The U.S. Dollar is slipping a bit against the Euro overnight as it continued to trade inside its almost 60 day range. Although it has been lingering at the top of the range, buyers have been reluctant to buy or sell heavily at this high level. The technical momentum hasn’t been there either to drive it through the high for the year at 1.4327. Buyer have backed away on each approach because no one seems to want to print the high tick without solid evidence the Euro Zone is clearly on the road to recovery.
The September British Pound is trading better this morning which is probably profit-taking ahead of tomorrow’s Second Quarter Preliminary GDP. The Pound has been feeling downside pressure most of the week on the thought that the economy is still weakening and that the U.K. doesn’t have the room to expand the budget.
The Dollar is stronger versus the Japanese Yen. The overnight strength in the equity markets is pressuring the lower yielding Yen in favor of higher risk investments.
The mixed Dollar is causing mixed results in the August Gold. This market has been holding its own this week while the Dollar weakened despite comments from Fed Chairman Bernanke that interest rates would remain low and inflation under control.
Better earnings from Ford Motors are helping to boost the September E-mini S&P 500 and the Dow this morning, but the big story has been the gains in the September E-mini Nasdaq. This market is in the throngs of an 11-day rally and is showing no signs of a let up. The only concern about current rally is the light volume. Money is being invested by the mutual funds but new money isn’t flowing that fast into these same funds. It appears that investors are still on the sidelines.
The markets will continue to be sensitive to earnings reports the rest of the week. Investors should not that a lot of these companies reporting better than expected earnings are doing so because they have slashed expenses. At some time in the future, the market is going to demand that revenues start to increase.
The first leg of this current rally was probably a relief rally. This current rally is being triggered by cost cutting. The next leg will have to be driven by increased revenues. This may cause the market to retreat if the majority of stocks do not show better revenues. Those that do will rise to the top but may not be enough to boost the indices.
December Wheat is trading a little better this morning following yesterday’s sharp sell-off. Besides improving crop conditions and the potential for a bigger than estimated crop, traders now have to worry about the regulators watching for excessive speculation. If trading curbs are implemented, both soybeans and corn may join wheat in the down slide.
