Currencies Taking The Long View

  • May 15, 2001
  • Marc Dupee

European currency futures gapped higher and are
rallying on their highs of the session on the combination of weak economic data
out from the US and the prospect that the Fed may conclude or wind down its
program of interest rate cuts today after its FOMC meeting. Tony Crescenzi
pointed out in his commentary
last night on TradingMarkets that the “The Fed must shift gears somehow,”
implying that it will take its foot off the rate-cutting accelerator either by
cutting rates just 25 basis points or by removing its loosening bias (moving,
perhaps, to neutral). 

Currency traders are taking a longer-term view and
weighing the likely effect an end to the interest rate cutting cycle will have
on economies and inflation and marking down the dollar. Swiss francs
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are making good on their Turtle Soup Plus One Buy
 setup, and
euro FX futures
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rallying as well.  

June gold
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and Pullback From Highs
lists, sold off this morning but has made back more than half of its losses.
(Note the lower dollar). Look for a move today or tomorrow above the high of the
low-bar pullback. 

While copper
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leave a classical Turtle Soup Plus One buy signal yesterday (the previous low
occurred April 6,  more than 20 days ago), the contract is pulling back
from contract lows. Look for a continuation of the rebound off lows in a swing
trade. 

Silver
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scratched out a new contract low in today’s session and is also forming a head-and-shoulders top. A break below today’s low implies — using measured-move
analysis –  a move twice the distance from the head to the neckline, or a
test of 421. 

Pork contracts continue moving to the downside out of
their declining patterns and indicators.
June lean hogs
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from lows and August pork bellies
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the Implosion-5 List,
are down 1.075 to 74.700.

Also in the meats,
June live cattle
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setup. 

The 950-960 Maginot line support zone in cocoa
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continues to have a bearing. The engulfing bar from two days ago is being
negated by cocoa’s 34 rally to 1058. A move to new high ground would work to
more conclusively negate the May 11 engulfing bar (outside day down) and support
higher prices. The gap above the psychological 1000 mark is also supporting this
market. 

Cotton
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left something of an island bottom where the May 10 and 11 contract lows are
surrounded by laps,  three consecutive moves higher as well as an expansion
bar off the low. These are signs of a bottom. 

This morning’s agriculture futures pre-opening outlook
pointed out that sugar
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number of reported positions with speculators going from net short to carrying a
heavy net long position. This is a situation that often brings bull squeezes (a
move south followed by long covering).