Europe is Still Under Pressure - forex trading tax south africa

Europe is Still Under Pressure ~ forex trading tax south africa

by Angelo Airaghi [Guest Analyst]

As global markets are sizing the Euro-zone sovereign risks and the Chinese reserve requirement, the U.S. economy is giving tangible signs of recovery. The U.S. dollar, in the mean time, is finding good resistance points at current levels.

U.S: Recovery unfolding
Bringing some order inside the troubled finances remains the main target this year in the United States and in Europe. Nevertheless, with the job market layouts having probably topped at current levels, especially in the U.S., consumer spending should rise in the coming months, albeit at a lower level compared to previous recessions.

In January, consumer spending moved up by 0.5% month-on-month, more than the expected 0.4%. December and November numbers were revised up as well. The first moved to -0.1% from -0.3% and the second jumped to 2.0% from 1.8%. January’s rise was broad-based confirming that households keep on spending even after the holiday season. Sells rose 0.8% excluding auto, gasoline and building equipment.

The housing market remains at contrary a corner stone of the U.S. recovery, but prices might struggle to find their way out of the bottom.Housing starts are stalling, also due to the adverse weather conditions, although the uptrend should continue. The Federal Reserve will maintain the gradual removal policy, as the initial step toward higher rates that could materialize later in the year. Policymakers still expects low growth and low inflation for the months ahead. In effect, December’s trade deficit confirms that the economic recovery is unfolding in the United States. The deficit increased to $ 40.2 billion from November’s $ 36.4 billion.

Both export and import rose. The first moved up by 3.3% and the second increased by 4.8%. So, the Gross Domestic Product (GDP) might pass 3.5% this year. Core retail sales rose almost 6.0% annually in the past six months.The vast majority of key U.S. companies have overcome Q4 forecasts with profits rising on a pace of over 15% year-on-year excluding financials.


EUROPE is still under pressure

The European markets are still under siege, as Greece and other European nations are struggling with fiscal challenges. German and France have already announced they will support the Mediterranean’s country, but other nations might join.

Cutting 10% of GDP deficit in just over three years will not be easy for Greece without the concrete intervention of the European Community. Spending should be cut dramatically, while wages reduced from current levels.

This might inspire more social unrests, after the strikes that have blocked Athens throughout last year. In reality, Euro-zone finances as a whole are in a better shape than those in the United States.The Euro-zone general government deficit will be almost 7.0% of the GDP in 2010 according to OECD numbers, while the U.S. is forecasted at 10.7%. Nonetheless, large imbalances among the member states are a serious threats the EU stability.The challenging economic conditions are putting Portugal, Spain and Greece economy under pressure. A centralized fiscal policy targeted to each nation need is more appropriate, but this would imply giving up current autonomy.

At present, nobody in Europe wants to compromise their independence. The European Central Bank (ECB) will keep rates low for now. Greek jitters are unfolding, while the economic recovery is still weak.In fact, while the Euro-zone GDP fell 2.1% in the fourth quarter, less than the 4.0% decline registered in the third quarter, industrial production slumped 1.7% month-on-month in December after having increased 1.4% in November.

GBP/USD: testing key support linesEUR/USD: The Euro has reached the important support line at 1.35, 1.37. It corresponds to the longtime trend line and should hold at first touch. However, a move below 1.3390 is necessary for 1.33, 1.3250. A breakout failure would take the price back again to 1.35.

GBP/USD: The pound has reached to important support line at 1.560/1.55. This is at the conjunction of various support lines and should hold. Nevertheless, a move below 1.5390 would target 1.53, 1.52. A breakout failure would instead take the price to 1.5860, 1.6020l.USD/JPY: The market is finding a good support in the 88.00/89.00 area. A move above 91.50 would target 92.30.USD/CAD: The resistance line at 1.07/1.08 is holding. It corresponds to the higher Bollinger bands and few resistance lines. A decline to 1.0550, eventually 1.0380, is possible
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Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.
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