Good day forex traders.
Yesterday we noted that a Spanish bank was seized by regulators. Investors were concerned about the depth of the Euro Zone crisis and were making speculations that the aid solution could only delay the inevitable. We were reminded too that the better than expected US Existing home sales figure were probably due to the tax credit scheme and the sustainability of the figure would be something to look out for.
Finally, a report suggested that the US Dollar might be changing into a growth currency due to the apparent strength of the US economy. If this indeed happens, we would need to take a look again at the various correlations.
Looking at the EUR/USD, it resumed it’s bearish slide and is currently facing opposition from the strong line of 1.2200. Do remember that support and resistance lines are never a single pip.
The S&P 500 resumes it’s slide, reaching the 1040-1060 region. This suggests a major breakdown in sentiments.
Reflecting a similar tone, oil is now under $70.
Gold on the other hand climbs towards $1200. This may be a sign of risk aversion. Gold is usually a popular investment of choice when it comes to uncertainty.
North Korea’s military was put on alert. With the global economy already fragile from the financial crisis, one of the last thing the world needs is a new hot zone. This probably caused risk aversion and sent risk takers diving for their trenches!
Furthermore, with the announcement of the seizing of the Spanish bank, many investors are now echoing that Spain is next. Four banks in Spain announced a merger in a bid to remain strong. With the can of worms of bail out aids opened in the Euro Zone, we may be expecting more Euro Zone countries to come forth with “declarations” of financial problems and seeking aid solution.
A condition we are familiar with in the 2008 crisis, the Libor rate has spiked and this suggests that lending is once again slowing down in the interbank market. Investors are worried that this credit crunch may develop into a wider systematic meltdown. The fall of the MSCI World Index to a nine-month low is an indicator of the possible brewing storm.
From a technical point of view, the strong line of 1.2200 may serve as a support for now. Further developing negative sentiments may push it through towards the low of 1.2135. Otherwise bullish relief may see 1.2300/330.
Fed Chairman Bernanke is due to speak hours later and hence be careful of unexpected moves as traders try to look for clues in his speech. Tomorrow also bring us economic data such as the French Consumer Spending and US New Home Sales. As usual, you can find the list of the various economic releases in the Economic Calender below.
I am no politician nor a global issues expert but correct me if i am wrong. North Korea’s citizens are apparently suffering. Hunger, outdated technologies, etc but yet much economic resources go into it’s military. Is the country really under so much threat of an attack by the US, South Korea or the world? With the reports i read from the mass media, it seems to be the other way round. As a fellow human, i hope the people in North Korea will live well and proper.
Trade safely and always be thankful for the good things in life.
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