The U.S. dollar index has broken through the major 75.00 support zone over the past few sessions, which puts the 74.00 target area in play. The lower U.S. dollar price action shown against the majors in trade this week is driven by a higher stock market and, to some degree, commodity trading that seems to be more concerned with long-gold in response to a weaker dollar than it does as a fear of inflation.

There is no real evidence of heavy inflationary pressure to match the tone set by those calling for inflation-backed gold trades. Since March 2009 the gold market has added around 20%, compared to the 50-60% moves that equities have made. If anything, the natural balance of equities trading lower as gold trades higher would be expected if the inflationary based outlook was in play.

Overall, the currency market saw a flat Asian session, but around the European opening bell, the dollar index started declining at a strong pace against the major pairs. However, this sell-off was somehow short-lived, since at market came to a standstill and had some attempts to turn around during the BoE Inflation Report. Looking ahead, the U.S. session will be influenced by the U.S. Veterans’ day and by the Canadian’s Remembrance Day.

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Equity Futures: Dow +65.00. S&P +7.60. NASDAQ +10.00. Japanese Nikkei +90.00. German Dax +20.00.

European Trade: European markets saw strong positive momentum from the opening bell, with the major indexes surging approximately 1%. The same positive momentum also influenced the S&P futures, helping the index reach a new yearly high, after it broke above the 1100.00 area.

In an article posted recently, Three Ways To Play The Black Stuff, the choices in trading the oil market were covered, and ideas put forward as to how best to take advantage of leverage. The issue of properly funded accounts, in regard to capitalization that allows any potential trade to be taken, is an important point to understand in why these articles were written. Most traders are hedging their longer-term portfolios, and as such do not always have well enough capitalized trading accounts to hold near-term trades that turn into longer-term investments.

We hear the comment, "I cannot trade contract "X", it's too expensive," and while that might be true in its purest form, there is always a work-around in the global traded market arena. As global traders, we need to always be aware that there are other markets that have the ability to influence our forex, equity, and commodity positions. We should be always looking to take advantage of them, because that is what the new market-place was built for; maximizing both time and leverage.

Mercantilism is alive and well in China this article reveals. China is now the world’s third largest economy although well down the leader board in per capita terms. Chinese monthly economic figures for exports, industrial production, and investment will be reported today.

A massive three-dimensional policy stimulus from low interest rates, deficit fiscal spending and intervention to maintain a highly undervalued yuan has the Chinese economy revving back to pre-global downturn speeds in a hurry. Re-pegged against the dollar since July 2008 at roughly 6.83, the yuan has followed the greenback southward in 2009 against almost all other world currencies. The last thing the global adjustment process needs is for the biggest surplus economy to have a depreciating currency.

The United States is overly indebted at all levels, but the concern in this article focuses on households. Families think of savings as any change in wealth, including income that is not spent immediately but also capital appreciation of previously accumulated assets. An economist’s notion of savings is deferred income.

Personal income not spent on consumption is saved. In their aggregate, savings influence what is available domestically for business investment, and the size of the imbalance between savings and investment determines the directionality of capital flows with other countries and whether a country is in chronic current account deficit or surplus.

The Dow Jones index recently hit 13-month highs, the dollar index reached 15-month lows, gold is trading at an all time high, but the Treasury market does not fit in this picture very well at all.

The Treasury market is used by investors in times of uncertainty, as investors take short positions in the equity markets and invest in the (relative) safety of the bond and Treasury market. This was clearly seen during the credit crisis, when the global stock markets were tumbling at an incredible pace, and at the same time, the Treasury market saw strong demand.

There were references to quantative easing at the G-20 meeting in Scotland this weekend, and the speed that the developed economies can be taken off the drip-feed of central bank liquidity.

"It is too early to start to lean against recovery," said U.S. Treasury Secretary Tim Geithner in his speech. "The classic mistake in past crises was to put on the brakes too quickly."

Forex Trader Note: Near-term moves in Asian trading have not managed to get the four-hour global market momentum reads out of neutral mode. Most currencies are overbought against the Usd, on low momentum. Forex pairs will now require a boost from oil and S&P trade to hold the recent moves that came on thin order flows overnight.

The near-term technical reads show a market that is selling dollars on light volume. We will look for a reversal on euro, cable, and swissy before things can move too much further. Aussie and cad have not reacted to gold moving through $1100, and oil has not moved to back the short-dollar play. Neutral momentum and an oversold dollar, on a Monday, with not all major pairs aligned, is not a reliable read especially when Dax and S&P futures are not moving too far.

December Light Sweet Crude is holding a bullish formation, and the daily chart reveals a potential $17 long move, if the global market stars align, says TheLFB's Chris Lewis. There is substantial support around the $77 area, and that is where a bullish flag has formed.

The ETF that covers the crude technical set-up, and offers leverage to play the move with no cost of carry (or delivery threats) is USO, or United States Oil Fund. The ETF links the same move, and allows a more affordable way of taking the oil trade.

Overall, the overnight session proved to be very slow in the currency market, with the major pairs moving on thin momentum. The same trading behavior was seen during the prior day of trading, when the currency market on Thursday barely moved. The chances are that the market will start to trend once again around the NFP payroll numbers are released, which, historically create strong volatility.

4 Hour Chart: Mixed. Main price points: 74.95, and 76.82. Looking for: Move higher

Currency Pair Overview:

Slow Forex Raises Interest Rate Questions

Overall, despite the report calendar being loaded with top-tier reports, the currency market has failed to move anywhere of importance in trade on Thursday. The pound was the only pair that had a daily range bigger than 100 pips, while the cad and the swissy were at the other end of rope, with a daily range of approximately 60 pips. The market’s inability to move is quite strange, since both the ECB and the BoE were scheduled today, and both offered plenty of opportunities for the market to rally. This is one of the first signs we have had that global growth may be starting to be gaining enough momentum, possibly, to be able to wean the dollar off the S&P drip-fee, and onto the interest-rate differential diet.

On Wednesday, after the FOMC interest rate statement Wall Street equity traders dropped the 1% gains, that had taken 23 hours of futures trade on the S&P to build, in a 15 minute elevator ride lower.

Traders absorbed the BOE and ECB interest rate releases on Thursday, neither of which impacted the trading pattern seen earlier, as the U.K. and European central banks maintained rates at historically low levels.

Global Market Wrap:

Earnings and Labor - A Bullish Delight

Equity Futures: Dow +105.00. S&P +7.80. NASDAQ +11.50. Japan Nikkei +40.00. German Dax +10.00

At the press conference following the ECB's monthly rate decision press, at which it left its key interest rate unchanged at 1%, central bank President Jean-Claude Trichet issued a statement of two halves, addressing monetary and fiscal policy. On the monetary front, the statement was little changed from his more recent monthly missives. In summary, the euro-area and global economy are recovering at a sluggish pace and the outlook is rather fragile.

The bank's governing council did, however, make its first reference to a possible exit strategy from current emergency policy, saying that, "Looking ahead... not all of our liquidity measures will be needed to the same extent as in the past". This echoes the statement made by Bundesbank President Axel Weber a week ago, when he said that the ECB's 12-month refinancing program -- the main liquidity tool used by the bank during the credit crisis -- might not be available next year. The 12-month refinancing program was used by banks to take huge loans from the ECB, worth billions in some cases, at rates near 1%, with a 12-month maturity.

Overall, the dollar index gained a few basis points during the overnight session, but the movement was slow as the market heads towards the BoE and the ECB interest rate decisions. In Wednesday trade, the major pairs managed to reach important price point levels, but the sell-off seen during the late U.S. equity session forced the major pairs lower once again. Over the last few days of trading, the market had a calendar that was loaded with important news reports, something that was reflected in the foreign exchange’s momentum and trading volumes.

Equity Futures: Dow -9.00. S&P -1.30. NASDAQ -5.75. Japanese Nikkei -2.00. German Dax -15.00.

European Trade: The regional European indexes lost an average 0.50% in Thursday morning trade, reflecting the market’s uncertainty ahead of important interest rate decisions, coming from the Bank of England and from the European Central Bank. In addition, the sell-off seen during the last few minutes of the U.S. cash session had a negative contribution to the global equity markets, sending both Asian and European shares lower.

Gold has reached new highs over the past 24 hours, aided by the Indian Government’s decision to buy 200 tonnes of the International Monetary Fund’s gold at $6.7 billion, making it the 10th biggest bullion holder in the world. The move also helped India diversify its reserves in a way that spreads its risk, which is over-weight with overseas currency.

Of $285 billion in Reserve, foreign currency assets account for more than 90%, or $268.3 billion, followed by gold at $10.3 billion, IMF’s special drawing rights at $5.2 billion and a reserve position in the IMF of $1.59 billion, mainly in the form of U.S. Treasury bonds.

Overall, the Asian session was flat, but the major pairs started heading up during the early European session. Following the greenback’s decline throughout the European trading hours, the dollar index is preparing to break below the 76.00 area, which has been the main support level over the last six days of trading. The dollar’s sell-off comes on positive equity and commodity markets. Ahead, the market prepares for the Fed meeting, at 14:15 EST, which is likely to have a strong influence in the forex market.

Equity Futures: Dow +64.00. S&P +7.00. NASDAQ +6.25. Japanese Nikkei +20.00. German Dax +3.00.

European Trade: European shares found positive momentum near the opening bell, which helped the regional equity indexes recover some of the declines seen throughout Tuesday trade. Interestingly, the same sectors that dragged the market lower during the prior day of trading, carmakers, basic materials and banks, are the ones to post the biggest gains in Thursday trade.