"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, May 8, 2014

ECB President Draghi Talks Down the Euro

Apologies for the lateness of the comments. It has been a busy day.

The big market movement today was in the Euro as Mario Draghi went out to meet reporters following the ECB's meeting. As many of us suspected, he apparently has been getting an earful from disgruntled European exporters and manufacturing interests and proceeded to waste no time in affirming that the ECB would be willing to take action to stave off deflationary pressures in the Eurozone, if necessary, in their June meeting.

Inflation pressures have been persistently low there and that has the Central Bankers concerned. ( Personally I think it is a great thing but I am not a Central Banker ).

That was all that was needed to see the Euro get kicked in the teeth and down she went. I am constantly amazed in this world of fiat currencies, how easy it is for Central Bankers to move their currencies around by just opening their mouths and uttering some words. It is almost like watching a magician utter some magical phrase before he levitates a beautiful assistant into the air.

The Euro, which had been knocking on the door of the key 1.40 level, was bashed lower falling through 1.39 in the process and below 1.385 before managing to bounce somewhat.

Whether Draghi's comments are enough to reverse its uptrend remains unclear for now but for the short term, at least for today, he accomplished what he wanted. If the Euro falls as low as 1.38, it is going to be interesting to see whether or not bulls will come in and buy it there or whether they are convinced that the ECB is going to come in with either an interest rate cut next month or something more potent, such as their own version of QE. The sense I am getting at this point is that it is going to take some economic data releases which show some sort of constriction in the Eurozone due to currency strength before the ECB gets too aggressive. Time will of course tell.

I put up the Euro chart to show the currency's resistance zone which begins near 1.395 and extends towards 1.40. Downside support is slightly above the 1.38 level with another support zone closer to 1.375.

The fall in the currency sparked a bit better reaction to the upside in Euro gold which moved up 0.51% today compared to a mediocre 0.05% gain in Dollar gold.

Gold was rather comatose the entire session, as were the shares. The strength in the Dollar kept it from moving sharply higher but lingering concerns out of Ukraine continue to support it.

Silver did not fare too well as it works closer down to key support near $19 once again.

Friday's have been anything but calm in the precious metals complex as how traders view the geopolitical situation in Ukraine has been the factor that either generates a strong wave of short covering ahead of the weekend or a wave of long liquidation. Neither bull nor bears seem to want to push their luck with that mess going on over there and with neither side knowing for certain whether things are calming down or heating up. I guess it will continue this way until perhaps later in May when we get that vote although Russia seems to be trying to have that postponed or put off to ratchet down the tensions there.

The big mover tomorrow will be in the grains when USDA comes out with another of their reports which are notorious for producing wild price swings across the entire sector. That is due out at 11:00 AM CDT.  We will know what the market thinks of the report about 30 minutes after it is released when the algos are through playing with them. I will give a report on the grains tomorrow.

There is not much else for me to say today so I will leave it at that except to say "Go Spurs".

I don't have a dog in the hunt between the Nets and the Heat.