Wednesday, March 10, 2010

without consolidation similar to that seen in the EUR. Just as the AUD differs on the weekly, it does on the daily while it attempts to make new highs. China’s exports rose more than forecasted in February. This is the third straight month these figures have surprised to the upside; increasing pressure on policy makes to reduce stimulus aid. This rapid increase in exports is also expected to add to inflationary pressures. Government figures released tomorrow will give more guidance on this issue. It is worth noting that expectations show inflationary pressure within China, will be around 16 month highs. Crude trades higher and Asian markets are lower on this news, as market participants fear a central bank tightening. A political issue that we believe will impact financial markets quite significantly in the near future, that being healthcare reform, is not expected to meet its March 18 th deadline. The deadline was set by Robert Gibbs, White House Spokesman, those in favor of reform claim the deadline is irrelevant and the plan can still be passed. We shall see only with time. Dubai World meet with creditors earlier this week and proposed a debt restructuring that would allow debtors to receive their principal investments without a haircut. This is an optimistic element to the global recovery as many feared months ago, that this entity would collapse. Romano Prodi, the European Commission President, claims that the worst of Greece’s financial crisis is over and there will not be similar issues arising in other European Nations. I am inclined to remain suspicious as small spending cuts do not fix large budget deficits.

The Shelton Letter
James W. Shelton m (859) 486-0100

A rather interesting development occurs in the currency market, as our favorite pairs, the EUR, AUD, and GBP (against US dollars), trade in what one could deem separate directions. Don’t get me wrong, this parity remains intact on the behalf of the weekly timeframe, especially between the EUR and GBP. (Charts Above) The AUD, who attempted to make impulse waves lower like the EUR and GBP, failed, and now gives reason to believe it will continue higher. The unusual price action I am currently referring to can be seen best on the daily charts. One analyzing the EUR would see continued range trade that started with the lows of February 18 th; these lows will be broken the next time they are approached. If you were to take a look at the GBP, one would be looking at impulse waves to the downside
James W. Shelton