The worries about the debt positions inside the Euro zone came back containing the current market sentiment after another downgrading of Greece credit rating by Moody's to trigger selling in the European equities markets and to put pressure on the single currency which is waiting for a close tightening action by the ECB as it has become widely expected after Trichet's recent comment which is well known in the markets as a reference of a tightening action to come in the next meeting of the ECB that it is strong vigilance warranted to watch the prices but this waited action for containing the prices over the medium term has been seen as another obstacle in the way of covering the costs of borrowing inside the European countries ailing of debt...

as it will exceed the cost of covering their auction and in the same time this tightening policy can feed the market with believing that the ECB is caring much more now about the prices upside risks than funding the debt of these countries which should lead to further injection of funds into their markets and banking system which can tackle the ECB efforts for containing the inflation over the medium term after it had resided above its 2% yearly target in the recent period fueled by remarkable increasing of the commodities and energy prices with the tension in the Middle East and specially Libya which is one of the most important and nearest oil and gas suppliers to Europe giving Italy lonely 35% of its needs of gas that's beside the supplies which go behind of Italy like to Spain, France and Germany and cutting these supplies should raise the cost of energy in Europe which can tackle the growth which has started to shown good signs of recovery recently lead by Germany which has had significant declining of its unemployment rate of February to 7.3% from 8.5% in January and new 52k added jobs in that same month from just 18k in January while the market was waiting for another 18k in February and that's beside the continued spectacular improving of the Germane IFO business sentiment index which reached new high again in Feb at 111.2 and this number has not been seen since the beginning of that index in 1969 and also we have seen recently improving of its PMI manufacturing index to in February 62.7 from 60.5 in January a little bit above the market forecasting of 62.6 helping EU PMI to keep its scale of expansion of January at 59 and it is widely known that the number above 50 means expansion and below it means contraction. The single currency has been dragged down below 1.40 on these worries about the Debt outlook weights in the Euro zone after adopting a tightening policy by the ECB and it is now trading well below 1.39 ahead of testing back 1.386 as a support and failing to have the required support there can lead to 1.37 and this can be accompanied with breaking the trend line support extended from 1.2873 to 1.3523 which can threat the ascending channel leading to the recent bottoming level at 1.3424 and breaking it can open the way again to 1.3238 then the psychological level at 1.3 versus the greenback which is gaining momentum currently from the risk aversion sentiment and the investors uncertainty which effect negatively on their business spending amid the rising of commodities energy prices to tend to square their risky positions buying the low yielding currencies and the gold as a hedge against inflation and store of their wealth value as a safe haven and so it could keep its place above its recent resistance at 1394$ and the psychological level at 1400$ which underpinned it technically too to get over its recent resistance at the top which it has formed recently at 1423$ and breaking its recorded high at 1430$ recording another high at 1444$ this week.

Kind Regards

FX Market Strategist

Walid Salah El Din

E-Mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.fx-recommends.com