U.S. equity markets are called steady to better this morning. The lack of follow-through to the downside following yesterday’s sell-off is triggering a short-covering retracement rally. Earnings, bank fees and taxes are on the minds of traders today which could lead to limited gains. The March E-mini S&P 500 is likely to stall following a rally to 1137.75. Yesterday’s break stopped inside of a short-term retracement zone at 1129.00 to 1124.50.
March Treasury Bonds are giving back some of Tuesday’s gains after testing a 50% price level at 116’28. Regaining this level could trigger a further rally to 117’14. On the downside, look for a pull-back to 116’05. Talk of higher interest rates from Fed President Plosser and in the U.K. is pressuring fixed income instruments today.
February Gold is trading slightly better but in a narrow range. Overnight volatility in the Dollar has traders confused about the direction of this market. The chart indicates a move to $1119.10 to $1108.80 is likely over the near-term. A rally today is likely to be short-covering. Look for new selling pressure to come in if this market rallies back to $1143.60.
News that China may be pulling stimulus, and signs that the cold weather on the East Coast may be moderating, is helping to chase speculators out of March Crude Oil. Based on the range of 73.52 to 84.45, the charts indicate a break to 78.99 is likely over the near-term. Downside momentum could weaken this market further to 77.70.
The U.S. Dollar is trading weaker overnight following a volatile trade. The initial move in the Dollar was to the upside as Germany announced that its economy had shrunk more than expected in 2009. German GDP contracted 5% which was its first decline in 5 years.
Hawkish comments from Federal Reserve Bank of Philadelphia President Plosser also triggered a rise in the Dollar. He said the Fed should raise interest rates as the economy improves and not wait for the unemployment rate to decline. Plosser is a voting member on the FOMC so his comments carry some weight.
The Dollar could not hold earlier strength and is now trading lower ahead of the New York session. Increased demand for higher yielding assets seems to be the developing theme. The key report today is the Fed Beige Book which is scheduled for a 1 pm Central Time release.
The main trend turned up in the March British Pound overnight on the trade through 1.6235. The next upside target is 1.6351. Watch for a technical bounce at this level. The British Pound is being boosted by hawkish comments from Bank of England member Andrew Sentence. He said that the BoE has done enough to stimulate the economy and that interest rates should be allowed to rise this year.
The March Euro has recovered after overnight weakness triggered by Germany’s bearish GDP report. Short-covering ahead of tomorrow’s European Central Bank meeting could be the catalyst behind the turnaround. The charts indicate the Euro is still on pace for a near-term test of 1.4677.
The March Canadian Dollar tried to continue the break which began two days ago and continued on Tuesday, but the selling pressure stalled after the market regained an uptrending Gann angle at .9643. The actual low tested an old bottom from December 1 at .9608. Watch for a minor corrective rally to at least .9678.
The March Japanese Yen is trading lower overnight as demand for lower yielding assets is down. This currency is trading inside of yesterday’s range. The short-term picture indicates the start of a small correction, but the bigger charts indicate there is plenty of room to the downside with 1.1273 the first objective.
The March Swiss Franc is up and resting near a .618 level at .9873 after testing a 50% price at .9806. Upside momentum could drive this market higher and into a slow moving downtrending Gann angle at .9935.
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