Stocks Trade in Tight Range; Investors Waiting for Bernanke to Speak
stock indices are trading in a tight range overnight as investors await
testimony before the House Financial Services Committee by Fed Chairman
Bernanke. Expectations are for Bernanke to talk about the state of the
employment situation as well as addressing whether more financial stimulus is
Investors will be looking for clues as to if or when the
Federal Reserve will begin to hike interest rates in 2010. Signs that rates will
rise will likely support the Dollar which could put pressure on U.S. stock
markets. Technically, the March E-mini S&P 500 is indicating that this
market wants to move higher. The overnight trade took out a .618 retracement
level at 1107.00.This price is new
support. A failure to hold this level could trigger a break to 1094.50.
Slightly better equity markets overnight are helping to
pressure Treasury futures. Currently, the March Treasury Bonds are in a
downtrend but trading inside a retracement zone at 117â€™01 to 116â€™14. Concerns
over the Fed hiking interest rates are keeping bullish traders away from the
April Gold traders are waiting for direction from the U.S.
Dollar. The trading action late last week suggests that traders are looking for
the Dollar to weaken. The main trend will turn up on a trade through 1126.40.
April Crude Oil traders also appear to be betting on a
weaker Dollar. The main trend turned up late last week when this market took
out 78.04. Look for a possible technical bounce off 80.95.
The U.S. Dollar is trading mixed against the majors in a
tight and narrow range. The trade weighted Dollar Index is trading lower in a
follow-through move following Fridayâ€™s closing price reversal top on the daily
chart. The main trend is up and will not change to down unless 79.61 is
The lack of major U.S. economic reports today could
keep the Forex markets in a tight range until Fed Chairman Bernanke speaks at
10 AM CT.His comments could move the
markets. Today, he is expected to speak before the House Financial Services
Committee about employment growth prospects and whether fiscal stimulus is
Traders will be looking for Bernanke to give them clues
about the timing of future U.S.
interest rate hikes. If the Fed Chairmanâ€™s comments indicate tightening then
the Dollar is likely to rise. A dovish tone will be bearish.
The March Euro is weakening after an early session surge
following Fridayâ€™s closing price reversal bottom. The overnight follow-through
rally stalled inside a minor retracement zone at 1.3615 to 1.3656. The main
trend remains down. A trade through 1.3788 will turn the main trend higher on
the daily chart. Looking at the bigger picture, this market is inside a major
retracement zone at 1.3800 to 1.3483.
In order for this market to rally, there has to be an
unexpected event such as major buying by China
If this becomes the case and the market rallies through 1.3788, then look for
the move to continue to a major 50% level at 1.4055.
Even if the ECB bails out Greece, there is no guarantee the
Euro will rally. The fear is the ECB will have to keep interest rates at
historically low levels while the U.S. is getting ready to remove
stimulus and then perhaps begin raising rates. Fiscal tightening in Greece, Portugal
will likely help to keep recessionary pressures on the Euro. This will force
the ECB to maintain its loose monetary policy.
A short-term rally may be just what speculators have been
waiting for because of their desire to maintain short-selling pressure on the
Euro. Speculators know that the Fed and the ECB are not on the same page and
have different timetables regarding the removal of stimulus. According to the
recent FOMC minutes, the Fed is getting ready to lift stimulus while the ECB
may have to abandon its plans to begin withdrawing stimulus. In addition, the
record 59,422 shorts currently being reported in the CFTC Commitment of Traders
Report have shown no signs of letting up.
The March British Pound is trading higher but inside of
Fridayâ€™s range. Oversold conditions may lead to a short-covering rally which
could take this market back to 1.5583 to 1.5637, but the trend will not turn up
unless 1.5814 is violated.The economy
and the U.K.
budget deficit continue to weight on the Pound. In addition, the country is
facing an election in which there is no clear leader. Furthermore, investors
seem to be losing confidence in the Bank of Englandâ€™s ability to stem the
The March Japanese Yen is trading higher overnight following
Fridayâ€™s closing price reversal bottom. This current break is holding inside of
a retracement zone at 1.0950 to 1.0886. The current chart pattern suggests a
rally to 1.1074 to 1.1126 is likely over the near-term. Appetite for risk seems
to be waning overnight which is leading to the strength in the Japanese Yen.
Fridayâ€™s strong rally in the Euro helped trigger a closing
price reversal bottom in the March Swiss Franc. This helps to diminish the
chances of another intervention by the Swiss National Bank which will be
friendly toward the Swiss Franc. Clearly the Swiss Franc will take its
direction from the Euro today. The main trend is down and will turn up on a
trade through .9334. If this occurs, then look for a rally to .9526 to .9608.
The March Canadian Dollar is feeling upside pressure
overnight. Higher gold and crude oil are helping to give the Canadian Dollar a
boost. In addition to being supported by the rise in commodities, the Canadian
Dollar faces virtually no risk exposure while benefitting from an improving
economy. Look for a possible technical bounce at .9650 today, but a failure to
hold this level could trigger an acceleration to the upside.
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