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Posted by fxrecommends@gmail.com on June 25, 2009, 9:44 am
The US Q1 final reading came better than expected at -5.5% while the
market was waiting for -5.7% to add a relative strength to the
greenback which was actualy underpined by The fed's decsion of not
adding further easing steps of its quattitive easing policy yesterday.
The fed has not mentioned the deflation risks as it has done it its
April meeting and the concerns about the US treasuries attractivness
amid rising of the comodities and energy prices seemed caping the Fed
as By god's will, if these huge Fed's quatitive easing steps could
cause the inflation preasure which can hurt the demand for the US
treasuries, this can lead to a hike of the interest rate and tackling
of further easing steps of the current quantitive easing policy of the
fed to add some attractivness to the US treasuries to convince the
bonds holders to keep their holding of US debits to prevent a second
round effect of the credit crisis by the this current waited halting
recovery. The US treasuries notes were the first option of the Fed's
quantitive easing policy by offering an exchange of them by the
mortgages back securities which caused the financial problem and
became known as toxic assets which can poison the US creditability
itself and they 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 clean the banks balances sheets and to spur growth
moving in its rescue financial plans for a promising recovery can
start later this year and store the confidence in the US economy again
to cover its debits worries.
The Fed had mentioned yesterday that the pace of economic contraction
is slowing and the conditions in financial markets have generally
improved in recent months. The household spending has shown further
signs of stabilizing but remains constrained by ongoing job losses,
lower housing wealth and tight credit. Businesses are cutting back on
fixed investment and staffing but appear to be making progress in
bringing inventory stocks into better alignment with sales. Although
economic activity is likely to remain weak for a time, the Committee
continues to anticipate that policy actions to stabilize financial
markets and institutions, fiscal and monetary stimulus, and market
forces will contribute to a gradual resumption of sustainable economic
growth in a context of price stability.
The cable which could rally to 1.658 amid an improving of the market
risk appetite after the increases of May US durable good orders by 1.8
yesterday came under pressure after the Fed's US assessment and it is
not trading above 1.62 again where it has found support several times
in the recent 2 weeks. The cable main resistance area currently is
still between 1.662 whereas it has fallen on 11th of this month and it
could not be broken yesterday again and 1.666 whereas it has fallen on
3rd of this month and the way down is expected to meet the same
support level at 1.62 level and the breaking of it can lead to a test
of the psychological level at 1.6 and the breaking of it can expose
the cable recent main low at 1.58 to be tested again as a support.
The single currency came under the same pressure versus the greenback
to slide from above 1.41 to stand above 1.39 currently. We have seen
the beginning of this week the germane IFO of June which was expected
to be 85 coming at 85.9 after last week release Germane ZEW of June
which surged to 44.8 from 35 in May while the current conditions
figure improved to -89 from -93 in May and we have seen also the flash
reading 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 this week.
The gold eased last week with the easing of commodities and energy
prices amid the correction of the equities market. After sliding from
960 and closing below it for 2 consecutive weeks. The gold has come
under further technical pressure to decline below 942.8$ reaching
925.88$ last week failing to be sustained again above 940$ resistance
this week too. The falling of May US CPI Index by 1.3% y/y broadly and
the core figure excluding the food and energy decreasing to 1.8% y/y
could cap it last week could add further 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%. The recent US inflation data shows
that the inflation pressure is still tamed negatively impacted by the
recessionary pressure.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com
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