ECB Striking Out
The European Central Bank intervened for a third time in global currency
markets, following up the two purchases of euros it made on Friday in what is
turning out to be a failed bid to bolster the single-unit currency that has
dropped as much as 30% since its inaugural debut in January 1999.
As I’ve pointed out previously in this column, intervention rarely succeeds in
raising the value of a currency unless the other major central banks
participate. 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 and is down .00470 at .86220.
Technically, euro FX futures are making good on their Turtle Soup Plus One
Sell setup. The correlated Swiss franc
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both Pullback From Lows
setups, are also declining and trading on their lows of the session.
December dollar index futures
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are the beneficiary here (the euro is the most heavily weighted currency on the
dollar index), currently up .68 at 115.55. Treasury Secretary’s Summers comments
Friday reaffirming the US maintains a strong dollar policy is also acting 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).
Interest rate futures are continuing lower as few traders
are 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
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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are down.
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 are also
higher. Grains are also higher on recent brokerage reports predicting a reduced
crop and ahead of this Thursday’s USDA crop estimate.
I mentioned in Friday’s Futures
Market Recap that coffee would 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 is 1.10 higher at 74.70.
