Oil continues to flash deflation signals as no matter how much producers cut production demand just continues to slide. Crude futures closed down $3.23 at $37.60, a fall of 7.9%. Just a week ago we ere flirting with $50 after that very short-lived reflation boomlet in the first few trading sessions of 2009. Since then we’ve seen European industrial production come in even lower than expected, US employment rise to its highest level since the early 1990s and China’s imports of raw materials and machine tools fell off a cliff.
It looks as though an extended global recession will keep commodities low and risk aversion high for the foreseeable future. Look to take advantage of EUR/JPY rallies to take advantage of that trend. Fade rallies to 120.00 near-term. We trade now at 119.25.