Liquidation in the gold market is continuing overnight
triggered by a firmer Dollar. This move is a continuation of last Fridayâ€™s
sell-off which was fueled by a surprise reduction in the U.S.
unemployment rate. The change to the better from 10.2% to 10.0% helps
strengthen the Dollar because of the possibility the Fed will begin hiking
interest rates sooner than expected.
Last week, February Gold formed a weekly closing price
reversal top.This formation often leads
to a 2 to 3 week break.The current
chart pattern suggests a minimum break to $1107.40 to $1079.00 is likely over
Equity futures are trading weaker overnight.The stronger Dollar is causing traders to
rethink the carry-trade.This should
trigger weakness in the stock market as investors will be forced to sell stocks
to pay-off Dollar based loans.
The daily December E-mini S&P 500 chart suggests at
break to 1098.50 to 1093.50 is likely.A
failure to hold this level should lead to an acceleration to the downside with
1077.50 the next likely target.A trade
through this price will turn the main trend down.
Weakness in the December E-mini NASDAQ could trigger further
selling pressure to 1779.00 to 1770.25.A trade through this zone could trigger an acceleration to the downside
with 1741.75 the next likely target.A
trade through this price will turn the main trend down.
A sell-off today could send the December E-mini Dow down to
a retracement zone at 10357 to 10321.The main trend turns down on a trade through 10205.
Yields rose last week in the Treasury cash markets sending
March Treasury Bonds and March Treasury Notes sharply lower following the
better than expected U.S. Unemployment Report.Investors adjusted their positions to accommodate the possibility that
the Fed would begin aggressively phasing out stimulus and raising interest
rates sooner than previously expected.Although
T-Bonds and T-Notes are trading higher overnight, selling pressure could surface
if investors begin to factor in this weekâ€™s $74 billion auction.There is no doubt that investors will be
asking for higher yields for this new debt.
Technically oversold conditions are helping the December
Japanese Yen regain some of last weekâ€™s losses.The Dollar rallied sharply higher against the Yen after better than
jobs data pointed toward the possibility of the Fed raising rates sooner than
The reversal of carry trade positions also helped send the Japanese
Yen to levels not seen since early November.The friendly employment numbers forced traders to buy U.S. Dollars to
pay back borrowed funds and short borrowed Japanese Yen.Last week, the Bank of Japan helped put in
the top in the Japanese Yen when it announced another stimulus package.The BoJ seems to be leaning toward a less
expansionary policy while the Fed readies to tighten.This should help the Dollar gain ground on
the Yen over the intermediate term.
Technically, the Yen is trading inside of a 1.0834 to 1.1790
range.Last Fridayâ€™s break exceeded the
retracement zone of this range at 1.1307 to 1.1195 before finding support.1.The overnight action suggests that a pullback
to 1.1401 - 1.1492 is possible.
Last week, the U.S. Dollar posted a huge gain versus a
basket of major currencies.The strong
up move was triggered by a better than expected Non-Farm Payrolls Report which
showed a decrease in the unemployment rate from 10.2% to 10%.The pace of job losses also declined and
there was a revision to the better in October.
Traders bought the Dollar on the thought the Fed would begin
accelerating its process of reducing stimulus measures while gearing up to
raise interest rates sooner than previously expected.
Technically, the move in the Dollar appears as a spike on
the charts, but it did lay the foundation for a further rally this week by
taking out the previous weekâ€™s high at 75.66.The weekly chart is the one to watch for the best change in trend
indicator.At this time the main trend
will turn up when this index crosses the November top at 77.50.
The short-term range is 77.50 to 74.27.The retracement zone of this range at 75.89
to 76.27 is near-term resistance.Weâ€™ve
seen this move before three times before over the past 6 months.In June the index rallied from 79.12 to 82.34
or 3.22 points.In August the index
rallied 77.83 to 79.92 or 2.09.Finally,
in October, the index surged from 75.08 to 77.50 or 2.42. This means that the
current rally has to exceed 76.36, 76.69 and 77.49 in order to overbalance the
previous rallies. Basically, the shorts have to sweat until 77.50 is taken out.
Last week, the December Euro finished lower.Overnight, the main trend turned down on the
daily chart on the break under 1.4801.The break under a retracement zone at 1.4884 to 1.4823 also indicates
weakness.The possibility of the Fed
raising rates before the European Central Bank is triggering the selling
pressure in the Euro.Last week, the ECB
voted to leave interest rates unchanged.It also initiated a hawkish stance when it announced it would begin
phasing out its stimulus programs. Additional selling pressure hit this market
when ECB President Trichet said he wanted to see a stronger Dollar.
The December British Pound is under pressure overnight after
closing lower last week. While the Fed. and the ECB are gearing up to begin
phasing out stimulus and raising interest rates, the U.K. is still struggling to exit
from its recession.
The current daily chart pattern is bearish now that a lower
top has been formed at 1.6720.The main
range is 1.5702 to 1.6876 with a retracement zone at 1.6287 to 1.6148.This zone is the next likely downside
target.Additional support comes in at two
main bottoms at 1.6258 and 1.6245. On December 10th, the Bank of England meets
to discuss monetary policy.Look for
interest rates to remain unchanged while the BoE leaves its asset buyback
The December Swiss Franc is trading lower overnight. The
breakdown under the last swing bottom at .9782 turned the main trend down. The
sharp break in gold is helping to fuel the break. While the Fed is thinking
about raising rates to stem inflation, the Swiss National Bank is still worried
about deflation.This means that an
intervention by the SNB is not out of the question.The situation will be clarified when the
central bank meets on December 10th.
The Bank of Canada meets this week on the 8th.Look for it to keep interest rates unchanged
at 0.25%.It may address last weekâ€™s
surprise hike in the number of jobs added.This may trigger a short-term rally, but gains are likely to be limited
if the BoC expresses concerns about the impact of a higher currency on
Technically, this market is still trading inside of two
ranges.The main range is .9094 to .9798.This creates a retracement zone at .9505 to .9574.The shorter-term range is .9212 to .9609 with
a retracement zone at .9410 to .9364.
March Crude Oil finished last week lower but inside of last
weekâ€™s range.This pattern suggests
heavy volatility this week.Falling equity
prices, a stronger Dollar and bearish supply/demand fundamentals could put huge
downside pressure on this market with a minimum downside target of 75.53 to
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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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