Tumbling Dollar Sends Equities Markets Sharply Higher
Demand for higher risk assets helped to trigger a strong
rally in U.S.
stock markets.The December E-mini Dow
contract took out the October high at 10068 and made a new high for the year.
The December E-mini NASDAQ and S&P 500 closed within striking distance of
their highs for the year. The action by the Fed last week combined with bearish
unemployment report is expected to keep pressure on interest rates which is
helping investors build confidence in the long side of the market again. News
that the G-20 finance ministers failed to back the Dollar at its meeting over
the week-end, fueled most of the rally today.
The U.S. Dollar Index reached a 15 month low on Monday
following a massive sell-off against most major currencies.The Dollar has gone down since November 3
when it topped at a 50% price at 77.50.The 2008 bottoms at 73.79 and 73.67 are the next downside targets.
The Greenback was trounced on Monday after the G-20 finance
ministers failed to discuss the value of the Dollar at their week-end meeting,
thereby, effectively offering no support.In addition, they decided to keep stimulus measures in place until the
global economy can show sustained gains.
The real selling pressure hit the Dollar after an IMF report
issued at the meeting said, the Dollar has moved closer to â€śmedium-term
equilibriumâ€ť but â€śstill remains on the strong side.â€ťThis statement was a shot at the Dollar being
overvalued versus the Asian currencies particularly the Chinese Yuan.Aggressive traders seized this moment as an
opportunity to increase selling pressure on the Dollar overnight and throughout
the New York
The fact that the G-20 Finance Ministers failed to talk up
the U.S. currency came a few days after the Federal Reserve voted to leave
interest rates at historically low levels, and it was reported the U.S. lost
more jobs while boosting the jobless rate to a 26-year high. All of this added
up to a perfect storm versus the Dollar.The Fed decision itself added up to a free ride for the Dollar bears
until the Fed meets in December.With
interest rates at historically low levels and plenty of liquidity available,
traders should continue to treat the Dollar as the worldâ€™s funding currency
throughout the foreseeable future.
December Gold rallied to a new all-time high because of the
weaker Dollar.Now that this market has
pierced the $1100 barrier with conviction, look for this price to become
short-term support. December Silver closed up but is still struggling to take
out the October top at 18.17.This could
be because traders are using silver as a hedge against gold.December Copper also traded firm but settled
below its October top at 3.069.
December Crude Oil took back all of last Fridayâ€™s break with
a strong move to the upside.Higher
equities, a weaker Dollar and increased speculation are providing the major
support.Traders are speculating that
the Dollar will continue to erode in value.In addition, news that a hurricane is heading toward a major refining
area in the Gulf of Mexico near Louisiana
is also helping to boost unleaded gasoline futures.
Treasury futures closed slightly better. Early in the
session December Treasury Bonds and December Treasury Notes traded lower as
traders pulled money from fixed income instruments and reinvested in the stock
market.Later in the day, the inability
to break the Treasuries lower led to some mild short-covering.Technically, the December T-Bonds are holding
inside of a retracement zone at 118â€™24 to 117â€™18.
December Corn and December Wheat rallied sharply higher on
increased speculation that a weaker Dollar will lead to increased demand for U.S. grain.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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