American shares, oil and the euro fell Monday, with the retreat sending the blue-chip index to its lowest level in more than a month, on signals Europe’s debt trouble could be worsening. The Dow Jones Industrial Average closed down 130.78 points at 12,381.26, after falling as much as 180 points. It was the lowest close since April 19. Monday’s slide had the S&P 500 off 15.90 points at 1,317.37, while the Nasdaq Composite Index fell 44.42 points at 2,758.90. U.S. economic data were sparse, but only served to further sour sentiment, with the Federal Reserve Bank of Chicago’s index of economic activity in April falling to its lowest reading since August.
The dollar rose against the euro, which bought $1.4052 and has fallen more than 5% against the greenback this month. Crude futures for July delivery declined $2.40 to finish at $97.70 a barrel on the New York Mercantile Exchange. Commodity prices continue to ‘re-price’ the end of the dollar, which has been ever so slowly making a comeback thanks to the near-death experiences of the European Union as investors have exited positions that bet the dollar would fall, they have unwound the flip side of that trade — bullish bets on rising oil futures and stocks. As the dollar has rallied, stocks have fallen 3% to 4% this month, and oil has dropped more than 14%.
Setting off the day’s action, ratings company Standard & Poor’s said late Friday that Italy was at risk of having its debt rating reduced if it could not curb its borrowing and increase economic growth.
The review added to worries that European government-debt problems were getting worse, and that leaders were far from agreement in trying to solve them. Weighing on stocks Friday, Fitch Ratings cut its credit ratings for Greece. Over the weekend, regional elections in Spain signalled a public backlash over planned austerity measures.
Today’s Important Economic Announcements (GMT)
8:00 AM EUR German Ifo Business Climate
8:30 AM GBP Public Sector Net Borrowing
9:00 AM EUR Industrial New Orders m/m
10:00 AM GBP CBI Realized Sales
11:00 AM GBP MPC Member Fisher Speaks
1:00 PM EUR Belgium NBB Business Climate
1:50 PM USD FOMC Member Plosser Speaks
2:00 PM USD New Home Sales
11:50 PM JPY Trade Balance
Crude Oil
Oil futures pared some of their Monday losses during electronic trading on Tuesday, helped by China oil-demand data and a Goldman Sachs upgrade, though a gain in the U.S. dollar helped limit the rebound.
Oil futures edged up 13 cents to trade at $97.86 a barrel in electronic trading. Commodity rallies are very vulnerable right now, as in addition to slowing growth prospects, the easy ‘ballast’ that the weaker dollar has been providing is no longer readily available either. These changes reflect a tightening supply situation against a backdrop of ongoing solid demand, with the ongoing loss of Libyan crude and disappointing non-OPEC supply implying that OPEC spare capacity will be effectively exhausted by early 2012. For today, we are expecting crude oil to head towards the support price of $96.50
Stop Loss: 99.08
Take Profit: 96.50
EUR/USD
Worry on European sovereign debt crisis intensifies once again. S&P cut its outlook on Italian government debt to negative from stable over the weekend, following Fitch Ratings downgraded Greek sovereign debt by three notches to B+ from BB+ Friday. There are concerns on contagion and markets’ eyes are on whether Belgium would be the next to be downgraded. Also, markets remember that ECB Trichet warned that soft restructured Greek debts will no longer be accepted as collateral and there are much uncertainties ahead if Greece does undergo such restructuring. Economic data from Eurozone provided little help to the common currency neither. On the upside, break of 1.4149 resistance is needed to signal short term bottoming. Otherwise, outlook will remain bearish even in case of recovery.
Stop Loss: 1.4149
Take Profit: 1.3971
AUD/USD
The potential for steeper wave of price drops can be identified on the pair’s daily chart. AUD/USD movement, since the beginning of the month, has created the BEARISH TRIANGLE pattern that reveals an opportunity for a short position in the event that the triangle breaks in a downward direction. In the meantime, the lower side of the pattern is succeeding in keeping the pair’s head above the water. However, a daily closure on any day of the week, below the level of 1.0545 will signal the start of a move downwards. The downwards break is expected to develop momentum and accelerate to the psychological and significant support level of 1.0000. We encourage our traders to be bearish with caution.
Stop Loss: 1.0578
Take Profit: 1.0478
Published by www.SolidityBrokers.com
