The current market sentiment is still contained by the US budget negations in US between the Republican Party and the Democratic Party for avoiding the fiscal cliff in the beginning of the next.
So, the volatility can keep growing as long as we are to go to the charismas holidays with no deal yet as the difference between having a deal or not is big to the markets which has started to price actually on a some sort of deal can at least calm down the affect since the presidential election ended with Obama's interest in changing last year last summer agreement to start the austerities measures from the beginning of next year by cutting the govern mental spending by $109 bln and ending Bush's tax cuts after it has been extended before for another 2 years and imposing new taxes to the higher than 250k$ income a year families ending emergency unemployment benefits to cut the deficit by about $550 bln next year in a plan for saving 7 trillion dollars in 10 years by costing the US families approximately from $2k to $5k a year.
This plan is expected to lower US GDP by 1% yearly driving the unemployment rate by about 1.5% percent for cutting the deficit to GDP rate to 4% and driving the US debt to 12 trillion from about 16 trillion currently hoping for improving the financial status of US and avoiding the credit downgrading in the future by God's will but this is not guaranteed as these measures can have strong negative implications on the US economy hurting its ability to grow as what has been warned by Fitch credit rating agency and also by Goldman Sachs which has come out saying that U.S. can fall into recession early next year can lead to shrinking of its economy again while avoiding the fiscal cliff can lead to very different situation and that what is putting the investors in an astray and miss-confidence stance currently making the market nervous and ready to move in a volatile way in the next days by the year end.
The single currency which could avoid a shortfall by reaching a new agreement for supporting Greece and easing the critical financial conditions which it faces is now trading above 1.30 again versus the greenback on these hopes for avoiding the fiscal cliff and by the increased expectations of the US economic ability to grow next year too after yesterday US GDP figure of the third quarter which has shown growing by 2.7% annually from 2% in the previous reading and from 1.3% in the second quarter.
By God's will, EURUSD can face now in the case of rising further another resisting level at 1.3082 before its recent formed lower high on 17th of last month at 1.3138 after it failed to break 1.3171 again while retreating back can be met by supporting levels at 1.2938, 1.288, 1.2734 before 1.2661 again whereas it could rebound after the market worries about Greece got down while breaking it too can lead to another supporting level at 1.2604 which is forming 50% Fibonacci retracement of the rising from 1.2041 to 1.3170 before 1.2464 again which meets also the 61.8% Fibonacci retracement of this same rising.
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143