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16/10/2009 − The Current Market Sentiment

Fri, Oct 16 2009, 02:29 GMT
by Walid Salah El Din

FX Recommends

In spite of the red opening of the US equities market, the US stocks could close in the green territory as the market optimism because of the third quarter better than expected earning reports which could contain the market sentiment again to lead Dow close its second consecutive session above 10000 at 1062 as the investors have seen in these data further stability in the financial market after the earning reports releases of JP Morgan, Goldman Sachs and Citigroup in the recent few days plus today's strong release of NY Fed Manufacturing index of October which came at 34.57 while the market was waiting for just 18.9 from 18.88 in September and this Thursday release of US Jobless claim which declined further to 514k after last week release declining by 33k to 521k from 554k.

Yesterday, The market has seen in the Fed's September meeting minutes a stronger than anticipated tendency of the Fed's Governors to buy further Mortgage back security which put further weights on the already weakened US dollar today versus the Australian dollar which could keep its constant progress on versus it getting above .925 right now which can open the door to the gold to get above 1070 again versus the greenback which is suffering from the improving of the investors' risk appetite speculating on further recovery signs and demand for commodities and energy which can increase the inflation outlook. By god's will, there can be a rate above 1100 in the next few weeks ahead, if this sentiment can persist longer as long as the gold is still taking advantage from the bright outlook of the Australian dollar after last week surprising interest rate hike of the RBA by .25% to be 3.25%. The RBA has backed that decision last week to the materialized improving in the current economic conditions which are strongly stimulated by the Chinese growth and demand for the Australian exports which are mainly the raw materials such as the gold. The ties between the Chinese economy and the very rich Australian economy of commodities were working in this direction in the recent decades which could cap it from the negative impacts of the credit crisis in favor of this strong Chinese demand.

The recent mentioned ECB worries about the single currency strength in Trichet's press conference after the ECB decision to leave the interest rate unchanged at 1% could not cap its gains versus the greenback getting above 1.495 again currently in the Asian session. The investors were unfazed of these worries focusing on the greenback weakness which is increasing currently from different sides fundamentally and technically. As last week, Jean Cluade Trichet has given last week a stronger evaluation of the current conditions than the previous meeting when he was saying that Prudence and cautions are of the essence in the present situation. He has just referred to the need of the current easing steps of the ECB as there is no realized inflation pressure yet referring to the new signs of improving in the banking and the financial sectors as the recent stress banking test said that even if the economy took another turn for the worse there will be no major European institutional falling. The market has seen in his talking a chance to sell the single currency taking some profits but it has quickly come back up after failing to break 1.4665 supporting level.

The Cable could find a strong technical support with the beginning of this week at 1.573 area and it could break the intermediate resistance at 1.5945 getting above the psychological resistance at 1.6 and it could gain momentum again earlier today breaking 1.61 resistance level after 2 pervious failing tries to break it which lead to stop losing orders triggering above this level and it is now trading above 1.63. The next main resistance currently is at 1.6466 which was the former formed lower high on the 23rd of last month after falling from 1.6741 and making a bottom at 1.6135. The cable has been facing an accumulating pressure recently and a dovish interest rate outlook which pushed it below 1.58 with the beginning of this week under the pressure of the disappointing releases of UK manufacturing productions and industrial productions of August before getting back with the market weakening pressure on the greenback preferring taking risk.

God willing, we are waiting today for August US TIC Net long term transactions to be 11$B from 15.3$B and US September industrial production to increase by just .2% and capacity utilization to be 69.8% from 69.6% in August and also October US Michigan university consuming sentiment survey to be 72 from 73.4 in September.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Fri, Oct 16 2009, 02:29 GMT