Global Market Strength Boosts U.S. Stock Indices

James Hyerczyk from ForexHound.com at 12/28/09

 

The overnight strength in the global equity markets spilled over to the U.S. markets on the opening. Demand for higher risk is rising because of concerns over U.S. debt. With new Treasury debt being issued this week, investors are looking for higher returns. The inability to follow-through to the upside under thin trading conditions has encouraged traders to back off from the highs slightly. The chart indicates that a daily reversal top is possible.

Treasuries are trading lower once again. Demand for higher yielding assets and a weaker Dollar is helping to pressure March Treasury Bonds and March Treasury Notes. The T-Bonds are trading below a retracement level at 115’08. Regaining this area could trigger a short-covering rally. The main concern for Treasury traders is the growing U.S. debt.

The U.S. Dollar remained under pressure at the mid-session although up slightly from the opening. With the lack of major economic news this week, global investors are being forced to worry about another round of U.S. debt. Throughout the week, the Treasury is going to add to its already massive debt pile by another $118 billion. This news is weakening the Greenback.

Aside from the debt worries, trading is thin and lifeless at the mid-session. One can only speculate as to where the Forex markets can move, but without major player participation, large movements are expected to be muted throughout the week. Technical factors could drive the Dollar lower because of overbought conditions. Chart patterns indicate there is room to the downside before the Dollar hits meaningful support.

The March Euro is up at the mid-session. A new main bottom has been formed at 1.4217. The chart pattern suggests that upside momentum may be building with a possibility for a rally back to 1.4680 over the near-term. Concerns over U.S. debt issues are encouraging traders to lighten up their short Euro positions.

The March British Pound is appears to be building a small support base. The lack of fresh negative news has led to the absence of sellers. Watch for a short-covering rally if 1.6022 is penetrated.

The March Japanese Yen is trading inside of a tight range. Downside momentum is slowing which makes this market vulnerable to a short-term retracement. The daily chart pattern suggests a possible pull-back to 1.1024 over the near-term. Investors seem content with holding this market in a range until after the first of the year when fresh economic data will be made available.

The old bottom at .9675 appears to be forming short-term resistance for the March Swiss Franc. If this resistance fails, this market could accelerate to the upside. The current pattern suggests a rally to .9806 is possible over the near-term.

The March Canadian Dollar is showing strength at the mid-session. Earlier this morning, this market broke through a resistance level at .9574. This action is triggering an acceleration to the upside which could fuel a further rally to a main top from earlier in the month at .9609.
The rally this morning in February Gold fizzled. The inability to drive the Dollar lower may have been a factor. Thin trading conditions and the lack of buyers are most likely the main reasons behind the turnaround. The key to sustaining a rally in this market will be the market’s ability to hold above an old 50% level at $1107.40. The current chart pattern suggests a rally to $1151.30 is possible over the short-run.

March Crude Oil surged to the upside this morning after taking out a .618 retracement level at 79.27. Upside momentum is building which could drive this market to the last main top at 81.52. Support is at 79.27 and 77.99.