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2/6/2009 − The Current Market Sentiment

Mon, Jun 1 2009, 22:59 GMT
by Walid Salah El Din

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The US equities market could sustain its gains of the last week pushed by the bullish closing of last week technically. The US ISM came better than the market expectations of 42 at 42.8 improving in a gradual pace as the market was waiting and the Fed reference recently. The Dow could close up by 221 at 8721 recording a new high of this year at 8760 during this optimistic session.

The greenback was under significant pressure surely on these strong gains of the equities markets and the current increased risk appetite. The gold was also underpinned by the rising of the commodities and energy prices amid the current cheeriness of a closer recovery later this year. The price aid index of the ISM manufacturing index of May has come up also to 43.5 from 35 in April to support the current market believe in the growing of inflation up side risks coinciding with this recovery supporting the gold as a mirror of the inflation. The gold has met a resistance at 966.80 which was the lower high of this year on March after the formed high of Feb at 1006 but getting above it last week makes the 1000$ psychological level very vulnerable. The gold could form double bottoms last month at 864.90 and 864.50 and then started to make higher lows at 878.85, 914.95 and 945 which was its previous resistance 945 and this higher bottom and successful test could encourage it to break 966.8 this time.

Recently, the worries about the demand for the US treasuries could contain the market sentiment increasing the market speculations of a Fed's hiking interest rate for attracting demand for these treasuries. These worries about losing confidence in the US treasuries could temper the market and brought this issue on Timothy Geithner visit agenda to China to store the biggest treasuries buyer confidence in the US debit holding in spite of the recent US quantitive easing steps which exposed the US debit to the mortgages bad loans by replacing them with US treasuries. In this same time, the US treasuries are still the Fed's preferred way to pump funds and easing by its adopted quantitive easing policy after losing the cutting interest rate tool to afford the required liquidity for the government to cleans the banks balances sheets and to spur growth moving in its stimulation financial  plans for a promising recovery can start later this year and store the confidence in the US economy performance again. Timothy's language was very friendly referring to the required strong relationships between US and china to get out of this crisis together.

By god's will, If these tries failed, the greenback can be under threat of selling off the US treasuries which can force the Fed to hike the interest rate for adding attractiveness to them which can threat the recovery from another side as it is waited to come in a gradual way as they have remarked formerly which makes the market serious question right now is whether these toxic assets which caused the problem and damage of the US banking sector could poison the US creditability and total economy or not and the answer is only in the hand of this struggling waited recovery.

By God's will, it is important to wait for the release of US labor report of May to watch a fewer number of lost jobs in US. The non-farm payroll is expected to be -520 in May from 539 in April.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Mon, Jun 1 2009, 23:00 GMT

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