Notes From Underground

The BOC raised rates 25 basis points today as it attempts to remove the stimulus it provided while the world financial system was under extreme stress. The statement from the bank was mildly hawkish and because the market was unsure of the bank’s intensions, the LOONY went immediately bid. An hour later, the IVEY PMI was released and the data was much more robust than anticipated. All in all a very positive day for Canadian fundamentals.

The commodity markets are also adding support as the energy and metals sectors are holding nicely and the grain markets continue to rally as some previous exporters are now hoarding for fear of running short. Are commodity markets set for another round of appreciation? It seems as if demand is increasing and we have run into supply problems. We are watching COPPER because it is critical to the global growth story. The red metal has performed well as of late and we will watch to see if the rebuilding effort in New Zealand will give it a further boost. As always, we advise doing your technical work and finding the best reward with the least risk for whatever time frame you choose.

Another indicator for the grain markets is BUNGE, which is a huge publicly traded global grain power. The week of July 26,2010, Bunge came out with weak earnings which led to a $10 drop in the stock price. The market is currently testing the high of that week made before the break of the poor earnings. This may well be the precursor of the inbalance of demand/supply in the global grain markets. These are all FUNDAMENTAL signs aiding the recent strength in the commodity currencies.

We will be off for the next two days and will return sometime on Sunday. To all who celebrate the Jewish New Year, may you have a happy and healthy year. For all those who don’t partake of the Jewish New Year, we wish you the same—-Yra

Tags: Bank of Canada, Bunge, copper, fundamental, Ivey PMI, Loony

This entry was posted on September 8, 2010 at 9:27 am and is filed under Canada, Commodities. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.