The stronger Dollar triggered a sharp sell-off in February
Gold overnight.Despite the hard break,
this market is still holding a key 50% level at $1107.40.A break of this level will fuel a further
decline to the November main bottom at $1102.60.Ultimately, this market should test
uptrending Gann angle support at $1094.00.Watch for a technical bounce when this angle is tested.
Despite the stronger Dollar and weak equity prices, March
Crude Oil is holding yesterdayâ€™s low at 72.45.At this time, the market is hugging a .618 price level at 73.63.Regaining this price will likely trigger a
retracement to 75.53.Yesterday, OPEC
did nothing to change the bearish supply/demand picture.Todayâ€™s industrial production report could
help underpin this market today.
Equity markets are trading flat to lower across the
board.Investors have digested the Dubai news and are now
waiting for another catalyst to drive these indices higher.Many traders are choosing to remain flat
ahead of tomorrowâ€™s important Fed decision.Traders are reluctant to chase this market higher which means their may
be a correction today to set up the next buying opportunity.If stocks couldnâ€™t sustain the upside
momentum yesterday after receiving good news, it is highly unlikely that today
will be a bullish day,
March Treasury Bonds and Treasury Notes are trading under
pressure overnight.Investors continue
to drive yields higher in anticipation of a rate hike by the Fed by June
2010.Traders are nervous that the Fed
may put out a more hawkish comment tomorrow which may move up the date of the
first rate hike in years.
The U.S. Dollar Index erased all of yesterdayâ€™s loss
overnight and turned the main trend to up when it crossed a previous main top
at 76.82.Traders are increasing bets
this morning that the Fed will raise its key interest rate by at least a
quarter-percentage point from near zero by June.
Traders are basing their projections on the recent series of
good economic reports, namely the unemployment rate and retail sales.Expectations are for the Fed to revise the
language in its statement to represent a more hawkish outlook while revealing
signs of an earlier exit from low rates than previously estimated.Aggressive traders are already giving the
Dollar a boost based on this projection.
The key to sustaining the rally in the Dollar will be Fed
Chairman Bernanke.The question
investors are asking is â€świll he validate an early exit scenario?â€ťLately he has been downplaying the need for
higher interest rates because of his concerns about the sustainability of the
economic recovery.He doesnâ€™t want to
raise rates too early or too late.
Traders will be watching the Fedâ€™s statement tomorrow for a
hint of a rate hike.Market participants
will be disappointed if the Fed maintains its current dovish stance.In its November statement, Fed officials
pledged to keep rates near zero for â€śan extended periodâ€ť.They also specified that the current loose
monetary policy will stay unchanged as long as inflation expectations are
stable and unemployment fails to decline.Since this statement, the unemployment rate has declined from 10.2% to
10.0%.The drop in the unemployment rate
should be enough for the Fed to lighten up the tone in its December
Todayâ€™s producer prices report is expected to show an
advance.This news should be supportive
for the Greenback as it would force Dollar traders to readjust short positions
to readjust their positions and fuel more speculation that the Fed is getting
ready to begin a tight monetary policy campaign. Other reports which may
trigger the same response from traders include industrial production and the
NAHB Housing Report.
The March Euro took a hard hit overnight following the
release of the German ZEW Economic Expectation Index report.The Euro fell to a two-month low versus the
Dollar when the ZEW report showed a decline from 51.1 in November to 50.4.Going into this report, Euro investors were
cautious about the economy because of credit downgrade concerns in Greece, Spain
and Portugal.Adding further to the weakness is a report
nationalized a bank last night and may be facing a banking crisis.
Technically, the Euro is headed toward a major uptrending
Gann angle from the March low at 1.2456.This angle comes in at 1.4496 today.In addition, a minor .618 retracement level is at 1.4465.Breaking under these two levels will be
bearish for the long-run, but oversold short-term indicators could trigger a
technical bounce or short-covering rally.
Despite the weaker Euro and signs the Fed is getting ready
to hike interest rates, the GBP USD remains inside of a retracement zone at
1.6292 to 1.6154.Overnight news that
November CPI increased to 1.9% was largely ignored by traders since the
pre-report guess was for an increase of 1.8%.This currency is not likely to move until it breaks out of its
short-term trading range.
The increased outlook for a rate hike by the Fed is helping
to boost the Dollar versus the Yen. Traders are becoming more confident that
the Fed will hike rates sooner than expected while the Bank of Japan is
expected to keep interest rates unchanged at 0.10% on December 17th.The increase in the spread between the two
interest rates is triggering a reversal in the carry-trade. Investors are
buying Dollars to payback loans while simultaneously borrowing Yen.
Yesterdayâ€™s news that that Abu Dhabi bailed out Dubai made
traders rethink their position about using the Yen as a safe refuge.Technically, the March Japanese Yen rejected
a test of a 50% level at 1.1318.The
current formation rally indicates that 1.1207 is the next downside target.Taking out this level signals a further decline
Weaker Gold and the stronger Dollar are helping to trigger
an overnight break in the March Swiss Franc.This market is now at its lowest level since October.Look for the old bottom at .9690 to become
Weaker gold and crude oil should put pressure on the
Canadian economy which is likely to lead to a further decline in the March
Canadian Dollar.This currency currently
remains rangebound with .9365 the downside objective and .9571 the upside
Forex Trading News
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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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