A better than expected
U.S. home sales report is helping to drive stock prices higher at the
mid-session. Traders are taking advantage of the thin trading
conditions to drive the three major indices higher after failing to
follow-through to the downside following Tuesdayâ€™s sharp sell-off.
June E-mini found early support following a test of a minor 50%
retracement level at 1071.75. The June E-mini NASDAQ is trading inside
of yesterdayâ€™s range as well as the June E-mini Dow.
Treasury Bonds are trading lower, pressured by the good U.S. housing
number and the lack of demand for safer assets. Once again the T-Bonds
failed to take advantage of the room on the upside and instead have
settled into a range. Look for this market to remain sensitive to the
direction of the stock market, but in a position to rally as long as
122â€™05 holds as support.
The June Japanese Yen is breaking
sharply at the mid-session, weakened by greater demand for risky assets
and on speculation that the next prime minister will favor a weaker
The Japanese Yen began to weaken overnight following
the resignation of Japanese Prime Minister Yukio Hatoyama. Traders are
worried that the economy will weaken further during the election
process at a time when Chinaâ€™s economy is slowing and Europe continues
to struggle. In addition, speculators are selling the currency because
they believe the next prime minister will be Naoto Kan who favors a
After piercing a key 50% retracement level at
1.0954 overnight, the Yen was able to establish resistance at this
level, setting up a further decline to the Fibonacci retracement level
at 1.0854. A trade through this price could trigger an acceleration to
The June Euro is trading lower but inside of
Tuesdayâ€™s range. This pattern indicates impending volatility. The lack
of fresh news today is helping to hold the market steady. Lately the
news coming out of the Euro Zone hasnâ€™t been encouraging for the bulls
but hasnâ€™t offered any surprises for the bears either. Look for an
acceleration to the downside if bottom at 1.2110 fails to hold. Watch
for a change in trend if the market can muster enough momentum to take
out the last swing top at 1.2453.
The strong rise in crude oil
and U.S. equities is helping to boost the June Canadian Dollar at the
mid-session. Volatility is much higher today compared with Tuesday when
the market barely reacted to the news of an interest rate hike by the
Bank of Canada. Todayâ€™s rally took out a key 50% level at .9552 before
testing the .618 level at .9632 while changing the trend to up on the
move through the last swing top at .9601.
Signs that the global
recovery may be back on track are likely to strengthen demand for
higher risk assets, especially crude oil. Gains may be limited by the
news that the BoC is not likely to hike interest rates in July due to
unstable conditions in the global economy.