China Rates Hikes could Take Down Australian Dollar
The Australian Dollar is under pressure overnight following a rate hike by China’s central bank. The 25 basis point rise to 3 percent is the second attempt in just over a month to fight against inflation. The interest rate increase is an attempt to slow down the world’s number 2 economy.
The British Pound is trading flat to slightly higher this morning after it was reported that the U.K. economy unexpectedly contracted in the final quarter of 2010. Fourth-quarter gross domestic product declined by 0.5% compared to the previous quarter. This was the first decline since the third quarter of 2009. The report also severely missed pre-report forecasts calling for a 0.4% rise.
Downside pressure continued to mount on the December E-mini S&P 500 overnight as traders continued to shed risky assets amid speculation of debt woes in the Euro Zone. Without major economic releases to follow and a Treasury Bond market to lean on because of the U.S. Veteran’s Day holiday, thin market conditions and low volume could lead to volatility.
Stocks Could Move Higher; Gold Indicates Uncertainty
The rebound in the U.S. equity markets indicates that stocks are poised to move higher. Although the Fed told us nothing that wasn’t already built into the market, the fact that more liquidity was made available shouldn’t hurt equity prices. Stocks could also benefit from an improving economy especially if Friday’s U.S. employment data comes out better than expected.
Euro Weakness Could Mean Risk is Off Today; Stocks Flat to Lower
Weakness in the Euro could be translating into a risk-off trading session today in the U.S. equity markets. Although they are not moving together closely to the upside, last night’s reversal down in the Euro appears to have triggered a pre-session sell-off in the December E-mini S&P 500.
Nobel Winner Warns Economic Woes Could Endanger Euro
USD JPY Consolidating; Could be Setting Up for Rally
The USD JPY is consolidating inside the retracement zone created by the 84.73 to 86.37 range. This zone is 85.55 to 85.35. If the market can form a support base then look for it to make a run at the swing top at 86.37. Not only will a breakout over this level turn the main trend to up on the daily chart, but it will also confirm last week’s weekly closing price reversal bottom.
Overbought Conditions Could Trigger Weaker Stock Market Opening.
If overnight trading action is any indication then look for U.S. equity markets to open lower. The lack of buying interest overnight is most likely a reflection of short-term overbought trading conditions and the lack of fresh economic news. The Dollar is still under pressure against the Euro and British Pound, but equity traders are a little disconnected from this move this morning.
Weaker Equities could Trigger Flight into U.S. Dollar
The U.S. Dollar is picking up strength this morning as traders shed risky assets. Investors are lightening up positions because of the weaker durable goods data, but the actually selling pressure may have started last night following a disappointing Australian Consumer Price Index number.
Weak Economy, Technical Reversal Could Trigger Stock Market Break
Overnight stock futures are showing slight gains. Selling in Asia and a 4.2% drop in Google stock is likely capping the market in the pre-market. News that Goldman Sachs reached a $550,000 settlement with the SEC has had very little impact on the market. Trading has also been light ahead of the release of earnings data from Citigroup, General Electric and Bank of America.