The strengthening April Gold market is a strong indication that the pact between the European Union and Greece is imminent, thereby driving up demand for risky assets. Speculators are anticipating that the agreement to shore up the debt in Greece will be released shortly. This news should pressure the Dollar and underpin the gold market.
March Crude Oil is trading sharply higher overnight after taking out a key retracement zone. Oversold conditions and the possibility of a weaker Dollar are helping to boost this market. Traders are looking for increased demand for risky assets to continue today. In addition, signs of an improving economy may increase demand for energy.
Equity markets are trading higher overnight. Confidence is returning to the markets. Traders feel that an agreement between the EU and Greece will increase appetite for risk and are buying in anticipation of the news. Tonight’s rally is being driven by Asia and Europe. The key to higher markets will be whether demand comes in from U.S. traders.
News of an impending agreement between the Greece and the EU is helping to pressure March Treasury Bonds and Notes. Traders are selling off safe haven positions in anticipation of a resolution to the Greek deficit woes. Yesterday’s comments from Bernanke, hinting at a hike in the discount rate is also pressuring the market. Furthermore, traders feel that yields will rise because of the new supply of Treasury debt hitting the market.
The March Euro is trading flat to lower this morning as traders await details on the Greece rescue plan. Traders seem a little more confident this morning now that a pact has been reached. This is helping to stabilize the Euro and keep it from breaking further. Once the details of the actual decision are released, this market should rally as fresh buying and short-covering should drive it higher.
The Euro chart pattern suggests this market is being wound tightly. The longer it remains in a tight range the stronger the breakout move. A rally through this week’s high at 1.3838 should put this market on path to retrace to at least 1.4079 over the near-term.
The March British Pound is up slightly after holding on to the week’s low at 1.5534. This market appears to be forming a support base and like the Euro is awaiting details of the Greece rescue plan. Shorts are likely to cover as the details of the rescue are released.
Technically, this market has a short-term target of 1.5801 to 1.5865. Gains could be limited because of the economic issues in the U.K. Yesterday the Bank of England lowered its inflation estimate while hinting at expanding and extending its quantitative easing program. Furthermore, just because Greece is being helped out does not mean the deficit issues facing the U.K. will go away. Over the short-run, the focus may shift away from Greece to the U.K. credit rating.
The March Japanese Yen is trading higher. This overnight strength comes as a surprise because the combination of the Greek rescue plan and Bernanke’s talk of raising the discount rate should have been supportive for the Dollar. Short-term oversold conditions could be triggering the strength.
The weaker Euro is helping to pressure the March Swiss Franc. The lack of buyers is the catalyst behind the weakness. The charts indicate a tight range which indicates impending volatility. Because of the magnitude of the situation in Greece, traders may be waiting for the actual release of the details from the EU/Greek pact before committing to the short-side. A stronger Euro later today should support the Swiss Franc because it eliminates the need for the Swiss National Bank to intervene to protect the value of its currency and its economy against deflation.
The March Canadian Dollar erased earlier losses yesterday and finished higher for the day. This strength spilled over into the night session driving the Canadian Dollar higher. Higher gold and crude oil prices are the catalysts behind the current strength and could lead to a surge to the upside today.
Technically, this current rally is all related to last Friday’s closing price reversal bottom The main trend on the daily chart turns up on a move through .9483, but gains may be limited once this contract reaches a retracement zone at .9553 to .9607.