U.S. Dollar Falls to 15 Month Low against Basket of Major Currencies
The U.S. Dollar fell to a 15 month low against a basket of
currencies on Tuesday as concerns about debt issues in Dubai subsided, leading to increased demand
for higher yielding currencies. Further weakness in the Dollar was attributed
to a report that Chinese manufacturing increased at its fastest pace in five
The weakness in the Dollar helped boost commodity and stock
demand as investors once again felt comfortable adding more risk to their
equity markets opened higher and maintained strength throughout the day.The leader was the December E-mini Dow which
took out the November high and rallied to 10494 before settling below the
Once again the December E-mini S&P 500 backed away from
its most recent top at 1112.25.Traders
have gotten used to buying dips and seem to be reluctant adding to positions at
higher levels.The current chart pattern
suggests that this market could break out over the resistance and rally to a
major 50% price level at 1122.00.
The December E-mini NASDAQ was repelled by 1800.00, but
still managed a strong gain for the day.In order for all three indices to get back in sync, the NASDAQ needs to
take out the November high at 1813.75.If the Dollar maintains its downward slide, it shouldnâ€™t be hard for the
stock indices to reach new highs for the year.
The rise in higher yielding assets pressured the Treasury
markets throughout the day with the March Treasury Bonds taking the hardest
hit. Yields for both March Treasury Bonds and March Treasury Notes rose as
these two instruments are begin forced to compete with the higher yields
investors are getting in the equity markets.The chart indicates that March Bonds should break to at least 121â€™06
over the short-run with 120â€™24 a possible target by December 7th.
Support for the U.S. Dollar continued to erode all day
triggering a collapse in the Dollar Index to near last weekâ€™s low at
74.27.A break through this level sets
up a further decline to 73.67 which would match the April 2008 bottom.
News that Chinese manufacturing rose to a seasonally
adjusted level of 55.7 helped drive the December Euro over $1.51.Later this week, traders expect the European
Central Bank to leave interest rates unchanged, but offer plans to gradually
decrease its financial stimulus package.
The December British Pound rose sharply as U.K. manufacturing increased
slightly. Technically, this market rallied back into a retracement zone at
1.6574 to 1.6646.This market may use
this current retracement as an opportunity to form a secondary lower top.Yesterdayâ€™s drop in consumer confidence and
rising unemployment are still major concerns for the bulls.
The Dollar traded higher versus the Yen on Tuesday after the
Bank of Japan took action to weaken its currency.The BoJ voted earlier this morning to leave
interest rates unchanged while deciding to provide three-month loans to
commercial banks at an interest rate of 0.10 percent.This action by the BoJ is expected to help
stimulate growth and prevent deflation.
News that Russian will add the Canadian Dollar to its Forex
reserves, along with higher equity and commodity markets, helped to pressure
the U.S. Dollar against the Canadian. Demand for higher yielding assets should
continue to strengthen in the Canadian Dollar.The chart pattern suggests more upside action to follow now that the
.618 retracement level at .9574, and a pair of old tops at .9570 and .9599 has
been broken.The only thing that could stop
the rise in the Canadian Dollar will be action by the Bank of Canada to provide
liquidity to the market.The BoC is
concerned that a rising currency will hurt export demand.
February Gold broke through the $1200 barrier for the first
time but closed below it as profit-takers lightened up on their positions.The strong rallies in overnight trading are
signs that foreigners are driving this market higher. The weaker Dollar provided
all of the support at throughout the trading session. Look for higher markets to continue unless the
Dollar reverses course.
March Crude Oil traded higher throughout the day buoyed by
stronger stocks and a weaker Dollar. News that Chinese manufacturing was up is
expected to increase demand for crude oil. The trend remains down until the
last main top at 82.30 is violated, but regaining a key retracement price at
80.27 has put a bullish tone in this market.A break back under 79.24 will be a sign of weakness.
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