25 March 2008 - 23:32Market Commentary 3/25/08

Well now that Easter Sunday and Monday are over it is back to business as usual. Which if your trading currency means shorting the dollar. Even though a stronger than expected existing homes sales report was released the dollar has not been able to sustain a rally. This is proof of my earlier assertion that the dollar’s rally last week was just a knee jerk reaction. The rise in existing home sales is a good sign, probably a sign that those desperate to sell at a lose to avoid a foreclosure are finding plenty of investors desperate to get out of the shaky stock market which at this point is being propped up by the fed. Speaking of the stock market I think it’s rally has fizzled out and that USD/JPY is destined to stay below 100. It finds support at around 96 where it also hung out for a while during the Asian currency crisis in the mid nineties. Gold bugs are in their glory after taking many years of razzing in stride and are on their way to the promised land. No doubt many have already cashed in and demand is expected to moderate now that the Indian wedding season is over. None the less gold is a buy and I have rode it up form $910 this week and plan to continue to hold it at least until $1,000 is tested again. Considering the fundamentals of the U.S. economy I can see no reason why it shouldn’t. The Pound has rallied as I expected and right now rests above key Fibonacci support at $2.0036. The Euro looks like it is poised to at least attempt the double top here against the dollar if not set new all time highs. The German IFO tomorrow morning should give the market direction and the path of least resistance is up. The even bigger news later on will be the crucial durable goods report at 8:30 am and if the news is bad once again this month it could really break the back of the dollar. Following that key report up will be new home sales report which is expected to show less new homes being purchased than the month prior. This would not surprise me since it makes more sense to buy a used home from a “motivated seller” at a “deep discount” than to pay top dollar for a new one.