Will The Yen Pass This Personality Test?
A high approval rating from an opinion poll of new Japanese Prime Minister
Junichiro Koizumi fueled the biggest one-day gain in the yen in nearly a year.
The poll showed Koizumi received a
record approval rating on hopes that the self-styled “reformist” will be able to
make the structural changes required to break Japan’s economy out of economic
doldrums. But will the charismatic personality of Koizumi be enough to
re-ignite economic strength once dubbed the “Japanese Miracle” and
will the recent signs of momentum in the yen be good for more than a
“honeymoon rally”?
Among the actions that Koizumi must take to
permanently bootstrap the Japanese economy out of its 11-year slump will be
structural changes in corporate relations and the creation of a scheme to
forgive the trillions in bad debt that are effectively hamstringing the banking
system, liquidity and growth. Any structural changes
will likely take years to implement and have an effect. But the euphoria could
produce at least a test of the recent one-month high at .8307. The yen
gapped strongly above a five-bar pullback from a one-month high and continued
higher in the CME session before closing with a net gain of .0100 at .8232.Â
Also in the currencies,
Canadian dollars
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for a fourth consecutive day to a two-month high in potential
completion of the right side of a cup formation. Canadian dollars are on the Momentum-5
List and nudged .0005 higher to .6514.
In economic news, the National Association of Purchasing Managers report
for March showed manufacturing slowed for the ninth consecutive month. The NAPM
came in below the 44.00 expected reading at 43.2. Readings below 50 are
considered a sign of manufacturing contraction. T-bonds
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bolted higher after head-faking lower below an intraday consolidation range and
leaving a five-minute outside, or engulfing bar. Bonds rallied on the view that the slower activity in the crucial manufacturing area
increases the likelihood that the Fed will aggressively cut interest rates this
month at its FOMC meeting in order to spur greater economic growth. Bonds closed
up 18/32 at 101 1/32. T-bonds and 10-year notes
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entries.Â
Closing at 95.870, the June Federal Funds futures
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May 15 meeting and about a 50-50 chance of an additional .25% cut intersession
cut by June.Â
Dow futures
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List, rallied throughout the session and led the way for a broad up-move in
equity index futures. Dow futures made good on an Off The Blocks
entry after breaking above yesterday’s final-hour high (this entry is used
due to the lap down opening). A Momentum-5
List reading in the S&P futures
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positive finish in the spooz, which gained 18.20 to 1272.50. Nasdaq 100 futures
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traded into a retracement cluster pointed out in Boroden’s
TradingSubscriptions Price Action Levels, rallied 70 handles,
and closed on contract highs.Â
From the Implosion-5 List,
natural gas
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its gap-down opening mark (a multi-month low). Nat gas is showing weakness after
having dropped out of a four-month descending triangle formation and falling
below the 5.000 mark. The contract filled the morning gap but the pressure
remains to the downside in this contract. Nat gas finished .054 lower at 4.641.
In a very constructive
formation, sugar traders opened the July contract lower to shake out weak hands
and then sprung it higher in its biggest up-bar in months. This downside fake
out ploy is often used before a contract is taken higher. Sugar’s upside
momentum is reflected in its Momentum-5
List reading and today’s outside-day expansion bar is further evidence of
upside price persistency. July closed .45
higher at 8.95.
After shedding five cents
in little over a week,
June lean hogs
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conditions. Hogs were too far away to trigger their Turtle Soup Plus One Buy
setup but the signal acted as a good indication of a possible
reversal. June hogs closed up .625 at 68.200.
Coffee
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setup and closed 4.19%, or 2.70 higher at 67.15.