FX.co ★ The Euro growth is in doubt. The coming week forecast

The Euro growth is in doubt. The coming week forecast

Here is the end of another trading week, which slightly differs from the previous 6 weeks, according to the deals results. The last week most expectable events were reports of the American banks and major companies.

The net income of American company Google Inc by the end of Q2, 2009 came in better than the estimates and reached 1,48 bln.dollars, compared to the last year indicator of 1,25 bln. dollars for the the same period. But the company\'s earnings were put under pressure. The shares of Google dropped by 2,8%.

The American bank Citigroup net income in Q2, 2009 amounted to 4,28 bln.dollars against 2,49 bln.dollars a year before. The Citigroup revenue rose by 69% on the second quater to 33,1 bln.dollars, compared to last year result of 19,55 bln.dollars in the same quater. The Citigroup shares fell by 0,3%.

The Bank of America net income in Q2, 2009 decreased by 6% and came in at 3,2 bln.dollars versus 3,4 b.d. a year earlier. A profit from share reached 0,33 dollars quaterly vs. 0,72 in Q2, 2008. The bank shares declined by 2,4%.

The General Electric Company net income in Q2, 2009 lowered by 49% to 2,68 bln.dollars, compared to the previous year estimate of 5,26 bln.dollars. The sales volume of the company in Q2, 2009 contracted by 17% to 39,08 bln.dollars vs. 46,8 b.d. a year before.

This is not a full list of reports, but other companies and banks reports are approximately similar. It is clear that such turn of events inspired the investors very much, that impacted the risky currency rates, which surged significantly against the greenback. The joy did not last long.

Later, in Media appeared an information that CIT group bank, operating with corporate clients of small and medium businesses, is to announce about its bankcruptcy on Friday. The bank faced the sharpest liquidity deficit, amid this situation the federal authorities are not going to save the bank. This information is not confirmed, but in the Internet I found that this bank has about million of clients. Imagine what will be the effect in case this concerns come true, it will be the same as with the Lehman Brothers bankcruptcy. This fact is a good reason for the bulls to think it over before parlaying on risky currencies growth, and for us — to think over the risk factor if we are going to sell the dollar.

The fundamental data did not change substantially, according to the last week results. The findings were different. Only the U.S. housing market brought some good news. On the whole, without the CIT group bankcruptcy, we could witness the key levels break through of many pairs by the end of the week, that could sort out a lot of problems of future week predicting and consiquently in the future on the whole. And here we have faced the unwillingness to risk further and “carry trade” deals closing.

There is a balance between the bears and bulls in the market again, that keeps my attitude to future dollar prospects.

Concerning the technical factors, at the pound graphs everything remained unchanged, but there is something to see at the Euro day graph.

The price broke through the triangle upper bound, but did not break through a very significant level at 1,4200. In the same range stood the resistance in the form of Fibo level at 23,6 and green median b. From the technical aspect this resistance level is rather essential. If the coming week closes above this level, this fact will make me doubt strongly regarding the further dollar strengthening. But now I have the same point of view as in the previous outlooks.

This week the market participants attention will be compeled to the following events: the Ifo business optimism, the Bank of Canada rate decision release, the minutes of the MPC Bank of England last meeting, Michigan University consumer confidence index and Great Britain GDP for Q2. Monday is a holiday in Japan, so all stock exchanges will be closed.

Have a good week.

July 18, 2009

Aleksey Goncharov