Losing another 131k of the non-farm payrolls of July has weighed negatively on the greenback across the broad. These weak data effect directly on the interest rate out look differentials of the greenback as the decision of hiking the interest rate has become harder to the Fed which is focusing on the labor market developments worrying about expected slow down of the growth in US in the second half of this year and it is expected to have a softer language than even its recent meeting when it has highlighted these worries about the growth out of its coming meeting this week and it may prepare the market for a new measurement in the face of the growth recovering flattering before it can have further negative impacts of the struggling labor market and dampen the demand for consuming and investment again. The treasuries yield went down after the data which effected negative on the greenback in spite of the risk aversion which weighed negatively on equities the markets by the weekend after better than expected earning reports of the second quarter could contain the market sentiment in the recent month and the gold could close again above 1200$ as good choice for who are looking for a safe haven hedge against the weak dollar and investment returns but the double impact was obvious at the USDJPY trading below .85 serious psychological level before getting back above it by the closing as it has no way but going down, in spite the Japanese vocal threating of intervening after the dovish labor data on the greenback weaker interest rate outlook and the unwinding of the carry trades as the weak market sentiment after the data which had down revision of June losing of 125k to 221k too. The market eyes will focus closely on this pair at this critical level which can trigger interventions by BOJ as it is hard to relinquish to the demands for watching! As the weak currency can effect severely on the Japanese economy which depends on the exports, in a time of an expected consuming weakness from US which is waited for important retail sales figures by the end of this week about July after falling by .5% in June monthly and also cooling growth tries in China which has increased worrying about prices currently as we have seen it last week calling for banking stress test suggesting declining of the housing prices by 60% which is the double of what was initially made at just 30% and it has obeyed for demand for further re-evaluation step used to be named gradual action by PBOC after it has actually reduced the banks lending percentage to their capitals from the beginning of this year which worked too for the demands of cooling this overheating economy which caused prices rising risks could be appreciated finally by PBOC which can effect negatively on its demand for capitals goods from Japan and we have seen the Chinese PMI index coming down in July to just 51.2 while the Euro zone as a counterpart competitor of Japan is getting use of the EUR exchange rates which is trading currently below 114 versus the Japanese yen and it is exposed to get down below 110 if BOJ allowed to its currency to appreciate further versus the greenback breaking 84.87 support of the USDJPY which is still holding since July 1995. As it was expected, Trichet's comments in the ECB press conference after its decision to keep the interest rate unchanged again at 1% last Thursday have come optimistic about the debt crisis easing effects on the growth in the Euro zone expecting it to be better than what was initially expected welcoming the stress test results which calmed down the markets relatively recently. The single currency could get above 1.33 for a while after the weaker than expected labor report of July breaking its recorded recent high at 1.326 after but it could finally have footing above 1.3 versus the greenback last week to jump above its previous solid resisting area between 1.3096 whereas the pair has fallen making another lower high on 10th of last may after breaking it as a support and tested it back as a resistance and 1.3114 which is the 38.2% Fibonacci retracement level of the falling from
1.5142 to 1.1874 getting strong momentum to get 1.3261 before easing finding support at this same mentioned area successfully testing it back as a support first time making a higher low at 1.3117 to continue its rally which starting from 1.1875 amid the increased worries about the debt crisis in Europe supported by the successful EU banking stress tests which have shown failure of just 7 banks out of 91. The next major supporting levels are expected to be at 1.3096 then1.2735, 1.255, 1.2452, 1.2165, 1.2044 and 1.1954 and 1.1875 which has become the pair main defending line before 1.16 whereas the pair has started its rally to 1.604 before falling again to 1.233 amid the credit crisis and rising back forming a lower high at 1.515 in the beginning of last December while the major resistances are at 1.3352, 1.3415, 1.3704 then 1.3885 which is 61.8% Fibonacci retracement level of this same recent declining from 1.5142 to 1.1874.Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com