US Dollar Index (DX) Futures Analysis – May 20, 2013

The June U.S. Dollar Index is trading lower in limited action. Volume is light because of a European bank holiday.

After reaching a high of 84.51 on Friday, the index is under pressure today, led mostly by a stronger Japanese Yen.  The Japanese Yen is trading better today after a senior Japanese government official said the currency’s “correction” had largely run its course.

Daily June U.S. Dollar Index
Daily June U.S. Dollar Index

The U.S. Dollar is also losing ground to the British Pound and Euro. The Greenback weakened against the Sterling after an industry report showed U.K. home sellers raised asking prices to a record. This is a sign that the U.K. economy is improving.

The June U.S. Dollar Index is due for a pullback following a strong rise from 81.37 to 84.51 from May 1 to May 17. The catalyst behind the rally was speculation that the Fed was gearing up to announce its strategy to exit its aggressive bond purchasing program.

Without any major news stories to react to and the bank holiday in Europe, traders should look for a sideways-to-lower trade the rest of the session with the news from Japan exerting the biggest influence. 

Gold Continues To Tumble As US Data Gives Sentiment A Boost

Gold Continues To Tumble As US Data Gives Sentiment A Boost
Gold Continues To Tumble As US Data Gives Sentiment A Boost
Gold tumbled once again on Monday morning down by over $20.00 to trade at $1343.85 responding to positive eco data and sentiment in the US. Gold futures declined for the seventh consecutive session on Friday, as the dollar index jumped to near 3-year highs and US data raised optimism about the economic recovery. The longest decline in Treasuries this year has left

U.S. govt debt the cheapest since Mar 2011 when measured by real yields and the best relative value compared with German bunds in more than two decades. After inflation, 10-year U.S. notes yielded 0.91% last week or 1.77% points more than real yields on U.K. gilts, the widest spread in 25 months.

Americans’ confidence in the economy climbed in May to the highest level in almost six years as rising real estate values and record stock prices boosted household wealth. The preliminary index of consumer sentiment increased to 83.7, the highest since July 2007, from 76.4 in April. Separately, the Conference Board’s gauge of the economic outlook for the next three to six months climbed 0.6% in April, more than forecast.

Home sales probably rose in April to the highest level in more than three years, extending gains in residential real estate that are giving the U.S. expansion a lift, economists said before reports this week. Combined purchases of new and existing residences climbed to a 5.41 mn annualized rate last month.

The beginning of the end of the Fed Reserve’s massive bond buying program might come sooner than many investors think if recent gains in the U.S. labor market do not prove fleeting. Reports on job growth in particular will go a long way in helping Fed officials determine whether the time is right to trim the pace of their $85 bn in monthly purchases.

Wall Street rose, giving the S&P’s 500 Index its fourth straight week of gains, as gauges for leading indicators and consumer sentiment advanced more than estimated. As traders looked for more risk and higher profits, gold continued its decline supported by constant outflows from gold-backed exchange-traded funds. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,038.41 tons, as on May 17.

The strength of the US dollar and the lack of demand for precious metals weighed on silver also. Silver fell this morning over $1.00 to trade at 21.26. . Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,252.69 tons, as on May 17. The recovery in the US does not seem to have sparked an increase in demand for industrial metals, with the exception of copper which is facing a declining inventory helping to support prices. Copper is trading at 3.2975 this morning flat to Friday’s close. LME copper stocks, which rose again on Friday, have climbed 10% since early April. Metal market will look out for currency moves and economic data to chart its move forward. LME Copper warehouse stocks have shown a significant amount of volatility in recent weeks, with large swings in inventory levels evident in stockpile data. The fact that one of the world’s largest copper mines, PT Freeport Indonesia’s Grasberg operation, remained shut following a fatal accident also highlighted supply risks to the copper market and was also a price-support, although analysts said this interruption was having a limited effect on prices so far.

Global Chatter Centers On The US Dollar

Global Chatter Centers On The US Dollar
Global Chatter Centers On The US Dollar
Global chatter over the weekend was focused on the strength of the US dollar, the US economic recovery and the US Fed asset purchase program. The US dollar rose to its highest level in nearly 3-years versus a basket of currencies and notched its highest level versus the Japanese yen since October 2008, on growing anticipation that the Federal Reserve will move to wind down its bond-buying program and an unexpectedly strong rise in consumer sentiment.

The dollar index, which measures the greenback’s movement rose as high as 84.37 and traded at 84.266, hitting levels last seen in July 2010. This is up from 83.758 in North American trade on late Thursday. Monday morning the greenback eased just a tad to trade at 84.25 allowing its crosses to recover a bit. The strength of the US dollar marks a shift in sentiment as speculators are now secure that the US recovery was well underway. Asian exchanges are trading in the green this morning as Hang Seng was up by 1.72% while Nikkei 225 was up by 1.38% and Chinese markets were up by 1.20%. Asian stocks rose for the first time in three days, with the regional gauge heading for the highest close in nearly five years, after U.S. leading indicators and consumer sentiment advanced more than estimated, boosting investor confidence in the global economic recovery.

European stocks closed higher after volatile trade on Friday, boosted by a rally in the auto sector. The pan-European FTSEurofirst 300 closed provisionally up 0.1 percent at 1,246.79 points but the euro remained weak, trading close to the 1.2850 level. This morning the euro has regained 7 pips as the US dollar takes a small breather.  Cyprus may need additional financing if its economy contracts more than expected or there are slippages in implementing the terms of its bailout program with the euro area and International Monetary Fund, IMF staff said on Friday. Data earlier in the week showed that that eurozone remained deep in recession disappointing investors who are once again pushing the ECB to intervene. The ECB at its last meeting earlier this month reduced its key lending rate by 25bps, but speculators do not think this is enough. On the other side of the coin is the possibility of negative interest rates, which would weigh heavily on the euro.

Trade balance numbers from Japan and the weak yen are beginning to worry European leaders as the cost of exported electronics and autos from Japan decline as the JPY continues to fall, making European exports a lot less attractive. Numbers released recently show a surge in auto exports from Japan. The JPY closed the week above the 103.00 level but dipped this morning to 102.67. Data released on Thursday said that Japan’s economy grew markedly in the first quarter, only weeks after a new government and a new team at the central bank set about stoking inflation in the world’s third-biggest economy. The 0.9 percent quarter-on-quarter growth — or 3.5 percent if the data were stretched over a year — confirmed Japan’s exit from recession after a decade of lost growth and deflation.

European leaders are now quietly rethinking their austerity stance and will begin to promote growth which has been the battle cry lately of the IMF and the World Bank. Each organization said that there is a time and place for austerity, but that time has passed and now the world needs to focus on growth.

Although the UK does not seem to want to follow these words of guidance as the Bank of England remains firm on its monetary policy and the government seems to be more set on current austerity programs. The pound remains weak trading this morning at 1.5197.

 

US Dollar Index forecast for the week of May 20th, 2013, Technical Analysis

The US Dollar Index rose during the previous week, and most importantly close above the 84 handle at the end of the Friday session. Because of this, we have essentially broken out of a significant resistance level, and now look fully capable of reaching the 88 handle over time. Because of this, we feel that buying opportunities will be abundant in this market, and that pullbacks will simply offer those buying opportunities. Also, we are perfectly comfortable going long of this market on a break of the highest from the weekly candle. Obviously, selling is an even a thought at the moment.

 

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US Dollar Index Forecast May 20th, 2013, Technical Analysis

The US Dollar Index finally broke above the 84 handle on the daily close from the Friday session, which of course is very bullish sign. If you been watching our videos, you know that the 84 level is a major breakout point and leads to the 88 handle eventually. Adding to the bullishness on this chart is the fact that the market has just broken above two shooting stars at the 84 handle, and as a result it looks like the US dollar will remain king for the foreseeable future. As for selling is concerned, we have absolutely no basis for thinking it.

 

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US Dollar Index (DX) Futures Analysis – May 17, 2013

The June U.S. Dollar Index is trading higher this morning despite comments from a Fed official on Thursday projecting the possible timing of the winding down of the Fed’s aggressive stimulus program.  

The U.S. Dollar Index fell early in the session on Thursday after a an unexpected jump in U.S. weekly jobless claims, mixed signals from the housing market, and Philly Fed data showing that the region’s manufacturing sector worsened in May.

Later in the session, the U.S. Dollar Index rebounded after San Francisco Federal Reserve President John Williams said that the Fed can slow the pace of buying $85 billion a month in bonds as early as this summer if the economy expands in line with his forecasts. “Then, if all goes as hoped, we could end the purchase program sometime late this year,” said Williams.

Daily June U.S. Dollar Index
Daily June U.S. Dollar Index

Besides the possibility of the Fed ending its aggressive stimulus plan sooner-than-expected, a sharp drop in the Australian Dollar is also helping to underpin the Greenback this morning. The Aussie continued its drop against the U.S. Dollar over concerns about a slowing Chinese economy and slower domestic economic growth.

Technically, the main trend is up but the market has traded sideways for two days since posting a new high for the year at 84.22. A surge through a steep uptrending Gann angle at 84.37 will put the market in a position to rally further with the July 2012 top at 84.82 a potential upside target. 

The Greenback Trumps The Currency Markets

The Greenback Trumps The Currency Markets
The Greenback Trumps The Currency Markets
The dollar index, which measures greenback’s movement against six other major currencies, was at 83.758 in recent trade compared with 83.795 on late Wednesday. The dollar was near a 6-week high against the euro and a 4-1/2-year peak against the yen, on prospects of more monetary easing in the euro zone and scaled back asset buying in the United States. The US dollar recovered on Friday morning to trade above 84.04 after Federal Reserve Members support tapering off asset purchases, supported the greenback.

German Chancellor Angela Merkel said that the euro risks falling apart unless European Union nations cede some sovereignty and work toward closer economic and budgetary cooperation.

Euro fell to six‐week low Thursday after economic data showed that growth in euro‐zone continues to remain sluggish. The euro is trading at 1.2862 giving up 20 pips this morning. The eurozone’s gross domestic product fell 0.2% in the first three month of the current year, compared with market expectation of 0.1%. The trade surplus for the 17 nations that use the euro hit its highest level in March since records began in 1999, driven by a sharp rise in exports and a decline in imports.

European investors believe that the Cyprus bank resolution has increased the risk that sovereigns will be less likely to support future bank bailouts, according to a Fitch Ratings investor survey conducted in April. The bank said in its quarterly report that the economy is likely to grow more rapidly than it thought in February, although the recovery will be weak by historical standards and vulnerable to threats from abroad, such as the crisis in the eurozone, the U.K.’s biggest trading partner.

The GBP is trading at 1.5248 down by 20 pips taking cues from the euro after the US dollar recovered after speeches from several Fed members late in the US on Thursday.  Sterling was heading towards six-week lows against the dollar on Thursday as investors sold the pound on concerns that a deepening recession in the euro zone would be a drag on the British economy.  The Bank of England (BoE) raised its growth forecasts on Wednesday, but Governor Mervyn King said there were challenges ahead given the problems in the euro zone. Separate data showed the euro zone economy had shrunk for a sixth straight quarter.

The weight of the US dollar also propelled it up against the weak Japanese yen. The yen is now trading at 102.31 giving up 4 pips this morning. Positive eco data in Japan could not support the JPY against the greenback. Yesterday Japanese GDP reported well above expectations supporting Prime Minister Abe’s aggressive economic policies to turn the around the Japanese economy from 20 years of deflation. Again today, Core Machinery Orders reported well above expectations showing signs of a possible recovery.

 

As Stocks Fall Crude Oil Climbs

As Stocks Fall Crude Oil Climbs
As Stocks Fall Crude Oil Climbs
Stocks skidded on Thursday, as a series of mixed economic reports offered little inspiration to buy stocks. After hitting new all-time highs on Wednesday, Dow Jones and S&P 500 closed down 0.3% and 0.5%. NASDAQ dropped 0.2%.

The government reported that jobless claims were up from a week ago. Additionally, housing starts for April fell and were below forecasts.  Wall Street was dragged down, after signs that the Federal Reserve may start winding back its bond-buying program as early as June or July. That has fuelled some fear in the markets, because investors are concerned about how the US economy will perform, without the support of the Fed’s fiscal stimulus measures.

Data in Japan earlier in the day, showed a jump in GDP numbers starting to show some support for Prime Minister Abe’s aggressive economic plans.

The question begs to be asked, what is driving the price of crude oil to trade this morning at 95.12 giving back 4 cents after the US dollar recovered a bit this morning. Yesterday crude oil moved from the 94.00 range to trade over 95.00. Crude oil futures recovered from early losses to close in positive above $95 a barrel, as traders considered prospects for energy demand amid weak US economic data.

Crude prices were supported over tensions in the Middle East over Syria’s civil war and Iran’s nuclear program which stoked supply concerns and supported prices. A weaker dollar after poor housing data from US also helped push crude prices higher.

Domestic crude oil futures were trading slightly higher today tracking mild upward recovery in benchmark contracts on the New York Mercantile Exchange, where prices gained as the US dollar weakened against the euro. The greenback lost ground against the euro after the release of discouraging US data. Data from the US Labor Department showed that the country’s jobless claims rose 32,000 to 360,000 in the week ended May 11. However, the gains were limited as weak US data could also hurt oil demand from the world largest oil consuming nation. Besides, decline in the US crude oil stocks in the week ended May 10 lent some support to oil futures.

Oil prices eased in Asia today as poor housing and employment data from the United States sparked concerns of weaker crude demand in the world’s biggest economy, analysts said. New York’s main contract, light sweet crude for delivery in June, dropped 14 cents to $95.02 a barrel and Brent North Sea crude for July delivery shed 15 cents to $103.63 in mid-morning trade. The market has taken fright at those worse-than-expected numbers.

Natural gas fell below the 4.00 price level on Thursday and remains weak on Friday morning as the US dollar strengthened. Natural gas prices fell sharply, after the US Energy Information Administration reported a 99bn cubic feet rise to 1.964 trillion cubic feet in US inventories for the week ended May 10.

Federal Reserve Speeches Lower The Boom On Gold & Silver

Federal Reserve Speeches Lower The Boom On Gold & Silver
Federal Reserve Speeches Lower The Boom On Gold & Silver
Gold continued to tumble this morning in Asian trading giving up $7.55 to trade at 1379.35 at this writing. Traders seemed to ignore lackluster US data and paid closer attention to several FOMC members’ speeches yesterday. Reserve Bank of San Francisco President John Williams said on Thursday that the Fed within months may begin slowing the pace of its $85 billion in monthly bond-buying amid signs the economy is gradually gaining strength. The program could be ended late this year if all goes as hoped.

Gold has lost nearly 6 percent of its value in the six sessions through Thursday as stocks gained on the back of strong U.S. economic data, and on fears the Federal Reserve could end its bullion-friendly bond buying program. Spot gold was down 0.53 percent at $1,378.41 having fallen to a four-week low of $1,369.29 on Thursday as renewed liquidation in gold ETFs and a recent drop below the $1,400-per-ounce level spooked investors.

The shiny stuff is down 17 percent for the year and is on track for its worst weekly decline in a month.    Physical demand was also quiet on Friday as consumers in the biggest gold buyers, India and China, wait for prices to stabilize or drop further, traders and dealers said.

Gold demand fell 13 percent to a three-year low of 963 tons in the first quarter, as rising jewelry demand and strong appetite for coins and bars failed to offset a sharp drop in investment, the World Gold Council says.  Gold is headed towards a low last seen in April, when fears of European countries liquidating gold reserves sent gold prices tumbling.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said holdings fell 0.55 percent to 1041.42 tons on Thursday, the lowest in four years.  Gold has retreated 18 percent this year, falling into a bear market last month, as the dollar rallied 5.2 percent against a six-currency basket amid prospects for a U.S. recovery and reduced stimulus from the Fed. Holdings in ETPs have lost 16 percent in 2013

Silver dropped 0.5 percent to $22.5875 an ounce, set for a second weekly decline. Platinum lost 0.2 percent to $1,476.35 an ounce, also heading for a second week of losses. Palladium declined 0.2 percent to $737.80 an ounce, paring a fourth week of gains that’s the best run since February. With disappointing US data the metals pack traded in the red. US data showed a drop in housing starts along with higher than expected unemployment claims and weak manufacturing data the dollar still traded on a high note weighing on all metals.

 

US Dollar Index Forecast May 17, 2013, Technical Analysis

For the second day in a row on Thursday, the market trying to break above the 84 handle in the US Dollar Index. However, as you can see that the end of the day shows this market not been able to overcome that significant barrier. In fact, we have formed what looks a bit like a shooting star, in this suggests that perhaps we could see a little bit of a pullback. Quite frankly, if we can get above the 84 handle, this is a long-term buy signal as there is essentially nothing between there and the 88 handle keeping the market down.

A lot of this will come down to being able to break the psychological barrier it 84, and as a result it could be a bit of a fight. The fact that the move has been so strong all the way from 82 suggests that perhaps we need to pullback in order to collect more buyers. We need more momentum to go higher, and as a result this pullback really wouldn’t be that much of a surprise.

Unlike the last couple of days, the Euro in the Yen haven’t been beat up on by the US dollar either. Because of this, the US Dollar Index will naturally move slowly, and as a result it’s not a surprise that we didn’t really go anywhere for the session. After all, even though we formed a shooting star we only lost 0.26% for the session.

Going forward, we believe that this market will find significant support down at the 83 handle, and most certainly down at the 82 handle. We think that a drop to those levels will simply be a buying opportunity, as the trend has been so strong recently. Without a doubt, the world feels much better about the US economy than others out there, and as such this has had the US dollar picking up for the last couple of months. We see nothing on this chart to change that trend at the moment, although the next couple of days could be a bit on the soft side.

 

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US Dollar Index (DX) Futures Analysis – May 16, 2013

The June U.S. Dollar Index is trading a little better this morning, but well below yesterday’s high at 84.22. The market produced an inside move overnight, suggesting the major players are on the sidelines ahead of today’s U.S. economic reports. Today’s reports will be watched closely because they could offer clues as to whether the economic recovery remains on track.

Overnight, the U.S. Dollar is posting slight gains against most major currencies. Selling pressure hit the AUD/USD particularly hard after a technical support line was violated. This move comes after several days of lower trading following a weakening economic outlook for Australia.

The EUR/USD was also trading lower in limited follow-through selling following Wednesday’s weaker-than-expected quarterly growth data from France, Germany and the Euro Zone. This is leading to speculation that the European Central Bank will implement another round of stimulus.

This morning, investors will get the opportunity to react to reports on building permits, inflation, unemployment claims and housing starts. Later in the morning, the Philadelphia Fed Manufacturing Index is on tap.

Economists are looking for unemployment benefits to rise to 330,000. The Philly Fed report is expected to rise from 1.5 to 2.5. The results of this report could move the markets today.

Daily June U.S. Dollar Index
Daily June U.S. Dollar Index

Technically, the main trend is up on the daily chart. Upside momentum should increase if the market can cross the Gann angle at 84.12. This would set up a quick rally to Wednesday’s high at 84.22. The ultimate target of this current rally is the July 2012 top at 84.82.

Although the nearest support angle is at 82.75, this level is not expected to be tested today. If a short-term top is forming, this angle is likely to be tested but at a higher level.

Today traders should look for the uptrend to continue if the U.S. economic data is supportive. The June U.S. Dollar Index could surge if the Philly Fed number is bullish. 

Global Currencies Under Pressure From The Greenback

Global Currencies Under Pressure From The Greenback
Global Currencies Under Pressure From The Greenback
The US dollar remained higher, despite weaker data on New York State’s manufacturing sector and US wholesale prices. The ICE dollar index, which measures the greenback’s movement against six other major currencies, traded at 83.795 on Wednesday compared with 83.575 on late Tuesday. Yesterday the US dollar moved above the 84.00 price and is trading this morning at 83.94.

The euro dropped to a 6-week low against the US dollar on a closing basis, fell after quarterly economic reports from France, Germany and the euro zone missed expectations. The euro fell to a six-week low against a buoyant dollar on Wednesday, hurt by an unexpectedly large contraction of the euro zone economy which bolstered the case for more monetary easing by the European Central Bank. The euro is below the 1.29 level trading at 1.2872 this morning.

International demand for U.S. stocks, bonds and other financial assets weakened for a second straight month in March as a stronger economic outlook emboldened investors to take other risks. Federal Reserve Vice Chairman Janet Yellen is seen by a third of international investors as the most likely to take the helm of the central bank when Ben S. Bernanke’s term ends in January.

Confidence among U.S. homebuilders improved in May for the first time in five months as buyers rush to take advantage of near record-low mortgage rates. Industrial production declined in April by the most in eight months, indicating American manufacturers will provide little support for an economy beset by weaker global markets and federal budget cuts.

The strong US dollar has made it difficult for commodities and crosses to gain momentum. Traders have been running to the equities markets in droves, driving stocks to record intraday levels.

This morning news from Japan showed a jump in GDP above expectations. Japan’s economy expanded the most in a year last quarter as consumer spending and export gains outweighed the weakest business investment since the wake of the March 2011 earthquake and tsunami. The JPY gained a bit of momentum this morning gaining several points to trade at 102.22. This has been the first complete report since Prime Minister Abe took office and pushed huge stimulus packages to turn the economy from deflation to inflation. Traders are a bit leery about the results as it is the first positive data since the beginning of Mr. Abe’s programs.

The Great British pound is trading at 1.5221 down by 15 pips against the stronger US dollar. The pound had gained a bit of traction yesterday.  The BoE’s growth outlook has been revised up to 1.1% in 2013 and 1.8% in 2014; while CPI has been revised down to 2.9% in 2013 and 2.5% in 2014 but is still above the 2% inflation target until the later part of the BoE’s forecast period and even then there is a close to 50% chance that CPI will be above the 2%.

Gold Takes A Major Tumble

Gold Takes A Major Tumble
Gold Takes A Major Tumble
Gold continues its tumble this morning trading at 1393.35 down by 2.85 after nose diving on Wednesday. With equity markets trading at or near record highs, traders are continually moving away from precious metals and to higher performing equities.  Most Asian exchanges rose this morning after key U.S. indexes clinched another record finish although Japanese stocks skidded as a firmer yen led investors to lock in recent gains despite strong economic growth data and upbeat results from banks. Japanese GDP printed higher than expected giving a bit of a bounce to the JPY.

A stronger dollar internationally and falling crude prices which lowered inflation concerns also weighed on gold. SPDR Gold Trust, the world’s largest gold-backed exchange traded fund’s holdings fell 0.43 percent to 1047.14 tons on Wednesday from 1051.65 tons on Tuesday. Gold prices internationally are likely to move down as easing physical demand and improved risk appetite globally can continue to hurt gold’s appeal as a safe haven. A drop in ETF holdings indicates that investors are shifting to equities from gold.

Eurozone economy extended its recession for sixth quarter. The GDP in the euro area contracted 0.2% last quarter against a consensus estimate of 0.1% decline, raising expectation of more monetary easing by the ECB. The Germany economy grew 0.1% below the 0.3% economists forecast.

Gold fell below $1,400 an ounce yesterday as investor’s desert bullion in the face of record-high stock markets and growing economic confidence. The price of the metal closed down two per cent at $1,396.20, as US data suggested consumer prices are set to stay relatively flat undermining its safe-haven appeal. In October gold hit a peak of $1,794 an ounce before entering a period of decline. It eventually crashed in April.

Gold remained under pressure as holdings in exchange-traded funds tumbled to their lowest in four years.  Rallying stocks also hurt bullion’s appeal as an alternative investment, although tight physical supply in the world’s largest consumer India could offer some support. 

Financial markets are buzzing with speculation that the US Federal Reserve will begin winding down its asset-purchasing programme, which is tantamount to printing money. Bullion hit an 11-month high in October last year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank’s money-printing to buy assets would stoke inflation. 

Silver is trading at 22.700 weighed down by the drop in demand for precious metals. Industrial metals are expected to move down as a slew of weak economic data from China and rising supplies are likely to put pressure on base metals. US housing data expected slightly positive today could limit the downside.

Copper prices were down as a slowdown in euro zone economy and poor US industrial production hurt prices. A build up in copper inventories at LME warehouses and a stronger dollar pushed prices further down. Copper is trading at 3.279

US Dollar Index Forecast May 16, 2013, Technical Analysis

The US Dollar Index rallied during the session on Wednesday, and at one point in time broke above the 84 handle. However, we could not keep gains above that level, and as a result we got a little bit of a pullback later in the day. The candle looks a bit like a shooting star, so we get some type of pullback from here there would not be much of a surprise. Nonetheless, we do believe that this market still will continue higher over time. With that being the case, we are looking to buy on a break of the highest from the session on Wednesday, or buy supportive candles after a slight pullback.

 

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US Dollar Index (DX) Futures Analysis – May 15, 2013

The June U.S. Dollar Index is surging today after the Euro Region reported weaker-than-expected-growth. Technically, the market is gaining steam after taking out the early April top at 83.66. In addition, the market crossed over to the bullish side of a steep uptrending Gann angle at 83.87. This morning’s rally to 84.22 puts the index in a position to challenge the July 2012 top at 84.82.  

Daily June U.S. Dollar Index
Daily June U.S. Dollar Index

The U.S. Dollar Index rallied after the Euro fell to a six-week low. Poor quarterly economic reports from France and Germany helped drive the Euro lower versus the dollar. With France now in a recession and Germany posting weak growth, the relatively stronger U.S. economy is making the U.S. Dollar a much more attractive currency.

Although poor economic data may pressure the Euro against the dollar, the move will be gradual unless the spread between U.S. and European interest rates begins to widen. If U.S. rates become substantially favorable then look for investors to aggressively sell the Euro while seeking the higher yielding U.S. Dollar. 

The Strength Of The Greenback Over Powers Global Currencies

The Strenght Of The Greenback Over Powers Global Currencies
The Strenght Of The Greenback Over Powers Global Currencies

The euro finally fell to close below the 1.2950 level. Late in the day Fitch rating services, raised Greece’s credit rating but this positive news was not enough to support a climb in the euro. The US dollar strength continues heading towards the 84 price level. US data showed that small business confidence soared above expectations, which continues to reinforce the theory that the US Fed will reduce or halt their asset purchases in the near future. The euro group has signed off the first installment of the $13bn financial bailout package for debt-stricken Cyprus while allocating fresh disbursements for Greece and Portugal.

The cost of goods imported into the U.S. dropped in April, propelled by retreating fuel costs. The 0.5 percent decline in the import-price index followed a 0.2 percent drop the prior month. The European Central Bank clashed with Germany over how the European Union will handle struggling banks and whether to create a common agency and fund to manage failures. German investor confidence rose less than economists forecast in May, highlighting the risks to the economic outlook as the euro region remains mired in recession. EU industrial production surprised traders printing well above expectations as traders looked for the silver lining in the cloud.

The eurozone’s largest economy Germany showed signs of weakness in their economy after poor CPI, WPI and Economic sentiment data. Traders can expect the euro to remain in range to lower as upcoming GDP data today can move the markets accordingly and show the strength in crisis hit eurozone.

The budget deficit for the current year is projected to come in well below what was estimated just a few months ago, according to a US govt. The CBO cites higher tax revenues and better-than-expected bailout repayments by mortgage giants Fannie Mae and Freddie Mac as the key reasons for the improved outlook. The budget office now predicts a 2013 budget deficit of $642 bn, more than $200 bn below its Feb estimate. This year’s shortfall would register at 4.0% of the economy, far less than the 10.1% experienced in 2009 when the government ran a record $1.4 tn deficit.

The greenback dipped against the Japanese yen this morning, though it still hovered near its highest level in more than four years on prospects for an improving U.S. economy and the end of monetary stimulus by the Federal Reserve. The dollar exchanged at 102.15 yen, compared with ¥102.25 late Tuesday in North America. The yen hadn’t fallen below the 102 level since October 2008. The fall of the yen helped push the Nikkei to trade above 15,000.

The Great British pound traded at 1.5225 ahead of today’s Bank of England Inflation Outlook. British Prime Minister David Cameron’s bid to defuse a rebellion in his Conservative Party faltered as Tory lawmakers and his Liberal Democrat coalition partners criticized his proposal to support a bill authorizing a referendum on U.K. membership in the European Union.

 

 

Gold Trading A Bit Confusing

Gold Trading A Bit Confusing
Gold Trading A Bit Confusing
Gold prices were down this morning as optimism over economic recovery in strong US equity markets hurt gold’s safe haven appeal. U.S. stocks rose, sending the S&P’s 500 Index to its eighth record high in the past nine sessions, on increased optimism over growth in the world’s largest economy. It seems that the primary conversation these days is focused on the US Fed and their asset purchases. As the strength of the US dollar trampled over its crosses, the JPY soared well above the 102 price level. Asian stocks rose as Nikkei climbed above 15,000 for the first time since Jan 2008 after the yen touched a 4 1/2-year low against the dollar, boosting the earnings outlook for exporters.

Gold on Tuesday fell to close at 1424.00 and remains weak this morning. Over the past months gold has developed a habit of climbing in the Asian session to give back gains throughout the day, but this morning gold is trading on a negative bias in the Asian markets.

Greece’s credit rating upgrade by Fitch and positive eurozone economic data also eased uncertainty in the region and hurt the investment demand for gold. SPDR Gold Trust, the world’s largest gold-backed exchange traded fund’s holdings remained unchanged on Tuesday. Hedge fund managers and money managers remain sidelined. Gold prices internationally are likely to move down as easing physical demand and improved risk appetite globally are likely to hurt gold’s appeal as a safe haven. Asian countries are seeing unprecedented demand for the yellow metal after the dip in prices in April. India imported $7.5 billion of gold bullion in the last month up from $3.1 billion a year earlier. The country’s trade deficit widened 70% with the increase in gold and silver imports.

The U.S. dollar eased and outflows from exchange-traded funds halted, but firm equities could lure away investors seeking better returns and keep a lid on bullion’s gains.  While gold has recovered around 8 percent from a two-year trough hit in April, its safe-haven appeal has been battered by record high U.S. equities, signs of an improving U.S. economy, and fears of a slowdown in demand by top consumer India. 

Bullion has slumped more than 14 percent so far this year, after gaining in the past 12 consecutive years as easy monetary policy burnished bullion’s appeal as a hedge against inflation.  Holdings at SPDR Gold Trust, the largest gold-backed ETF, were unchanged at 33.8 million ounces on Monday after falling almost daily. But the holdings were still within sight of their lowest since March 2009 that was hit after funds cut their exposure to bullion, whose historic fall in April took ardent gold investors and bulls by surprise. 

Silver followed the cues from gold falling to trade at 23.252 down by almost 13 cents. Precious metals remain weak along with industrial metals as lackluster data from China over the past weeks show a recovery but not as strong as expected.

US Dollar Forecast May 15, 2013, Technical Analysis

The US Dollar Index initially fell during the session on Tuesday, but as you can see the 83 handle offered enough support in order to make this market bounce again. What’s even more impressive is the fact that the market managed to close above the 83.50 level, an area that we suggested would be resistance based upon a shooting star that had formed in the early part of the month of April.

Now that this is happened, we have to think that the momentum is picking back up for the US dollar, and that the US dollar remains supreme still. That being the case, as we look around the Forex markets we can see that one of the main drivers of US dollar strength will be the Japanese yen, and we believe that as long as that pair continues to go higher, so will this market. Don’t forget the Euro either, as it has been relatively weak against the US dollar lately as well.

Going forward, we see a significant resistance level at the 84 handle, based upon longer-term charts. If we can get above 84, we see absolutely no reason that we will hit 88 in relatively short order as there is essentially an “air pocket” on the longer-term charts through that region. Because of this, we think that this could be one of the better trades out there, and the fact that we have broken out now suggests to us that dips should be bought in this market, and looked at as potential buying opportunities.

With interesting is that the Dow Jones Industrial Average rose during the session by a reasonable amount, roughly 120 points, and the US dollar gained in strength as well. Typically that correlation is negative, but it appears to be going positive now. This is more than likely because of money flowing into the United States, and of course into the stock market. Foreign orders keep coming into the stock exchanges in America, and as a result the US dollar continues to strengthen. We see absolutely no case for shorting this market right now.

 

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US Dollar Index (DX) Futures Analysis – May 14, 2013

The June U.S. Dollar Index reversed course after early session weakness and is now trading higher for the day.

Helping to turn the market lower was a sharp break in the Australian Dollar which fell against the dollar after the government forecast slower growth. This led to speculative selling pressure as traders increased their bets that the Reserve Bank would cut borrowing costs to support the economy.

The Euro fell against the U.S. Dollar following a worse-than-expected German ZEW Economic Sentiment report. Sentiment fell to 36.4 versus economist guesses of 39.5.

Also helping boost the U.S. Dollar was a better-than-expected rise in the NFIB Small Business Index.

Daily June U.S. Dollar Index
Daily June U.S. Dollar Index

Technically, despite the rebound rally this morning, the June U.S. Dollar Index remains under last week’s high at 83.52 and the April 4 top at 83.66. If upside momentum is fading then look for the weakness to return later in the session.

On the downside, uptrending Gann angle support is at 82.50. This is followed by retracement zone support at 82.44 to 82.19.

Crossing over to the bullish side of an uptrending Gann angle at 83.62 will put the index in a strong position to accelerate to the upside. 

Fracking and Exports Support Natural Gas While Crude Oil Declines

Fracking and Exports Support Natural Gas While Crude Oil Declines
Fracking and Exports Support Natural Gas While Crude Oil Declines

European exchanged closed lower on yesterday, having pared losses after retail sales data in the U.S. came in better-than-expected. However, shares remained near the five-year highs hit in last week’s global rally. Wall Street closed flat in lackluster trading Monday after the S&P 500 briefly touched a new all-time high. Traders moved to the US dollar after a report from the Wall Street Journal said that the Federal Reserve was mapping out a plan to exit its asset purchase program. This news sent the US dollar to a high not seen since 2008 with the greenback trading at 83.33, declining this morning to trade at 83.14.

The strength of the US dollar weighed heavily on dollar denominated crude oil, which fell yesterday on a combination of the strength of the US dollar and lackluster Chinese Industrial Production, combined with Friday’s OPEC statement and forecast. Crude oil prices declined to close at 95.18, after choppy day of trading session, hit by slowing oil demand in China and data showing the biggest drop for US retail gasoline sales in more than 4-years.

China’s fixed-asset investment unexpectedly decelerated last month while industrial output trailed estimates, adding to concerns that the economy will fail to show much of a recovery this quarter. Fixed-asset investment excluding rural households in the first four months of the year increased  20.6%, compared with 20.9% in the 1st Qtr. Production grew 9.3% in April from a year earlier and retail sales climbed 12.8%.

Sales at U.S. retailers unexpectedly advanced in April, helping ease concern of a sustained pullback in consumer spending that would stifle the economy. The 0.1% gain followed a 0.5% decrease in Mar. The median forecast by BBG called for a 0.3% drop. Retail purchases climbed by the most in 4 months less receipts from service stations, where cheaper gasoline prices depressed the dollar value of sales.

WTI crude traded near the lowest level in more than a week before govt data that may show U.S. stockpiles climbed to the highest since at least 1931.

Natural gas futures closed slightly higher at 3.92 recovering from a 5-week low as a seasonal demand lull puts pressure on prices. This morning natural gas is trading flat. U.S. producers are poised to ship vast quantities of gas overseas as energy companies seek permits for proposed export projects that could set off a renewed frenzy of the much-debated kind of drilling known as fracking.

If approved, the resulting export boom could lead to further increases in hydraulic fracturing, a drilling technique also known as fracking. It has allowed companies to gain access to huge stores of natural gas underneath states from Colorado to New York. The export demand for natural gas continues to support prices while residential use tumbles between the winter and summer seasons.