Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+0 — It could be tough to get bond prices back above this weeks highs, as the
Federal Reserve Chairman didn’t satisfy the bulls or the bear camps. Greenspan
certainly confirmed that slowing and deflation are potential problems, but at
the same time suggested that more data was needed in order to define a clear
trend direction in the economy. In general the bull camp came away with the idea
that the Fed would be primed to cut rates in the June meeting, but at the same
time it did not seem like there was a glaring need to apply stimulus to the
economy.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +260,
DOW +19, NIKKEI
+33, FTSE +32 — Surprisingly US
equities have managed to reject the "falling Dollar" impact and foreign
investors have decided that some US issues are attractive given the cheap
currency "in-cost" to foreign investors. In other words, the fear of a wholesale
foreign liquidation of US Securities isn’t happening yet. In fact, even with the
Dollar down consistently this week, an important thing happened when it became
apparent that the Euro zone economy might be in more trouble than the
economy.
FOREIGN EXCHANGE
DOLLAR: The Dollar bias is still down but the pressure seems to have
abated slightly. Certainly the weak Euro zone numbers are tempering the rampant
selling interest in the Dollar but it would not seem like the comments from the
US Federal Reserve did anything to alter the down trend in the Dollar. It would
also not seem like the tax cut plan (that is about to be passed) is going to
suddenly throw the Dollar back into favor. However, the trade is beginning to
get a sense that the
economy is going to benefit from the relatively low value of the Dollar. In
other words, the world has to have a little better view of the
economy and that is a concern to the Dollar bears. In conclusion, there is not a
significant reason to begin looking for a Dollar bottom but those that are short
the Dollar might consider running profit stops or picking a point on the
downside to take profits. It will still take a couple closes back above 94.10 in
order to turn the trend around in the Dollar.
EURO: A number of EU officials are beginning
to posture for a change in EU rules, as many realize that current debt limits
were set in much better economic times. In other words, the Euro zone realizes
that their high standards for deficit control and controlling spending will be
hard to live up to. We think the dialogue coming from EU officials begins to
erode the luster of the Euro. However, it would see unwise to sell the Euro but
it might be wise to begin running profit stops on longs. In fact, overnight some
European equity fund managers apparently lowered EU based equity investments and
raised the outlook for US equities.
YEN: The trade surplus in
gained 1.6% and that helps the Yen bounce from the overnight low. The fact that
the Dollar is showing some semblance of consolidation probably takes some of the
upside potential out of the Yen. However, the Yen is at the bottom of the last
months range and could easily rise to 86.30 on a pure technical bounce and that
type of run would mean nothing on the charts. Therefore, there could be a
downside breakout in the Yen, but the fundamental picture would seem to foster
an attempt to rally, before a probe down is seen later.
SWISS: We have to think that the Swiss will
continue to outperform the Euro and that solid support around 77.00 will hold up
the Swiss trade. We would suggest that traders be long the Swiss and short the
Euro.
POUND: The Pound is disappointed with its
economic standing and because the Pound is relatively high in the recent trading
range, there should be some selling pressure today. The CBI apparently lowered
its GDP forecast but with the April retail sales managing to post a positive
number (+0.3%) the Pound should not encounter stiff selling. The trend is up in
the Pound until something more significant is seen.
CANADIAN: The Mad Cow issue is thought to be
an isolated case but the negative connotation toward the Canadian economy still
exists. More importantly it would seem that strength in the US Dollar is
fostering a profit-taking slide in the Canadian. Canadian CPI readings this
morning would seem to be hot but once the food and energy components are removed
there is no inflation threat. It would seem that the Canadian might be primed to
washout down to critical support of 73.05.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD
-2.50,
SLV -0.0, PLAT -1.30,
CP +15;
Gold Fix $369.60, +$4.70; LME Copper
Warehouse stks 767,675
tns, -3,025 tons;
Comex Gold stocks 2.471, Unchanged;
COMEX Silver stocks 108.2 ml oz, +408,368
oz; OVERNIGHT: Just enough anxiety toward terrorism to maintain recent gold gain
GOLD: While the gold market is showing signs
of flight to quality buying off the terrorism threat, the bull camp might be
more consistently served by a falling Dollar and straight on long-term
investment interest. A quasi-double top at $374 is the current resistance and we
suspect that the market will attempt to respect support of $370 basis the August
contract. Considering that a Television station in the
is giving consistent air time to a terror group, so that they can advertise a
call to attack
US, Australian and Norwegian interests around the world, it certainly makes
sense to migrate some money into a globally fungible asset like gold.
SILVER: While gold is showing better price
action, the silver market remains vulnerable from a technical and fundamental
standing. The July silver must hold above $4.70 on a close basis, or the
moderately large spec long position might be prompted to protect positions with
stop loss orders. While the macro outlook toward the economy hasn’t worsened
significantly, it certainly isn’t benefiting the silver market.
PLATINUM: In looking at the charts, it would
seem that the July platinum is headed toward support of $654.5. We assume that
the trend is up in the Platinum until there is a close back below $652 in the
July contract.
COPPER: The funds came in and bought the
market, even after prices forged a 2-month breakout on the charts. In other
words, the funds wanted in bad enough that they didn’t mind paying up for
copper. The Chinese copper market was higher overnight and also managed a
2-month high breakout.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -8,
HEAT -13, UNGA -4 — All it took
was another confirmation of a tightening of US crude stocks by the API and the
market responded by pushing prices sharply higher. The 4.5 million barrel
decline in the API crude stocks report was partially offset by the minor
increase in DOE crude stocks.
NATURAL GAS
The
natural gas remains bullishly poised with the market
playing up the threat of supply disruptions off the weather. The weekly
inventory readings put the injection at 75 bcf to
100 bcf, but it would seem that the market is going
to be less sensitive to the weekly inventory readings because they are expected
to stay in the injection mode until the cooling season reaches full stride.