Futures Point To A Weaker Open
METALS
GOLD:
The recent recovery flare in gold prices was short lived, with the trade backing
away from the market once prices reached $353.8. Therefore, for the time being
it would appear that the trade has little interest in gold under $343 or above
$354. We still think that gold lacks a reason to rally and that the Dollar
won’t be a reliable catalyst unless it falls under the June low of 92.37.
SILVER:
The recovery burst in silver was certainly impressive but when a move like that
comes without a catalyst it is usually difficult to sustain. However, as we
mentioned early this week, the silver market’s technical position is much more
balanced than in the gold market and that could allow silver to make gains
effortlessly. In fact, it would not take much of an improvement in the macro
economic case to rationalize a rally in silver off physical demand! Therefore
the bias in silver is up and traders should be buyers at critical support levels
of $457, $454 and certainly $4.51.
PLATINUM:
Like silver, platinum is showing signs of positive progression but needs to get
a good reading on the
US
payroll
situation in order to extend the rally. As mentioned a number of times over the
last month, the platinum market is already priced very high historically and
that makes it a little more difficult to buy.
COPPER:
Even in the face of an aggressive equity market rise and favorable US economic
numbers, the copper market wasn’t able to turn sentiment around this week.
Asian copper prices were down and Chinese copper futures were mostly unchanged
and that leaves the
US
market
without true direction. Therefore, we have to assume that prices could slide
back to 75.00 unless of course, the
US
payroll
readings this morning inspire positive attitudes toward the economy.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE +19Â ,HEAT+17Â
,UNGA+11 Â Oil prices have firmed this morning because Nigerian Union
officials have begun removing workers from Crude Oil operations in an effort to
support the Nationwide work stoppage. With
Nigeria
being the world’s 6th
largest oil exporter and oil operations already being affected prices should
rise.
NATURAL
GAS
With
prices seeing the lowest levels since early April and the expectation of hot
temps ahead, it is clear that the back of the bull market is broken. With the
injection season running full force and the regular energy complex failing to
inspire speculative players, it’s understandable that prices fell through
critical chart support.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS -103 The Treasury
market seems to be on the ropes technically and fundamentally. With the sharp
recovery in equity prices early this week and the subsequent decline in Treasury
prices the payroll report this morning could take on an epic proportion. In
other words, it is possible that even a slightly favorable payroll reading might
“stick a fork†in the bull market case.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-130
DOW -15 NIKKEI +32 FTSE -11Â Traders should expect to see a major decision
today off the monthly payroll report, especially since the market has rallied
aggressively into the report. Overnight AT&T saw its credit ratings cut and
some big oil concerns are weaker off the threat of a Nigerian strike extending
to the oil sector in that country. Therefore, the stock market will come into
the key report release undermined and slightly overbought technically.
FOREIGN
EXCHANGE
DOLLAR:
We get the sense that the Dollar needs a favorable payroll report this morning
to keep the bears at bay. In fact, early this week the trade was very willing to
dump the Dollar and we suspect that urge will resurface if the payroll report
gives the slightly reason to doubt the pace of the
US
recovery. However, unless the numbers are extremely weak, we don’t see the
Dollar sliding below the middle of the consolidation down at 94.08. In fact, the
chances are improving that the Dollar has forged a new, slighter higher trading
range of 94.30 to 95.70. We think the Dollar can easily tolerate a +.1% increase
in the unemployment rate and a 15,000 payroll loss, but anything more than that,
and the selling could intensify. On the other hand, we are not sure that the
Dollar will soar off the payroll report unless the numbers are surprisingly
strong.
EURO:
We are actually surprised that the exceedingly weak PPI readings from the Euro
zone didn’t result in the trade attacking the Euro! However, there has been
some chart damage to the Euro and it could easily see the most damaging response
to the
US
numbers
today. Critical support and a target in the action today is the 113.76 level.
However, a slight rise in the Euro zone PMI readings (48.2 versus 47.9) could
serve to diffuse the selling interest in the Euro.
YEN:
The heaviest trading session since 1989 in the Nikkei overnight, highlights the
growing confidence in the Japanese economy. However, the Japanese Yen seems to
have run into solid chart resistance and may have run into the BOJ. In other
words, we have to wonder if the BOJ stepped in to stop the recent rise in the
currency. Near term it would seem that the Yen is capped at 84.76.
SWISS:
The Swiss appears to be poised for a downside breakout on the charts. With the
Euro equally soft, it would appear the two currencies are set to trade to an
even lower level. If the
US
payroll
report is anything but bearish to the
US
economy, the Swiss falls even more.
POUND:
The Pound is poised to capitalize on the
US
numbers, if they are weak. However, the Pound is short term overbought and could
be vulnerable. Fundamentally, the Pound has a backstop against selling, with its
June services PMI rising sharply from 51.9 to 54.5. Therefore, one has to favor
the long side in the Pound.
CANADIAN:
Around the highs today, the Canadian was very vulnerable to the
US
payroll
report. However, if the Canadian were to correct back to 73.13, that could be a
buy. In the event that US numbers are “strong†which means much better than
expectations we would exit all Canadian longs and look to reset those positions
next week down around the 73.00 level.