ECB Throws Away More Cash
Throwing good money after bad, the European Central Bank
bought more euros in a bid to prop up the sagging currency. Euro purchases were
calculated to be over $1 billion, but traders pointed out the lack of skill with
which the ECB conducted its third intervention since the introduction of the
currency in January 1999. Many expected multiple follow-up volleys of euro
purchases–similar to Friday’s two buys–in order to show the ECB’s resolve in
its unilateral action. Similar to Friday’s action, Monday’s attempt to
exogenously bolster the value of the euro failed. Â
As I’ve pointed out previously in this column, intervention rarely succeeds in
raising the value of a currency unless major central banks participate in
unison. On Friday, euro FX Futures
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opening level in the ECB’s first two swings at halting the euro’s losing streak.
Monday’s intervention is also a swing and a miss as the ECZ has declined below
Friday’s close after a slight pop-up opening to close down .00470 at .86220.Â
Technically, euro FX futures hinted they could trade
lower by registering (and making good on) a Turtle Soup Plus One
Sell setup. The correlated Swiss franc
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both Pullback From Lows
setups, also declined and closed .0033 and .0214 lower, respectively.Â
December dollar index futures
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were naturally the beneficiary here (the euro is the most heavily weighted currency on the
dollar index), and rallied .75 to 115.62. Treasury Secretary Summers comments
Friday reaffirming the US maintains a strong dollar policy also acted to
undermine the ECB’s intervention. Also potentially exacerbating the negative
sentiment in the euro is a historical tendency for the dollar to rally after a
US election and a firming US stock market (which attracts dollar buyers).Â
Interest rate futures continued lower as few traders were willing to initiate buy positions ahead of the election. A Bush win implies
the budget surplus will go down because of the Texas Governor’s platform on
social security and taxes. Tony Crescenzi also pointed out in Monday morning’s BondWire
(on TradersWire) that Friday’s Commitment of Traders Report showed an unusually high number of
long positions versus short positions in 10-years at a time that new short
positions were being initiated. Both T-bonds
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fell, closing down 8/32 and 7/32, respectively.
Crude oil
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Crude sank on the opening following London’s down session as the market
anticipated the weekly API statistics to show a build up in crude oil
stockpiles. A disruption in exports from Nigeria brought the market back to a
slightly positive finish with the December contract closing up .15 at
32.86.Â
Momentum-5
futures
soymeal
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June, triggering buys stops and inspiring sympathy moves in related contracts.
The bean complex, corn (also from the Momentum-5 List), and wheat also traded
higher before giving back gains. Grains have rallied following anticipation of
smaller-than-expected crop forecasts. Soymeal closed 2.4 higher at 174.6.Â
 
I mentioned in Friday’s Futures
Market Recap that coffee had setup in a Turtle Soup Plus One Buy
at a seven-year low and could make a volatile move given its Multiple Days Low
Volatility reading. Coffee sprung up 1.10 to close at 74.70.
