– From “The Brewer Blog”, by Brewer Investment Group –

The EUR USD plunged sharply lower on Thursday breaking through 1.26 and approaching dangerously close to the October 2008 bottom at 1.2329. There may be a technical bounce if this area is tested, but longer-term swing charts project a possible break to 1.14.

Early Thursday morning the Greek government passed its new cost cutting measures, making Greece eligible for the bailout money offered by the European Central Bank and the International Monetary Fund. The Euro continued to weaken however, as bearish traders focused their attention on similar fiscal problems developing in Spain and Portugal. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

The European Central Bank is expected to hold its benchmark interest rate steady at 1.00% this morning. In addition, look for it to issue a statement saying that rates will remain low for quite some time because of the fiscal problems in several Euro Zone nations and the risk of contagion.

Because so much money is being set aside to bailout Greece and additional funds may be needed to support the economies of Spain and Portugal, the ECB cannot afford at this point to begin raising interest rates without risking a possible double-dip recession.

With a few major nations raising rates or set to raise their benchmark rates in the near future and the ECB set to hold rates steady, traders will continue to sell the Euro because of the interest rate differential. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

The Dollar Index continued to soar on Tuesday as it touched its highest level since May 2009. After spending April trading on both sides of a monthly 50% level, the Index is now in a position to test the .618 price. Based on the major monthly range of 89.62 to 74.17, traders should look for the market to test 83.72 over the near-term. This market should continue to remain strong as long at 81.90 holds as support.

The Euro traded sharply lower on Tuesday, reaching a 12-month low at 1.2993. Although a bailout agreement was reached by the Greek government, the European Central Bank and the International Monetary Fund over the week-end, bearish traders have shifted their focus to the growing fiscal problems in Spain and Portugal. Hedge fund and large traders continue to press the short-side, but the technical bounce after briefly breaking the psychological level at 1.30 may be an indication that this currency is ripe for a short-covering rally. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

June Gold is stronger overnight buoyed by the weaker Dollar. On Thursday the market struggled throughout the trading session despite the weaker Dollar. Traders seemed to be adjusting their long positions now that it appears the demise of the Euro has been overstated. Earlier in the week, speculators drove up gold as they hedged against the possibility of a Euro collapse.

Gold traders may attempt to hold gold high in the recent trading range until the Greek resolution is reached. Furthermore, traders may be holding gold up because financial problems still linger in Spain, Portugal and Ireland. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

An easing of tensions regarding Greece and a different attitude toward the possibility of a hung parliament helped drive the GBP USD higher. Although election pools are indicating no clear winner emerging, investors are speculating that the U.K. may still be able to tackle its deficit problem without a majority. Speculators are supporting the market after building a case that the Liberal Democrats may be able to shift the power in case of a hung parliament. Many traders believe this party will take an aggressive approach toward balancing the budget. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

Stocks are trading higher overnight on the prospects of a global economic recovery following the release of better than expected European and Chinese manufacturing reports. The rally started overnight in Japan when the Nikkei average rose fueled by the weaker Yen. Talk that Japanese investors will seek better returns in foreign markets helped support the U.S. equity markets. News that China’s purchasing manager’s index was up more than expected also contributed to the rally.

The inability of U.S. stock markets to fall sharply after Wednesday’s worse than expected ADP jobs data is helping to lead to follow-through buying overnight. Traders bought early weakness yesterday indicating that the bulls are not ready to give up on this market despite its lofty price levels. The only thing holding back the June E-mini S&P 500 appears to be the lack of volume and participation by major stock players ahead of Friday’s U.S. Non-Farm Payrolls Report.

The indices are called higher this morning, but traders are not sure whether U.S. investors will chase this market higher. Five days of sideways trading has the major indices set up for a major move. The only thing missing at this time is a catalyst. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

The U.S. Dollar finished lower against all major currencies as trader demand for risk helped to pressure the Greenback. The weakness in the Dollar was attributed to optimism in the Euro Zone over the potential positive impact of the new European Union and International Monetary Fund bailout proposal for Greece. Throughout the day, the major theme was demand for risky assets as equities, gold and crude oil posted strong gains, supporting the commodity-linked currencies.

The EUR USD closed up for the second consecutive day as weak shorts continued to cover their positions in response to last week’s EU/IMF Greece bailout agreement. The new plan is designed to help Greece should it be unable to find financing in the capital markets. The proposal amounts to a pledge to help Greece out of the Euro Region’s biggest deficit if it runs out of traditional financing options.

On Monday, Greece issued new 7-year financing priced in Euros. This $7 billion offering was the first test as to how investors perceive the viability of the aforementioned bailout plan. According to reports, the bond issue went off without a hitch although the Greek government paid about a 3.10 basis point premium to complete the sale. The relative ease of the bond issue helped relax tensions allowing the Euro to remain firm throughout the day. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

Today, Fed Chairman Bernanke will continue his testimony before the House Financial Services Committee. Yesterday he said the U.S. economic recovery has been “nascent” and requires low interest rates to help it sustain growth. He also said that low employment and subdued inflation allow the FOMC to keep downside pressure on interest rates.

Today’s January Durable Goods Report came out better than expected, but that wasn’t enough to help the equities. Stock indices are down on the news that initial claims rose by 22,000 to 496,000. Traders had been looking for a decrease.

U.S. stock markets are under pressure overnight because of another shift in risk sentiment. Sovereign debt issues in Greece are putting fear into traders triggering liquidation of risky asset position. It’s highly doubtful that Bernanke will say anything today which can turn this market around so traders should look for downside pressure throughout the day. A break through 1090.00 in the March E-mini S&P 500 could trigger a further decline to 1084.50. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

The U.S. Dollar traded mixed in a tight and narrow range. The trade weighted Dollar Index finished slightly lower after confirming last Friday’s closing price reversal top.

The lack of major U.S. economic reports on Monday helped hold the Forex markets in a tight range as investors awaited testimony later in the week from Fed Chairman Bernanke. His comments should move the markets especially if they come after a few days of range bound, directionless trading. His testimony before the House Financial Services Committee is expected to be about employment growth prospects and whether fiscal stimulus is needed.

Traders will be looking for Bernanke to give them clues about the timing of future U.S. interest rate hikes. In addition, he may be asked to explain why he hiked the discount rate last week.

The Euro finished lower as investor confidence evaporated following a failure by the European Union to reach an agreement with Greece regarding its fiscal responsibility. Depending which side you talk to, the EU and Greece are either very close or far apart. [entire post]

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– From “The Brewer Blog”, by Brewer Investment Group –

U.S. stock indices sold off after Thursday’s hike in the Fed discount rate. The immediate reaction by traders was to sell because many traders thought this move served as a sign that the Fed would begin tightening its monetary policy. The Fed, however, is emphasizing that this move is not a deviation from its policy statement that interest rates will remain low for an “extended period”. This news is helping to stabilize the stock indices, leading to a shortcovering rally overnight.

The March E-mini S&P 500 is still negative, but trading well off of its low. The current shortcovering rally indicates that yesterday’s late session break may have been overdone. Don’t be surprised if this market tries to regain the psychological barrier at 1100.00.

March Treasury Bonds and Notes sold off sharply after the Fed hiked the discount rate, but in a case of sell the rumor, buy the fact, they both turned positive overnight. Oversold conditions are most likely contributing to the rally. In addition, bond traders are buying into the Fed’s comments that the discount rate hike is not a sign that the monetary policy is tightening. [entire post]

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