The new news about another gradual step from China for re-evaluating its Yuan during the weekend could help the commodities currencies which gets benefits from the Chinese buying helping the risk appetite which has already improves recently weighing on the greenback versus the single currency which made a new 4 years low at 1.1875 2 weeks ago to creep up above 1.2452 after closing above 1.234 by the end of last week eyeing at the higher resistance at 1.2671 which has been reached a month ago in spite of last week Moody's new downgrading of the Greek debt to junk and the germane disappointing release of May ZEW economic sentiment which has fallen last week to 28.7 from 45.8 while the market was waiting for 42 which can effect negatively on the Germane IFO business climate of June which is waited to come out tomorrow at 101.2 from 101.5 in May. The market did not seem ready enough to continue pushing the single currency lower selling it again below 1.2 versus the greenback before even one correction to bring it back above this psychological level versus the greenback with no new shocks from Europe and Trichet's recent assurance that the current interest rate is still appropriate and the single currency is a very credible currency after the ECB decided to keep the interest rate unchanged again at 1%, this correction could continue above 1.2452 after it has been under strong pressure earlier this month with the increased worrying about Hungarian financial situation because of the debt crisis and the exposure of the European countries banks to its debt especially after the release of the ECB report which has warned about the long term debt refinancing in Europe which looks in 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 financing problems have seemed ahead from the ECB report showing a serious need for storing stability and injecting funds into the nerves of the European banks too as the European governments which can transfer the problem to the balance sheet of the ECB threating the single currency again.

The pair next resistance should be at 1.2598 then 1.2685 which was the recorded previous high of last May and from it the pair fell breaking 1.2143 while the next support should be at yesterday low at 1.2165 then 1.2044 and 1.1954 which was the low of last Friday after falling from 1.2073 and could protect the pair from making a newer low again below 1.1875 which has become the pair main support right now before 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.

Best wishes

FX Consultant Walid Salah El Din E-Mail: