Monday, June 22, 2009
The fear of higher interest rates triggered adjustments in the markets overnight. This week the Treasury will auction a record $104 billion in notes. This huge amount of supply hitting the market is expected to help push yields higher.
Foreign currency traders bought the Dollar because of expectations of higher interest rates. This is basically a case of traders seeking a higher yield and not based on any economic news or expectation. Some traders are dumping more risky assets and buying the Dollar for safety. Others are position-evening ahead of the FOMC meeting on June 24th.
Traders also bought the Dollar on the thought that the global economic recovery would occur at a much slower pace than originally anticipated. Because of this change in sentiment, some investors found it easier to liquidate positions in the foreign currency markets rather than wait until actual reports confirm this conclusion.
The weakness in the Euro is an indication that this market may be getting ready to break further. Last week€™s rally could not take out a swing top at 1.4177 and even failed to reach a key 50% level at 1.4013. Look for lower markets to push this currency to 1.3610 over the near term
The inside range in the British Pound is an indication of impending volatility. Based on the developing lower top formation, this market seems poised to challenge the last main bottom at 1.5810 over the near term. Losses will be limited, however, until this market fails to hold at a retracement zone at 1.6211 and 1.6114.
Weaker commodity and equity prices drove the USD CAD sharply higher. The higher-top, higher-bottom formation indicates more strength to follow. Breaking through a minor retracement level at 1.1419 helped accelerate this market higher and put it in a position to challenge the next key retracement level at 1.1922 to 1.2191.
The USD JPY fell as weak equity markets encouraged Japanese investors to repatriate funds out of fear of losing on their investments. Currently, the main trend is up, but the charts indicate no threat to the main trend unless 94.47 is violated. Currently, this market is trapped inside of a retracement range at .96.36 to 95.77. The longer this market stays inside of this range the greater the move.
The USD CHF closed higher on Monday. Today€™s positive performance has put this market in a position to challenge the last Main Top at 1.0955. A retracement zone at 1.0788 to 1.0741 is also holding up this contract. The lower-top, higher-bottom formation indicates impending volatility as this market is spiraling to a point where the trade can get explosive.
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