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Dollar Rally Pressuring Equities

James Hyerczyk from ForexHound.com at 12/09/09


An intraday rally in the Dollar is helping to pressure U.S. stock index futures. Traders are jumping in the Dollar for safety and out of higher risk assets. Fears that a global debt crisis is building is causing traders to seek shelter in the Dollar. End of the year selling is also pressuring stocks as traders are taking money off the table rather than risk a substantial correction in their portfolios.

Despite the firming Dollar, March Treasury Bonds and Notes are trading lower. This could be because investors are asking for higher yields at today’s 10-year debt auction.

The U.S. Dollar is mounting a strong comeback after earlier weakness. Concerns over credit issues in Dubai and Greece helped drive the Dollar higher yesterday. Today’s issue has to do with Spain. This news helped the December Euro erase all of its earlier gains. The December British Pound is trading lower. Support has been broken causing longs to bail out. The catalyst behind today’s break is the rejection of a new budget proposal. Traders seeking safety in lower yielding assets are helping to boost the December Japanese Yen.

February Gold is weakening because of the renewed strength in the Dollar. The chart indicates that a decline to $1107.00 is likely. March Crude Oil is trading sharply lower. Weaker equity markets and a higher Dollar are driving higher risk assets lower, but increasing supply is the main factor contributing to the weakness

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