Home > Uncategorized > Weekly Overview 2009/12/21: It Still Pays to Watch Whether a Carry Trade Crisis is Brewing on the Back of Weak European News

Weekly Overview 2009/12/21: It Still Pays to Watch Whether a Carry Trade Crisis is Brewing on the Back of Weak European News

▪ The US Dollar Index remains commensurately stronger than any of weakness in stock markets. While that US dollar strength is driven by different factors against the various other currencies, strength against Europe is a major key right now. And that also raises the question of whether the strength in various asset classes can be maintained if the real-world economic activity fails to catch up with the gains in asset prices?

▪ As noted previous, key lower interim and major supports are DJIA 10,300-350 area  and 10,100-10,000 range, with the equivalent S&P 500 levels in the 1,090-85 area and down at 1,070-65, respectively.  Beyond that, other multi-asset class decisions remain consistent with the influence of better US economic data, yet with weak indications elsewhere. One of the key indications will be whether recently very weak government bond markets will see March T-note hold onto to late week gains back into the 117-24/-16 area, and even more critical whether March Gilt continues to hold back above the major 115.35 lead contract low (from back in July.)

▪  From a technical perspective, the US Dollar Index has experienced a .7700 UP Break from its intermediate-term DOWN channel (from the .8150 area high of the mid-June bounce.)  Next interim resistance is not until .7950, with extended resistances beginning back up to that .8150 area high of the mid-June bounce.

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