Monday October 25, 2010 - 12:12:01 GMT
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U.S. Equities Set to Open Higher; Weak Dollar Underpinning Gold
The weaker Greenback is helping to boost U.S. equity
prices overnight, leading to the call for a higher opening. There is not much
to say technically about the stock indices. The rallies have been labored,
leading to periodic weakness, but investors have been waiting to buy the dips.
Despite expectations of additional quantitative easing by
the Fed, the December Treasury Bonds have been sitting inside of a tight
retracement range at 132â€™11 to 131â€™20. The market is likely to sit in a narrow
range until after the Federal Open Market Committee meeting on November 3.
There may be some pressure this week or at the least, rallies could be muted
because of additional debt supply concerns.
The weaker Dollar is triggering a rally in December Gold.
Technically this market is recovering following a test of a 50% level at
$1313.00. The current chart pattern suggests a rally to $1351.80 to $1360.40 is
The U.S. Dollar is trading sharply lower against all major
currencies after the Group of 20 finance ministers and central bankers over the
weekend failed to come up with any plan to shore up the Greenback.
The U.S. Dollarâ€™s downtrend is likely to continue after the
G-20â€™s joint committee warned of the need to move toward more
â€śmarket-determinedâ€ť currency exchange rates. This basically means no
interference from the central banks. This same committee also said that a
global economic recovery is underway but uneven. By allowing letting the market
determine the Dollarâ€™s value, the G-20 is saying the stronger currencies will
The December Japanese Yen continued its rally, reaching a
fresh 15-year high. This pair is rapidly approaching its 1.2500 high hit during
the second quarter of 1995. The rise in
the Yen is also putting a hurt on Japanese companies and the economy.
The December Euro resumed its rally. Although the daily main
trend indicator is still down, upside momentum is building which may mean
another test of the last main
top at 1.3884.
After forming a support base at a major 50% level at 1.5701,
the GBP USD is mounting a small rally. Expectations are for this pair to rally
back to a downtrending
Gann angle at 1.5866. If upside momentum is strong enough, this market may
reach a 50% level at 1.5878. This could be another selling opportunity as
traders still feel the Bank of England
will implement another round of quantitative easing because of the weakening
After a strong short-covering rally drove the December
Canadian Dollar into a major 50% level, it looks as if this market is set to
resume its uptrend. This morning this pair is testing a retracement zone at .9815
to .9860. Once this area is cleared, look for a test of a downtrending
Gann angle at .9865.
Although the Bank of Canada
refrained from hiking its benchmark interest rate earlier in the month while
warning of an economic slowdown, the U.S. Dollar is just too weak to ignore,
thereby setting up the Canadian Dollar for another test of parity over the
After an early response to the G-20 announcement, traders
will be given a chance to react to this morningâ€™s U.S. existing Home Sales. Early
guesses are for this report to show a rise of 6.3% to 4.39 million. This is
versus last monthâ€™s rise of 7.7%.
Itâ€™s still too early for traders to shut down in
anticipation of the U.S. Federal
Reserve Open Market Committee announcement on November 3.
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