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19/10/2009 − The Current Market Sentiment

Mon, Oct 19 2009, 00:41 GMT
by Walid Salah El Din

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The declining of US consuming sentiment preliminary reading survey of University of Michigan in October to 69.4 from 73.5 in September affected negatively on the US stocks encouraging the investors to take some of their profits out of the equities market which supported the greenback to have a reprieve after a week of massive selling because of the improving of the investors risk appetite which have been underpinned by better than expected earning reports of third quarter which could store the investors confidence in the US financial sector after encouraging earning reports from JP Morgan, Goldman Sachs and Citigroup in the recent last week but last Friday disappointing BOA earning report could stave off this confidence and the stocks gain leading Dow to close the week below 10000 psychological level.

But by god's will, the investors are still waiting to have a clear signal from the fed that there is a starting of tightening and taking off their quantitive easing policy steps to find a reason to buy the greenback again but last week, we have seen Fed's September meeting minutes showing a stronger than anticipated tendency of the Fed's Governors to buy further Mortgage back security which can put a close end of this started correction last Friday bringing the pressure back on the greenback shortly.

The single currency came off its high versus the greenback just shy of breaking 1.50 last week recording 1.4967 but it looks eying on breaking this psychological level unfazed of the ECB president recent mentioned worries about the current EUR appreciation which can affect negatively on the euro zone products competitivity. The ECB president language has been turned positively in his recent press conference after the ECB decision to keep the interest rate unchanged from being in Prudence and cautiousness to just a referring to the need of the current easing steps of the ECB as there is no realized inflation pressure yet highlighting the recent signs of improving in the banking and the financial sectors as the recent stress banking test have shown that even if the economy took another turn for the worse there will be no major European institutional falling. By god's will, it is important later this week to watch the germane IFO release of October which is expected to get better to 92 from 91.3 in September.

The Australian dollar which could keep its constant progress on versus it getting above .925 right has faced a strong selling versus the greenback before finding support at .91 last Friday closing the week at .917 as it was still underpinned by surprising interest rate hike of the RBA by .25% to be 3.25% backing it 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 which pushed it strongly recently taking advantage from the bright outlook of the interest rate in Australia which will effect positively on the Aussie.

The Cable has faced the same pressure from the greenback appreciation by the week end and the red closing of the US stocks reaching 1.625 before finding support and closing the week at 1.635. 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 still trading above 1.63. The next main resistance currently is still 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 last week under the pressure of the recent disappointing releases of UK manufacturing productions and industrial productions of August before getting back back up last week with the market weakening pressure on the greenback preferring taking risk but if there further persisting of these weak UK data, the cable can come back under pressure again. So it is important this week to wait for the release of UK retail sales figure of September which are expected to increase by .5%m/m and 2.8% y/y from a flat reading monthly and increasing by 2.1% y/y in August and also the release of UK GDP preliminary reading of the third quarter which is waited to be down by 4.6% y/y after declining of the second quarter by 5.5%.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Mon, Oct 19 2009, 00:43 GMT