The risk aversion could contain the market sentiment in the beginning of this week on worries about the debt outlook in the Euro area after rumors that there is new preparing request from Greece to restructure its debt while there are market worries about changing of the Finnish government can threat the Portuguese new request for the aid of the bailing out plan which has been underpinned by 190 billion euros to be 440 billion recently from 250 billion for aiding European ailing of debts countries. The 10 year yields of the Greek bonds have risen to 14.4% and also the Portuguese 10 year bonds yields have surged to 9.1% and the Irish 10 year bonds yields have risen to 9.8% while the European equities markets have come under strong pressure dragging the US stocks to open deeply into the negative territory forcing Dow to lose more than 200 points until now as the risk apitite has been already undermined since the PBOC has sent its fourth request of this year to the Chinese banks to exceed their reserved holding of liquidities by .5% for fighting the inflation which has reached in March 5.4% while it has been forecasted to be just 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.

This new request of PBOC has been encouraged by the stronger than expected Q1 GDP of this year which rose by  9.7% yearly from 9.8% in the last quarter of 2010 while it was expected to ease to 9.4% and this request is number 4 this year and number 10 since the beginning of last year with 3 times of raising the interest rate since the last charismas for containing the inflation pressure which some of it has come from the tension in the middle east and specially labia and some other 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 came 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.

The gold next supporting levels are waited to be at 1450$ then 1410$, 1393$ then 1380$ which has been reached after the Japanese earthquake.

The gold is still well supported by being above the trend line support extended from 1307$ to 1380$ heading to 1500$ psychological waited level underpinned by the current worries about the debt outlook in Europe which have dampen the business sentiment encouraging the investors to look for it as a safe haven stance of their wealth value after the inflation in EU have come stronger than expected in March above the flash reading of it which was 2.6% at 2.7% from 2.4% in February which can encourage the ECB to move forward tightening its monetary stance but from another side, this can raise the bonds yield putting more the pressure on Greece, Ireland and Portugal while the other European countries are not growing at strong pace of recovery which can tackle the tightening stance to be not at the required pace for fighting the inflation firmly.

The silver could open this week trading above 43 after it could jump above 1.42 level following the 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.

 

Kind Regards

FX Market Strategist

Walid Salah El Din

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