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Commodity and Stocks Expected to Be Supported by Demand for Risky Assets

James Hyerczyk from ForexHound.com at 01/05/10


Commodity and stock prices are expected to continue to see support from investors demanded higher yields although short-term overbought conditions may limit upside action.  Traders are citing the stronger global economy and low interest rates in the U.S as two reasons for the renewed interest in higher yielding assets.


U.S. stock indices continued its surge to the upside overnight on the heels of higher equity markets in Asia and Europe. 


Despite the stronger demand for higher yielding assets, U.S. Treasury Bonds and T-Notes are trading higher overnight.  A support base is being built in the March Treasury Bonds which indicates that a value zone may have been reached.  A trade through the last main top at 115’29 will turn the main trend to up and indicate further upside potential.  A minor bottom has been reached in the March Treasury Notes which could launch a retracement to 116’24.


The weaker Dollar is helping to support February Gold.  The main trend turned up on the daily chart, putting this market on path for a potential retracement to $1151.30 to $1169.30 over the near term. 


March Crude Oil traded higher overnight. One-by-one a series of tops is being taken out. These tops include 81.52 and 82.30.  The next two upside targets are 82.81 and 83.60.  Stronger manufacturing numbers are triggering expectations for a rise in demand for oil products.


The U.S. Dollar continued its New Year slide as investors sought higher risk assets.  Overnight an index representing a trade weighted basket of currencies turned it main trend down on the daily chart on a trade through 77.32.  The chart pattern now suggests a correction to 76.31 to 75.80 is imminent. This move would represent a normal retracement of the entire 74.17 to 78.45 rally. 


The March Euro continues to show strength.  The current chart pattern suggests a move to 1.4680 is likely over the short-run.  Minor resistance at 1.4503 could slow down the current upside momentum.


The main trend remains down in the March British Pound but buyers could step in now that the British Pound has retraced its recent three-day rally.  The short-term range is 1.5832 to 1.6240.  The retracement of this range is 1.6036 to 1.5988.  If the trend is getting ready to turn higher, then look for buyers to begin to step in.


The March Japanese Yen continues to strengthen following yesterday’s closing price reversal bottom. Last night’s follow-through to the upside was confirmed which could mean the start of a correction all the way back to 1.1318.  The first upside objective today is 1.0951 which is a downtrending Gann angle from the 1.1789 top.


The March Swiss Franc is also showing overnight strength.  Based on the range of 1.0090 to .9522, traders should watch for a correction to .9606 to .9873 before new sellers step up. 


Rising gold and crude oil prices as well as firm equity market are helping to underpin the March Canadian Dollar.  The main trend is up with .9741 the next upside objective.  A key retracement level at .9574 is the new support.

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