Another day, another wave of confidence all across the markets, with stocks and oil rising on speculations that economic recovery may be underway as governments are making plans for the future. The pound is the winner of the day in the currency markets so far, as GBP/USD printed new multi month highs over 1.60 and the pair so far found resistance at 1.6030. A clear break of the latter level may give the pair further upside towards 1.61.
The EUR/USD is trading lower since early European morning and that is mainly because of recent comments by ECB members, which said that there is room for further rate cuts in the near future as EU economy has not shown clear signs of improvement. The pair has failed to break 1.40 once again and instead it fell more than 100 points just above 1.39. Next level to watch is 1.3860 ahead of 1.3830 and the latter level should hold if further upside is to be seen.
The economic calendar is almost empty today and therefore markets are driven mainly by news headlines and market sentiment which so far seems to be positive. Market conditions are still fragile and traders are not committed either way amid worries of the economic future. The only important release out of US is the existing home sales, which is expected to show a slight improvement and it will be interesting to see how investors react in the aftermath. It is important to mention that fundamentals are coming back to trader€™s attention and if data is better, risk appetite returns in the markets which drives the dollar down instantly.
The one thing that market players have in their minds at the moment is the massive debt that US government has to deal with and this is making everyone wary and the stocks direction uncertain. The point is that Obama€™s administration has to deal with this by either borrowing money from €œwilling€ lenders which could create all sorts of problems or by monetizing the debt by printing more money. Printing more money will eventually create higher inflation and more problems for the US Treasuries holders. Either way it seems that investors want to exit their long term bond positions, as the future looks gloomy and recovery slow and painful.
For now let€™s watch US stocks and equities and also the dollar which seem to be weakening once again across the board. Levels to watch on the upside is 1.4030 for EUR/USD and 1.6080 for GBP/USD which for now need to give way before further upside is to be seen€¦