Buck Bolstered By Beckner
A reporter who follows the Fed for Market News, Steven
Beckner, wrote in an article yesterday that the monetary-policy setting body was
inclined to cut rates 25 basis points rather than 50 basis points, the amount
the market was widely expecting.
March dollar index futures
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DXH1 |
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PowerRating) punched higher in reaction to
the news today, correcting from the expectation of the 50-point cut. Dollars
receive greater demand when dollar-denominated assets such as Treasuries have
interest rates relatively higher than in Europe.
At the same time, a report that consumer prices in key
states in Germany were unexpectedly higher, created the impression that
inflation will rise faster in Germany that in the US and limit the European
Central Bank’s leeway to lower interest rates to stimulate their economy. Here
we have an example where the market is taking some of its directional cue from
future economic growth rather than relative interest rates. Faster economic
growth in the US would create relatively greater demand for dollars than euros.
Usually, the market is more closely focused on interest rate differentials,
positing that there will be greater demand for the currency that offers the
highest interest rate.
Euro FX futures
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ECH1 |
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PowerRating) gapped lower in
overnight trading, hitting a one-month low of .92550. The contract provided an
entry opportunity in a 20-bar (5-minute) reversal, an intraday setup that is
similar to the Turtle Soup Plus One buy setup.
The Japanese yen
(
JYH1 |
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PowerRating), continued lower for
a second day out of its Pullback
From Lows setup, providing additional upside for the dollar. Here the cause
is jawboning. Lawrence Lindsey, President George W. Bush’s economic adviser,
told Japanese officials the U.S. would tolerate the yen at 120 per dollar.
T-bonds
(
USH1 |
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PowerRating) are trading right at their Turtle Soup Plus One Buy
trigger.
Federal funds futures
(
FFG1 |
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PowerRating) plummeted when the above-cited Steve Beckner
sought to clarify yesterday’s story, saying he had not intended to signal that
the Fed would only cut rates by 25 basis points but that it was a
consideration.
Heating oil
(
HOH1 |
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PowerRating) is also falling sharply for a second day out of its Pullback
From Lows setup after weekly oil and distillate inventory figures showed
that stockpiles of the heating fuel have risen sharply and unexpectedly.
Stockpiles levels were nearly ten times higher than one year ago and it is
believed that many households that use heating oil had large stockpiles on hand,
inventories that do not show up in the weekly data.
Nasdaq 100 futures
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NDH1 |
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PowerRating) and S&P futures
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SPH1 |
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PowerRating) are
making good on their Momentum-5
List readings. The spooz made good on an Off The Blocks
setup.