Gold Surges as Dollar is Unable to Follow-Through to Upside
Last week the December Dollar Index posted a weekly reversal
bottom, but the overnight action failed to confirm this bottom with a
follow-through rally.This sets up a
break of at least 50% of last weekâ€™s range or even a new 15-month low.
The weaker Dollar has triggered another round of buying in
December Gold.Last night gold reached
another new all-time high.The
fundamentals remain intact for this rally to continue.Technically, conditions are overbought but
traders will be waiting to buy after any sizeable correction.The weekly chart indicates that chances are
fairly remote that the trend will turn to down anytime soon.
Equity futures are up big overnight as traders realize that
trading the long side in the stock market is the best game in town as long as
pressure remains on the Dollar.Last
nightâ€™s rally has already retraced more than 50% of the recent drop in the
market.Regaining 1100.00 is bullish for
the December E-mini S&P 500.The
next upside target for this contract is the major 50% price at 1122.00.Last weekâ€™s closing price reversal top was
not confirmed which means that 1083.00 will most likely become a new higher
December Treasury Bonds and Notes are trading slightly
lower.Money from the sale of fixed
income instruments is moving back into the equity markets. Losses are being
limited by the thought of more future buys of mortgage backed instruments by
Supply/demand concerns are being ignored by crude oil
traders as stronger equity markets and a weaker Dollar are providing solid
support.Grumblings out of Iran
are also providing support.
The December Euro is trading sharply higher overnight as
speculators increase bets the U.S.
economy will continue to weaken.Traders
are basing their expectations in part on U.S.economic reports this week which are expected
to show a slower than expected recovery.
Today, existing home sales may show a slight increase in
October, but tomorrowâ€™s revised GDP could be cut below the 3.5% increase
presented last month.Among other
concerns for investors are high unemployment and foreclosures.Recent reports have showed the U.S.
economy is losing momentum which indicates a long, bumpy road to recovery.
Overnight, traders are reacting to news that the Fed will
keep its stimulus measures intact and interest rates low beyond the announced
March 2010 date.This is triggering the
rally in the Euro as speculators believe that the European Central Bank is in a
position to begin removing its stimulus from the market.
Yesterday, Federal Reserve Bank of St.
Louis President James Bullard said that he supported extending the Fedâ€™s
mortgage buyback program beyond March 2010.The dovish language recently used by the Fed is helping to drive the
Dollar lower and demand for riskier assets higher.Bullardâ€™s position was based in part on his
analysis of unemployment and labor markets.He said, â€śunemployment is high, and labor markets are lagging.â€ťDuring a holiday shortened, low volume week,
this type of comment can go a long way as seen by the punishment the Dollar is
Bullardâ€™s comment along with speculation the ECB may begin
to withdraw stimulus measures has put the Euro back on a path toward $1.5000 or
perhaps even a test of the high for the year at $1.5063.Now that some central banks are close to
lifting stimulus measures, investors are starting to use more traditional
analysis to position themselves in the Forex market.This means interest rate differential
analysis.At this time with the ECB
holding interest rates at 1.0% and the Fed maintaining historically low rates,
the best return is in the Euro.This is
another recent why this market should rise.
Unless the ECB steps in to talk down the Euro or use more
aggressive tactics to weaken its currency, a new high for the December Euro is
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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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