Renewed Demand for Higher Risk Assets Fuels Surge in Commodities
James Hyerczyk from ForexHound.com at 01/04/10
A renewed surge in demand for yielding assets is helping to drive crude oil and gold prices overnight. A firm undertone is also developing in the equity markets while the Dollar is under pressure.
The strong rally in February Gold turned the main trend to up on the daily chart on the move through $1114.50. The daily chart indicates this market is poised to rally another $30 back to a retracement zone at $1151.30 to $1169.30.
The news of a better than expected surge in Chinese manufacturing is helping to trigger a breakout to the upside in March Crude Oil. Traders are expected to see increased demand for energy. In addition, cold weather in the U.S. has led to a pick-up in demand for heating oil and natural gas. The last main top at 81.52 was broken overnight, setting the stage for a test of the October top at 83.60.
A strong surge in U.K. and China manufacturing data helped to pressure the Dollar overnight. These two better than expected reports triggered renewed interest in demand for higher risk assets. Losses are being limited, however, as traders await this morning’s U.S. ISM Manufacturing Index which will be release at 9 a.m. Central Time.
The daily chart pattern in the March Euro suggests the first upside objective over the short-term remains 1.4680 to 1.4790. Whether traders go after this level will be determined by a slew of U.S. economic reports this week especially the employment report on January 8th.
The March British Pound is following through to the upside after last week’s late turnaround. The daily chart indicates that this market has room to the upside with 1.6355 to 1.6478 the next objective.
The March Japanese Yen is trading stronger after a steady to lower opening. Traders feel the market has fallen enough and are reacting to oversold technical factors. In addition, renewed demand for higher yielding assets is helping to pressure the Dollar. The chart indicates a rally to the old bottom at 1.0847 is likely over the short-run.
The March Swiss Franc broke overnight but ran into technical support at a .618 level at 9603. Renewed interest in higher risk assets could send this currency pair back to .9806 to .9873 over the near-term.
After a slight retracement late last week, the March Canadian Dollar is once again showing upside strength. The main trend is up. The chart indicates developing buying pressure is likely to accelerate over an old main top at .9609, setting up a further rally to .9741 over the short-run.
