Friday May 28, 2010 - 18:26:31 GMT
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Dollar Strength Weighing on Stocks
The threat of higher
interest rates because of the better than expected U.S. Retail Sales
Report, helped knock the stock index futures off their highs. Traders,
however, did not give up on the long side and bought a late morning
dip. The reversal of the carry trade, where investors sell stocks to
pay back borrowed Dollars, could trigger a sharp sell-off late in the
session. Holding above 1106.00 will be a sign of strength.
Treasury Bonds and Treasury Notes are feeling downside pressure
following the release of this morningâ€™s bullish retail sales report.
Traders are selling Treasuries to adjust for the possibility of a hike
in interest rates by the Fed sooner than previously estimated.
Gold failed this morning in its attempt to retrace this weekâ€™s
sell-off. The stronger Dollar is the catalyst behind todayâ€™s weakness.
The chart indicates that a test of the major 50% retracement level at
$1107.40 is likely. Watch for a technical bounce.
Oil failed to hold the .618 support level at 73.63. Mixed equities, a
stronger Dollar and bearish supply/demand fundamentals are contributing
to the weakness.
The U.S. Dollar soared to the upside after the
government reported better than expected retail sales in November. The
increase was more than twice pre-report estimates. The Greenback
received an additional boost after the University of Michigan reported
a greater than expected uptick in consumer confidence.
participants want to see stability in the labor market and an increase
in consumer spending. The bullish response to the retail and consumer
confidence numbers is as sign that speculators believe the Fed has
enough evidence to hike interest rates sooner than expected.
March Euro collapsed to the downside under heavy selling pressure. The
downside momentum took this market under the November bottom at 1.4625.
March British Pound is trading weaker but still holding the low for the
week at 1.6166 as well as a .618 retracement level at 1.6154.
reversal of carry trade positions helped drive the March Japanese Yen
sharply lower. This morningâ€™s reaction to the bullish U.S. economic
reports triggered a burst to the upside which has this market in a
position to test uptrending Gann angle support at 1.1053.
March Swiss Franc turned the weekly main trend down on the trade
through .9690. The sharp break this morning negated yesterdayâ€™s
potentially bullish closing price reversal bottom.
Signs of a
recovery in the U.S. economy, a mixed stock market and sharply lower
gold are all factors contributing to the weakness in the March Canadian
Dollar. Yesterday it was reported that Canadaâ€™s trade balance posted a
surplus because of higher precious metal prices so weaker gold will
turn this market bearish.
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