Brits Pound Buck

December 14, 2000
Marc Dupee

Surprisingly robust economic data out of the United
Kingdom kicked March British pounds
(
BPH1 |
Quote |
Chart |
News |
PowerRating) to a two-month high as concerns
about the strength of the UK economy waned and traders began embracing the
possibility that the next move in interest rates in that country will be
higher.Â

Stronger-than-expected retail sales and a rise in
manufacturers confidence altered perceptions that the British economy has been
slowing more than in the US. The March contract gapped higher from overnight
activity after closing on its highs Wednesday, demonstrating unusual strength by
pulling back for only two days from a one-month high struck on Monday. BPH1
closed .0170 higher at 1.4736.

Euro FX futures
(
ECH1 |
Quote |
Chart |
News |
PowerRating) followed the lead of
the currency used across the English Channel, rallying out of a Pullback From Highs
setup, a pattern mentioned in this space yesterday. Euros rallied despite the
European Central Bank leaving interest rates unchanged and tame US wholesale
inflation figures. The tides are turning slightly, as the Euroland economy is
now growing at a slightly faster pace than in the US. A stronger Euroland
economy will likely inspire the ECB to raise interest rates sometime early next
year at a time when many traders are betting that the Fed will lower US rates in
order to stimulate the American economy. Higher Euroland interest rates increase
the demand for Euro-denominated assets. March euro FX’s rose .01320 to .89270. Swiss francs
(
SFH1 |
Quote |
Chart |
News |
PowerRating)
also rallied out of a Pullback From Highs setup to close at a three-month high,
up .0080 at .5953.

Of course, going the other way due to the strong weighting
of the euro on the dollar index, the March contract
(
DXH1 |
Quote |
Chart |
News |
PowerRating) got pounded
after closing below the halfway point within Wednesday’s bar and failing to
break above 115.00 yesterday. This action heightened the chance that today’s Pullback From Lows
setup would trigger. The DXH1 held below yesterday’s low, the trigger, and
descended to settle 1.22 lower at 113.22.

The Japanese yen
(
JYH1 |
Quote |
Chart |
News |
PowerRating) drifted higher after a down
start to new contract lows, closing .0004 higher at .9037. Revised economic
figures, but utilizing an older method the Japanese have recently changed from,
showed that their economy actually shrank .3% last quarter rather than expanded
nominally.Â

Interest rate futures rallied for a second day out
of Pullback From High setups, encouraged by this morning’s Producer Price Index,
which showed wholesale inflation remains tame. A slowing economy has increased
the likelihood that central bank chief Alan Greenspan and the Federal Reserve
Open Market Committee will soon lower interest rates to stimulate an economy
that may be slowing toward a recession.Â

Tony Crescenzi pointed out on TradersWire BondWire
that the Federal Fund futures contracts rallied this morning, increasing
the odds that the Fed will ease short-term interest rates. Crescenzi calculated
that the January Fed funds contract “is pricing in a rate of 6.435%
indicating as much as a 25% chance of a rate cut at the December 19 FOMC
meeting, up from about 15% yesterday. The April contract is pricing in a rate of
5.995% indicating that the market is looking for 50 basis points of rate cuts
between now and the March FOMC meeting.”

Stock index futures yawned at the new Commander-in-Chief,
George W., and focused instead on another spate of negative earnings data from
corporate America. The soon-to-merge duo of JP Morgan and Chase Manhattan both
warned that they will underperform next quarter. The downside action in JP
overwhelmed Dow futures
(
DJH1 |
Quote |
Chart |
News |
PowerRating), leaving them 135.0 lower at 10,780.0. Spooz
also head south, clipping 19.80 to 1358.00. Naz 100 futures
(
NDH1 |
Quote |
Chart |
News |
PowerRating) traded
on both sides of break even before capitulating at noon and falling 100.00 in
the last hour to settle 127.00 lower at 2670.00.

Coffee
(
KCH1 |
Quote |
Chart |
News |
PowerRating) continued tanking today after a
Brazilian grower’s cooperative reported there were approximately 50% more coffee beans in
storage than last year. Brazil is the world’s leading producer of coffee. Coffee is the leading contract on the Implosion-5 List
and has been trending lower with consistent down readings on the
Futures
Trend Matrix.Â Today’s action sent the March contract down 2.45 to 65.55
to a new seven-year low.

Chat Live With Jeff Cooper today!

Jeff Cooper is todayÂ¹s featured speaker on AOL MarketTalk Live! Catch this
interview at 5:00 pm est. This is your chance to directly ask him questions
about his techniques and methodologies. Jeff will be sharing his views of the
current market situation and and answering questions on trading.

For AOL browsers only, you can view AOL MarketTalk produced by Sage via AOL
keyword: MarketTalk. Following the chat, anyone with any browser can access the
transcript via sageonline.com and hyperlink to https://www.sageonline.com/chat_transcript.asp

Brits Pound Buck

BUY THE FEAR, SELL THE GREED

Quick Links

Company Info

Contact

Company Resources