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30/6/2009 − The Current Market Sentiment

Tue, Jun 30 2009, 05:28 GMT
by Walid Salah El Din

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The US equities market could contain the currencies market sentiment again pushing the greenback down across the broad with improving of the investors' risk apitite which could push Dow up by 1.08% to close its first session this week at 8529 after its second consecutive week of losing after reaching this  year high at 8875 on 11st of this month from this recorded low on 9th of last March when it reached 6469. By god's will, the market is expected to focus today on US June Chicago PMI which is expected to come at 38.3 from 34.9 in May and later this week on the pace of the US manufacturing recovery and the current recession impact on the US labor market in May. As we wait tomorrow for the US manufacturing index of June to be 44 from 42.8 in May and as this Friday is US is off because of the independence day, we have this Thursday the release of June US non-farm payroll which is expected to lose further 368k jobs and the US unemployment rate to increase to 9.6%. If we had weaker performances of these important indicators, the market expectations of a halting unreliable recovery can increase weighing negatively on the equities market and the risk appetite which can support the greenback.

The cable could get above the resistance which has been formed in this same day we have aforementioned when Dow reached this year high  and it is trying currently to get above its year high at 1.666 whereas it has fallen on 3rd of this month. The cable was already supported by UK June GFK Consumer Confidence Survey which came at -25 from -27 in May. By God's Will, We wait later today for UK GDP Q1 final reading which is expected show falling quarterly by 2.1% and yearly by 4.3% and it is important to watch tomorrow release of June UK CIPS manufacturing index which came at 45.4 in May well below 50 in the contracting area. If we can have a higher number this can be good for the British pound and refer to a diminishing of the contracting pace.

The single currency has been support by the same reasons versus the suffering greenback to be traded now above 1.41 underpinned by an optimistic consuming confidence figure of June came at -25 from 28 in May and it was expected to get worse to -30 which helped the European stocks in the beginning of this week. Last week the flash release of June PMI manufacturing index which was expected to get better to 40 from 39.6 coming at 40.5 and PMI services index of this same month which was expected to be 45.6 from 45.2 in May coming at 44.5 but these data could not make a major change of the single currency direction last week waiting god willing for this week final releases of EU Manufacturing PMI index which is expected to improve to 42.4 from 40.7 in May and EU PMI Services index of June which is expected to be 44.5 from 44.8 in May. Also it is important this week to wait for the release of EU CPI preliminary release of June which was unchanged in May y/y and the ECB president Mr. Trichet has indicated in his recent press conference after the ECB decision to keep the interest rate unchanged at 1% on the 4th of this month that the ECB is expecting the inflation to be from 0.1% to 0.5% and if we have had negative rates this week this can dampen the single currency. We wait also to see the ECB interest rate decision which is widely expected to be unchanged at 1% and Trichet press conference to know its recent evaluation after its decision last week to extend its lending offering to the European countries to 442Bln Euros for one year in another extra easing decision in which can move current economic recession.

The gold could find support from the greenback falling today versus the commodities and oil to get above 940$ hardly again. The gold has suffered recently from the easing of oil and commodities prices and the correction of the stocks market in the recent 2 weeks which pushed underpinned the greenback and downplayed the inflation upside risks which came tamed negatively impacted by the recessionary in May. As we have seen US CPI Index decreased by 1.3% y/y broadly and the core figure excluding the food and energy decreasing to 1.8% y/y could add pressure on the gold which is the mirror of the inflation as the market was waiting for a slide by just .9% after April slide by .7% broadly and was waiting for the core to be as the same as April at 1.9% and also May PCE came broadly yearly at just .1% from .4% in April and the core came at 1.8% and monthly the figure came broadly as the same as April at just .1% while the core came lower than the market forecast of .2% and lower than the .3% of April at just .1%. 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 close above 940 which has been taken out hardly today. The gold should face a difficulty again to get above 948 to retest 960 as a resistance.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Tue, Jun 30 2009, 05:29 GMT