Currencies and Metals Outlook- An Excerpt from CRB'S Futures Market Service
CURRENCIES
The dollar index is consolidating modestly below last month’s 8-3/4 month high. The euro is attempting to find support above its recent 9-3/4 month low and the dollar/yen is moving sideways between November’s 14-year low and January’s 6-month high. Bullish factors for the dollar include (1) the unexpected narrowing of the Jan US trade balance, and (2) the statement from Standard & Poor’s that the dollar will retain its status as the world’s reserve currency as long as US financial markets are sound and government spending is sustainable. Bearish factors include (1) the statement from the European Commission that Greece is on course to meet its budget goals in 2010, which propped up the euro, and (2) comments from Chicago Fed President Evans who said he needs to see signs of “highly sustainable” growth before he would support steps toward tighter monetary policy.
Since July 2008, China has kept its currency pegged at 6.83 yuan per dollar, but at the annual session of the legislative National People’s Congress, PBOC governor Zhou Xiachuan said that the days of the “special yuan” policy were numbered. He said the dollar peg was a “temporary” response to the global financial crisis, but gave no timescale for any change in policy. The US and Europe have been pushing China to let the yuan appreciate, since the artificially lower currency gives Chinese exporters an unfair advantage. China will most likely abandon its current dollar peg gradually, as a oneoff revaluation could deal a severe blow to its manufacturers and exporters.
METALS
GOLD— Apr gold prices remain near the middle of a 4-month $180 range, moderately below the all-time nearest-futures high of $1,226.40 an ounce. The main bullish factor for prices is strong demand for gold as a store of value as the massive liquidity programs of global central banks may debase their respective currencies and fuel inflation. Bearish factors include (1) the recent 8-3/4 month high in the dollar index, and (2) recent comments from Fed Chairman Bernanke that inflation is likely to be “subdued for some time.” As of Mar 2, large specs increased their large long position to 207,372. The Gold Council reported that with gold prices up 38% in Q4 vs the year-earlier, gold demand fell -24% y/y in Q4 to 819.7 MT, Q4 jewelry consumption fell -8% y/y, Q4 industrial demand rose +11% y/y, and Q4 gold supply fell -8% y/y to 898 MT.
COPPER—May copper prices remain well-supported, just below January’s 1-1/2 yr high. Bullish factors include (1) the +10% m/m increase in Feb China copper imports, and (2) China’s manufacturing sector expanding for the 12th straight month in Feb and the US manufacturing sector expanding for a seventh straight month in Feb, signaling strength in the global economy. Bearish factors include (1) the recent +31% y/y jump in global copper inventories to a 6-yr high of 794,657 tons, signaling adequate supply and slack demand, (2) the -11.2% plunge in Jan US new home sales to a record low 309,000, (3) recent dollar strength, which undercuts support for most commodities, and (4) ICSG’s estimate of a 539,000 MT global copper surplus for 2010. Large specs as of Mar 2 maintained a moderate long position of 15,867.
******************************************************************************************************************
Like what you're reading? Get a Free Trial to CRB's Futures Market Service!
This weekly publication is designed to make you a more powerful trader through the understanding of the fundamental factors moving the comodity and financial futures markets. Also included in the service is a weekly version of the highly rated CRB Futures Trend Analyzer, an automated technical trading system providing specific trade recommendations with exact market entry and exit points. Sign up today!
******************************************************************************************************************
Copyright © 1934-2010 Commodity Research Bureau, a Barchart.com, Inc. company. All rights reserved. 330 South Wells Street, Suite 612, Chicago, Illinois 60606-7110 USA • 800.621.5271 or 312.554.8456 • E-mail: info@crbtrader.com • Website: www.crbtrader.com. The information herein is compiled from public sources believed to be reliable but is not guaranteed as to its accuracy or completeness. No responsibility is assumed for the use of this material and no express or implied warranties are made. Nothing contained herein shall be construed as an offer to buy/sell, or as a solicitation to buy/sell, any security, commodity or derivatives instrument.
