Monday August 16, 2010 - 20:07:06 GMT
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Forex Hound - www.forexhound.com
December Gold Tests Fib Retracement Level
The weaker Dollar and struggling equity
markets helped trigger an early session rally in December Gold. After finally
breaking through a key 50% level at $1215.00 last week, gold has been
underpinned by expectations of a weakening equity market. This morning, buyers
drove the market into the next upside objective at $1228.00 before light
profit-taking pushed it back a couple of bucks.
As long as equities remain under pressure,
there should be strong support for gold since both markets are competing for
the same investment Dollar.
Treasury yields continue to fall, driving
Treasury Bonds and Treasury Notes sharply higher. Technically these markets
have reached overbought levels but the underlying fundamentals remain too
strong to attract any selling pressure.
This morningâ€™s NY Fed Empire State
Manufacturing Index didnâ€™t help the outlook for the economy. The report
actually gave off mixed signals since it showed that manufacturing is still
expanding, but at a slower pace.
The Treasuries also received support from a
surprise decline in the NAHB-Housing Market Index. The report showed the index
declined to 13 from 14 the month prior. Traders were pricing in an increase to
Traders are shrugging off stories of heightened
sensitivity in Euro Zone bond markets and are driving down the Dollar at the
Early in the session the Euro was down on
reports that the premium investors pay to hold 10-year Irish and Greek
government bonds rather than German Bunds are rising. In addition the cost of
insuring their debt against default also increased. The Euro was under pressure
early in the session on this news, but has since turned around to the positive
Technically the current September Euro
chart formation suggests a possible closing price reversal bottom. Based on the
current short-term range of 1.3334 to 1.2732, traders should watch for the
start of a 2 to 3 day rally with 50% of this range the next objective. This
minimum retracement objective is 1.3033.
All three commodity-linked currencies are
also showing signs of potential reversal bottoms. The Australian Dollar could
be starting a retracement rally to .9039. The New Zealand Dollar retracement
target is .7175. Short-term oversold conditions and the return of demand for
risk are the primary drivers behind this morningâ€™s developing reversal bottom.
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