Land Of The Setting Sun
Dollar index futures
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PowerRating) rebounded from weeks of bruising losses incurred off a double-top formation. The March contract has
waterfalled 7% since the double-top peak etched on November 24.Â
While a stalled U.S. economy, the prospect of domestic
interest rate cuts, and the perception of a relatively healthier European
economy have been the primary factors weakening the greenback, today’s (and
yesterday’s) focus was off the dollar-euro and trained on the dollar-yen
relationship.
Japan can’t get out of the doldrums. The world’s number
two economy has reeled this week on a string of three reports showing that the
economy is grinding to a halt even faster than in the US. This week’s reports
showed that consumer spending fell, unemployment rose, and industrial production
dipped. Japan also has sizeable inventories that it needs to unload in a world
economy that is also downshifting its spending and demand. Add to that the recent
and questioned interest rate hike by the Bank of Japan and you have what many observers believe is a recipe for
even slower growth ahead.Â
With Japan’s fiscal hands tied (Prime Minister Mori
recently survived a no-confidence vote) and stimulative options exhausted and with the
monetary policy-weapon already going against the grain of economic stimulus,
government finance officials appear to be favoring devaluation as a means of exporting the
country’s way to financial health. Indeed, comments from Japanese officials
recently appear to favor a lower yen. Japanese deputy finance minister for
international affairs Haruhiko Kuroda said as much yesterday in comments. If
Japanese banking officials want a lower yen, then all bets about intervening to
support a currency that is trading at a 16-month low are off and the road lower for the yen is open.Â
One final economic note in this regard. Yesterday’s rally
in US retail stocks despite holiday sales coming in below plan implies that
consumer spending may not be waning as rapidly as feared. Consumer spending is
important to US growth because it accounts for two-thirds of GDP. If the US economy is
not doing as poorly as the recent dollar plunge suggests, than the beleaguered
greenback could see a healthy counter-tend, or corrective bounce. The Fed’s
decision not to cut rates last week may support this view that the economy is
not stalling as rapidly as feared. The March yen
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PowerRating), from the Implosion-5 List,
traded to a new contract low for the fourth consecutive day before recovering
for a marginal loss to .8854.
Interest rate futures moved lower for a third day off
a contract high and lost ground in a move supportive of the argument that the economy may
not be slowing as rapidly as appeared. The weekly jobless claim figures came in
lower than expected. Fewer jobless claims imply that the labor market–an oracle
of economic health– is
not degenerating.
T-bonds
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10-year notes
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Chilly weather across the Midwest amid lower stockpiles
of heating fuel pressured heating oil
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PowerRating). The February contract
closed down .0317 at .8593.
In the grains from the Momentum-5
List, corn
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many days.Â
March soybeans
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private analysts Sparks Cos. that estimated the US crop would come in
substantially below USDA forecasts.
December soybean oil
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PowerRating) closed at a multi-month low, down .0700 at
14.8900, amid a world glut. Some soybean processors closed due to excessively
heavy inventories. Soymeal
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PowerRating) rallied and pulled back to fill the gap
down left from yesterday, in a gain of .42 to 189.5.
Sugar
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PowerRating) continued running into overhead resistance at the Oct. 26
gap-down level. The March contract also made good on its Turtle Soup Plus One
Sell setup for a loss of .21 to 10.03
Cocoa
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PowerRating) is setting up in a low volatility
situation at a six-week high. Cocoa also registered on the Momentum-5
List and has inched out new
New 10-Day Highs for the past four sessions. The pattern of higher lows is
positive. Closes above the 745 gap-up close level will also be constructive.
March closed down 9 in an inside day at 766.