Monday, 28 Mar 2011

Dollar Strengthens While Commodities Weaken Before Housing Data

During the European trading session the dollar continued to book gains and commodities declined. The lone exception was the Aussie dollar which hit a new high versus the greenback. This morning's trading lacked economic data as markets were still being influenced by the weekend's events in Europe and the Middle East.

The euro was down on the day, booking declines versus both the dollar and the Swiss franc following this weekend's elections in Germany and France. Both ruling parties of Angela Merkel and Nicolas Sarkozy lost in their respective regional elections. This helped to weaken the euro as a loss of political clout in their nations will not strengthen their hand in EU negations to end the European debt crisis.

The EUR/USD was trading lower on the day at 1.4034, down from the weekly opening price of 1.4053. Yesterday's overnight low of 1.4020, a level that coincides with the 20-day moving average will serve as the initial support level. A breach below this level may target the 38.2% Fib retracement from the February to March move.

The Aussie dollar hit a new all-time high today at 1.0313 as the commodity boom boosts growth rates expectations of further interest rate increased by the RBA may help to strengthen the currency further.

Commodities were down following a stronger dollar. Spot crude oil was lower at $104.00 from $105.05 with support at $102 while gold was off at $1,413 from $1,425 with support at $1,393.

This afternoon traders will be focusing in US pending home sales. Expectations are not high as most economists forecast a decline of -0.5%. Last month's pending home sales fell by -2.8%. A surprise to the upside would feed into dollar strength and extend today's commodity sell off.