Forex Outlook

In foreign-exchange trading, the dollar moved sharply higher against the euro, continuing the previous session’s rally. The dollar index (DXY:

US Dollar Index Future - Spot Price

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Last: 79.36+1.89+2.44%
5:09pm 09/30/2008
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DXY 79.36, +1.89, +2.4%) , which measures the U.S. unit against a basket of major currencies, stood at 79.447, up from 77.720 in late Monday trading. See Currencies.

On the equities side, the Amex Gold Bugs Index (HUI:

amex gold bugs index equal-$ weight

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Last: 314.24-6.86-2.14%
5:06pm 09/30/2008
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HUI 314.24, -6.86, -2.1%) lost 2.1% to close at 314.24 points.

The SPDR Gold Trust (GLD:

spdr gold trust gold shs

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Last: 85.15-4.42-4.93%
3:59pm 09/30/2008
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GLD 85.15, -4.42, -4.9%) lost 5% to finish at $85.10, the iShares Gold Trust (IAU:

iShares COMEX Gold Trust

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Last: 85.22-4.22-4.72%
3:59pm 09/30/2008
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IAU 85.22, -4.22, -4.7%) dropped 4.4% to close at $85.47 and the iShares Silver Trust ETF (SLV:

ishares silver trust ishares

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Last: 11.85-1.10-8.49%
4:00pm 09/30/2008
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SLV 11.85, -1.10, -8.5%) lost 8.5% to close at $11.85.

The Market Vectors-Gold Miners ETF (GDX:

market vectors etf tr gold miner etf

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Last: 34.29+0.29+0.85%
3:59pm 09
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GDX 34.29, +0.29, +0.9%) tacked on 0.6% to close at $34.19.

BY : Moming Zhou

Daily Pivots: (S1) 1.4300; (P) 1.4435; (R1) 1.4567
EUR/USD’s fall from 1.4867 resumes by taking out 1.4302 low and reaches as low as 1.4150 so far. Break of 1.4512 support confirms that rebound from 1.3881 has completed at 1.4867, below 1.4908 resistance as expected. At this point, intraday bias remains on the downside as long as 1.4429 minor resistance holds. Further decline is expected to be seen to retest 1.3881 low and 1.3851 key medium term support. On the upside, above 1.4429 will turn intraday outlook neutral first but another fall is still expected after recovery.

Read the rest of this entry »

Gold surges to as high as 932 today and the break of 926 resistance indicates that rise from 739.8 has possibly resumed. 4 hours MACD’s cross above signal line supports this too. Further rally is now expected towards 989.6 resistance first. On the downside, however, below 868.8 will indicate that Gold is still bounded in sideway consolidation that started at 926 and today’s rise is just a false break. In such case, further fall should be seen to retest 828.5.. Nevertheless, downside should be contained above 793.60 support and bring rally resumption.

In the bigger picture, strong rally from 739.8 indicates that whole correction from 1033.90 has already completed with three waves down to 739.80 after being supported by key medium term support of 732, with 61.8% retracement of 546.40 to 1033.90 at 732.63 and 138.2% projection of 1033.90 to 846.40 from 989.60 at 730.48. Sustained trading above 55 days EMA (now at 964.59) adds more credence to this case and further rise should be see to retest 989.60/1033.90 resistance zone. Though a break below 793.8 support will dampen this view and turn outlook mixed.

In the long term picture, the multi year up trend from 260 (01 low) is still in good shape. Gold is still holding well above 55 months EMA (now at 610.28). The three wave structure of the fall from 1033.9 to 73.98 indicates that it’s merely a correction only. Also, such correction was contained above key long term fibo level of 38.2% retracement of 260 to 1033.9 at 738 level. Hence, the long term up trend is still expected to extend further.

Comex Gold Continuous Contract 4 Hours Chart

Comex Gold Continuous Contract Daily Chart

Comex Gold (GC)
By : Oilngold

Action Insight Mid-Day Report
Euro dives sharply in early US session as markets get more bad news from European financial sector. France and Belgium are believed to be leading a state-backed rescue of the world’s largest lender to local government, Dexia SA. Belgian Prim Minister Leterme said that Dexia will receive $9.2b to shore up its capital after its shares had a record decline yesterday. This, in addition to the still fresh news of failure of Belgian Fortis, UK B&B and German Hypo Real Estate, is raising concern that problems in Europe might not be much better than that in the US. EUR/USD dived to below 1.42 level and the development is so far consistent with the technical view that corrective rebound from 1.3881 has completed at 1.4867 already. Further downside is expected to be seen to retest this low at least.

US President Bush warned in early US morning that the US economy is depending on decisive actions from the government or the economic damage could be “painful and lasting”. Presidency candidate McCain and Obama urged Congress to redouble efforts to save the financial system bailout. Stocks rebounded after yesterday’s historical sell off following surprised rejection of the $700b bailout plan by House. The Japanese yen gives back some against but remains generally firm.

The economic calendar is very busy today but markets paid little attention to the load of data released. US S&P Case-Shiller dropped more than expected by -16.3% yoy in Jul. Chicago PMI dropped less than expected to 56.7 in Sep. Conference Board Consumer Confidence improved more than expected to 59.8 in Sep. Canadian GDP was surprisingly strong, rising 0.7% mom in Jul. UK Q2 GDP final was revised higher from 1.4% yoy to 1.5% yoy. Gfk consumer sentiment improved from -36 to -32 in Sep. Eurozone HICP flash moderated to 3.6% yoy as expected. Germany unemployment rate was unchanged at 7.6% in Sep. Australia retail sales posted stronger than expected gain of 0.3% mom in Aug. Japanese manufacturing PMI dropped further to 44.3 in Sep. Household spending dropped much fore than expected by -4% yoy in Aug. Unemployment rate rose more than expected to 4.2% in Aug. Industrial production fell -3.5% mom, -6.9% yoy in Aug. Housing started rose 53.6% in Aug.
By ActionForex

World investors are deeply concerned with the widening of financial crisis after the unexpected rejection of US $700b bailout plan sent DOW to a historical fall yesterday. Asian and European stock markets open sharply lower today. Though, follow through selling is not apparent and the markets recover mildly instead. Yen crosses are still holding above Sep’s low and recovers mildly after edging lower earlier today. Dollar remains bounded in range against European majors.

There are a large amount of uncertainty for the moment, depending on how Bush and colleagues will modify the plan before House meets against on Thursday. The vote was just 228 to 205 and some cosmetic changes might be good enough to win 13 votes to get the bill passed. On the other hand, the Senate might vote the the bill first on Wed and then send it over to the House but some Senates has already expressed that they have no inclination to take up a bill without being certain of its fate in the House. In addition, markets are starting to speculate an intermeeting 50bps cut from Fed if no progress is seen this week. Indeed, speculations went even further for a coordinated 50bps cut from world central banks which could include BoE, BoC and RBA. With the amount of uncertainty lying ahead, sentiments of investors could flip either side as things develops

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Markets’ focuses seem to be turning to the Japanese yen as risk aversion is back following European Government’s actions on Fortis, Hypo Real Estate, B&B and Giltnir. US stock markets are set to open sharply lower despite the progress on TARP. Fortis bank was injected 11.2m Euro by governments of Belgium, Netherlands and Luxembourg after take over talk with BNP Paribas and ING broken down. German bank Hypo Real Estate Group will receive 35b euro in emergency funding from a group of GErman private banks and the government’s after suffering heavy losses in mortgage lending in the US. Bradford & Bingley, the UK’s largest mortgage lenders, become the second UK bank after Northern Rock to be nationalized and was seized by the government after credit crisis shut off funding and clients struggling to repay mortgage. Icelandic Central Bank acquired a 75% stake in Giltnir bank for 600m euro to avoid the bank to fail within weeks. Citigroup also accnounced that they will acquire the banking operations of Wachovia in a deal facilitated by the FDIC.

In short, the global financial crisis is widening and it seems that the problems are spreading over to Europe. Investors are deep alerted and sent the Asian and Europe stocks sharply lower today. US stock markets are also set to gap lower. The Japanese yen is benefited from risk aversion and surges broadly in crosses and could extend gains further depending on the development in US stocks.

Dollar remains firm against major rivals in early US session as markets are awaiting House approval of the finalized $700b TARP. In a press conference this morning, Bush urged lawmakers to pass the so called Emergency Financial Stabilization Act. He said the the bill would give the US government’s to tools to stabilize the financial system and help the economy to return to its strength in the long run. Fed Chairman Bernanke said in a statement that he welcomed the package and look forward to ’swift passage’ of the legislation. The plan is expected to pass House today and Senate by latest Oct 1.

Economic data released today saw US PCE core accelerated to 2.6% yoy in Aug. Headline PCE moderated slightly to 4.5% instead. Personal spending was flat versus consensus of 0.2% growth while income beak expectation by growing 0.5%. Eurozone sentiments were steadily bad in Sep. Economic sentiment dropped less than expected to 87.7 while consumer confidence was unchanged at -19. New Zealand Trade deficit came in narrower than expected at -750m in Aug. Japan retail sales rose more than expected by 0.7% yoy in Aug.

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Although the $700B rescue package will likely be passed soon, failures of financial giants across the Atlantic indicated that economic slowdown is contagious and the worst of all is that we are like driving in fog - we have no ideas on how bad the situation would be and how many more banks will fall down.

Crude oil November futures plummeted by 6.6% 99.8 in the beginning of the week due to dollar’s strength as well as weakened demand outlook. As price broke below 101.95, outlook turned bearish and we believe that rebound from 90.51 has possibly completed. Initial targets would be 95.88 and then a retest of 90.51 low.

Although there’s increased possibility that the $700B bailout package will be passed soon, investors remained skeptical on how effective the plan can help the disastrous crisis. At the bottom of our heart, we know that the bill will be passed, yet, we believe it will only delay the meltdown rather than curb it. Therefore, demand outweighing supply is still a problem.

There are more signs showing deteriorating economies. The US consumer spending (August) released today was the worse figure in 6 months. The growth was flat, worse than market expectation of +0.2%. On another side of the Atlantic, Belgian banking Fortis received a $16.4 billion bailout from Belgium, the Netherlands, and Luxembourg. Bradford & Bingley, the UK’s biggest mortgage lender, is to be nationalized. The government will be take control of its $92B in mortgages, and sell its branches and $39B in deposits to Spain’s Santander for $1.1B.

USD strengthened amid likely successful resolution of the US bailout plan. Trading at 1.4417 again Euro, the dollar regained 2.8% from last week’s low. This contributed much of the decline in oil price.

Moreover, the UN Society passed a resolution against Iran confirming that Tehran’s nuclear programme was peaceful in nature. The exemption of Iran from being sanctioned eased geopolitical tensions and thus relieved upward pressure on oil price.

Gold price movement showed divergence from oil recently. As we have been emphasizing, precious metals normally shine during times of economic uncertainly. Surged by $25/oz to as high at 913, gold is trying to re-test near term high 926. Although outlook for gold remains strong, only break above said resistance would confirm recent consolidation has completed and further upside to 977 and 989.6 would be seen.

The flight to safe-haven ahead of bailout vote indicated investors’ doubt towards the plan. In fact, the plan is not only insufficient to resuscitate the worsening economy but would increase debt burdens of the US government in the future.

USD’s strength would be short-lived. It’s expected the Fed would cut interest rate more aggressively. For a long period of time, USD has appreciated when US real rates were high and depreciated when they were low or even negative. Therefore, from an interest rate perspective, USD’s outlook is vulnerable.
by : oilngold

Action Insight Daily Report

Dollar gapped higher as the week opens on the news that President Bush and Congressional leaders agreed on the $700 bailout plan finally. The plan, Emergency Economic Stabilization Act of 2008, is expected to pass House today and Senate by Oct 1. The announcement eased the fears that further financial markets disruption in the US would be seen, at least in near term.

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Oil fell more than $1 to below $107 a barrel on Friday, reversing the previous session’s gains of more than $2, as investors took profit on uncertainty over the U.S. government’s $700 billion rescue plan.

Traders said oil’s gains on Thursday were largely driven by news that U.S. lawmakers appeared close to a final agreement on the massive bailout plan, a deal that could help the world’s largest energy-consuming nation avoid a deep recession that would cut deeply into fuel demand.

But the deal to rescue the faltering U.S. financial system stalled on Thursday amid bickering between Democrats and Republicans.

NYMEX crude for November delivery fell $1.32, or 1.2 percent, to $106.70 a barrel by 0156 GMT, after rising $2.29 to settle at $108.02 on Thursday.

London Brent crude fell $1.13 or 1.1 percent to $103.47.

Oil has gained about 11 percent so far this year on geopolitical tensions between Iran and the West, supply disruptions in Nigeria and a falling U.S. dollar, but it is still 27 percent below the record price of over $147 hit in mid-July.

“Oil is down because traders are taking profits,” said Ryuichi Sato, an analyst at Mizuho Corporate Bank in Tokyo.

“The delay in the bailout plan is bearish for crude markets. There is no confidence in the U.S. economy and traders are worries about the energy demand outlook.”
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Daily Pivots: (S1) 1.4523; (P) 1.4646; (R1) 1.4730

EUR/USD continues to trade with a soft today but is still supported above 1.4542 so far. Nevertheless, with 4 hours MACD staying below signal line, intraday bias remains mildly on the downside as long as 1.4700 minor resistance holds. Break of 1.4542 support will be the first indication that rebound from 1.3881 has completed. Further break of 1.4150 support will confirm this case and bring retest of 1.3881 low and key medium term support at 1.3851. On the upside, while another rise cannot be ruled out, since rebound from 1.3881 is treated as correction to fall from 1.6038 only, upside is still expected to be limited by 1.4908 resistance and bring fall resumption.

In the bigger picture, medium term up trend from 1.1639 has completed at 1.6038, after a double top reversal pattern (1.6019, 1.6038) and subsequent decisive break of medium term rising trend line support. A short term bottom is in place at 1.3881, above key medium term support at 1.3851 (50% retracement of 1.1639 to 1.6038 at 1.3839). Rebound from there is treated as correction to fall from 1.6038 only and is expected to complete in 1.4629 and 1.4908 resistance zone. The whole decline from 1.6038 is still expected to extend further after completing the correction. Sustained trading below 1.3851 will indicate that fall from 1.6038 has resumed to next target of 61.8% retracement of 1.1639 to 1.6038 at 1.3319 first. On the upside, sustained break of double top neckline resistance at 1.5284 is needed to confirm decline from 1.6038 has completely finished. Otherwise, medium term outlook will remain bearish.