6/7/2009 - The Current Market Sentiment
fxreco...@gmail.com
the investors risk appetite strongly last week is still putting
pressure on the US indices future and the European stocks in the
beginning of this week. S&P 500 could not close above 900 this time
and Dow has lost 233 heading lower to complete the third consecutive
week of loses since it has started its rebound on the 9th of Last
March when it reached this year low at 6469. There is a strong
technical pressure on the equities market to continue the declines of
the recent 3 weeks this week too. June Non-farm payroll has shown
losing of further 467k and an increasing of the unemployment to 9.5%
by a long weekend in US because of the independence day. These new
loses of the labor market itself can lead to a cautiousness of the
consumers' spending which can dampen this current sluggish demand
which should bring growth and the waited recovery which looked halting
and unreliable to the investors after these data which can not rule
out an exacerbating of the current economic situation as the business
confidence is still at a very low level and the pace of contraction
can increase again and the demand is still weaker than spurring demand
for jobs or even growth again. May US ISM manufacturing index improved
to 44.8 from 42.8 but it's still well below 50 and By god's will, we
are to wait today for June US ISM non-manufacturing index which is
expected to be 45.6 from 44 in May.
The Single currency has dived below 1.40 versus the greenback which
gets benefits from being a safe haven option to the investors at these
times of losing confidence in growth and taking risks. The single
currency has got no clear direction from Trichet's comments after the
ECB decision to keep the interest rate unchanged at 1%. The central
Bank has mentioned in the recent meeting that it will buy covered
bonds worth 60 billion Euros with mortgages loans or public loans in
the euro area and it has surprised the market last week by adding that
it will extend the one year loans which worth about 442 billion euros
to the European banks on 1% to afford the required liquidity to move
the current economy stagnation and the market was waiting for new
clues today from Trichet's comments which came very conservative and
as expected repeating the mantra that the current interest rate is
appropriate and the current negative inflation rate is likely to be
short lived and the gradual recovery is expected to be in the first
half of next year and the current situation is not out of the ECB
expectations.
The cable has come under pressure since the release of UK GDP Q1 final
reading. the cable could reach a new year high at 1.6743 by the
release of these growth data which was expected to decline quarterly
by 2.1% and yearly by 4.3% and it has come at -2.4% q/q and -4.9% y/y
and the pressure continued after the disappointing releases of June US
consumers confidence survey and US Labor reports of June last week
especially after a technical break out of 1.62 support which could
hold several times last month the way down is expected to meet the
same support level at 1.62 level and this breaking can lead to a test
of the psychological level at 1.6 and the breaking of it can expose
the cable recent main low at 1.58 to be tested again as a support.
The Japanese yen was supported by the frustrating jobs figure of June
in US as it increases the carry trades unwinding in the favor of the
low yielding currencies such as the greenback and the Japanese yen
which has an interest rate at just .1%. Nikkei 225 has followed the US
stocks market as expected in the beginning of this week too losing
further 135 to close at 9680 negatively impacted by the strong yen
which can hurt the Japanese exports at this time of sluggish global
demand which effected negatively on the Japanese Tankan survey of the
big manufacturing of the second quarter which came last week at -9.4%
and it was expected to be 6.9% putting further pressure on the
Japanese stocks which could not even get out of the negative impact of
the disappointing release of June US consumers confidence survey which
can hurt the demand for the Japanese exports.
The gold which was struggling to stand above 940$ has suffered
recently from the easing of oil and commodities prices and the
correction of the stocks market in the recent 3 weeks which
underpinned the greenback and downplayed the inflation upside risks
which came tamed negatively impacted by the recessionary pressure in
May. The gold came under strong pressure after sliding from 960 to be
under further technical pressure to drove it down below 942.8$ to
reach a new low at 912.8 after its previous low at 925.88 before
rebounding to 948 but it could not even hold above 940 to slide again.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: ma...@fx-recommends.com
http://www.fx-recommends.com