Dow could add 44 points to its gains underpinned by better than expected ADP employment change in July by 42 while it was forecasted to be just 34k and July ISM non-manufacturing index which came up to 54.3 and the market was waiting for just 53.5 yesterday, in spite of the announcement of new Chinese banking stress test suggesting declining of the housing prices by 60% which tempered the market sentiment supporting the greenback. The risk appetite has risen markedly in the beginning of this week pushing the equities markets and the commodities prices up too which pushed the oil prices above 80$ and the gold above 1200$ again 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 which supported the cable to get above 1.595 but it could not hold this gains yesterday with market worries about the housing prices in china which effected negatively on the risk apatite by the waited release of US labor report of July tomorrow which is expected to show declining of the non-farm payroll by another 95k after turning back to lose 125k in June from adding 413k in May.

We wait later today for ECB press conference after its decision to keep the interest rate unchanged again at 1% to have some optimistic comments about the debt crisis easing effects on the Euro zone even in the short term. The single currency could finally have footing above 1.3 versus the greenback this week 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 getting strong momentum to continue its rally reaching 1.3261 starting from 1.1875 which recorded amid the increased worries about the debt crisis in Europe supported by the successful EU banking stress tests which have shown failure of just 7 banks out of 91. The next major supporting levels are expected to be at 1.3096 then1.2735, 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 while the major resistances are at 1.3352, 1.3415, 1.3704 then 1.3885 which is 61.8% Fibonacci retracement level of this same recent declining from 1.5142 to 1.1874.

Best wishes

FX Consultant

Walid Salah El Din

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