Markets on alert for changes to Fed QE program


The December U.S. Dollar Index (NYBOT:DXZ13) closed at 80.825, up 56.2 points on short-coverings after recent Euro strength tied to the ECB’s audit of the region’s financial system and encouragement for lenders to repatriate overseas assets. Friday’s action was a correction with most currencies losing against the dollar. The Euro lost 1.03c to close at $1.3489, the Swiss Franc 85 points to $1.0962, the Japanese yen 47 points to 0.010125, the British Pound 1.29c to $1.5919, the Canadian dollar 5 points to 95.80c and the Australian dollar 22 points to 94.09c. The concern over recent statement by various Fed Presidents related to the possible timing for the end of the U.S. stimulus program could lead to higher interest rates and prompt new investment in dollars. We are now returning to a bullish stance for the dollar.


December crude oil (NYMEX:CLZ13) closed Friday at $94.61 per barrel, down $1.77 or 1.8% tied to ample supplies and the gain in the dollar. For the week crude declined a full 3%. Our bearish stance for crude is maintained both fundamentally and technically. Hold put positions.


December copper closed at $3.2985 per pound, down 20 points as reports of copper stockpiles tracked by the London metals Exchange gained for the second day. For the year stockpiles have increased 49% tied to the decline in economic activity in China. Recently however, China has been reporting better economic growth and that could prompt short-covering in copper depending on the level of growth. We are now on the sidelines in copper after having been bearish for over a year.

Precious Metals:

December gold (COMEX:GCZ13) closed at $1,313.20 per ounce, down $10.50. For the week gold lost 2.9%. The loss in precious metals is attributable to U.S. dollar strength and concern over the potential for ending the U.S. stimulus program. The "taper" of the stimulus program is tied to the perception by the Federal Reserve of the rate of economic improvement as determined by the data. We do not feel the U.S. economic is in recovery mode and for that reason we see no immediate change in Fed policy. December silver (COMEX:SIZ13) lost 3c per ounce on Friday closing at $21.84. We maintain or sideline bias for metals. January platinum closed at $1,451.90 per ounce, up $3.50 or 0.2% while December palladium gained $1.45 or 0.58% per ounce to $738.25. The increase in auto sales prompted the short-covering in the white metals which are used in automobile catalytic converters. Otherwise we prefer the sidelines.

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