Investors are clearly nervous over the fall out of losses by bears sterns and an Irish hedge fund. This resulted in gold, silver and copper falling only to recover thereafter towards the close and edge higher. Carry traders once again prevented commodities and equities from a fall as yen nears 125.0. It’s all about carry trades for thetime being of lack of major market moving news. Global interest rates scenario is benign for the rest of 2007 which will only support carry traders. The only question is the tolerable limit of euro’s weakness against the yen by the European central bank (ECB). For the time being I do not that the ECB will be concerned over euro’s gains against the yen as the eurozone services has been showing continuous signs of improvement. Loss of exports in eurozone is being substituted by growth in services sector in eurozone. Only when the services sector in eurozone shows a decline that the ECB may intervene verbally to stem yens weakness. Till then major unwinding of carry traders in the short term seems like a mirage in a desert.
Markets will be looking forward to the next weeks Fed meeting with retail investor sitting on the sidelines. All the good news on US economy and interest rates has been factored in by the markets. If the Fed disappoints the US dollar could see a major decline in July to September quarter and gold and silver some sharp gains.
COPPER -- JULY FUTURE
It needs to break $344 and $347.40 for $351.55. $351.51 is the key resistance and only a break of the same will result in losses to $360.30. On the lower side $336.90 and $331.30 are supports.
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