Oil price continued hovering around $53 level Thursday. Near-term outlook on price is mixed as there are good and bad news surrounding us. On the positive side, the Fed committed up to $800 billion on Nov 25 in addition to the previous $750B to unfreeze credit for homebuyers, consumers and small businesses. It will also buy debts. The people’s Bank of China announced to cut lending and deposits rate by 1.08%, hoping to put a floor in China’s growth. As the largest and second largest oil consumers in the world, investors hope the policies adopted by the US and china would stimulate corporate and consumer activities which hence increase demand in oil.

However, on the negative side, The US Energy Department reported crude oil inventory gained by 7.3 mmb on the week ended Nov 21. The addition was really out of expectation as both Bloomberg’s and Platts’ survey expected gain of around 1 mmb. The report indicated that analysts still overestimated demand. We expect more and more downgrades in oil price follow.
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Mid-Day Report: Euro Extends Losses, Dollar Rebounds Further
Euro extends earlier losses after the release of record drop in inflation and rise in unemployment that spurs speculations that ECB could cut deeper than 50bps next week. EU/USD breaches 1.27 level briefly while EUR/GBP extends the correction that started at 0.8660, heading to 0.824 level. EUR/JPY is pressing 121 level. Dollar, on the hand, strengthens generally against most currencies except the yen. Dollar index’s break of 86.43 resistance argues that correction from 88.46 has completed and more upside could be seen to retest this high. Data released in US session saw Canadian trade surplus narrowed to 5.64b in Q3. Oct PPI was flat mom.

Eurozone inflation posted a record drop in November with HICP flash estimate sank further to 2.1% from 3.2% in October. After being above ECB’s target of 2% since Sep 07, inflation is now very close to such target. Unemployment rate came in at 7.7% for October, the highest level in 2 years (consensus: 7.6%). The number of jobless people jumped by 225K to 12 million. Among the 15 nations, Spain got hit the most, with unemployment rate rose to 12.8% in October (Sep: 12.1%, October 07: 8.5%), while Germany recorded a 7.1% rate in October, which is the same as September’ data and declined from 8.1% a year ago and unchanged from. September’ unemployment rate was also revised upward to 7.6% from 7.5%. While a 50bp cut is fully expected from ECB on Dec 4, there’re increasing speculations of a larger cut considering faster than expected deterioration of the economic outlook and moderation of inflation.

Earlier today, Japan released a number of economic data which indicated the nation is in deepening recession. Manufacturing PMI for November fell to 36.7 (Oct: 42.2), the ninth consecutive fall and a record low since the survey started in 2001. Concerning the components, output index fell to 30.9 from 39.7 a month ago, its sharpest fall ever. New orders plunged to 27.3 from 34.5 while new export orders also fell to 31.1.

Household spending fell -3.8% in October on annual basis worse than -3.4% as market expected. Though better than expectation, Japan retail sales still dropped 0.6% in October from a year ago and marked the decline for the second month. Accounting for more than 50% of Japan’s GDP slowdown in consumer spending signaled the nation will take longer to recover from recession. Unemployment rate fell to 3.7% in October, much lower than economists’ forecast of 4.2% and set a one-year low.
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Comex Gold (GC)

At this moment, Gold is still struggling below mentioned 824.5/838.8 resistance zone. Outlook remains unchanged. Intraday bias remains mildly on the upside as long as 786.20 minor support holds. Decisive break of mentioned 824.5/838.8 resistance zone will be an early alert that whole correction from 1033.9 has completed and stronger rise should then be seen to test 936.3 resistance first. However, on the downside, failure below 824.5/838.8 , followed by break of 786.20 support will indicate that an intraday top is formed. Further break of 739.2 support will maintain the original bearish view. In such case, fall from 936.3 should be resuming for 681 low and below. Read the rest of this entry »

Daily Pivots: (S1) 1.2695; (P) 1.2824; (R1) 1.3084

EUR/USD surges further to as high as 1.3080 in early US session and at this point, intraday bias remains on the upside as long as 1.2803 minor support holds. As discussed before, rise from 1.2423 should represent another rising leg of the consolidation that started at 1.2329 and further rally could be seen to 1.3290 or above. Though, upside is still expected to be limited below 1.3768 cluster resistance and bring down trend resumption. On the downside, below will turn intraday outlook neutral first. Further break of 1.2423 will indicate that such consolidation has likely completed and recent down trend is resuming for 50% retracement of 0.8223 to 1.6038 at 1.2131 next. Read the rest of this entry »

Mid-Day Report: Market Sentiments Boosted by Fed’s Plan to Unfreeze Credit, Dollar Extends Weakness

Investors’ confidence is further boosted by Fed’s announcement to unfreeze credit for home buyers, consumers and small businesses Fed announced a plan to purchase as much as $600b in debt issued or backed by GSEs as well as setting up a $200b program to support consumer and small-business loans. US stock markets are set to extend the biggest two day rally since 1987. As risk appetite improves, dollar and yen are generally lower all over the board, extending this week’s decline. Dollar index dives to as low as 85.14 and is set to extend further lower towards 83.11 support. Crude oil recovers earlier loss today and is back pressing 54 level. Gold resumes recent rally to above 830 level.
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Daily Report: Focusing Turning to UK CPI

The forex markets remain bounded in tight range today even though the greenback is mildly firmer on risk aversion. More noticeable movements are found in GBP/USD’s recovery as well as USD/CHF’s strength. Though, both are cross driven as sterling continues to recover after hitting record low of 0.8660 against Euro last week. Swissy also continues to retreat in EUR/CHF and GBP/CHF crosses after both hit record low earlier this quarter. Note that since Sterling’s recovery is corrective in nature, recent down trend is still expected in respective pairs. Swissy, only other hand, will likely remain the weaker one among European majors until it’s pullback in crosses completes. Elsewhere, crude oil is set to retest 55 level again while gold remains directionless in tight range.

Main focus in the European session will be consumer inflation data from UK. CPI is expected to moderate from 5.2% peak in Sep to 4.8% yoy in Oct. Core CPI is expected to be unchanged at 2.2%. RPI is expected to slow from 5.0% to 4.6% while RPI-X is expected to slow from 5.5% to 5.2%. BoE has noted that inflation risk has ’shifted decisively to the downside’ and justified the much larger than expected 150bps cut earlier this month. Today’s data might mark the turn of trend in inflation that support BoE’s cut. Also, any sign of steeper than expected fall in inflation will give room to BoE for carrying on the steep path of policy easing. Other data from Europe include Swiss retail sales.

US Treasury Paulson said overnight that financial markets distress will remain for “a number of months” even though fears of bank collapse subside. He also said that he’s not looking to start new lending program unless it’s absolutely necessary. The reserves, which are in excess of $400b, will be preserved for Obama administration. Markets focus will turn to TARP testimony of Fed Bernanke, Treasury Paulson and FDIC Bair. data from US is expected to show steeper moderation in PPI by -1.8% mom in Cot, brining yoy rate down from 8.7% to 6.2%. Though, core PPI is expected to be unchanged at 4.00% yoy. NAHB housing markets index is expected to be unchanged at 15 in Nov.

By ActionForex

Not change in Gold’s outlook as consolidation continues between 717.1 and 778.3. The development so far argues that it’s in form of a triangle pattern which could be completing. As discussed before, below 717.10 will indicate that such consolidation from 684.6 has completed. In such case, retest of 684.60 low should be seen first and then 100% projection of 1033.9 to 739.8 from 936.3 at 642.2. On the upside, while another rise cannot be ruled out for the moment, we’d still expect upside to be limited below 824.5 resistance and bring down trend resumption. Read the rest of this entry »

Mid-Day Report: Dollar and Yen Regains Ground after Retail Sales Fell by Record Amount

Dollar and yen continues to regain grounds in early US session after poor retail sales data from US. Headline sales dropped more than expected by -2.8% yoy in Oct, worse on record and even below 2001’s 2.65% fall after terrorists attacks. Ex-auto sales also dropped more than expected by -2.2%, also the worse performance ever. Both export and import prices fell -1.9% mom and -4.7% mom in Oct, deeper than consensus. The overall forex markets remain indecisive though and will depends on the development in the stock markets.
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Daily Report: Risk Aversion Back as Stocks Tumble on Recession and Deflation Worry

The Japanese yen strengthens sharply today as risk aversion is back in the markets following late selloff in the US stock markets. S&P 500 tumbled to 5 year low at 806 while DOW is back below 8000 level. The selloff continues in Asian stock markets with Nikkei down over 6% to below 8000 again. Investors are clearly continued on recession and deflation risks in the US and the worry intensified after Fed released downgraded projections with the FOMC minutes yesterday. Markets were also disappointed as lawmakers deadlocked on the bailout plan for the Big Three automakers in US. Read the rest of this entry »

Daily Pivots: (S1) 95.19; (P) 96.17; (R1) 96.68

USD/JPY’s break of the intraday trend line support with 4 hours MACD dragged down signal line argues that fall from 100.54 might be resuming. Intraday bias is now mildly on the downside and near term focus is turned to 94.47 minor support. Break will confirm this scenario and bring deeper fall to retest 90.92 low first. On the other hand, above 97.13 minor resistance will revive the case that rebound from 90.92 is still in progress for 100.54 or above before completion.

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