The worries about the inflation are containing the market sentiment currently after the rising of China CPI of march to 5.$% while it was waiting to be 5.1% from 4.9% in January and February after easing in last December to 4.6% from 5.1% in November and Chinese PPI of march to has increased to 7.3% from 7.2% in February which shows continued inflation pressure over the producing level too which can increase the probability of increasing the interest rate by PBOC again after raising it 3 times since the charismas after asking its banks to increase its liquidity reserves 6 times last year for containing the inflation pressure which some of it has resulted from the Fed's adopted quantitive easing policy which is weighing negatively on the greenback....

driving up the prices of the commodities and energy while it is till looking to the fed that it is too soon to end this policy as what has been said a week ago by the Fed's Vice president Yellen which cam inline with the recent statements of Bernenke which downplayed the risks of rising the energy prices over the long term referring to that the rising of the oil and commodities prices can be temporary and this direction has been obvious in the recent meeting minutes of the Fed too with no signal for hiking the interest rate until now and this direction can be maintained as we have seen no implication to be mentioned on US ISM manufacturing index which has come at 61.2 which the market waiting for just 60.5 from 61.4 showing no easing of the demand in the sector despite the rising of the commodities and oil prices which can give the conclusion that the easing period can be extended undermining the greenback having more rooms for prices to grow up with no tightening action to be taken against them which can underpin the demand for the precious metal like the gold and the Silver as a hedge against inflation.

So, the gold could rise to a new high at 1479 during the Asian session as a requesting it as a hedge against inflation after this remarked rising of the Chinese consumers price index heading to 1500$ psychological waited level and this can be done in the case of having today stronger inflation data out from EU and US as we wait today for EU CPI index of March after the flash reading of it has shown rising to 2.6% from 2.4% yearly in February while the core figure excluding the food and energy is forecasted to rise by 1% as February and also we wait today for Mar US CPI index which is expected to rise monthly broadly by .5% while the core figure excluding the food and energy is expected to rise by .2%. The gold next supporting levels are waited to be at 1450$ then 1410$, 1393$ then 1380$ which has been reached after the Japanese earthquake on asking for liquidity

And also the silver could jump above 1.42 level after this strong inflation figures of china as a hedge versus inflation while situation in Libya is still mixed threating the oil supplies from the middles east to be cut. The silver could end its recent profit taken wave at 39.67 making a higher low after it has ended the previous correction at 36.45 well above the trend line support extended from 26.39 to 33.66 which is still underpinning it technically and its next supporting levels are expected to be at 40.52 then 39.67 again following over a longer range by 38.04, 37.06 and 36.45 again.

While the British pound is still under pressure since the release of March CPI index which has got back to 4% from 4.4% in February while the market was waiting for 4.4% again which can lower the pressure on BOE to hike the interest rate for fighting the inflation focusing on the growth needs of the current kept easing monetary stance which can undermine the cable which has been trading at 1.6315 by the release of the inflation data to be traded currently at 1.626 after reaching 1.6225

And despite the dovish Germane ZEW economic sentiment release of March which has fallen to 7.6 from 14.1 which the market was waiting for 11.3 and also EU ZEW economic sentiment release of April which came down to 19.7 from 31 in March while the market was waiting for easing to 29.6 merely, the single currency could continue rising to record new high versus the greenback since the credit crisis at 1.4518 thanks to the interest rate outlook differential which stands by the single currency currently while the Fed is widely expected to extended its holding of its quantitive easing policy into this year downplaying the prices upside risks on the underling inflation over the long term.

The risk appetite has been undermined this week also by the Japanese announcement of elevating the current nuclear radiations risks which are facing Japan to the seventh degree which is the same degree which has been announced after Chernobyl nuclear crisis to bring back the worries about the Japanese economy to contain current market sentiment driving up the low yielding currencies and specially the Japanese yen which could correct some of its recent loses versus the greenback which could reach 85.53 thanks to the BOJ intervention and the US better than expected jobs data of March and the USDJPY is trading currently just above 83

And also the Swiss frank could gain momentum this week by the continued tensions in Libya which have no close clear end until now driving UK and France to call for taking more aggressive actions against El Qaddafi's troops forming more pressure on USDCHF to break .8915 reaching .8895 after this new Japanese risk alert which has weighed negatively too on the European and US equities markets this week which are forecasted to have dovish opening today from as the  risk aversion which can be triggered by the increased markets expectations of having further monetary tightening steps from China for containing the ascending inflation upside risks in china.
 

Kind Regards

FX Market Strategist

Walid Salah El Din

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