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Only Limited Flight to Quality Flows into the U.S. Dollar

by Archer Financial Services | Aug 10, 2017
By Alan Bush | Senior Financial Economist at ADMIS     


STOCK INDEX FUTURES

Futures are lower as tensions between the U.S. and North Korea showed few signs of easing. 

Initial jobless claims, increased 3,000 to a seasonally adjusted 244,000 in the week ended August 5. Economists expected 240,000 new claims. 

The producer price index decreased a seasonally adjusted .1% in July from June. Economists had expected the index to increase .2% last month. From a year ago, prices advanced 1.9%.

The index for core prices, which excludes food and energy, dropped .1%. Economists had anticipated an increase .2%. From a year earlier, core prices increased 1.8%.

Heightened geopolitical tensions will only temporarily get in the way of this bull market.

The main trend for stock index futures is higher. 

 

CURRENCY FUTURES

In light of the ongoing tensions between the U.S. and North Korea, there appears to be only limited flight to quality flows into the U.S. dollar, which should be viewed as a sign of weakness.

The main trend for the greenback is lower, as interest rate differential expectations remain bearish.

The main trend for the euro currency is higher as speculation remains that the European Central Bank could announce plans to wind down its quantitative easing program this year, possibly at its September 7 policy meeting.

U.K. industrial production grew unexpectedly in June.  Industrial output rose .5% on the month in June, which surpassed expectations of a decline .2%.

Flight to quality buying continues to support the Japanese yen.

The Canadian dollar and the Australian dollar are higher due to stronger crude oil prices. 

 

INTEREST RATE MARKET FUTURES

Treasury futures are steady to higher as a result of escalating tensions between the U.S. and North Korea, which spurred buying of safe haven assets.

The Treasury will auction 30 year bonds today.

At 9:00 central time New York Federal Reserve Bank President William Dudley will deliver opening remarks and join a panel of New York Federal Reserve economists.

Because of rising geopolitical tensions the probability of a fed funds rate hike has declined this week from the 50% area last week.

The probability that the Federal Open Market Committee will increase its fed funds rate at the December 13 meeting is 44%, which is unchanged from yesterday.

The long term fundamentals for futures are mixed.

 

SUPPORT AND RESISTANCE

September 17   S&P 500

Support    2456.00       Resistance    2476.00

 

September 17   U.S. Dollar Index

Support    93.310         Resistance    93.750

 

September 17    Euro Currency

Support    1.1713         Resistance    1.1807

 

September 17    Japanese Yen

Support    .90850         Resistance    .91470

 

September 17    Canadian Dollar

Support    .78550         Resistance    .79110

 

September 17   Australian Dollar

Support    .7855           Resistance    .7921

 

September 17   Thirty Year Treasury Bonds

Support    154^4          Resistance    155^8

 

December 17   Gold

Support    1277.0         Resistance    1295.0

 

September 17   Copper

Support    2.9150         Resistance    2.9400

 

September 17   Crude Oil

Support    49.33           Resistance    50.55

 

For more information about these markets, please contact Alan at 312.242.7911 or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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