The weak release of the non-farm payroll of June losing125k after adding 413k in May while the market was waiting for losing just 100k has undermined the market sentiment increasing the probability of having a recession second dip in the second half of this year in US after getting out of it in the third quarter of last year. We have seen recently many dovish data from US suggesting this probabilities like the slide of US consumer confidence of June to 52.9 while the market was waiting for 62.9 and June US ISM manufacturing index which was expected to be 59 from 59.7 in May coming last week at 56.2. That's beside the increasing worries about the housing market performance in US which has deteriorated in May as the pending home sales 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%.

The single currency could find support last week from the demand for the Spanish bonds which was not expected after Moody's announcement to have the Spanish crediting under downgrading revision and the lower than expected demand for l31.9 billion euros on the ECB program financing program for 3 month which was expected to be around 200 billion Euros to decrease the market worries about the long term debt refinancing problems in Europe after the earlier released report of the ECB in June which 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.

The single currency could get above 1.26 after the dovish non-farm payroll release of June after breaking 1.2452 and getting momentum last Thursday reach. The next expected resistance should be at 1.2685 which was the recorded previous high of last May and from it the pair fell breaking 1.2143 recording this year low at 1.1875 while the next major support should be at 1.2165 then 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 greenback and the Japanese yen are expected to be well-supported with the falling of the investors' risk appetite with the equities markets loses which prolonged to its second week in spite of the release of Tankan survey of the second quarter which has shown better than expected market expectation of the big manufacturing coming positively at 1 which the market was waiting for -3 but the weaker than expected PMI of China which weakened to 52.5 from 53 in May has brought back the selling pressure to contain the market sentiment and the worries about the growth pace in US which have started to started to emerge recently and have been mentioned in the recent Fed's assessment when it has decided to keep the interest rate unchanged at nearly 0% maintaining its same cautious stance worrying about the current growth pace which is getting out of stream and the debt crisis of Europe consequences negative impact on US encouraging the investors to settle their taken risks positions even by the release of last week important data which has actually started with disappointing slump of June US confidence last Tuesday affirming the growth easing worries in the second half of this year which have watched actually losing of the US equities markets indices around 10% in the first half of it.

By God's Will, the market is closed today in US but we are to have the PMI services index of June from EU to be 55.4 again as May and UK PMI services index to be 55.2 from 55.4 in May waiting for tomorrow opening to have June US ISM non-manufacturing index which is expected to be 55 from 55.4 in May too.

Best wishes

FX Consultant

Walid Salah El Din