Yen Yanked To New Low

The Japanese yen
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extended losses out of triple bottoms, gapping lower in thin trade on signs of continued economic weakness in the world’s second-largest economy. Mitsui became the latest in a two-year string of construction companies to announce that it would forgive loans estimated at nearly $1 billion to creditors. The debt forgiveness is seen as evidence that the economy remains weak and is not about to snap out of its slow-growth doldrums.

The political stagnation that has hampered any potential of upside economic or currency progress also initiated the recent down stroke that has taken the Dec. yen futures down nearly 5% since November 3. Although Prime Minister Mori survived a vote of no confidence from the Japanese parliament last week, a move that would have resulted in his ousting, political observers doubt he or the ruling Liberal Democratic Party will be able to create policy or infrastructure changes that could rectify the economic malaise.

Technically, the yen is on the Implosion-5 List. Last year on Thanksgiving Friday we saw a similar leap in price in the favor of the prevailing (up) underlying trend, which served as a short-term exhaustion gap. The steep sell-off this month and perception that a cheaper yen will help the Japanese export their way out of economic stagnation could prompt a gap-filling retracement (move up) Monday. Basis December closed down .0092 at .9012.

Strong downtrends have kept the currencies from registering on the Implosion-5 List, but as pointed out in recent installments of the Futures Market Recap, the euro FX, Swiss Franc, and British pound have been establishing a string of fresh New 10-Day Lows, which can also serve as an indicator of strong downside momentum. All three currency futures basis December edged lower Friday, pushing Momentum-5 List dollar index futures
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to a stealth contract closing high, up .50 at 118.48. A 5% Naz 100 rebound also abetted the buck rally.

News from the Florida election front that favors G. W. Bush winning the election worked to help stock index futures while hurting bonds. December Nasdaq 100 and S&P futures both gapped open to just above their Turtle Soup Plus One Buy trigger points and went on to tally total gains of 146.50 and 23.60, respectively, in relief of a five-day slide.

Although T-bond futures
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only traded briefly below their Turtle Soup Plus One Sell trigger, they closed down 10/32 at 101 16/32, coming off contract highs inspired in a recent flight to safety buying.

The thinking in bonds is that a Bush victory will likely result in a tax cut which would reduce the budget surplus, inspire the government to issue more debt, and create a greater supply of US Treasury debt. Bonds have rallied in part throughout 2000 because of a debt repurchasing program that has pared government obligations by nearly $30 billion so far this year.

Finally, soybean meal
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continues to rally after breaking out of its high-level consolidation last week (whose setup was pointed out in recent Futures Trading Outlooks and Futures Markets Recaps). Friday soybean meal traced a new breakaway gap, and moved from its lows of the day to finish on its highs of the day—