The owes of the equities market has not stopped yet, in spite of the massive declines in the few recent days as the pessimism is still containing the current market sentiment. The consuming is still shrinking in US as Feb consuming sentiment of Michigan university final reading came down to 56.3 following the weak release of US consuming Confidence survey of the same month which reached 25 and we can have a great deal of losing jobs in this week release of US non-farm pay roll of Feb which is expected to be -600k currently and this can effect negatively further on the consuming and the demand and the taking risk apatite currently. From another side, the worries about the global economy growth and the banking future have increased in these days as the doubt about citigroup nationalization and its ability to attract new capitals and the decline of its stock to just 1.5$ that is beside the huge unsustainable loses of AIG which reached 61$b last quarter merely!.

The gold came down with the opening of US equity market to trade below 920$ right now as the market was optimistic after the severe declines of the recent few days. The next support right now is at 988$ then the main support at 850$ level and the way up should meet a resistance 932$ then 960$ and on the break of it, the main resistance should be at the 1000$ psychological level. The gold has faced high volume profit taken wave after reaching this level could which contain the rise from 964$ to pushing lower to the current levels. The gold finds support from the risk aversion sentiment and the increased market expectations of longer recession than what was widely expected in the beginning of the credit crisis and in spite of the slowing down of inflation and the deflation forces the gold is still a safe haven beside the US treasuries, in this time of crediting worries and cooling down of the global economy.  

The greenback is still pressing on the single currency which is suffering from the negative impact of the credit crisis on the eastern European banking and financial sectors, in this same time of the slumps of the equities markets in Europe and the woes of the workers in several parts in European countries.

The market is waiting later this week for the ECB interest rate decision which is widely expected to be a cut by .5% after the recent tame inflation pressure data of Jan which can open the way for the ECB be to cut interest rate with no worries about the inflation which is effected negatively by the recession pressure and decline of the global demand which drives the prices down and from another side, the commodities and energy prices are suffering from this weak demand. The January HICP Final y/y was up by just 1.1% in a lower pace of Dec which was by 1.6% and the core HICP increased yearly by 1.8%and the core monthly rate came surely negative by 1.3%.

The single currency dived under 1.26 after these data and the flash release of Feb CPI has come up by just 1.2% yearly with no surprise and it is trading right now below 1.25 and it has met a strong support several times at this level between 1.25 and 1.24 and the profit taken after the waited ECB cut decision can help this support to hold further especially as it is well know to the market that the ECB is cutting in a gradual way and the .5% is widely discounted but on the break of 1.24, the stop loses can drive it lower further especially if there are a surprising decision of cutting further than .5% and if there are new hints of a closer new rate cuts in the ECB press conference.

By god's will, we are waiting today for the release of the service PMI data from EU which is expected to be down from 42.1 in Jan to 38.9 in Feb and the service PMI data of UK which was 42.5 in Jan and it is expected to be 41.9 in Feb and from US we wait for the ISM non-manufacturing index of Feb which is expected to be 41 from 42.9 in Jan and by this release we have ADP employment change which is expected to be 610k in Feb from 522 in Jan and this indicator is widely taken as a clue of the next release of the US non-farm pay roll of the same month which is waited next Friday.

Best wishes


FX Consultant

Walid Salah El Din

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