Monday was a quiet day on Wall Street. The major indexes finished the day without any significant change. The low trading volume seen in recent weeks shows a balancing out of the bullish and bearish views waiting for more information. The Dow Jones Industrial Average ended up 1.06 points, at 12,381.11 after edging between small gains and losses for most of the session. The Standard & Poor’s 500 Index closed down 3.71 points at 1,324.46 while the Nasdaq Composite Index ended down 8.91 points at 2,771.51.
Benchmark crude-oil futures fell $2.87 to $109.92 a barrel on the New York Mercantile Exchange, as a cease-fire plan appeared to be in the works for Libya. Earlier, the contract had reached $113.46 a barrel, a high not hit since September 2008. Crude-oil futures extended losses as the impact of global growth forecasts and profit-taking took pressure off prices. It is Interesting to note that Goldman Sachs advised investors to lock in commodity trading gains, according to a Reuters report. Unlike Goldman, We don’t encourage traders to abandon their long positions just yet.
In the forex market, there are intriguing inflationary signs coming out of the UK. The BoE hawk Sentance said today that he voted for a 50bps hike during last week’s meeting. Sentance believed that there’s a need to “begin to adjust interest rates in a gradual way”. Also, “a rise in interest rates does exert some upward pressure on the pound,” and he could see “some benefit from a gradual upward move in the pound” to reduce imported inflation. Sentance said that “the yield curve suggests getting up to somewhere round about 2 percent next year.” Don’t be surprised if you see a rate hike in the near future.
Today’s Important Economic Announcements (GMT)
9:30 AM GBP CPI y/y & Trade Balance
10:00 AM EUR German ZEW Economic Sentiment
11:15 AM USD FOMC Member Dudley Speaks
1:30 PM CAD Trade Balance & NHPI m/m
1:30 PM USD Trade Balance
2:00 PM CAD BoC Rate Statement & Overnight Rate
7:00 PM USD Federal Budget Balance
7:50 PM USD FOMC Member Fisher Speaks
12:00 AM NZD REINZ HPI m/m
The US dollar – Japanese yen pair is on the brink of a reversal in direction and heading towards a sharp drop. After it reached the critical level of 85.50 but failed to breakthrough, the chances for a new wave of drops have increased. Earlier today the market confirmed, with a fair degree of certainty, that the downward trend has begun is a clean break of the support and test level at 84.65. On a fundamental level, the value of the pair should move towards its realistic value of around 72.5 yen to the dollar. The technical analysis supports the economic estimates and points to a potential identical drop. However, short term traders can target the important support level of 82.90 as their final target for full realization of the pair’s short position.
Stop Loss: 1.4390
Take Profit: 1.4492
As previously mentioned in the fundamental analysis, crude oil fell Monday. We consider this move to represent nothing more than a mere technical correction. The possibility of a cease fire in Libya gave way to a pullback in oil, but has come to no resolve. Goldman Sachs recommended its clients to take profits, which contributed to the day’s selloff across the board. Crude has broken through the March high support level of 108.40; the upward trending channel from the March low has also been broken and can now lead to a larger meltdown. But given the bullish sentiment surrounding this market, we would have to assume that buyers will come in at key support levels. Long positions are encouraged with caution.
Stop Loss: 106.85
Take Profit: 110.0
Despite the last wave of drops, the trend of the British index has not changed and it is still positive. In fact, it is possible to use the present drop as a chance to collect the FTSE at a low and attractive buy price. The forecast is that the FTSE will continue is sideways (shuffling) movement until a stage when it will break upwards and up to the resistance level of 6110. It is important to take notice of the close resistance level of 6030 that signals the upper border of the shuffling movement. Then rising inflation mentioned above clearly indicate that the British economy is recovering. We expect the FTSE to head higher in the coming days.
Stop Loss: 5970.00
Take Profit: 6110
Written by SolidityBrokers.com