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Jim Wyckoff's Morning Report: Chinese Yuan Falls Dramatically Against US Dollar

28 February 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The Chinese currency, the yuan, fell sharply against the U.S. dollar Friday—the steepest one-day decline in nine years.

The drop in the yuan helped to pressure gold prices Friday. With gold priced in dollars on the world market, the weaker Chinese currency makes it more expensive for Chinese citizens to buy gold. China is the world’s largest consumer of gold. It appears the Chinese government is manipulating its yuan for world trade advantages and to punish currency speculators trading the yuan.

Meantime, the Euro currency rose Friday following a European Union inflation report that came in slightly higher than expected. Consumer prices in the EU rose 0.8%, year-on-year, in February. That reading still does not match the European Central Bank’s inflation target of 2.0% a year, however. The ECB holds its monthly meeting next Thursday.

The crisis in Ukraine is still a worry to the market place. Gunmen have reportedly taken control of two airports in Crimea. The country is on the verge of financial collapse and needs funding soon from outside sources. It does appear the International Monetary Fund is moving quickly to provide funding to the Ukrainian financial system. If this situation escalates it would put even more risk aversion into the world market place, which would likely be bullish for gold and U.S. Treasuries and bearish for equities.

U.S. economic data due for release Friday includes the gross domestic product report, the ISM Chicago business survey, pending home sales, and the University of Michigan consumer sentiment survey.

Wyckoff’s Daily Risk Rating: 6.0 (The Ukraine uncertainty is keeping some risk aversion in the market place heading into the weekend.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

--Jim

U.S. STOCK INDEXES

S&P 500 futures: Prices are slightly lower in early U.S. trading today, on mild profit taking. Prices are hovering not far below this week’s record high. The bulls have the solid overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at the record high of 1,856.50 and then at 1,865.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 1,830.00 and then at 1,817.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 5.0

Nasdaq index futures: Prices are slightly lower early today on mild profit taking. Prices are not far below this week’s 13.5-year high. The shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is located at this week’s high of 3,706.70 and then at 3,720.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 3,675.00 and then at this week’s low of 3,655.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 4.5.

Dow futures: Prices are weaker in early U.S. trading on profit taking. Bulls still have the overall near-term technical advantage. Buy stops likely reside just above technical resistance at this week’s high of 16,277 and then at 16,300. Sell stops likely reside just below technical support at 16,200 and then at Thursday’s low of 16,150. Shorter-term moving averages are bullish early today, as the 4-day moving average is above the 9-day and 18-day. The 9-day moving average is above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early today. Wyckoff's Intra-Day Market Rating: 4.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are lower early today on profit taking after hitting a four-week high overnight. Bulls still have some upside technical momentum. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 134 27/32 and then at the February high of 135 3/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 134 5/32 and then at 134 even. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

March U.S. T-Notes: Prices are weaker early today on profit taking after hitting a three-week high overnight. Bulls still have some upside technical momentum. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 126.13.5 and then at the February high of 126.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 126.00.0 and then at 125.22.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

U.S. DOLLAR INDEX

The March U.S. dollar index is solidly lower early today and hit a two-month low overnight. Prices are in a four-week-old downtrend on the daily bar chart. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at 80.000 and then at 80.150. Shorter-term support is seen at the overnight low of 79.830 and then at the December low of 79.500. Wyckoff's Intra Day Market Rating: 3.0

NYMEX CRUDE OIL

April Nymex crude oil prices are near steady early today. Bulls still have the overall near-term technical momentum. This week’s pause is not bearish. A steep seven-week-old uptrend is still in place on the daily bar chart. In April Nymex crude, look for buy stops to reside just above resistance at $103.00 and then at this week’s high of $103.45. Look for sell stops just below technical support at the overnight low of $101.87 and then at $101.58. Wyckoff's Intra-Day Market Rating: 5.0

GRAINS

Markets were narrowly mixed overnight. The grain market bulls are fading, technically, late this week. Lower price closes on Friday would begin to signal near-term market tops are in place for the grains. Focus will soon turn from South American crop harvest and yields, to the U.S. planting season and any potential planting delays.

TheCropSite News Desk

IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%): 1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.



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