Tuesday September 8, 2009 - 13:00:04 GMT
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Higher Gold Drives U.S. Dollar Sharply Lower
Greater demand for higher yielding assets is punishing the U.S. Dollar this morning. All major currencies are expected to open higher versus the Dollar. Renewed interest in higher risk assets is leading to speculative Dollar selling fueled by a G20 pledge to continue stimulus spending. Equity indices are surging boosted by low inflation and earnings momentum. Gold has also cracked the $1000 barrier which is helping to make owning the Dollar less desirable.
The September Euro broke through the August high at 1.4449 and surged to a new high for the year. Continued improvements in the Euro Zone economy are helping to attract strong buying interest as traders increase bets that the European economies will recover before the U.S. economy.
Strong speculative buying in the September British Pound has triggered a 50% retracement of the recent break. Traders are beginning to speculate that recent moves by the Bank of England are filtering through the U.K. economy while putting the economy on a path to recovery. The BoE meets on September 10th. Traders will be watching to see if the BoE makes any adjustments to its quantitative easing policy.
The September Yen is up sharply overnight. The current move has this market in a position to test the recent top at 1.0909. Renewed interest in Japanese bonds because of the attractive yield is triggering the current buying spree in the Yen as traders are favoring Japanese debt instruments over U.S. debt instruments.
The strong surge in the U.S. equity markets and a firmer crude oil market is helping to boost the demand for the September Canadian Dollar. The trend is up in this market and momentum could drive it to the August high of .9408.
There is not much economic news driving this market this morning. Now that the summer vacation period is over, volume is expected to pick up as well as volatility.
December Gold broke through the $1000 level as the speculative buying spree continues. Without inflation to drive this market higher, this may be fear buying. Trader could be hedging against a yet unidentifiable event. The weaker Dollar is also contributing to the stronger Dollar, leading to speculation that a major event may soon strike the U.S. economy.
U.S. equity markets are up this morning. Demand for higher yielding assets is helping to boost stocks. Some traders still feel this market is way ahead of the economy which could be setting it up for a major fall later this month. Cycle watchers have identified the 11th to 15th time period as a potential top or the start of a sharp decline.
Treasuries are trading mixed to better. This could be another sign that traders are bracing for a volatile event. If traders truly favored equities over Treasuries, then the bonds and t-notes would be trading lower. If equities begin to break then look for Treasuries begin to firm. There seems to be a major battle looming between risk and safety.
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