Tuesday, December 05, 2006


The US$ And Oil "Continue To Dominate"

MarketWatch reports on the currency markets. "The dollar traded little changed against the euro Tuesday, as traders weighed mixed data on the health of the U.S. economy and inflation and await a key employment report due later in the week. The greenback rebounded from session lows after the Institute for Supply Management said its service index rose to 58.9% in November from 57.1% in October. It is at the highest level since May. Economists had expected the index to fall to 55.8%."

"The ISM services data suggested 'that the broader economy remains quite robust and is in fact improving over the most recent months, suggesting a stabilization at the minimum and perhaps the much awaited rebound from [third-quarter] weakness,' said Brian Dolan, director of research at Forex.com. The dollar is 'getting some legs here after a delayed reaction.'"

"Late in New York, the dollar was quoted at 114.83 yen, compared with 115.33 yen late Monday, after dropping to 114.41, the lowest level since Aug. 7. The euro changed hands at $1.3323, from $1.3325. The British pound traded at $1.9735, compared with $1.9796. The dollar changed hands at 1.1912 Swiss francs, compared with 1.1941 francs."

"The yen gained across the board, touching a four-month high against the dollar, after comments made by Bank of Japan officials reignited hopes the Japanese central bank would raise interest rates this month."

"Bank of Japan policy-board member Atsushi Mizuno said the central bank may raise interest rates despite weaker economic indicators. 'Some recent economic indicators have been unfavorable. But it's not like we can't raise our policy rate unless all economic indicators prove to be strong,' Mizuno was quoted by Dow Jones Newswires as saying in a speech."

"Comments from Japan overnight 'radically altered market's perception of the likelihood of a December rate hike by the BoJ and put a solid bid underneath the yen,' said Boris Schlossberg, senior currency strategist at FXCM."

"Elsewhere, the Bank of Canada on Tuesday left its benchmark overnight rate unchanged at 4.25%, as widely expected. The Canadian dollar, also known as the loonie, last traded flat at C$1.1405 versus the greenback."

"Gold futures fell Tuesday, prompting the February contract to close under $650 an ounce for the first time in four sessions as the U.S. dollar regained some lost ground and helped dull investment demand for the precious metal."

"'The move against the dollar has been too strong and too fast,' said Ned Schmidt, editor of the Value View Gold Report, noting that some strength in the dollar and some weakness in gold and silver could develop."

"Against this backdrop, gold for February delivery closed down $3 at $647.90 an ounce on the New York Mercantile Exchange. The contract has been closing above the $650 level since the last day of November."

"Overall, gold's latest move is 'just a symptom of thin conditions,' said Jon Nadler, an analyst at bullion dealers Kitco.com. 'Dollar and oil continue to dominate.'"

"On Tuesday, crude futures climbed above $63 a barrel, fell to a low under $62, then closed nearly unchanged as traders continued to gauge the likelihood of an output cut from key oil producers."

"Meanwhile, silver followed gold prices lower. March silver shed 22 cents, or 1.5%, to close at $14.025 an ounce, after a $14.37 high. And after ending higher on Monday, March palladium fell 5 cents to end at $336.45."

From Bloomberg."The U.S. Labor Department will release the November jobs report, an indicator of the U.S. economy, on Dec. 8. Employers probably added 100,000 jobs last month, up from 92,000 in October, a Bloomberg survey showed."

"'Gold's going to be locked in a narrow range of $640 to $648 until that figure comes out,' Peter Tse, chief precious-metals dealer at ScotiaMocatta, the bullion arm of Bank of Nova Scotia, said in Hong Kong."

"Gold will average $620 an ounce this quarter, down from $621 in the third, Barclays Capital in London said in a report yesterday."

From Reuters. "Platinum prices declined about three percent to a one-month low at $1,120 an ounce in late European trade on Tuesday, as a recovery in the dollar prompted investors to sell, dealers said."

USD hasn't bounced much at all since the sharp selloff. PMs are following a strong pattern; higher highs and higher lows. Looks like we are establishing another (higher) base in PMs. Bullish!
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