U.S. equity markets are
trading slightly better at the mid-session, but seem to be lacking a
catalyst to drive it sharply higher. An easing of investor risk
sentiment helped to support equity prices overnight, but the lack of
follow-through to the upside, helped limit early gains. Traders are
hoping for more concrete evidence that a resolution has been reached
regarding the deficit situation in the Euro Region.
risk is likely to rise once the situation in Greece stabilizes and the
Euro begins to rally. Optimism that a viable solution could be reached
to assure investors that Greece would adhere to its budget, should help
to drive investor confidence up. It looks as if today will be choppy
until investors decide whether to embrace risk or repel it.
Treasury Bonds are trading lower at the mid-session. The overnight and
midday weakness is being triggered by a combination of falling demand
for lower risk assets and the new supply of debt which is ready to come
to the market courtesy of the U.S. Treasury. Overnight support held
this morning at a 50% level at 118â€™24. A failure to hold this level is
likely to trigger an acceleration to the downside.
Dollar is helping to buoy April Gold following a strong overnight
rally. Some traders also believe that the gold market overreacted to
the downside last week. A combination of oversold conditions and a
successful test of a retracement level at $1049.60 could help to give
Gold a boost into the close. Furthermore, growing deficits in most
major economies is renewing talk of a major developing inflationary
situation. Some gold investors believe that central banks will be
forced to print money to cover their deficits. This will weaken paper
money, making hard assets more valuable.
The weaker Dollar and
increased demand for higher risk is helping to drive up March Crude Oil
at the mid-session. The supply and demand situation remains bleak so
this market will be more sensitive to currency movement. Look for a
surge to the upside if the Dollar trades lower into the close.
U.S. Dollar is trading lower at the mid-session as tensions eased
regarding the fiscal problems in Greece. Some traders feel that a
resolution will be reached which may involve aid or stronger assurances
that Greece will strictly follow its newly proposed budget.
March Euro experienced a choppy two-sided trade early in the session.
Continue to look for volatility, highlighted by a choppy trade until
the European Central Bank, European Union or International Monetary
Fund offers a viable solution to the Euro Regionâ€™s fiscal problems.
and choppiness is affecting the British Pound at the mid-session.
Besides the weak economy, investors are now having to deal with the
possibility that the U.K. will suffer the same fate as Portugal, Spain
and Greece and have its debt rating reduced because of its huge budget
deficit. Furthermore, news that the June election could result in
neither party receiving a majority is also hurting the British Pound.
March Japanese Yen is little changed at the mid-session, but this
trading pattern could shift quickly if risk aversion returns to the
markets. Budget problems in Europe, the U.K. and the United States may
encourage traders to seek the safety of the lower yielding Asian
currencies. The Japanese Yen is taking its clues from the stock market
The direction of the March Swiss Franc is being
determined by the movement in the Euro. A weaker Euro will increase the
chances of a Swiss Bank intervention, thereby strengthening the Dollar
versus the Swiss Franc. A short-covering rally in the Euro will help
underpin the Swiss Franc.
Stronger gold and crude oil should be
helping to underpin the March Canadian Dollar, but it looks as if the
choppy equity markets are exerting a larger influence on this currency.
Look for the Canadian Dollar to remain buoyed as long as it is getting
support from the commodity complex. A bullish turnaround in the stock
market will help strengthen the Canadian Dollar late in the session.
Some traders feel that dovish comments from Bank of Canada deputy
governor Duguay are helping to limit gains. He reiterated that interest
rates will hold steady until at least the end of the second quarter.
Furthermore, he emphasized a weaker Canadian Dollar scenario is
necessary to keep the economic recovery on course.