Losing Their Luster?

Losing their Luster?: Copper plunged today, making a limit down move early in the session, with little buying support found to close out the day. The metal markets have been driven by speculation rather than fundamentals over the past couple of months and volatility in these markets has forced the exchanges to raise margin requirements multiple times. Over the past two years, copper has more than doubled to its highest price ever, and gold has jumped to a 26 year high, while stocks and bonds have remained stagnant. This rally in the metals has contributed to rising global demand and brought many willing investors into the commodities markets. Some news contributing to a less bullish outlook came in the form of successful negotiations between workforce and management at both Inco Ltd., which inked a 3-year deal and Alcoa Inc., which ratified a new 4-year contract. Gold fell on concern that rising interest rates will ignite a boost in the value of the dollar and reduce the precious metal's appeal as an alternative investment to U.S. stocks and bonds. July Copper closed at 3.4710, down 15.4 cents for the session. Scott Snyder XPRESSTRADE analyst

FX market update by Mark Smyth XPRESSTRADE analyst: The FX markets had that "calm before the storm" feel today, as traders looked ahead to tomorrow's non-farm payroll number. Most expectations center around a figure of 150,000 for May. As this is arguably the most important monthly figure, the figure is considered to carry more weight than normal this time, given the current undecided and "data dependent" mood at the FOMC. Although the fed funds futures market is leaning towards another .25% move in June, a particularly strong or weak number tomorrow could easily skew the equation. After June's NFP, the next major figure will be May's core consumer price figure, which is due on June 14th.

The Australian Dollar was the biggest mover today among the majors in a relatively calm session. In the spot market overnight, the Aussie fell under technical trading pressure and dipped below the 200-day moving average; a directional move which was not countered at the U.S. open. The lack of recovery in the June futures contract had analysts looking for possible explanations. One reason put forward for the Aussie's sluggishness today is the slightly elevated sense that the U.S. Fed will raise rates again in June, which would provide the greenback with additional yield support. Others site a soft metals market today, which is often strongly correlated with the Australian Dollar. These factors, along with some technical trading in the spot market, combined to pressure the Aussie during the U.S. session. The June futures contract gapped down 68 ticks to open at .7450, reaching a low of .7436, before closing the day at .7471.