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9/7/2009 − The Current Market Sentiment

Thu, Jul 9 2009, 06:08 GMT
by Walid Salah El Din

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The pressure on the stocks markets continued to push the Japanese yen up across the broad getting benefits from the unwinding of the carry trades transactions in the favor of the low yielding currencies such as the greenback and the Japanese yen which has an interest rate at just .1%. Nikkei 225 is still under pressure 107 points until now trading at 9313 and it could not follow the US stocks rebound again today negatively impacted by the strong yen which can hurt the Japanese exports at this time of sluggish global demand which effected negatively on the Japanese Tankan survey of the big manufacturers of the second quarter which came last week at -9.4% and it was expected to be 6.9% putting further pressure on the Japanese stocks which have been hurt by a furry of disappointing data from US started last week with falling of June US consumers confidence survey to 49.3 and it was expected to be 57.

Dow has found support at 8100 to close up by .18% at 8178 yesterday following the IMF upgrading of the global growth to 2.5% from 1.9% in 2010 pushed by the chinease and the indian growth expecting the US to be lagged behind of them and EU to contract by .3%.

The greenback was well supported versus the European currencies following the current dovish market sentiment which dampened the investors risk appetite but it could give back some of its gains with the greenback closing of the Dow. Technically, we are still heading lower and near to the fourth consecutive week of loses and there can be further test to 8100 and if it failed to hold this time then we have the psychological support at 8000 but the main supporting area stands between 7791 and 7804 whereas it rebound on 21st April and 23rd April of this year but to stave off this downward momentum Dow needs to  it is strongly in need to close above last week high at 8580 to find a new upward momentum to regain this year high which has been made on 11 June at 8875.

The Cable has dropped below 1.61 again yesterday as it could not hold above 1.62 level which has become more vulnerable after the dovish breaking of it in the beginning of this week but the cable could find buyers at 1.5975 to push it above 1.60 psychological level again but the cable major support level is still at 1.58 while the upward way can face an intermediate resistance to stand above 1.6325 then a difficulty to break 1.644. The British pound is actually under pressure this week from the  market expectations of further easing steps of the quantitive easing policy of BOE to be taken today which can contain further buying of the governmental bonds and effect negatively on the demand for the British pound and the falling of  May UK Manufacturing productions which were expected to be up by .1% m/m by .5% and the drop of UK Industrial productions which were expected to be up by .2% m/m by .6% have exacerbated its position by today's MPC meeting by god's will.

By God's Will, We wait today for the germane June CPI final reading which is expected to be as the preliminary reading at .1% and if we have had negative rate, this can effect negatively on the Single currency as Trichet is keeping downplaying the risks of the deflation indicating that it can be short lived since his  press conference on the 4th of last  month and he has repeated this last week after the ECB keeping interest rate unchanged at 1% that the ECB expecting the inflation to be from 0.1% to 0.5% in 2009. Trichet has tried last week to show the market that the current interest rate is appropriate, the current negative inflation rate is likely to be short lived, the gradual recovery is expected to be in the first half of next year and the current situation is not out of the ECB expectations.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Thu, Jul 9 2009, 06:21 GMT