Daily Market Summary: Is the dollar reversal in sight?

Fundamentals still remain the key drivers of activities on monday as equities in the US and America saw a surge on monday. European stocks surged on the German Chancellor's victory in the weekend elections in Germany. The DAX had edged up 2.78% by the end of trading while the CAC and the FTSE100 edged up 2.3% and 1.7% respectively. In the US, news of Xerox acquiring ACS buoyed risk sentiments as the DOW, Nasdaq and S&P 500 finished up by 1.28%, 1.9%, and 1.78% respectively. As traders look to market moving fundamentals coming later in the week, technical analysis point to a possible dollar reversal. The euro failed to break through resistance at 1.4675. The graph below shows some form of head and shoulder pattern formed with the bearish trend emerging on the eur/usd 1 hour chart.


Short term resistance might be at 1.4675 while the second short-term resistance is at 1.4725.

Another sign of a possible change in risk sentiments is the fact that the volatility index (VIX) is at a multi-period low and when compared against the S&P 500, there are clear market correction signals on the S&P 500 index.



Traders are keeping their eyes on the volatility index which is at a multi-year low which signifies a possible correction in equities and a collapse of risk appetite which is good news for the dollar.

Traders expect further decline in the sterling as they look to GDP figures due in hours which is expected to show a year-on-year drop of 5.8% in the size of the british economy. For most of the day the sterling traded sideways.

As the dollar comes under more pressure as a global reserve currency, long-term US treasury bonds increased (yield dropped) as investors appear to be moving into US safe haven assets. Eyes are also on commodities especially on oil following geographical tensions that stirred between the US and its allies on one hand and Iran on the other over Iran's suspected secret nuclear bunker in Tehran.

So far, its still very much about the green-back. Happy trading!!!

Daily Market Summary: Its all about the green back

As the G20 meeting gets underway in the Pittsburgh, currency traders are looking out for more tips to signal a dollar pullback. Global equities are said to be overvalued and over the last 24 hours, we have seen the DJIA, FTSE 100, S&P 500 as well as the Nasdaq index pare some of the gains they've mounted over the weeks. As issues of financial regulation and bankers' compensation top the agenda at the G20 meeting, analysts are looking out for any sign of a probable exit strategy from the various stimulus programmes despite regulators in US and UK warning of a slow and uncertain recovery. Contrary to major USD, the sterling got pounded to a multi month low following dovish comments from the Governor of the Bank of England. Here is an
hourly chart of the GBP/USD pair:



The sterling is eyeing the 1.6 support mark as RSI on a 4 hour chart shows the pair in oversold zone. Further downside is expected as recovery in the UK is expected to be slow but a near-term slide will ride on dollar strength. Mid-week reports from the BoE warns of a slow recovery but analysts see an open window for the BoE to expand its asset repurchase programme to further support the recovery process.

In the near-term, the Euro appears to have lost its upside steam. Breaking through the bullish trend line on a thirty minutes chart during New York trading hours point to a possible reversal. The dollar gained against the loonie as investors dumped equities in apparent loss of risk appetite ahead of G20 summit.