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7/5/2008 − the current market sentiment

Wed, May 7 2008, 07:21 GMT
by Walid Salah El Din

FX Recommends

No significant change in the currency market waiting for tomorrow BOE and ECB meeting and both are expected to hold the interest rate unchanged but we want to know more about the current ECB evaluation of the inflation upside risks and growth down side risk in EU after weak April EU PMI manufacturing index which came at 50.7 lower than the 52 of March following a disappointing IFO business climate figure of April which has fallen from 104.3 in March to 102.4 in April and increasing the possibility of contracting numbers below 50 next months in a react of the  strong Euro and the slowing down of the US demand and its effect on the global demand following the crediting problem which triggered by the housing slump which is still on

From another side, Trichet has mentioned earlier this week that the Global Inflation Risks Are Significant, There is no time for complacency for central banks in any respect, There are significant upward risks to inflation globally, and central banks must do their utmost to anchor people's inflation expectations.

The single currency is still find difficulty to stand above 1.55 suffering a loss of momentum this week after reaching 1.536 versus the greenback in the aftermath of the non-farm payroll which came -20k and the market was expecting a decline by 80k in April. The pair has bounced back again above 1.54 finding support at 1.5426 then 1.5452. The pair is heading down now after failure to break above 1.5645 ended at 1.5594. Over the medium term the pair is still supported above 1.5340 which was the 38.2 Fibonacci retracement of the rise from 1.444 to 1.5902 forming a higher low at 1.5360 after an aggressive correction started with a divergence Stoch sign at a higher high at 1.6014. The pair has formed a lower high at 1.57 then 1.5645 but in breaking of 1.55 the momentum has increased again but now there is a loss of it from both sides as I have mentioned earlier. The market is moving right now in a tight range without volatility. The average true range is still diminishing forming lower highs over the short term charts and the momentum is near 99.8.

We wait today for the UK March Manufacturing Production which is expected to increase yearly by 1.2% from 1.9% in Feb and to be flat monthly. Also we have the UK industrial production which is expected to decrease by .1% m/m increasing by .8% yearly and from EU we have EU retail sales of April which expected to increase .2% monthly and decrease .6% yearly and from US march  pending home sales which is expected to decline by 1% from 1.9% decline in Feb.

Best wishes

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FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

Published on  Wed, May 7 2008, 07:22 GMT