Richmond Fed Manufacturing Index which slumped in July to 16 from 23 in June has fallen again in august to 11 and also US July Existing Home Sales which were waited to be 4.8m from 5.37m in June has shocked the markets by just 3.83m down by 27.2% after decreasing in June by just 5.1% to add more evidences about the current US growth slow down to the markets which have been already hit last Thursday by disappointing falling of Philadelphia Fed business survey of August to -7.7 waiting for a quiet rising to 7 after falling from 11.5 in June to 5.1 in July weighing negatively on the markets which were actually hurt by new rising of the US jobless claim release to 500k from 584k while it was forecasted to be 476k bringing back to the inventors the worries about the business spending and the struggling labor market impacts in US again to continue the weakness spiral which contained the market sentiment since the release of the weak labor report July which contained losing of another 131k revising down June losing of 125k to 221k weakening the US equities markets and the declining of the treasury yields putting pressure on the Fed to step forward in its quantitive easing policy buying Mortgage backed securities rolling over it’s holdings of treasury securities as they mature before the deterioration can have further negative impacts on the consuming and capital spending and to inform the markets that the Fed will not stand seeing the economy falling back in a second dip recession....

with no action even with the interest rate near 0% but this move affected negatively on the market sentiment and the risk appetite of the investors who were waiting for taking no action over the short term for keeping the trust in the markets as this means that the Fed may have more than modest recovery performance worries which added to the pessimism about the growth outlook in US and worked in the opposite direction fearing of the double dip recession possibility in US driving the investors to prefer taking the safe side squaring their risky positions buying back the low yielding currencies as the Fed used softer than expected language to ensure their previous highlighted worries about the growth flattering with no inflation pressure to change this policy stance.

The greenback could add more gains across the broad pressing down the single currency to 1.2586 after getting new momentum from breaking 1.2735 by the end of last week amid continued risk aversion containing the market sentiment putting pressure on the equities markets supporting the greenback and the Japanese yen.

Dow could not help losing another 133 points down by 1.32% this time to add to yesterday losing keep by .38% losing another 39 points unable to keep its beginning of the week green opening to continue its falling after short lived rebounding ended with last Thursday loss of 144 points.

The Japanese yen could not stand above 85 further versus the greenback with this massive selling in the stocks markets reaching 83.57 which can make it well-exposed to the BOJ interventions threats as it is hard to give up to the demands for watching its currency appreciation after unexpected growing of the Japanese Q2 GDP by just .1% while it was waited to be to be .6% and amid increased probability of having further persisting deflation forces because of the suffering consuming pace in US which has not reached its end as it looks yet in a time of cooling growth tries in China which has increased worrying about prices currently as we have seen it in the beginning of this month calling for banking stress test suggesting declining of the housing prices by 60% which is the double of what was initially made at just 30% and it has obeyed for demand for further re-evaluation step used to be named gradual action by PBOC after it has actually reduced the banks lending percentage to their capitals from the beginning of this year which worked too for the demands of cooling this overheating economy which caused prices rising risks could be appreciated finally by PBOC which can effect negatively on its demand for capitals goods from Japan and we have seen the Chinese PMI index coming down in July to just 51.2 while the Euro zone as a counterpart competitor of Japan is getting use of the EUR exchange rates which is falling in this same time across the broad trading currently below 107 versus the Japanese yen and this can continue if  BOJ let  the yen to appreciate trading freely below its previous 15 years low versus the greenback at 84.8.

The selling pressure on the single currency versus the greenback which has gained momentum recently with the breaking 1.3117, 1.3096 and the psychological level at 1.30 breaking 1.2735 by the end of last week has carried on again this week forcing the pair to be traded below 1.26 reaching 1.2586 after the single currency could get above 1.332 touching 1.333 with the weaker than expected labor report of July release underpinned by Trichet's comments that the debt crisis negative effects on the growth in the Euro zone are easing back expecting it to be better than what was initially estimated welcoming the stress test results which calmed down the markets relatively but the worries about the possibility of the European following of the US growth slowdown could revolve again to the market sentiment pushing the single currency down after its inability to get back above 1.293 again adding more technical pressure on the pair. By god's will, The next major supporting levels are now at 1.255 then 1.2452, 1.2165, 1.2044, 1.1954 and 1.1875 from 1.1875 which has been reached amid the increased worries about the debt crisis and could cap the pair from falling to 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 1.293, 1.30, 1.333, 1.3352, 1.3415, 1.3704 and 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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