The U.S. Dollar is climbing sharply higher as global investors dump stocks and commodities on concerns about Dubai World’s debt problems. Fear is racing through the global investment community, making lower-yielding assets such as the Dollar and the Yen more attractive. The situation in Dubai began to break late Wednesday night and spilled over into Thursday while U.S. markets were closed for the Thanksgiving holiday.
Investors began to take money out of higher risk assets when the largest corporate entity in Dubai asked creditors for a six-month break on debt repayments of almost $60 billion. This action by the Dubai corporation is raising concerns that other emerging market entities may be overextended in debt which could lead to even more liquidation.
Financial markets are taking a hit all around the world as traders fear that banks are facing major exposure to Dubai World’s mounting debt issues.
After reaching a high of 1.5144 earlier this week, the December Euro is now in a position to turn the main trend down on the daily chart on a move through 1.4801. Technically, the main range is 1.4625 to 1.5144. This makes 1.4885 to 1.4823 a key retracement area.
Investors should also watch for a potential weekly closing price reversal top.
The main trend is down in the December British Pound. The main range is 1.5706 to 1.6878. The first down side target zone was 1.6292 to 1.6154. Last night’s break stopped after the market tested the 50% price at 1.6292. The low overnight is 1.6271.
Falling equity and commodity prices are doing damage to the Canadian Dollar. The main trend in the December Canadian Dollar is down as the market crossed the last main bottom at .9317. This pair could fall substantially if crude oil continues to plunge.
The financial crisis in Dubai is helping to drive the Japanese Yen higher. This is beginning to raise concerns among Japanese officials that the rise in the Yen will hurt Japanese export sales. There may be intervention if the rise in the Yen begins to get volatile.
The Dollar is not only mounting strong gains versus the Swiss Franc because of flight to safety reasons, but because the Swiss National Bank sold Swiss Francs in an effort to knock down its value after the recent rapid rise.
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