Markets turn attention to Fed tapering expectations

Currencies:

The December U.S. Dollar Index (NYBOT:DXZ13) closed Friday at 8167.5 up 1 tick in quiet trading as investors ponder the effects of the potential reduction in monetary stimulus by the U.S. Federal Reserve this week. The weak consumer sentiment data as well as the less than "enthusiastic" retail sales figure could prompt the Fed to "think again" about "tapering" its stimulus program so we prefer to wait for the Fed’s clarification of its intentions before suggesting any positions. For now we are on the sidelines. On Friday the currency market was in effect sideways with the euro (FOREX:EURUSD) losing 5 ticks to $1.3303, the Swiss franc (FOREX:USDCHF) gaining 8 ticks to $1.0766, the Japanese yen (FOREX:USDJPY) gaining 13 ticks to 0.010074, the British pound (FOREX:GBPUSD) gaining 70 points to $1.5872, the Canadian dollar (FOREX:CADUSD) losing 27 points to .9637 and the Australian dollar (FOREX:AUDUSD) losing 20 points to 9191. We will monitor the situation and report to our clients directly as to any change in sentiment.

Energies:

October crude oil (NYMEX:CLV13) closed at $108.21 per barrel, down 39c tied to disappointing U.S. retail sales and the Thomson/Reuters, University of Michigan consumer sentiment index. The "agreement’ formulated between Secretary of State Kerry and his Russian counterpart allayed some fears over Syria and pressured crude prices. The overall supply/demand situation in our estimation warrants lower prices but the "fear premium" tied to Egypt and the Suez Canal keeps us away from any positioning for now.

Copper:

December copper closed Friday at $2.2220, up 1.2c per pound in light trading. Prices have remained rangebound tied to various economic reports and reduced overall demand. While recent China data supports prices, we see demand declining from the U.S. housing market and a general economic malaise. Our position for some time has been bearish and we suggested taking profits some weeks ago. We would now look to put on a few put options.

Precious Metals:

December gold (COMEX:GCZ13) closed at $1,308.60, down $22 after being down as much as $28 per ounce. Gold lost nearly 6% for the week. We continue to favor the sidelines. December silver (COMEX:SIZ13) closed at $21.72 per ounce, down another 43c added to the 4.4% decline on Thursday. For the week silver lost 9.1%. We favor the sidelines here as well but once again, our choice for those who "must have" a precious metal in their portfolio, is silver. October platinum closed at $1,444.50, up $1.80 and December palladium gained $6.30 to close at $699.10 per ounce. The white metals had benefited from the gains in auto sales where they are used in catalytic converters. With our concern that increased rates prompted by any Fed "tapering" could impact auto production as well as the housing market we prefer the sidelines.

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