June Gold is stronger overnight buoyed by the weaker Dollar. On Thursday the market struggled throughout the trading session despite the weaker Dollar. Traders seemed to be adjusting their long positions now that it appears the demise of the Euro has been overstated. Earlier in the week, speculators drove up gold as they hedged against the possibility of a Euro collapse.
Gold traders may attempt to hold gold high in the recent trading range until the Greek resolution is reached. Furthermore, traders may be holding gold up because financial problems still linger in Spain, Portugal and Ireland. A weaker Dollar is likely to also underpin gold. In summary, it looks as if it is going to take a lot of fundamental changes to weaken gold.
U.S. equities are called higher on optimism that a Greek bailout package will be worked out soon. In addition, Wednesday’s Fed policy statement said that interest rates would remain low for “an extended period”. Both of these factors helped to erase losses from earlier in the week while driving up demand for higher risk assets.
Technically, the June E-mini S&P main trend is down, but the ability to regain a short-term retracement zone at 1196.75 to 1201.50 indicates that further upside movement is likely. A break back under 1196.75 will be a sign of weakness.
The closing price reversal top from earlier in the week is still intact until 1216.75 is violated. Until this occurs, there still exists the possibility of a secondary lower top. Traders have been reluctant to chase stocks following a strong opening. This means we are likely to continue to see “back and fill” type trading.
Treasury markets are called flat to lower this morning. On Thursday June Treasury Bonds rallied into the close after the government finished another round of debt auctions. The Treasury’s sale of $32 billion, seven-year notes was met with enthusiasm.
Yields were kept low, most likely because of the lingering problems in Greece. Now that the auctions are over, traders will turn their focus once again on the sovereign debt situation in Greece. If risk stabilizes, then look for T-Bonds to mount another strong rally. If Greece, the IMF and the EU are able to hammer out a 3-year deal then T-Bonds are likely to break.
The weaker Dollar and stronger Euro are helping to extend Thursday’s rally in June Crude Oil. The strong rally turned the main trend to up on the daily chart overnight on the trade through 85.63. Speculators are looking for the stabilization of Europe to drive up demand for crude oil. As long as the debt situation remains stable, then crude oil traders will look for signs of a global economic recovery to drive prices higher.
The Euro is moving higher as traders are more optimistic that a multiyear rescue package agreement would soon be reached between Greece, the European Union and the International Monetary Fund.
Traders remain cautious about the long side, however, because sovereign debt problems similar to Greece’s can flare up in Spain, Portugal or Ireland. Although the European Union and the International Monetary Fund are working out a loan bailout agreement, traders are likely to remain skeptical about the Euro until the details of the plan are revealed. News is also circulating that Moody’s Investors Services was preparing to lower Greece’s debt rating several notches.
Technically, the charts indicate that a rally to 1.3402 to 1.3471 is likely over the next day or two.
The June British Pound strengthened overnight after opinion polls showed the Conservative Party won last night’s debate in the U.K. This news boosted the British Pound because it diminished the chances of a hung parliament.
Technically, the British Pound turned the main trend down on the daily chart on Wednesday. Thursday’s action looked more like a retracement of the recent break rather than a change in trend. The key to higher markets will be whether the Pound can trade through the retracement zone at 1.5310 to 1.5354.
The June Canadian Dollar is holding flat overnight. Despite higher equity, gold and crude oil prices, traders are a little nervous today about the long side after BoC Governor Mark Carney said a strong Canadian Dollar may have impact on inflation or monetary policy. A strong currency tends to flatten inflation while reducing foreign demand for Canadian exports.
Institutions have been shorting the Canadian Dollar the last two times it traded over parity, if they pull their offers the next time up, look for an acceleration to the upside. Aggressive traders have to be careful about buying into parity.
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