Reply #25: dollar watch

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Oil Prices Weaken After Four Days of Gains, Gold Destined for $1,200

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2010-05-04-1622-Oil_Prices_Weaken_After_Four.html

Crude has come under pressure as the US dollar posts fresh 2010 highs following the rise in risk appetite over the past 24 hours. Additionally, the decision by the People’s Bank of China to further raise the reserve requirement ratio over the weekend is capping bullish momentum at the present moment as the region digests the news and tries to estimate if there will be a slowdown in the surging Chinese economy, which will certainly effect crude demand.

Commodities – Energy

Oil Prices Weaken After Four Days of Gains, Gold Destined for $1,200.

Crude Oil (LS NYMEX) - $84.70/bbl

Crude oil prices have lost momentum today as fears over demand related to the sovereign debt crisis in Europe are weighing on the topside. Earlier this week, Greece accepted the bailout from the IMF and the EU worth $146 billion in order to avert default and prevent the countries debt crisis from spreading through the rest of the bloc. However, markets reacted negatively to the announcement, causing the euro decline and crude oil prices to pull back from overnight highs, and leading both to continue its southern journey on Tuesday. Many traders are speculating that the bailout is not enough and despite what EU members may publicized, inventors believe that the crisis has already spread onto other EU members similarly to what OECD’s Secretary General Gurria refers to as “Ebola.” Indeed, Crude has also come under pressure as the US dollar posts fresh 2010 highs following the rise in risk appetite over the past 24 hours. Additionally, the decision by the People’s Bank of China to further raise the reserve requirement ratio over the weekend is capping bullish momentum at the present moment as the region digests the news and tries to estimate if there will be a slowdown in the surging Chinese economy, which will certainly effect crude demand. Despite all the negative factors and a general pull back in risk aversion today, prices have been holding up relatively well in such volatile conditions and we may see price action test the yearly high of $87.28/bbl before retreating back to $80/bbl if European woes let up. Looking ahead, the fundamentals of supply and demand are surely to weigh on the crude prices.

Crude Futures (240 Minute)


Commodities – Metals

Spot Gold - $1,186.77/oz

The disconnect in the commodities bloc continues and has been magnified by today’s renewed sovereign debt fears. Gold looks well on its way to $1,200 as the yellow metal continues to shine vs. non-USD currencies, as it moves in tandem with the dollar. Historically a rare occurrence but certainly a valid correlation as investors use the two as safe haven assets. Gold is being viewed by the masses as an asset class that will survive the brewing storm in Europe and is not liable to volatile movements like paper based assets. The steep hike in Australia’s mining resource tax was one small negative impulse not only for gold but all metals, but seems unlikely to affect the overall up trend.

Spot Silver - $18.03/oz

Through early morning trading (Asian and European sessions) silver prices headed south to only pick pace during the North America trade as risk appetite lost its footing. Ultimately, the cheaper metal is expected to end the day to the downside, erasing three days of gains. Even more troublesome, the U.S. dollar would enjoy its own advance on safe haven flows and further pull silver down.

Spot Gold (Daily)


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Opening Comment 05.05

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/opening_comment/2010-05-05-0501-Opening_Comment_05_05.html

There has been no sign of a slowing in the market deterioration this week, with currencies, equities and commodities all being heavily weighed down by a number of significant risk events.
The threat of the Greek contagion into other economies (Spain the latest), softer Chinese data and a tightening from the PBOC, and a criminal probe into Goldman Sachs, are all negative events spread out across the globe that have weighed heavily on risk appetite. As a result, we have seen a massive flight to safety in the form of the USD, with the Euro, Swissie and even Yen all taking considerable hits and tracking to fresh 2010 lows against the Greenback. Even the commodity bloc currencies have been influenced, with Aussie, Cad and Kiwi all finding heavy offers in Tuesday trade. The VIX jumped up by close to 20% on Tuesday and market participants are feeling a similar sense of panic as had been felt post-Lehman.

While all major currencies are down against the buck on Wednesday thus far, the Aussie has managed to outperform on a relative basis, with the antipodean finding some bids on the back of a solid round of local data, with the performance of services index and building approvals exceeding expectations.

In our opinion, the USD is now very well positioned to extend gains across the board, with the single currency potentially benefitting in both risk averse and risk inclined markets. While a risk averse market should force USD appreciation on a flight to safety, any improvement in risk appetite could now also benefit the buck, which stands to gain on a Fed that is required to adopt a more hawkish monetary policy and thereby look to raise rates, which would in turn narrow yield differentials back in favor of the Dollar. As such, we remain USD bulls and would look to continue to buy the Greenback over the medium-term.

Looking ahead, German PMI (55.0 expected) is due at 7:55GMT immediately followed by Eurozone PMI (57.3 expected) at 8:00GMT. UK PMI (53.4 expected) is then out at 8:30GMT, with Eurozone retail sales (0.1% expected)

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