Weaker Dollar Supporting Gold

By: Brewer Futures Group | Mon, Oct 5, 2009
Print Email

Look for today's U.S. ISM Non-Manufacturing Index to move the markets today. Traders are looking for a rise from 48.4 in August to 50 in September. A number greater than 50 should trigger increased demand for higher yielding assets.

Equity markets are trading a little better overnight. The combination of oversold conditions along with expectations of a better ISM number is helping to trigger an early short-covering rally.

Traders are also bracing for the start of earnings seasons on Wednesday. This is going to be the key to driving the stock markets to the next level. During the first quarter the rally was triggered by cheap stocks and bargain hunting. The second quarter rally was fueled by better than expected earnings because companies cut expenses. Investors want to see evidence of more earnings growth during the third quarter, but they must be driven by increased revenues.

Treasury markets are trading higher overnight, but could turn south quickly if the ISM number comes out better than expected. Last Friday's closing price reversal top in the December Treasury Bonds indicates that the rally may be finished at least temporarily.

The U.S. Dollar weakened overnight following the release of the G-7 statement. Many traders had been looking for a comment supporting the Dollar, but instead the G-7 members said "excess volatility and disorderly movements in exchange rates have advance implications for economic and financial stability."

A slight boost in demand for higher yielding assets is helping to boost the December Euro. The December Canadian is trading higher as investors anticipate a recovery in equity markets following last Friday's sell-off. Firmer gold is also helping to support the Canadian Dollar. Weak oil prices are helping to limit gains.

The December British Pound and December Japanese Yen are trading flat to better. Oversold technical conditions continue to provide light support for the British Pound. The Japanese Yen is trading a little weaker, but technical factors could drive the Dollar higher versus the Yen. A trade through 1.1065 will confirm last week's closing price reversal top and could trigger a break to 1.0783 over the short-run.

December Gold did not follow the Dollar last week. At times it rallied along with the Dollar. Today, however, the weaker Dollar is supporting gold. $985.00 is now solid support with 1010.00 the new resistance. A better ISM number could weaken the Dollar and rally gold as traders will increase demand for higher risk commodities.

Energy markets are trading lower in the pre-market. Look for a short-covering rally if the ISM Report comes out better than expected.



Brewer Futures Group

Author: Brewer Futures Group


Contact us at:
Local: 312-896-3930
Toll Free: 1-800-971-2440

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Copyright © 2009-2010 Brewer Futures Group

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com