U.S. stocks finished higher despite a shift in sentiment toward less risky assets. For most of the day, the indices traded inside of a tight range on low volume. Traders kept a lid on gains and a floor on losses ahead of Friday’s U.S. Non-Farm Payrolls Report.
Demand for lower yielding assets helped give June Treasury Bonds a boost on Thursday. Trading was light and volume was low ahead of Friday’s U.S. jobs report. The Charts indicate the potential for a rally to118’17 if support can be established at 117’23.
The stronger Dollar helped pressure both April Gold and June Crude Gold failed to hold support at $1137.70 and broke. The next downside target is pegged at $1117.20.
June Crude Oil finished lower but volume was thin. The supply and demand fundamentals support a weaker market, but speculators continue to believe that stronger Euro will drive up demand for energy assets. A break under 80.15 could lead to an acceleration to the downside.
The U.S. Dollar was up sharply against all major currencies as investors flocked to safer assets following a poor housing report and concerns about Greece’s ability to shore up its budget deficit. More the most part, it was a quiet trade on Thursday as many big Forex players stood on the sidelines ahead of Friday’s U.S. Non-Farm Payrolls Report.
The March Euro was stable this morning after reports surfaced that investor demand was strong for the newly issued Greek 10-Year Bonds. This had the potential to be a major vote of confidence for Greece, but the euphoria was short-lived. The Euro began to fall apart after the European Central Bank left interest rates unchanged and ECB President Trichet said that growth in the Euro Zone would be uneven.
Traders fear that a slow down in the Euro Zone will hamper the ECB’s ability to raise interest rates. This will lead to deflation as most countries will be forced to cut spending. In addition, the Euro may lose the interest rate differential battle if other countries such as Canada and the United States begin to withdraw stimulus and hike their benchmark interest rates. This was most likely the primary reason behind Thursday’s selling pressure.
On Thursday, the Bank of England left interest rates unchanged along with its quantitative easing program. Some investors felt going into the report that the BoE would either expand or extend its asset buyback program. Nonetheless, the March British Pound sold-off mostly due to the weakness in the Euro. Other bearish factors pressuring the British Pound are the weak U.K. economy, political uncertainty and the wide budget deficit.
The March Japanese Yen finished lower despite increased demand for lower yielding assets. Technical factors may have contributed the most to Thursday’s loss after strong selling came in following a test of a major Fibonacci retracement level at 1.1356. In addition, the failure to accelerate to the upside after breaking a previous swing top at 1.1295 may have scared weaker longs out of the market. The strong close helped form a reversal top which could trigger a further decline to 1.1099 over the near term.
The March Swiss Franc finished sharply lower due to the weakness in the Euro. Traders once again feel that an intervention by the Swiss National Bank is imminent as it tries to protect its valuable export market.
Weaker gold, crude oil prices and oversold conditions helped pressure the March Canadian Dollar after almost a week long rally. Weak longs pared positions over the fear that the Bank of Canada may “verbally intervene at current levels. The BoC has in the past talked down the Canadian Dollar after a rapid rise over concerns that a strong currency would damage demand for Canadian exports.
