The U.S. Dollar is picking up strength this morning against most majors.  It looks like traders are picking up the trend that developed late last week.  Yesterday the Dollar was mixed.  Gains were posted against the European majors while the Dollar weakened versus the Asian-Pacific currencies.  M&A activity helped provide the fuel to power a gain in equities, but the lack of fresh economic news kept the Dollar in a tight range throughout the day.

This morning traders will react to the Case-Shiller Housing Price Index and Consumer Confidence.  Investors want to see if the housing market continues to show improvement.  A better than expected report may hurt the Dollar if trader appetite for risk increases on good news.  The most important report will be the Consumer Confidence number.  Investors want to see that the public is buying into the recovery.  Although confidence may be up because of the stock market rally, consumers have not turned this confidence into actual spending.  Nonetheless, the market wants to see consumer confidence continue to climb.

The December Euro is feeling pressure this morning.  This is a follow-through break following last week’s change in trend to down on the daily chart and the weekly closing price reversal top.

The December British Pound is up a little this morning.  Technically oversold conditions are helping to boost prices today.  Fundamentally this market is still weak and the Bank of England appears to be supporting a weaker Pound.

Weaker crude oil and equity prices are likely to weigh on the Canadian Dollar.  This should help the USD CAD in its quest for .8991.  A move through this price later this week will turn the main trend down on the weekly chart.

The Dollar is gaining ground versus the Japanese Yen.  Yesterday’s closing price reversal bottom is triggering a technical rally today.  Oversold conditions are also contributing to the rally.  Fundamentally, the repatriation of Yen by corporations could be easing.  This too may be contributing to the weakness in the Yen.

U.S. equity markets are expected to open steady.  There seems to be a little fear building in the equities despite yesterday’s strong rally.  Traders are getting a little more active in the put market in anticipation of a possible break in October.  Yesterday’s rise was a combination of a short-term oversold market and increased M&A activity.  Technically this current rally could be the final test of last week’s high at 1075.50.  We have to see a failure today to set up another leg down.

Money is flowing into the U.S. Treasuries.  This could be part of the fear mentality that is developing in the equity markets.  Investors may be dumping stock on the rally and placing it in the safety of the T-Bonds and T-Notes.  The charts indicate that a rally to 123-00 is likely.

December Gold is feeling pressure because of the stronger Dollar.  Technical factors indicate that gold should test the $975.00 area over the short-run.  Bulls may try to drive this market back to $1005.00, but it is beginning to look more like yesterday’s rally close to $1000 could have been the test of last week’s high.  The direction of the precious metals will be dictated by the direction of the Dollar.  A weaker Dollar will send this market higher; a stronger Dollar will push this market to the mid-970’s.

Supply/Demand factors continue to pressure the energy complex.  Supply is rising and demand is falling.  This situation continues to push inventory figures higher.  A stronger Dollar today and weaker equities could put additional pressure on this market.


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