The greenback has started the week under pressure after the Fed's Vice President Yellen has said it clearly that it is too soon to end the Fed's current quantitive easing stance on the current economic conditions and this statement has come to confirm what the Fed's believing that the underling inflation over the medium term is expected to be stable despite the rising of the oil and commodities prices which can be temporary as what has been said by the Fed's Chairman Mr. Bernenke and 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 silver could continue rising making new times records versus the greenback reaching 41.94 during the Asian session after breaking above 40$ by the end of last week which could trigger stop losing orders on reaching this new trading area after it has ended its short correction which has ended at 36.45 well above the trend line support extended from 26.39 to 33.66 and also the supporting level at 37.06 and 38.04.

While the demand for the gold is still growing as a safe haven option for saving the value of the wealth during the current military operations in Libya which can be extended with no clear victory and also as hedge against inflation too to get over 1476$ while the market is waiting for heading to 1500$ psychological level with the current persisting of the Fed's easing stance in US and also in Europe even after the ECB's expected hiking of the interest rate by .25% for containing the prices, it is not expected to be repeated easily for containing the inflation by the firm required way as most of the European economies are in need of the low interest rate for stimulating their struggling economic growth while there are other ailing countries by their budget deficit which can suffer further from the rising of their bonds issuance yields because of this tightening action Like Greece, Ireland  and Portugal while BOE is still unable until now to take a tightening action against the rapid rising of prices suffering from the stagflation pressure after UK GDP has shrank by .5% q/q in the last quarter of 2010 and even if the MPC decided finally to take an action to hike the interest rate, it is not expected to by the required way to contain the inflation which reached to 4.4% yearly in February and it can reach to 5% as the recent MPC minutes have shown.

The gold next supporting levels are expected to be at 1410$, 1393$ then 1380$ which has been reached after the Japanese earthquake on asking for squaring liquidity and specially for the Japanese yen which is widely used as a funding currency on its very low interest rate for lowering the investments costs which affected negatively on the investment sentiment generally but the gold could rebound again as the liquidity has brought back to the markets, after the BOJ intervention which has been supported by the G7 with no criticism from the European countries while the Japanese exports are depressed from different sides after the demand for the yen has pushed USDJPY below 80 reaching 76.35 while the Japanese products have become exposed to the radiations tests all over the world.

While the silver could continue rising too breaking above 40$ after it has ended its short correction which has ended at 36.45 to reach in the beginning of this week 41,94 getting use of stop losing orders after 40$ and being above the trend line support extended from 26.39 to 33.66 and also the supporting level at 37.06 and 38.04.

 

Kind Regards

FX Market Strategist

Walid Salah El Din

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