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A 15 Month Low for the Dollar, Stocks Climb to New Highs
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Wall Street presented a phenomenal session yesterday, closing with gains of approximately 2%. Even though some were skeptic about the intraday rally, due to recent economic data, investors pushed it aside, sending the major indices to new highs. The Dow Jones Industrial Average locked in further gains and closed at a 52 week high.
Yesterday’s session was influenced mainly by various statements and news of acquisitions by major leading companies. Google announced that it intends to expand its digital advertising empire to mobile phones by acquiring AdMob, a mobile advertising start-up. According to the New York Times, AdMob is one of the top sellers of banner ads on iPhone applications and web pages that can be retrieved from mobile phones.
The G20 also had an influence on the session, stating that they vote to leave interest rates at current low levels to further aid the wounded global economy. According to a released statement, G20 officials believe that the global economy is now starting to heal, but will require further government help. Officials also expressed their concerns about the employment situation. One must note that recent data from the U.S showed that unemployment had reached a whopping 10.2%.
From a technical point of view stocks climbed higher with the Dow Jones leading the way. The Index completed its prior low and climbed above its prior high. The Nasdaq gapped higher at the start of the session and is now trading just under its prior high.
Dow Jones Daily Chart
The Dollar Sinks to a new Low but finds SupportOn the Forex market the Dollar index gapped down at the start of the trading day as investors sold the greenback and rushed back into riskier currency pairs. The G20 statement also had an effect on the trading day, encouraging traders that further government efforts will help the economy in the long run.
The Dollar index dropped to its prior low, before finding support during the session. To date the index is trading on support of 75 points. From a technical point of view the current level could continue to act as a strong support level, especially as it bounced off it towards the end of 2007.
Dollar Index - Weekly Chart
On individual pairs the EUR/USD and the GBP/USD both increased against the U.S Dollar. The GBP/USD took center stage, breaking above its recent resistance level. One must note that even though further Dollar weakness could send this pair to higher ground, the currency’s previous false break should be taken into consideration. When taking a glance at the chart below one can see that the GBP/USD is now starting to complete its cup and handle pattern but still has to overcome its prior high.
Even though yesterday’s session was broad-based, as investors sold off the Dollar, Gordon Brown continued to spook investors by proposing new financial regulatory laws. Some are now concerned that the new proposal, which is made up of taxes and premium costs, will put a major strain on the economic recovery, something that could weigh on stocks and provide Dollar strength.
On the fundamental front, England showed that their RICS House Price Balance increased to 34%, indicating that their housing situation had slightly improved. Furthermore the BRC Retails Sales Monitor figure increased to 3.8% from 2.8%. Apart from the surprisingly good data from the U.K, Germany also showed an increase in industrial production to 2.7%, while Canada’ housing starts jumped by 157k compared to a 155k figure.
Economic Data to Watch Out ForLooking forward, Europe will take center stage today as Germany AND France are both expected to release production figures. The event of the day will be Germany’s ZEW Economic Sentiment, which is expected to show an improvement, compared to last month’s -5.6%.
To view the full economic calendar click here.
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