Friday July 17, 2009 - 12:23:33 GMT
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Forex Hound - www.forexhound.com
Flight-to-Safety Rally Supports Treasuries
Traders are buying Treasuries for protection against a decline in equities. The buying started last night following the bombing in Jakarta. No matter how much we hear about the risk in holding U.S. debt, global investors seem to always find there way to the Treasuries during times of geopolitical uncertainty.
Equity markets are trading weaker before the opening. The strong rally this week may have been overdone leading to profit-taking overnight. Investors really wanted to see knockout earnings reports this morning based on the sharp rise weâ€™ve seen this week. Anything less than spectacular could trigger a sell-off.
The strong Dollar is putting pressure on August Gold and September Silver overnight. This is likely to carry over to the New York opening. The lack of inflation has cast a long-term bearish pall on this market. The inability to react bullishly to a terrorist attack is a sign that this sector may be poised for another leg down.
Overnight events are encouraging safe-haven buying in the Forex markets in Europe. CIT bankruptcy concerns and explosions at hotels in Jakarta are sending investors to the safety of the U.S. Dollar and September Japanese Yen.
The flight-to-safety rally is also triggering weakness in emerging market equities. The developing fear mentality could spill over into the U.S. Forex and equity market openings where traders are already nervous about todayâ€™s U.S. Building Permits and Housing Starts Reports.
Flight-to-safety buying is supporting the Japanese Yen overnight. News that the CIT Group may file for bankruptcy has been making traders nervous for two days, but explosions at hotels in Jakarta overnight encouraged traders to take protection in the Yen.
Ideal growing conditions have grain traders thinking about much larger production than originally forecast. Unless this weekendâ€™s cool temperatures is perceived as a negative, look for the downside pressure to continue on the November Soybeans and December Corn.
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