Tuesday December 15, 2009 - 18:32:50 GMT
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Gold Moves Higher Despite Stronger Dollar
February Gold is now trading higher after trading sharply lower overnight because of the stronger Dollar. This market bottomed at $1112.00 after the release of the U.S. Producer inflation data. The surge to the upside took the market to $1128.00.
March Crude Oil is holding yesterdayâ€™s low at 72.45. This contract has traded steady to better all day. The boost in U.S. Industrial Production is helping to contribute to the rally as it indicates a possible increase in demand down the road. At this time, the market is holding a .618 price level at 73.63. Closing above this price will likely trigger a retracement to 75.53.
The U.S. Dollar continues to remain firm at the mid-session. Last night the main trend turned up on the weekly chart leading to a firm opening this morning. Early today, a jump in industrial output helped give the Dollar a boost as it represented another sign that the Fed is likely to lean toward hiking interest rates sooner than expected.
The March Euro is threatening to break through 1.4500. Overnight sellers hit the Euro following the release of the German ZEW Economic Expectation Index report.
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.
The March British Pound is under pressure but inside of a retracement zone at 1.6292 to 1.6154. Overnight news that U.K. 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.
Todayâ€™s better than expected U.S. Industrial Output report is putting downside pressure on the March Japanese Yen as it sends a signal to traders that the Fed is coming closer to hiking its benchmark interest rate. 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. Technically, the USD JPY could hit an uptrending Gann angle at 1.1056 today.
Weaker Gold and the stronger Dollar helped to trigger an overnight break in the March Canadian Dollar. The down move accelerated following the release of the better than expected U.S. Industrial Output report. This market is now at its highest level since October. Look for the old bottom at .9690 to become new support.
Weaker gold and crude oil is putting pressure on the Canadian economy which is helping to drive the March Canadian Dollar lower. This currency pair currently remains rangebound, however, with .9365 the downside objective and .9571 the upside resistance.
Equity markets continue to trade flat to lower across the board. Investors have digested the Dubai news and are now waiting for another catalyst to drive the 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.
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