Weak Equity Markets Trigger Dollar Rally

James Hyerczyk from ForexHound.com at 10/27/09

 

Weaker equity markets are triggering another rally in the Dollar at the midsession. Equity markets weakened after an unexpected drop in U.S. consumer confidence. A better than expected rise in home prices also put pressure on the equity markets. Traders could be reading this as a sign the Fed may start removing liquidity from the markets.

Weaker equity markets and good demand at today’s 2-year auction are helping the December Treasury Bonds rally this morning.

The U.S. Dollar is trading mixed at the mid-session. The Dollar is posting strong gains on the European currencies with both the Euro and Swiss Franc trading sharply lower. Short-covering is helping to drive up the British Pound.

December Gold had a sharp sell-off early this morning but has since recovered nicely although it is still trading lower for the day. The weaker Dollar is the cause of the break. The chart pattern suggests a move to at least $1028.80 is expected although there may be one more vicious short-covering rally before the final low is made.

December Crude Oil appears to be banking on geopolitical events to help it rally this week. This market was headed lower early in the trading session, but quickly turned around after it was announced that Iran is seeking permission to sell enriched uranium to other countries.