The Euro continued its strength against the U.S. Dollar after today’s announcement of a decline in U.S. 3rd Quarter Gross Domestic Product and yesterday’s rate cut by the Fed. The announcement by Germany of an economic stimulus plan also helped the EUR USD appreciate. The strong surge in the EUR USD reached a key retracement point on the charts and was met with profit-taking. This action is typical during a short-covering rally. The key resistance zone is 1.3049 to 1.3219. Fundamentally, traders are being a little cautious at current levels because they expect at least a 50 bp cut in interest rates at the next European Central Bank meeting on November 6. Trading could get choppy at current levels as traders are trying to decide whether to attack the resistance zone or take profits ahead of the central bank meeting.

No Comments

FINANCIALS
December Treasury Bonds and Treasury Notes are trading mixed to better as fear of a global recession slowly creeps back into the market after Thursday’s report that the U.S. Third Quarter Gross Domestic Product had contracted. Fed Funds indicate the market is already beginning to price in a rate cut in December.

Overnight the Bank of Japan reluctantly cut its benchmark interest rate to .30 percent down to .50 percent. This action seemed more like a symbolic move since the rest of the world has been lowering rates for several weeks.

No Comments

ENERGIES
The two-day short-covering rally in the December Crude Oil appears to be over as traders are once again focusing on the weakening U.S. economy. Traders are expecting the economic contraction in the U.S. to cut into demand for crude oil and its products. The strong Dollar is also encouraging selling.

Seasonal upside pressure could provide support for December Heating Oil. It is going to get cold in the Northeast and consumers will need to heat their homes. Continue to watch December Heating Oil for signs of a bottom. Although this market may still feel downside pressure, heating oil may not fall as much as crude oil.

No Comments

The Federal Open Market Committee statement yesterday (October 29) hinted that there is room for inflation. We could see higher commodity prices again if the world’s central banks cannot form a united front in the coming weeks with regard to interest rates. The interest rate change caused traders and investors to take money out of the treasuries. That money is currently running into stocks and some commodities. Energy, Grains and Metals have received an immediate boost. Keep an eye out for behind-the-scenes and lightly reported coordinated efforts by governments and central banks.

No Comments