Fiscal cliff negotiations demand market’s attention

Currencies: The March U.S. Dollar Index closed at 80.60 up 17.2 points on shortcovering and on the better than expected U.S. jobs data. While the U.S. economic concerns persist, on a relative basis against the Euro currencies, the dollar fared better. The 17 nation euro declined on reports that the majority of European Central Bank members favor an interest rate cut if the “economy doesn’t pick up” along with a downgrade of the German economic outlook. Germany is a major contributor to the European backed bailout proposals for Greece, Spain and other weak economies. We continue to favor the U.S. dollar on that basis. On Friday the euro closed at $1.2940, down 36 points, the Swiss franc 17 points to $1.0721, the Japanese yen 15 points to 0.12138, the British pound 13 points to $1.6030. However, the Canadian dollar managed a gain of 32 points to $1.0093, and the Aussie dollar 16 points to $1.0409. Stay with the U.S. currency.

Energies: January crude oil closed at $85.93 per barrel, down $0.33 against a stronger dollar even against Mideast concerns. We continue to view crude oil as bearish based on reduced global demand tied to ongoing economic recessionary concerns. Hold put positions.

Copper: March copper closed at $3.6665 per pound, up $0.022 tied to better than expected U.S. payroll numbers and an expected increase in copper demand from the U.S. as well as China. We continue to believe global recessionary trends will continue to reduce overall demand for industrialized metals and would hold put positions for now.

Precious Metals: February gold closed at $1,705.50 per ounce, up $3.70 on the Comex division of the New York Mercantile Exchange after trading as low as $1,684.10 early in the session and as high as $1,706.90 towards the close.  March silver closed at $33.13 per ounce, up $0.02 following gold. Of the two we prefer silver for those who “must” own a precious metal. January platinum closed at $1,607 per ounce, up $6.30 while March palladium gained $0.95 to close at $698 per ounce, Our favored spread of long palladium against short platinum worked well this week as palladium gained 1.4% against platinum’s gain of only 0.2%. Hold the spread.

Next page: Grains, meats and softs

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