News in 60 Seconds

Biggest % gainers: AUD/CHF up 1.62%, AUD/USD, NZD/USD, EUR/USD on a rise in commodites which is pushing down the dollar.

Biggest % losers: USD/CAD down 1.19%, USD/JPY on CAD strength due to rise in oil and USD weakness.

Oil $81.47 up 2.74% today.
Gold $1.121 up $26 today.

In 2010, if we get "stagflation" (low growth/high inflation) like I think...it could be a choppy situation for the dollar. This type of environment could cause stocks to fall and commodities to rise. Formerly when both stocks & commodities rose...it was a "no brainer" to sell the dollar. However, if we get a down stock market or even a stock market that essentially goes nowhere, and rising commodities then the dollar will be in for a ton of volatility as its thrown each way.

One way to avoid that "dollar confusion" would be to focus on the currency crosses that don't involve the dollar.

In the last reported month...we got our first year over year inflationary readings in all of the major countries except Switzerland and Japan. Formerly, MOST countries were in a deflationary spiral and only Australia, New Zealand and the U.K. had inflation. I expect the high inflationary mode to continue which will make it tough on corporate profits and consumer spending. This is why I see a sluggish stock market in 2010.

Also, watch the "January Effect" in the stock market. This is a phenomenon that has only been wrong 5 times in 60 years.

What is it? If the stock market is up overall after the first 5 trading days of the year, then it's likely that the month will end on a positive note. If the month of January ends positively, then it's likely that the year will end in positive territory as well. The opposite is also true.

So watch first first 5 days and how the entire month of January does and it may tell you a lot about how the stock market may perform.

Sean Hyman
DailyFX Forum Moderator