Fundamentals Underpinning Dollar
With not too much difficulty, the
Japanese yen
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.8200 heavy-support level. Two and three days ago, the yen hit New 10-day lows.
(But due to implosive action in stock index futures, the yen has not appeared on
the Implosion-5 List.)Â
Prime Minister Koizumi’s cabinet reportedly has drafted a
report titled the Basic Policies of Upcoming Economic and Fiscal Management
and Structural Reforms of Economy and Society. The report mentions that the
government will no longer have “wide authority,” implying it will cut
back pork project spending, local party subsidies, and implement plans that
speed the elimination of the mountain of bad bank debt. Naturally, this process
will take a long time — years — and Koizumi’s reform panel said as much by
noting economic growth would be slower than the 1.7% GDP target. Of course, a
negative yen is dollar positive.
German financial officials also cut growth forecasts saying
their economy would not reach a 2% target set for this year. This comes at a
time when prices are rising. With inflation rising, the market doubts the ECB
will be able to cut interest rates much further. Both are negatives for euro FX futures
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and the highly correlated Swiss franc
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The downside action in the currencies is a collective plus
for
September dollar index futures
(
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out of their Pullback From Highs
setup, pointed out in recent commentary. Negative economic fundamentals with the
US’s most important trading partners — and the impression the Fed will be more
adept at managing the global economic slowdown — are making the dollar a better
bet for currency traders.Â
From the Momentum-5
List, July sugar
(
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day as it continues to move out of its recent consolidation/triangle. A push
through the May year-to-date highs in the 9.00 to 9.20 area would be very
constructive. Continued steady moves up will keep this contract on the Multiple Days Low
Volatility List, a signal of an impending large move.
After head faking higher out of its triangle-on-low two
days ago, cocoa
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is has set a fresh five-month low. The contract has bounced a bit off lows in a
same-day Turtle Soup Buy setup.Â
Orange
juice’s
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shoulders to pattern implies the contract will complete a measured move. With
the head at 83.10 and a (conservative) neckline at 78, traditional measured move
analysis suggests a test to a new low down into the 73 area.Â
Coffee
(
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pressure from yesterday’s engulfing bar that wiped out the prior three day’s
gains. Coffee is trading on its lows after an early test higher which is
equaling a contract low and a nearly eight-year low for the breakfast
bean.Â
The second leading contract on the Implosion-5 List,
July cotton
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the fifth consecutive session to new contract lows. This market is nearly one
half its November price now and is down .38 at 37.80.Â
Momentum-5
List leader August lean hogs
(
LHQ1 |
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PowerRating) are making good on their
signal. This market has been on the M-5 list the entire month of June. My Off The Blocks
entry method has either kept you out of the market on flat days or down
days or got you in as this market advanced.