Currency: The Bank of Japan’s monetary policy committee announced last night they will be making no changes to their policy of easing and expansion. They are committed to raise inflation from zero to 2% and will so with quantitative and qualitative easing. I’m looking for the Yen to make the next leg lower soon. The Yen has been rising against the Euro just like the USD has been gaining value on the Euro. This in turn has been keeping the JPY/USD rate relatively stable. I think once the EUR/USD can find a little bit of stability the Yen goes lower against the US Dollar
The Euro is trying to find support after trading to 1.0500 yesterday. I expect short covering and profit taking heading into the conclusion of the FOMC meeting tomorrow. I am not expecting rate hikes tomorrow but many in the trade are expecting the Fed to provide more guidance on their plans for increases in interest rates. I think we can rally a little bit off these lows but eventually make our way to par in the next few months. We have not made a trade recommendation yet in Turner’s Take Daily, but when we do it will be buying put spreads and financing them with call spreads.
June Euro Chart:
Grains: Reports this morning that China bout 600,000 tonnes of corn from Ukraine is putting pressure on US corn prices. Corn is starting to break out below its channel which is surprising considering the Planting Intentions report is just two weeks away. I think we find some buying support and short covering next week, but for now the bears have control.
Soybeans and Wheat are also lower. The theme in soybeans remains the same. Large South American harvest, strong US Dollar, and large expected US new crop soybeans continue to bring out sellers. I am surprised Wheat is down as much as it is. The crop conditions for wheat, especially in Kansas, were worse than expected and should have been support for wheat today.
We have on put spreads in November soybeans and short straddles in December corn in Turner’s Take Daily to reflect our bearish views on beans and neutral opinion of corn.
Energy: Crude continues to head lower as the trade expects higher inventory numbers. Reuters: Crude oil weaker, higher U.S. inventory expected. At this pace of production many are estimating storage will be filled by May at Crushing, OK (storage for the exchange). After this happens, many are wondering what will happen to the excess crude. Will producers flood the market, will producers stop pumping, or will production keeps on going and new storage options are utilized.
I think as long as oil companies have an incentive to pump crude that they will. If storage gets to capacity at the exchange, there will be an incentive for large traders and institutions to take delivery, find ways to store crude, and sell the deferred futures while arbitrage is still profitable. If that is the case, then the crude spreads head lower as does the flat priced futures. We are bear spread in crude in Turner’s Take Daily and will continue to hold the position.
May Crude Oil:
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