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Forex Technical Report

Equity Market Rally Fizzles as Traders Await Auction Results

Thu, Jul 30 2009, 17:25 GMT
by James Hyerczyk

ForexHound.com  |  View company's profile

Equity futures surged to the upside after the U.S. opening in follow-through buying after a strong finish in Asia and Europe overnight. Asian traders were celebrating a recovery in the Shanghai Composite Index. European traders were buying aggressively due to better than expected earnings.

After an initial thrust to the upside in the U.S. markets following the opening, buying dried up as traders became concerned about today’s Treasury auction. In addition, buyers became scare in the September E-mini S&P 500 as this contract approached the psychological 1000 level. Volatility is up which could subject the indices to violent swings later this afternoon.

Treasury futures remained under pressure at the mid-session. The combination of higher equity prices and concerns about rising yields helped encourage selling overnight and throughout the morning.

The Dollar was trading mostly weaker against the major foreign currency markets. The September Euro is seeing a boost at the midsession due to increased demand for risk. In addition European confidence is up regarding the economy. This could be another sign that the economy is bottoming. A rise in unemployment, however, could be limiting gains. The September Canadian Dollar is attracting buyers today. Stronger equity prices and a rally in crude oil are helping to boost the price.

December Gold and September Silver are trading higher at the midsession. Technically both of these markets reached key retracement areas. Fundamentally, the weaker Dollar drew buyers back to the precious metals.

September Crude Oil is erasing some of the huge loss created yesterday following a bearish energy inventory report. This market reached oversold status while at the same time finding support at a 50% retracement zone. Today’s rally in the equity markets and increased demand for risk is providing additional support.

Published on  Thu, Jul 30 2009, 17:25 GMT