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Dollar 'Drops' on $1 .0 Trillion Bailout/Budget Concerns

Tue, Sep 23 2008, 09:15 GMT
by Bob Kozak

Alaron

Dollar Index (DXZ8):

The DX opened lower at 77.35 and rose to a morning Hi of 77.54, before retracing on concerns that the 'bailout' being proposed could increase to greater than $1 Trillion, after adding an additional $400B to insure MM funds. An increase in the budget-deficit in 09' of $31B and a 6.6% increase in the Nation Debt to $11.315T may see foreign investors standing on the sidelines until the 'dust' settles, reducing the buying of U.S. assets. Prices continued under pressure throughout the session as commodity prices 'surged', sending oil up $6.62 to $109.37, basis November and December Gold up $44.30 to $909.0. Prices continued lower into the close of 76.35, down 158 tics. The s/t trend remains 'negative' w/ weak momentum indicators. The flight to quality suggests that traders need more 'information' and a comfort level before believing the 'worst' is over. A lower open may find Support at 75.80 and 75.25, while an open above 76.84 could find Resistance at 77.39 and 78.43.

British Pound (BPZ8):

The BP opened higher at 1.8328 against the weaker DX. Prices slid to a morning Lo of 1.8278, before rising throughout the session to a daily Hi of 1.8513 and ending the session at 1.8506, up 234 tics. The s/t trend remains 'positive' w/firm momentum indicators. With odds increasing that the Fed may reduce rates 25bp at the Oct.28-29 FOMC meeting, the yield-gap w/ the BP makes the 5.0% yield or even a 4.5% yield more attractive. Traders will key on this weeks testimony of Fed Chairman Bernanke and Trea.Sec. Paulson, along with U.S. financial data. Longs should tighten 'stops' or buy 'puts' to reduce exposure. A higher open should find Resistance at 1.8622 and 1.8737, while an open below 1.8397 may find Support at 1.8282 and 1.8057.

Canadian Dollar (CDZ8):

The CD opened lower at .9518, dipped to .9516 and followed commodity prices higher throughout the session, as the DX 'wilted'. Prices hit a daily Hi of .9695 and drifted lower to a close of .9682, up 141 tics. The s/t trend remains 'positive' w/firm momentum indicators. A bail-out of the U.S. financial markets could pick up the demand for energy and another run to $150., helping Canada's export revenues. Longs should tighten 'stops' or buy 'puts' to reduce exposure. A higher open should find Resistance at .9747 and .9813, while an open below .9630 may find Support at .9564 and .9447.

Euro Currency (ECZ8):

The EC opened higher 1.4550 and dipped to a morning Lo of 1.4516, before climbing against the weak DX to a daily Hi of 1.4790 and closing at 1.4780, up 337 tics. Traders rotated away from DX and into other major foreign currencies w/ higher yields. The s/t trend remains 'positive' w/ firm momentum indicators. Tighten 'stops' if your long or buy 'puts' to reduce exposure. A higher open should find Resistance at 1.4912 and 1.5043, while an open below 1.4663 may find Support at 1.4532 and 1.4283.

Japanese Yen (JYZ8):

The JY opened higher at .9531 against the weaker DX and slid to a morning Lo of .9426, before following most other major foreign currency markets higher. Prices hit a daily Hi of .9569, before ending the day at .9559, up 144 tics. The close above the 9-day MA changes the s/t trend to 'positive' w/neutral momentum indicators. Traders will key on the DX and equity markets for direction. A higher open should find Resistance at .9619 and .9679, while an open below .9509 may find Support at .9449 and .9339.

Published on  Tue, Sep 23 2008, 09:22 GMT