The lackluster trade in the markets continued overnight with no real movement in commodities and equities. This is most likely because of the lack of fresh news and the fact that most commodity and equity markets have reached short-term retracement areas which have more or less neutralized them.

Overnight a pair of central banks announced no changes in their interest rate policies The Bank of England left rates alone while calling for the economy to be sluggish while it attempts to recover. The Swiss National Bank also left interest rates alone but reemphasized that it will take “firm action” if the Swiss Franc appreciates too much against the Euro. The SNB’s biggest fear is deflation.

With nowhere to go with interest rates and quantitative easing and additional stimulus on hold while the global economies begin to recover from the recession, what central banks say is going to take on more weight than what they do. Take for example the Bank of England’s comment that the economy will be sluggish. This is putting downside pressure on the September British Pound this morning. The SNB comment that it will take “firm action” is keeping the September Swiss Franc in a flat trade overnight.

Recently the Bank of Canada commented that the high price of the Canadian Dollar may have a negative effect on exports at some time in the future. Although they expressed no critical concern at this time, just to mention that they were monitoring the price level has been enough to drive the September Canadian Dollar down over the short run.

This brings us to next week’s Fed meeting on June 24th. Like the other central banks, the Fed is not expected to do anything with interest rates nor announce additional quantitative easing plans. It will, however, provide an official statement to investors around the world on what it intends to do during the second half of the year. With no meeting scheduled until August, this meeting’s comments will take on additional weight.

Following May’s lower than expected Consumer Price number, many investors are now calling for the Fed to break from its plan to raise rates by the end of September to perhaps stall the rate hike until early next year. Whatever it decides will have a major impact on the long-term structure of the markets for the next 6 to 9 months. This is why I feel this report will be the most important of the year.

Continue to expect lackluster trading until the Fed news is released. This may mean more sideways and choppy action until June 24th while traders and investors reevaluate long-term positions. After this FOMC meeting, traders will have more direction as to how to approach the market.

September Treasury Bonds and Notes are trading lower overnight. It looks as if the short-term rally may be stalling ahead of today’s release of next week’s Treasury auction plans.
September equity markets had a volatile trade last night. The September E-mini S&P 500 ping-ponged between resistance at 913.25 and support at 903.75. Breakouts of these two numbers will likely dictate the direction of the markets today.

The U.S. Dollar is trading mixed. The September British Pound is down on the news that the Bank of England feels the economy will be sluggish. The September Euro and September Canadian Dollar are feeling slight pressure as traders fear too much appreciation will hurt their respective economies.

August Gold and September Silver are trading flat to better. Yesterday’s U.S. inflation news seems to have already been priced into the markets following the recent declines. Although these markets have reached major retracement levels, traders will be reluctant to climb aboard after having been burned twice this year on attempts to break through the $1000 barrier in gold.

The sideways action in the Dollar and the Euro is triggering similar action in the September Crude Oil market. Prices are being held up by hedge fund speculators as the fundamentals still suggest an abundance of crude oil. Until these two currency markets move, look for the sideways action to continue.

The excessive rain we been seeing in the Midwest has helped support November Soybeans but have pressured December Corn. A bean rally can erupt as wet fields have prevented farmers from completing the planting of soybeans. This means a much smaller crop than anticipated. The rain on the other hand has been beneficial to the corn crop. A stronger Dollar may limit gains.

The Softs Complex is under pressure. The combination of the stronger Dollar and excessive speculation has killed the rallies in Cocoa, Sugar and Coffee. December Cotton could begin to feel hard downside pressure if the crop continues to improve and exports drop because of the strong Dollar. October Sugar is not likely to rise until India lifts its ban on forward contracts.

Look for sideways action for the next week as traders stand aside from taking large positions in the markets until they get direction from the Fed. In the meantime, trading could get volatile as thin trading conditions will allow traders to play both sides of the range.

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