The risk appetite has risen today markedly pushing the equities markets and the commodities prices up too driven by better than expected earning reports from HSBC and BNP Paribas and UK PMI manufacturing index of July which came above the market expectations of 56.7 at 58.3 revising June index up to 57.6 from 57.5 Not only was the June index revised up to 57.6 from 57.5. The market eyes should be directed now to the release of July US ISM manufacturing index which is anticipated to be to continue its declining for the fourth month in the row to 54.7 from 56.2 but after last Friday release of July Chicago PMI which unexpectedly rose to 62.3 from 59.1 in June while it was expected to be down 56.5, the market is looking optimistic that we can have better number today than what was initially estimated reducing the fear of having a double dip recession in US after the recent dovish data of US which effected negatively on the market sentiment as we have seen slow down of the consuming pace in US by new falling of US Conference Board's Consumer Confidence of July to 50.4 after a massive falling in June to 52.9.

June US retail sales which have declined by .5% and even on the business spending direction, we have seen US July Empire State Manufacturing which was forecasted to be 18.95 from 19.57 in June collapse to 5.08 and US July Philadelphia Fed Business Survey which was waited to be 11.5 from 8.0 in June and dropped to 5.1 and yesterday July Richmond Fed Manufacturing Index coming down to 16 from 23 in June after June US ISM manufacturing index which was expected to be 59 from 59.7 in May and came down to 56.2 which makes it very important to wait today for July US ISM manufacturing figure and by the end of the week the release of US non-farm payroll of July which is expected to decline again by 95k after the US economy turning back to lose jobs in June by 125k after adding 413k in May and falling bigger than that can effect negatively on the market sentiment which has been cheered recently by the earning performance of the companies in the second quarter pushing the greenback down across the broad and versus the single currency which is still struggling to have footing above 1.30 versus the greenback cheered by the stress test results to jump above solid area between 1.3096 whereas the pair has fallen making another lower high on 10th of last may after breaking it as a support and tested it back as a resistance and 1.3114 which is the 38.2% Fibonacci retracement level of the falling from 1.5142 to 1.1874 while the next major support is at 1.2735, 1.255, 1.2452, 1.2165, 1.2044 and 1.1954 and 1.1875 which has become the pair main defending line before 1.16 whereas the pair has started its rally to 1.604 before falling again to 1.233 amid the credit crisis and rising back forming a lower high at 1.515 in the beginning of last December.

Best wishes


FX Consultant

Walid Salah El Din

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