Why The Euro May Get Trashed
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
-3 — While the stock market mounted a slight rise Tuesday, the numbers
floated yesterday have to be a little supportive to the bull camp in
bonds. With the Richmond Fed posting some significant contractions in
employment and manufacturing sectors, it would seem that the economy is
within the “soft-spot” forecasted by the Fed a month ago. In
the FOMC release, the Fed specifically referred to the
“soft-spot” and that should embolden the bulls.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15
AM
S&P +140,
NIKKEI -76,
FTSE +58 — We
have very little interest in buying this market on recovery bounces. The
macro economic tilt is simply not so convincing,
that one should assume the added risk of buying significantly above
chart support levels. In fact, the mixed economic information Tuesday
was a prime example of the disjointed track of the
US
recovery.
FOREIGN
EXCHANGE
DOLLAR:
Huge spikes in volume might suggest that the trade is rolling from the
December to the March contract, or it could suggest that interest is
building for a major decision. The economic information from the
US
was simply uninspiring yesterday, with the exception that the ISM thinks
the US Dollar will be the strongest of the major currencies in 2003.
We are not sure what significance to attach to an ISM currency
forecast! Shifting to the March Dollar Index traders should see support
coming in at 105.65 and then again at 105.43. Critical overhead
resistance comes in at 106.32 basis the March
contract.
EURO:
Huge open interest and volume increases in the last couple of sessions,
seems to suggest that the Euro has topped! We have to think that
upcoming holiday euphoria in the
US
,
could pressure the Euro from current high levels and send the Euro back
down to the early December consolidation around 99.30. Decent stock
market action in European stocks this morning,
might initially dampen selling interest in the Euro but we are still
willing to bet on a near term top.
YEN:
Rallies in the Yen are unimpressive but volume and open interest totals
have begun to rise significantly, (as they have in other currencies) and
that certainly suggests some major decision could be in the offing. With
the pattern in the Yen suggesting lower prices since the July high and
Japanese officials lobbying for a lower Yen, we have to think that the
path of least resistance is down. Traders should look to sell the March
Yen on a rally to 81.57.
SWISS:
The Swiss has already forged a minor downside breakout on the charts,
with near term downside targeting seen at 67.89. With quiet markets we
could see a lower sense of anxiety and a lower flight to quality
interest and that could hurt the Swiss.
POUND:
A critical chart failure could be seen on a decline below 155.76. There
does not seem to be a significant increase in volume and open interest
in the Pound, like the other currencies and that might suggest that the
Pound might not be primed to take part in any potential Dollar/Euro
pivot.
CANADIAN:
We just don’t think that the Canadian is going to launch itself up
through what appears to be significant overhead resistance. The bull
bear line seems to come in at 64.04, with a downside breakout taking
place on a slide below 63.96 and a surprise upside breakout seen with a
rise above 64.23. We think the bear camp has a slight edge on the bulls.
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD +0.40,
SLV -0.3, PLAT -1.00;
London Gold Fix $323.75, -$2.20;
LME Copper
Warehouse stks
864,450 tons, -2,500 tns;
Comex
Gold stocks 2.03 ml, Unchanged; COMEX Silver stocks 106.4 ml oz, +357,082
oz; OVERNIGHT: Weaker action off recent $ strength and UN inspection
progress
GOLD:
With open interest shooting up and volume falling off, since the
December 2nd-3rd low, it would seem that gold reached a significant
overbought status around the recent highs. With the Asian gold trade
weakening overnight off ideas that UN weapons inspections are
progressing with greater speed, it is clear that some longs are becoming
a little impatient. Critical support in February gold comes in at $323.1
but a slight downward bias could unfold until war dialogue heats up
again.
SILVER:
Holding above the 460 level makes the silver charts look good.
Unfortunately for the bull camp, volume and open interest totals have
declined since the November 27th and December 2nd bottoming action. In
other words, fewer players are interested in silver, at prices
significantly above 443 basis the March
contract.
PLATINUM:
Two trend line support levels are seen with the close in support seen at
589.5 and the lower trend line support seen at 579.3. Open interest in
platinum was 8,579 contracts or the highest level in the last year,
which seems to suggest that some traders are unconcerned about paying up
for platinum around the $600 level.
COPPER:
Maybe the March contract has forged a solid technical low around 73.60.
Overnight the Chinese market was a little higher but it was clear that
sellers weren’t afraid of selling into higher action. We have to think
that the economic information released Tuesday, was negative to copper,
as it showed slowing in manufacturing and an improvement in service
sector activity.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE -7,
HEAT -36, UNGA -47
— With reports of massive gasoline stock builds at US coastal areas,
(in the latest API report) it would seem that the threat of halted
Venezuela gasoline imports is dampened slightly. However, it is
very clear that gasoline was the prime driving force behind the energy
complex gains Tuesday.
NATURAL
GAS
Colder
weather forecasts released Tuesday morning, propagated the upside action
in natural gas, which saw massive fund short covering Tuesday. We have
to think that a large portion of the gains Tuesday, were specifically
technical in nature, sparked by the February contract breaking out above
critical chart resistance.