FOMC impact on the Yen

Note the following chart of the Japanese Yen and you can see the points at which the Bank of Japan intervened into the Foreign Exchange markets to knock it down and lower its value for the sake of their export market. One would be hard pressed to find a reason for the Yen to rally when the Japanese economy is so weak and its official interest rate environment is about as low as that of the US.

Still, the Yen has rallied on "Safe Haven" trades. Whenever traders were feeling risk averse, they would buy the Yen on the crosses along with the Dollar and sell everything else. To put a stop to that the Bank of Japan has twice intervened with rather dramatic results. Unfortunately for them, traders have simply used the intervention to come right back in and bid the Yen back higher basically negating the gargantuan effort required to derail it.

Now comes along the FOMC with its ZERO INTEREST RATE POLICY and it has basically the same impact on the Yen as did the BOJ intervention - it moves LOWER. The reason for this is that the liquidity party is a green light for the risk trades (why else would copper be at a nonsensical $4.00 pound?). In that environment, no one wants to buy the Yen so down it goes.

One has to suspect that the FED and the BOJ are closely communicating these days as the impact of monetary policy is working nicely for both of them as neither one particularly wants to see a strong rally in their respective currency.

Coming Soon - More PAIN at the Gasoline Pump

Unleaded Gasoline prices rallied off their lows with the inception of tensions in the Straits of Hormuz but that has now taken a back seat to the LIQUIDITY PARTY being thrown by the Federal Reserve.

Can we say, "DEJA VU!".

Get used to further pain at the gasoline pump once again thanks to our illustrious money masters who continue to throw both senior citizens and the average citizen under the bus in the name of jamming the stock market higher to supposedly bolster consumer confidence. Yeah, I feel extremely confident - confident that food and energy prices are going to resume their upward march once again thanks to these bozos.

Wait until you see beef and pork prices later this spring and summer. You ain't seen nuthin' yet!

Gold - Choppy trading pattern continuing

Gold currently seems unable to better the level near $1750 which is proving to be rather stubborn. There appears to be a bit of a headwind arising from lingering fears about Greece and a potential slowdown impact on the global economy as debt issues remain in the back of traders' minds. That was trumped the other day by Chairman Bernanke's promise of another 18 months or more of free money but in today's session, apparently the effect has been somewhat muted. I am noticing that equities are lower today and the Dollar has managed a bit of a bounce with bonds moving up slightly off of their worst levels of the session and are now unchanged. One can spot the "risk aversion" trades in the session.

Trying to get a decent read on many of these markets is very challenging in this environment because there is an enormous tug of war from both the forces of deflation and the forces of liquidity. That has many traders sitting with their finger on the keyboard ready to run in either direction very quickly as what remains of conviction is generally easily swayed based on the latest headline or data release. The end result is that day traders are more at home rather than trend following systems which can easily be whipsawed and caught flatfooted.

On days like this I actually feel a bit sorry for the many newsletter writers who have to come up with some sort of baloney to explain price action in order to justify their subscription fees. Truth be told, sometimes there are just "a lot of fuss about nothing" days in the market when neither side (bulls or bears) really seems to have a clear edge and the markets end up marking time. This is the sort of environment which produces choppy trading patterns where floor locals make the majority of their income scalping or otherwise generally separating novice traders from their wealth.

Maybe we will ge something going later in the session. For now, the bulls are getting frustrated over their inability to beat back the selling at $1750. Support remains the same general region down near $1725 - $1720 where valued-based buying has been seen.

Silver Chart notes

Silver is responding to the "Free Money" environment being maintained by the Fed to keep the US economy limping along as it shot higher when the Dollar dropped lower and fell below the 79 level on the USDX chart.

It is once again knocking on the door of a heretofore very stubborn level of chart resistance that begins at today's high and extends into the region just north of $35. If silver is going to mount a breakout move and start a trend higher, the bulls must beat back the selling that is going to come in at this level. If they do, they have a very good shot at a rather quick move to $40.

Downside support is coming in from dip buyers who are currently attracted to the metal near $33.

Turning to the Dollar chart, note that the price has now decisively broken down below chart support at the 79 level.

Chairman Bernanke off the Administration Reservation

Someone needs to inform Ben Bernanke that he is not reading from the proper script. After all, he is employed there as head of the Federal Reserve courtesy of his boss, the President. One would think that he would get the memo to "help re-elect Obama" by spinning last week's fabrication, aka, the payrolls report, and spelling out in glowing detail how the President's policies are taking us all in the right direction and "not to muck things up".

Whoops - Bernanke went and did the exact opposite by basically confirming 100% what many of us have been saying about last week's government propaganda publication on the jobs situation here in the US. I am paraphrasing what his comments were this morning in front of the Senate Budget Committee but they were blunt and direct when he said that the 8.3% unemployment rate in January understated the real weakness present in the US labor market.

And what exactly did he say to prove this - Voila! the same thing many have been noting - it is a simple matter to manipulate this official number downwards if you stop counting people who have been dropped off out of the labor force. He spoke to the "unusually high level of long term unemployment" and noted that "we still have a long way to go before the labor market can be said to be operating normally". KERPLUNK! That was the sound of the Obama spinners' lies hitting the floor.

As I have stated before and will do so again - IGNORE all the political spin coming from the re-elect Obama friendly media and watch what the Fed does and what its members say in public. So what did they say this morning that should be noted? Interest Rates will stay near ZERO until late in 2014. That is all one needs to know about the TRUE state of the US economy. If things were improving at the pace that the Obamaites were assuring they were, we would not be getting any ZERO interest rate talk for another 2 years!

This is what got gold moving so strongly to the upside once again. Once those remarks began circulating, traders wasted no time responding in the exact same fashion they did when the FOMC first informed the hedge fund community that the speculative party was back on. Up went gold, down went the Dollar, into the toilet went the long bond and up went the commodity sector in general. What was this all about? Simple - the market took back all the losses that it incurred when fears arose that the payrolls number was so strong that it would signal an abrupt end to the FREE MONEY environment and would usher in the first interest rate hikes. That is a big no-no to these leveraged funds who want a green light to keep piling on the leveraged bets.

This news was once again large enough to overshadow any worries about Greece or any other sovereign debt problems out of Europe in the mind of traders. FREE MONEY trumps debt defaults any day.

Once the Dollar started getting thumped, gold and silver both moving higher with gold in particular loving the news. After all, there is little to no opportunity cost to hold and own gold in a zero interest rate environment.

On the technical price chart, gold had dropped into the support level I had noted on the chart and then violently spiked higher. That move has taken it right back up into the resistance zone near the $1750 level. Bulls need to clear this level and keep the price ABOVE $1750 to send it towards $1780. With the bears still reeling, thanks to Bernanke, it is going to take the deep pocketed bullion banks to stem the advance as the weaker shorts have run once again just as they did when the FOMC scared the hell out of them when it first announced the easy money policy would last for nearly another 2 years.

Trader Dan on King World News Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.

http://tinyurl.com/6s78s2t

Gold Bulls unable to break through resistance

Today's payrolls number, something which I might add is more akin to an Alice in Wonderland creation, was the factor responsible for the selling in both gold and in silver. The thinking was that if the economy is gathering steam at such a fast clip as the numbers suggest, then any notion of additional QE3 is a pipe dream. That means no Dollar debasement and little to fear on the inflation front so out came the sellers in the gold market. It also did not help the bullish cause that the market failed at a critical technical resistance level.

Between the two developments, longs who have had a nice run lately, decided to go ahead and take the profits while they were still there and wait for a better buy back in point. Short sellers looking for a top were also emboldened and made their presence felt as they have been on their heels lately due to the strong buying present in that pit.

The Euro gold chart also retreated from levels near its all time high so it looks like we have some confirmation from two different charts that a retracement is occuring. We will now wait to see where dip buying emerges and how much lower the shorts can press it.

Remember that copper chart that I posted yesterday noting the stall in upward momentum just short of the $4.00 level. Goodness - it looks like a veritable orgy of buying occurred in that pit today as copper put on a ridiculous 3%+. I am not sure who in their right mind wants to chase copper higher at these levels but with the hedge funds loading up on the red metal, that sort of thing does not matter much. I find it difficult to envision a rally in copper based off a payrolls number that is highly suspect when one digs below the headline number but who cares when the hedge funds algos start eating up all the offers.

Euro Gold comments

Once again, as has been the recent pattern in the gold market, gold priced in terms of the Euro, or "EuroGold", is putting in a very strong showing in today's trading session. If you note on the weekly chart, it has moved to within about 32 euros of its former all time high in price. Many traders/investors may be dismissing European Sovereign debt issues, but the gold market certainly has one eye on it.

I want to see how this market acts now that we are moving into these regions as this will be a decent barometer of sentiment towards the woes surrounding Europe. Any further escalation of issues associated with those problems will carry this market to the all time high. The flip side becomes if traders feel that the worst is over and is behind them.

I should point out that as gold nears this all time high in euro terms, it is also moving into a region where I expect it to encounter significant selling resistance in US Dollar terms, namely the zone near $1775 - $1780. That makes two separate charts showing two distinct resistance levels. If the bulls can power it through both levels, we will see a sharper move higher in gold. If it fails here, expect some longs to begin booking profits and liquidating longs while awaiting a lower buy back in point.

I find it noteworthy in today's session that two key markets that are heavily tied to liquidity conditions (risk on trades) both moved lower - Copper and Crude oil. Those markets bear close monitoring as they are closely attuned to sentiment towards the overall global economy and by inference, the risk trades and hedge fund money flows into the commodity sector in general.

Copper Chart:

As you can see copper has been moving higher in anticipation that the worst in the global economy is behind us and the Central Bank actions to provide liquidity would be forthcoming. Hedge fund managers have had a lot of money sitting on the sidelines since the end of last year and need to do something with it if they are going to show any profits for their clients. They have taken the price of copper $0.50/pound higher in a month's time but that has been on the expectation of improvements in demand. It appears that this might be as high as they can take it without some sort of actual evidence that demand for the red metal is really out there from anyone besides speculators. This market is notorious for big players taking the actual metal out of warehouses in one city and moving it to another in an attempt to paint a picture of strong demand so getting a read on it can sometimes be quite tricky. Still, the charts are showing a stalling of upside momentum just shy of $4.00. The fact that it has not been able to best this level yet in a convincing fashion is reason for pause in the commodity sector party that has been going on thus far this year.  While copper has not broken down technically on this price chart just yet, any failure to stay firm could signal that risk traders are having some second thoughts.

Crude Oil:

This chart looks heavy as it continues to reinforce the ceiling for crude just above the $100 mark. It is evident that without some sort of conflict in the Persian Gulf that the market will not tolerate $100 crude oil for long as the global economy is simply too sluggish. Crude has backed off from $100 once again and is now moving down towards the botom of its recent range near the $94 - $93 level. One would expect it to hold this level and move higher again if traders are convinced that liquidity measures will be sufficient to keep the global economy moving forward and prevent any slowdown or contagion effects from European debt woes. It might however take an actual burst of QE3 to take this market through $100 and hold it there. Watching this chart should help us get a feel for where hedge fund money is going in the immediate future.

I get the distinct impression from examining this chart that crude oil traders, after taking it above $100 on liquidity expectations and tensions with Iran, turned to each other in the trading pit and remarked, "Now what?".