Good morning. My trading screen is blinking green for literally all assets (ex bonds)...sometimes you can just feel capital flowing back into the markets. The underlying force of this reflation is of course the dollar. One cannot ignore the major interest rate differences between the US (2.25% and going DOWN), Europe (4%), and Japan (0.5%) - the dollar is the new carry currency.
Technically, euro and gold are poised to test major resistance levels. The Euro has strong resistance at $1.590, while the 50-day moving average ($945/oz) provides strong resistance for gold. Many market commentators have been calling for a rebound in the dollar (rebound in US credit market), so going long the Euro and gold seems to be a nice contrarian trade.
According to this morning's inflation data, price levels are rising faster in Europe relative to the US (bullish for Euro). Bullish crude data could provide more fuel to Euro and gold.
Short term targets:
Gold ($960/oz)
Euro ($1.615)
Wednesday, April 16, 2008
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