The Current Market Sentiment

The euro single currency could continue its ascending way after talking out 1.35 finally versus the greenback this week reaching 1.2645 cheered by better than expected release of EU Manufacturing PMI data of January drove it composite up to 47.9 while the market was waiting for 47.5 as the first reading came before from only 46.1 in December as Dec Italian PMI manufacturing index came at 47.8 from 46.7, the Spanish one came up to 46.1 from 44.6 and the germane rose to 49.8 from 48.8 in the first reading of it and from 46 in December to lead the index to this considerable rising despite the falling of the French one to 42.9 as the first reading came from 44.6.

The EU unemployment figure of December has come also to surprise the market by falling to 11.7% while it was expected to rise to 11.9% from 11.8% in November has been revised down too to 11.7%

These data have shown a kind of optimism in the beginning of the new year with the concerns about the debt crisis easing down driving the yields of the debt ailing countries down helping the single currency which has been already boosted by last week announcement of the ECB about giving back Eur137 B of the first round of the ECB Ltro offer with option of paying back after a year while the market was waiting for what’s lower than Eur100B showing no need to have this liquidity by the banking sector for getting over its current financial situation which is looking getting better to the markets specially after the recent reached deal of aiding Greece by the end of last November when the single currency was trading nearly at 1.275 versus the greenback.

The inflows to the debt ailing economies have shown the same result too as they have rose to Eur93B in the last 4 months to Greece, Ireland, Portugal, Spain and Italy after losing 406B in the first 8 months of last year and 300B in 2011 showing trust in loading risk again in these countries.

Germany has added too to the market belief in having a rebound later this year by a series of good economic data over the business climate as we have seen last week Germane IFO rising to 104.2 in January while it was forecasted to be 103 from 102.4 in December, over the investors’ confidence with considerable rising of Germane ZEW to 31.5 in January from 6.9 in December and even with yesterday release of the germane retail sales which have fallen in December by 1.7% monthly while the market was waiting for rising by 0.1% from 0.6% in November, the Germane GFK of the consumers’ confidence in Feb has come before rising to 5.8 from 5.6 in Jan has been revised to 5.7 and the figures of the germane labor report came out offset the negative impact of it by easing of the unemployment rate to 6.8% again in December from 6.9% in November adding getting out 16k from the unemployment change which the market was waiting for adding 8k to it after cutting by 2k in November.

All of that has been added to the lower market expectations of cutting the interest rate soon by the ECB which increased after the recent ECB decision of holding the interest rate at 0.75% came an unanimously not to by majority as the previous one to drive the single currency up across the broad bringing it back up to be traded above 1.3246 in the recent 3 weeks.

But the official criticism of the single currency appreciation cannot be ignored too as what has been done by the previous EU Fin Min Group Junker before leaving his place to the Dutch Fin Minister when he mentioned that the single currency rising exchange rate is risky could drag the single currency to slump more than 80 pips versus the greenback within less than 10 minutes after these comments.

By God's will, EUR/USD can face now in the case of rising further another resisting levels at 1.3794, 1.3866 before the psychological level at 1.40 which can be followed by 1.4246 while retreating back can be met by supporting levels at 1.3531, 1.3403, 1.3246, 1.3035 before the psychological level at 1.30 while getting below it can be met by another supporting level at 1.2734 before 1.2661 again whereas it could rebound after the market worries about Greece got down.