market can be durable to hold yet supporting the market confidence with no new announcements from the EU Fin ministers or even 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 recently 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 as Greece, Spain and Portugal putting the markets eyes on the financial sectors of these countries which can export the crisis to other major industrial economies like Germany, France and Italy and last week news about the need of emerging 4 banks in Spain could quickly contain the market sentiment adding worries about the financial sector performance in these countries putting pressure on the single currency which was already depressed to the extent which pushed the royal bank of Scotland to warn earlier this month about the possibility of reaching 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 falling adding a competitiveness feature to their exports to start capping the naked short selling of some of the financial sector stocks but 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 investors who are still watching a very slow pace of growth in the Euro area came at just .2% in a preliminary reading of the first quarter of this year which was not 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 has been announced last week from UK.
The gold has weakened easing from its all times high at 1249$ with the oil prices sliding and low inflation rates coming out from US showing that 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 above 1210$ currently while the gold main support level is still holding at 1124$ which was the bottom of the ascending wave to 1249$.
God Willing, it is important this week to wait from US for May ISM Manufacturing index which is expected to be 59.6 from 60.4, ISM non-manufacturing index of May to be 56.2 from 55.4 in April and ADP employment change of May to be 59k from 32k in April and by the end of the week May Labor report which is expected to show increasing of the non-farm payroll of by 500k from 290k in April and declining of the unemployment rate to 9.8% from 9.9% in April.
Walid Salah El Din