Thursday November 4, 2010 - 14:14:40 GMT
Share This Story
Forex Hound - www.forexhound.com
New Fed Money Drives Stocks, Precious Metals Higher
Stocks and precious metals are trading sharply higher this
morning after the Fed announced it would inject fresh liquidity into the
economy. The expected move by the Fed is weakening the Dollar and driving new
money into U.S.
stocks and global commodities.
Overnight, the December E-mini S&P 500 made a new high
for the year when it took out 1208.00. Look for higher than average volatility
today after stocks have traded in compressed ranges for the past several weeks.
The question remains whether U.S.
investors will chase this market higher or sit back and wait for pullbacks.
With the Fed greenlighting another leg higher because of the
new liquidity, investors may feel they are missing the boat and chase. This
could lead to a strong upside surge. Today the stock indices are under the rare
influence of both volatility and trend.
The weaker Dollar is helping to support the precious metals.
December Gold has recovered from Wednesdayâ€™s setback and is soaring toward the
contract high at $1388.10. December Silver which never really abandoned its
bullish picture is also trading at a 20+ year high.
Fundamentally, fresh cash means higher stocks and
commodities and a weaker Dollar. Technically, all traders have to be worried
about today is short-term overbought conditions and old resistance points. From
a trading standpoint, the decision will be whether to chase the markets higher
or wait for pullbacks.
This morning the Dollar is getting pounded once again.
Simply stated, new liquidity means a weaker Dollar. With the exception of the
December Japanese Yen, the Greenback is trading weaker across the board.
Traders are buying the December Euro and December British
Pound for economic reasons. The European Central Bank is considering
withdrawing stimulus while the U.S. Federal Reserve is adding liquidity. This
scenario favors a long Euro. The U.K.
economy seems to have stabilized and it seems to have absorbed the recent new
austerity measures and tax hikes.
The fresh money pumped into the system from the Fed is
flowing into stocks and helping to boost Dollar priced commodities. This is
driving up demand for risky currencies such as the December Canadian Dollar and
December Australian Dollar. Although the Bank of Canada recently refrained from
hiking interest rates, the huge amount of natural resources this country holds
is helping to support the currency. Higher gold and crude oil is translating
into support for the Loonie. Earlier
this week, the Reserve Bank of Australia
raised its benchmark interest rate, increasing the interest rate differential
between the U.S. and Australia,
making this currency an attractive buy as investors chase the higher yield.
Today looks like a lesson in Forex 101 as new liquidity has
breathed fresh life into the Dollarâ€™s downtrend. Traders are chasing the higher
yields that the U.S.
canâ€™t deliver at this time.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."