Monday, January 5, 2009

Market Heading Towards Dollar Safety

Market Heading Towards Dollar Safety

Overall, the currency market opens having most of the majors heading lower, as investors bought dollars. The recent international conflicts might have sparked a rally towards even more safety, empowering the dollar bulls. Ahead, the market is expected to move on a relative robust volume, despite the weak release calendar.

The Euro (Eur/Usd) is testing the 1.3850 level, the area where the pair bottomed on Thursday and Friday. The same support area also represents the 38.2% retrace of the euro bullish trend that lasted from November to mid December. Later this month, the ECB is expected to reduce the interest rate by 50 basis points.

The Pound (Gbp/Usd) already fell 100 pips in the Asian session, as some traders speculate the yield differential between BoE and the Fed will drop even more in the coming months. In addition, the pound is trading near a 6-year bottom, under all the moving averages.

The Aussie (Aud/Usd) started the Sunday session with a small bullish gap; however, the pair closed it very fast. The aussie is now trading around the 0.81 area, the resistance area of the last few months. From this point forward, the aussie will not be able to break higher without the whole market helping it.

The Cad (Usd/Cad) continues to trade very volatile and within the same channel. In the last few days, the pair traded between the 1.2050 area and the 1.2200 resistance area, unable to break decisively either way. Furthermore, the 20 and the 50-day moving averages act as resistances.

The Swissy (Usd/Chf) is trading just under the 200-day moving average. On Friday, the pair could not break above it, even though the resistance area was tested on a relatively strong volume. Tonight, in the Asian market, the swissy fell around 80 pips, under the neutral pivot point (1.0770).

The Yen (Usd/Yen) opened the new trading week with a small gap. The pair is now trading around the 92.00 area, where the high reached on Friday is located. Currently, the yen is trading above the 20-day moving average for the first time since early November.

Equity Markets Advance On Government Proposed Plans

Asian trade: Helped by government proposed actions, Asian markets have been rising for eight consecutive days, the longest streak in the last few years. Furthermore, the major equity indexes broke above important resistance areas, suggesting that they might head higher from a technical point of view.

Sources have said that President-elect Mr. Obama is trying to reduce taxes in order to stimulate the economy. This would be only a part of the $700 billion stimulus plan Mr. Obama will try to implement in the following weeks. Back in early 2000, when the economy was facing a recession, Mr. Bush decided to reduce the tax level for a limited period of time. It now looks like those tax cuts are going to be permanent.

Friday, the major indexes broke the resistance areas of the last few months, something that could signals further gains might be ahead. The S&P broke above the 915.00 area for the first time in the last two months, while the German Dax closed above the 4800.00 resistance area. The Nikkei gained 183.56 points (2.07%) to 9,043.12, breaking above the 8800.00 resistance area. The Australian S&P/Asx gained 11.80 points (0.32%) to 3,725.60.

Crude oil traded on a very low volume in the Asian trading hours. Crude oil for January delivery rose to $47.40.

Gold bounced again from the $880 resistance area. Bullion for immediate delivery lost $9.90 to $872.30

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved.

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