The risk aversion has added to the single currencies owes underpinning the greenback across the broad with riots in Greece street and strong selling in the European equities markets, In spite of a reached deal for bailing out Greece by 80 Billion euros from the other European countries and 30 Billion euros from the IMF in the coming 3 years during the weekend but it could not remove the investors' worries about the austerity measures effect after Greece has announced that it may have a shrinking of its GDP by 4% this year which shows the difficulties in meeting its debt obligations driving its yields up and the risk of owning it in the medium term in spite of the European rescue plan which could hardly calm down the markets in the short term and the strong need for having the interest rate in the Euro zone at its historical low at 1% if not adding more easing steps for stimulating the struggling economic growth in the Euro zone which is still coming very lagged behind US with worries about the spreading of the debt crisis in Euro zone from Portugal and Spain which are still exposed to further downgrading of their crediting which is still bringing the worst in front of the investors not behind them yet which effecting on the single currency and its back securities dominations across the broad. The single currency has broken 1.2875 which was the low of April 2009 easily today after falling below 1.3 psychological level yesterday versus the greenback adding to its downtrend momentum which can expose 1.233 which was the formed main bottom of October 2008 amid the credit crisis and over the medium term you can find the main strong level is at 1.16 which was the main support level 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.
The US stocks could not stave off their loss again today with gloomy pictures coming out from Europe effecting negatively on the market sentiment with the Dow falling below 11000 yesterday and the market focusing on the debt crisis consequences in Europe. The investors have lost some of their trust in taking risk at the current uncertainty preferring to take profits after more than a year of continuous rising in the equities market since the 9th of March 2009 when Dow got down below 6650 pushing the greenback up across the broad and also the gold as a better safe haven option 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 has exposed to profit taken today with a strong falling of the oil prices today after it had risen above 1180$ yesterday but it could find support above 1150$ closing above 1170$ and the next resistance is expected to be at 1200$ psychological level and then its recorded high on the third of December 2009 at 1226$.
The gold could add to its gains in the recent few weeks on increased speculations on having the interest rate and the easing steps of the ECB for a longer extended period of time than expected which can be faced by inflation upside risks with the current energy and commodities prices at the current exceptional very low level of interest rate in US and EU as the debt crisis has not effected negatively yet on the demand and growth rates but in this same time, the Fed could not even refer to a close end of keeping it between 0% and .25% with the current strong growth rates in US keeping their mantra of leaving the interest rates at exceptionally low levels for an extended period of time last week referring just to a gradual improving in the labor market.
The Fed looked worried about the current growth rates stability until now as losing these rates can brought them back to the losing trust spiral and the possibility of facing a double dip recession and paying further costs after the improving of the US economy they have had but to how long they can keep it. We have earlier this week ISM manufacturing index release of April which came at the strongest expansion pace since 2004 at 60.4 but with price paid index rising above 75 at 78 too which shows a strong inflation pressure inside this sector which can have a negative impact on the demand later eroding their accommodative easing policy effect.
God Willing, it is very important today to wait for the ECB interest rate decision and the press conference of Trichet after it and tomorrow from US, the non-farm payroll of April which is expected to add another 175k after adding 162k in March.
Walid Salah El Din