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Markets Ready to Put Recent Financial Collapse Behind?

Tue, Sep 15 2009, 13:58 GMT
by Lena Manousarides

SpikeCharts

What a day today is for the financial industry, as one year ago, on the 15th of September, markets across the globe got hit from the news that the biggest lender in USA Lehman Brothers filed for chapter 11 bankruptcies, amid the credit crisis and therefore starting the biggest liquidation that markets have seen for a long time. It was a black Monday and investors still shiver when they think how that day changed the course of history for all market participants. Today, a year after the worst recession since the 1930s, markets are in a better position with investors ready to pick up the pieces of the “financial earthquake” and never look back.

The EUR/USD so far has proved to be on the right track for 1.4650 which was a very important resistance level and therefore found sellers which took the pair back down towards 1,45. For now, as long as the pair holds 1.45 as support we may be more for further upside in the coming days. The channel that the pair trades for now in the 4hour chart is 1.4550 to 1.4650 and a breakout of those levels could give us the next move for the short term. On the downside, next level to watch will be 1.4470n ahead of 1.4430.

The economic calendar was full of important economic releases out of Euro zone and also US, with German ZEW printing yet another high number, proving that the sentiment in Euro area is getting better by the day and companies are giving better results which are a sign of recession easing. Also the UK CPI showed that inflation fell at a slower rate, giving investors fuel that the economy is improving faster maybe than anticipated originally and that Bank of England could very well start rethinking its monetary policy in the next few months. The data out of US were the surprise of the day though, as retail sales printed a really good number last month, showing that consumers did find them more positive about the whole economic crisis and went out to do what they know best: spend, spend, and spend.

The most impressive move in the markets since the Lehman collapse last year was the price of gold, as it appreciated more than 25% in the last year and made a breakout above 1.000 which signaled that the markets were looking for riskier assets to place their bets and risk appetite has returned in trader’s actions. Long gone the days of dollar being the flavor of the month due to risk aversion and we have seen the market sentiment stronger in the past few months, making market conditions more normal and easier to predict than before.

The words of President Obama yesterday, though were calming and reassuring for the American public, as he stressed the need of tighter regulation in big banks and Institutions; however the reality still remains that the country still suffers from unemployment and the tax payers still are the ones who are left to pay for the huge mistakes of the past. One thing is for sure, that the recession is still very much alive and kicking and the next stage now is to see what will happen towards the end of this difficult year. Many analyst predict that 2010 will be a year to start making the recovery a reality, however others warn that this market correction we experience at the moment is just that: a simple correction before another meltdown occurs in the near future.

Whatever the case is, let’s see where this week takes us, what with further economic data coming out of US and Europe and how the markets will react to that, what with oil and gold and the dollar all being in crucial levels for future direction…

Published on  Tue, Sep 15 2009, 13:58 GMT