U.S. Equity markets are
trading sharply higher after earlier weakness driven by a possible pact
between the EU and Greece and better than expected weekly jobs data.
Todayâ€™s rally makes it appear that confidence has been restored to the
financial markets. This renewed confidence is tied to possible
improvements in the global credit markets and signs that the U.S. jobs
market may be confirming the developing recovery. Traders feel that an
agreement between the EU and Greece will increase appetite for risk and
are buying in anticipation of the news. The March E-mini S&P 500 is
on path to test a 50% level at 1084.50.
The strengthening April
Gold market is a strong indication that the pact between the European
Union and Greece is imminent, thereby driving up demand for risky
assets. Speculators are anticipating that the agreement to shore up the
debt in Greece will be released shortly. This release of this news
should pressure the Dollar and underpin the gold market. Gold is
currently testing a minor retracement level at $1095.10. A breakout
through this level could trigger a further rally to $1105.60.
Crude Oil is posting a strong rally following earlier weakness. Crude
oil was under pressure earlier in the session because of uncertainty
over the EU/Greece pact and the stronger Dollar. Oversold conditions
and the possibility of a weaker Dollar could boost this market into the
close. Traders are looking for increased demand for risky assets to
continue today. In addition, signs of an improving economy may increase
demand for energy. The charts indicate this market has a clear shot at
testing 78.44 over the near-term, but it must hold 73.77 to complete
News of an impending agreement between the Greece and
the EU is helping to pressure March Treasury Bonds and Notes. Traders
are selling off safe haven positions in anticipation of a resolution to
the Greek deficit woes. Yesterdayâ€™s comments from Bernanke, hinting at
a hike in the discount rate is also pressuring the market. Furthermore,
traders feel that yields will rise because of the new supply of
Treasury debt hitting the market. 117â€™01 is a key retracement level for
March Bonds. Downside momentum could trigger a further decline to
The March Euro is trading lower at the mid-session but
well off its low as traders attempt to mount a recovery following a
sharp sell-off earlier this morning. Volatility is expected to continue
to be high as traders are reacting to news and the lack of news
regarding the possible announcement by the European Union of a plan to
support the Greek economy.
Timing the swings of the market has
been difficult today. One thing that has been made clear is an
agreement between the EU and Greece has been reached. The main issue
driving the Dollar and the Euro today is the details of the pact. Some
bullish Euro traders apparently were led to believe that a bailout out
would take place, but that does not appear to be the case.
is circulating that the pact is a show of solidarity by the European
Union. This is likely to mean that the EU as well as the International
Monetary Fund will maintain a watch over the Greek budget and assure
adherence to its strict requirements. Furthermore, loans will be
provided when deemed necessary to shore up the Greek economy.
maintain that this type of agreement will not last and that similar
issues are likely to flare up in Portugal and Spain. These issues will
once again test the foundation of the European Union. If anything,
trader reaction has been less than bullish although the door has been
left open for a substantial short-covering rally in the Euro.
Euro chart pattern suggests this market is being wound tightly. The
longer it remains in a tight range the stronger the breakout move. A
rally through this weekâ€™s high at 1.3838 should put this market on path
to retrace to at least 1.4079 over the near-term. Early in todayâ€™s
session, the Euro survived a test of the recent bottom at 1.3584.
March British Pound tested this weekâ€™s low at 1.5534 before mounting a
strong recovery before the mid-session. This market appears to be
forming a support base and like the Euro is awaiting details of the
Greece rescue plan. Shorts are likely to cover as the details of the
rescue are released.
Technically, this market has a short-term
target of 1.5801 to 1.5865. Gains could be limited because of the
economic issues in the U.K. Yesterday the Bank of England lowered its
inflation estimate while hinting at expanding and extending its
quantitative easing program. Furthermore, just because Greece is being
helped out does not mean the deficit issues facing the U.K. will go
away. Over the short-run, the focus may shift away from Greece to the
U.K. credit rating.
The March Japanese Yen is trading higher
and in a tight range at the mid-session. Todayâ€™s strength comes as a
surprise because the combination of the Greek rescue plan and
Bernankeâ€™s talk of raising the discount rate should have been
supportive for the Dollar. In addition, increased appetite for risk
should have triggered a more bullish response. Short-term oversold
conditions could be triggering the strength.
The weaker Euro
helped drive the March Swiss Franc to within a few pips of last weekâ€™s
low at .9264. Because of the magnitude of the situation in Greece,
traders may be waiting for the actual release of the details from the
EU/Greek pact before committing to the short-side. A recovery in the
Euro late in the trading session should underpin the USD CHF because it
eliminates the need for the Swiss National Bank to intervene to protect
the value of its currency and its economy against deflation.
Dollar traders are ignoring the stronger U.S. Dollar and instead are
focusing on the strength of gold, equities and crude oil. The March
Canadian Dollar opened higher, but broke a little early in the session
as the Greenback strengthened and risky assets fell.
this current rally is related to last Fridayâ€™s closing price reversal
bottom. The main trend on the daily chart turned up on the move through
.9483, but gains have been limited after a successful test of a 50%
price at .9527. A failure to hold this level will trigger a further
rally to .9587.