15/3/2010 - The Current Market Sentiment

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The equities market could keep its creeping up trying to get back last
January high when Dow reached 10729 again which is keeping the
pressure on the greenback to lose ground across the broad amid
increasing of the investors' risk appetite containing the market
sentiment and building momentum at these current levels tending to the
upside after bottoming out in Feb just below 10000. We have seen last
week an improving of US Trade balance of deficit of January to be just
-37.29b$ while the market was waiting for-40.3 b$ and by the end of
it, US retails sales of February which were expected to be up monthly
excluding the auto sales by .2% coming at .8% and broadly with the
auto sales at .3% and also US University of Michigan consuming
sentiment preliminary reading which was waited to be 73.5 from 73.6 in
February came slightly lower than these expectations at 72.5 helping
the US stocks indices to close the week up keeping the pressure on the
greenback.

While the recent data are showing that the growing pace in US is still
in its gradual pace with no signs of a double dip recession yet, it is
still struggling in Europe which put pressure on the single currency
from different sides giving the traders the reasons to sell it. We
have seen last week the germane trade balance of Jan has fallen to
just 8.7b euros while the market was waiting earlier this week for16b
euros from 16.7b euros in December and also the germane total
industrial productions of that same which were awaited to be up by 1%
has come a slower pace at just .6% but the increased risk appetite has
weakened the greenback giving relative strength to the single currency
which is still negatively impacted by its countries credit lowering
rating and the situation in Greece and its governmental tries to get
the European acceptance on cutting spending and taxes reforms which
caused increased streets riots to hold back its current unsustainable
deficit which has become 12% of the Greek GDP as it is required to be
back below 3% on Maastricht treaty while it is widely around 6% in
Europe at the current struggling growth after the credit crisis even
the ECB could not stop any of its accommodative easing actions
worrying about the current nascent recovery until now keeping the
interest rate at 1% again last in the beginning of this month for a
whole year was tackling the single currency recently but it could
close above 1.37 finally underpinned by the increased risk appetite
and the better than expected Jan industrial productions of EU which
were expected to be up monthly by .7% and came at 1.7% after a drop in
December by 1.7% and were expected to be down yearly by 1.9% from
falling in December by 5% but they came surprising up by 1.4% which
made 1.384 the next target now By god's will while the main support is
still at 1.343

Also the cable could find support from this increased risk appetite in
the recent days finding a place to be traded above 1.5 psychological
level closing last week above 151 after a free falling in the
beginning of last week to 1.4785.
The cable has become very vulnerable to the downside after forming a
lower peak below 1.584 resistance by the end of February and with the
breaking 1.51, the selling momentum has increased on news about a huge
bargain between AIG and the British insurance company Prudential for
buying the Asian parts of the first for about 35$ Bln while it has
become politically unstable by UK preliminary elections as the
conservatives' opposition party has lost its strong leading versus the
labor ruling party on the recent polls results with the exacerbating
UK debt after post its first net borrowing deficit month since the
beginning of 1993 with the public sector borrowing in Jan reaching 4.3
B Stg while the market was waiting for covering 2.8 B Stg of the debt
waiting Feb data which will be closely watched in the next period as
these rates can bring its budget deficit ratio to GDP above 12% like
Greece otherwise it looks in building up in UK while the efforts are
emerging for staving this debt off in Greece and in this same time, it
has currently higher inflation rates than Europe which can keep the
pressure back on the cable.

God willing, it is important today to wait from US for March NY Fed
manufacturing index which is expected to be 22 from 24.91 in February
and US capacity utilization of February to be as the same of January
at 72.6% and Feb industrial productions to be up monthly by just .1%
from .9% in January and also we have today the release of US Jan net
long term of TIC flows which expected to be 50b$ and were 63.3b$ in
December.

Best wishes

FX Consultant
Walid Salah El Din
E-Mail: ma...@fx-recommends.com
http://www.fx-recommends.com