Dollar Power Pushes Gold And Stocks Down - Crude Lower As U.S. Data Renews Upturn

A slightly mixed but nevertheless positive uptick in durable orders helped propel the U.S. dollar higher today. Taking out aircraft as a component meant the index was up 1% in April. Aircraft is taken out because it is volatile, orders sometimes taking years to develop and then exploding onto the graph, skewing the durables measure.

The expectation was for a 0.3% rise versus the full 1% jump, (aircraft exluded).

This jump added more fuel to the fire that signals a rate increase is coming this year. That’s in case you didn’t get the message from Chairwoman of the Fed, Janet Yellen, who said the increase will absolutely come this year. The message also came from Vice-Chairman Stanley Fischer of the New York Fed.

"What we are thinking about is raising the interest rate from zero, which is an ultra expansionary monetary policy to a quarter percent, which is an extremely expansionary monetary policy. This will be a gradual process," he said.

Fischer also stated that the Federal Reserve board expects the interest rate will reach 3.25 to 4% by 2017-2018.

Adding further speculation as to the rate rise timing were housing prices, a data set that was released today as well.

The S&P/Case-Shiller's 20-City Composite gained 5 percent year-over-year in March, matching February's pace of appreciation.

The elation over the gains needs to be tempered, however. The higher the prices rise in the 20-city survey, obviously the less movement in the market we get. Moreover, new construction is lagging and, as older homes rise in value, younger buyers are getting shut out of the market.

Nevertheless, the housing survey pushed the dollar to fresh highs against the yen, reaching an 8-year high.

To touch on crude again, it should be noted, (which we predicted many times), as prices for West Texas Intermediate reached the $60 per barrel mark, shale and other expensive-oil producers that had gone dormant would start reviving. How long this will last is really contingent on the strength of the greenback.

An even stronger dollar is not out of the question.

"The USD downward correction is complete," Morgan Stanley said in a report. "A stronger dollar would only reinforce our near-term concerns for oil prices, especially Brent."

The stronger the dollar gets, the more likely it is that gold will go lower. Coincidentally, that will allow the yellow precious metal and crude to reconcile and again trade in tandem.

More data will tell us what the Fed will be thinking. We’re less than a week away from May labor stats. That should be interesting and might prove to be the final piece of the Fed’s puzzle. If it’s a soft number, we’re back to the waiting game..

Wishing you as always, good trading,