Thursday April 29, 2010 - 20:47:12 GMT
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Forex Hound - www.forexhound.com
Stocks Driven Higher by Optimism and Low Rates
Stocks are rallying sharply higher on optimism that a Greek bailout
package will be worked out soon. In addition, yesterdayâ€™s Fed policy
statement said that interest rates would remain low for â€śan extended
periodâ€ť. Both of these factors are helping to erase losses from earlier
in the week while driving up demand for higher risk assets.
Treasury Bonds are trading steady. The prospect of low interest rates
is helping to reduce yields. Trading has been light, highlighted by low
volume and a tight range. The high earlier in the week was triggered by
a flight to quality rally. Until conditions worsen in Greece, it is
unlikely that 118â€™24 will be tested again. This makes the market
vulnerable to the downside with 116â€™16 a key objective.
is struggling despite the weaker Dollar. Traders are adjusting their
long positions now that it appears the demise of the Euro has been
overstated. Earlier in the week, speculators drove up gold as they
hedged against the possibility of a collapse in gold.
Dollar and stronger Euro is helping to drive June Crude Oil sharply
higher. The strong rally has this market in a position to change the
main trend to up on a move through 85.63. Speculators are looking for
the stabilization of Europe to drive up demand for crude oil.
June Euro is trading higher at the mid-session but traders remain
cautious about the long side. Although the European Union and the
International Monetary Fund are working out a loan bailout agreement,
traders are likely to remain skeptical about the Euro until the details
of the plan are revealed.
Technically, the Euro made a closing
price reversal bottom on Wednesday. Last nightâ€™s trading action
confirmed the bottom. The charts indicate that a 2 to 3 day rally is
likely with 1.3402 to 1.3471 the next likely upside target.
easing of tensions regarding Greece and a different attitude toward the
possibility of a hung parliament is helping to drive the June British
Pound higher. Although election pools are indicating no clear winner
emerging, investors are speculating that the U.K. may still be able to
tackle its deficit problem. Speculators are supporting the market after
building a case that the Liberal Democrats may be able to shift the
power in case of a hung parliament. Many traders believe this party
will take an aggressive approach toward balancing the budget.
the British Pound turned the main trend down on the daily chart on
Wednesday. Todayâ€™s action looks more like a retracement of the recent
break rather than a change in trend. At the mid-session, the Sterling
is trading inside of a retracement zone at 1.5310 to 1.5354.
the strong U.S. equity markets, the June Japanese Yen is trading flat
to lower. Expectation is for the Yen to weaken over the near-term due
to greater demand for higher risk assets and its huge budget deficit.
Traders may be pricing in the possibility that Japanese debt may
The June Canadian Dollar strengthened from the
onset on Thursday, driven by greater demand for higher risk assets.
Yesterdayâ€™s Fed commentary also helped to boost the Canadian Dollar.
The Fed said it would keep interest rates low for â€śan extended periodâ€ť
while the Bank of Canada is leaning toward hiking interest rates sooner
than expected. The widening interest rate differential is making the
Canadian Dollar a more attractive investment.
mid-session, the Canadian Dollar is paring some of its earlier gains
after BoC Governor Mark Carney said a strong Canadian Dollar may have
impact on inflation or monetary policy. A strong currency tends to
flatten inflation while reducing foreign demand for Canadian exports.
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