Weekly Fundamental Outlook for Energies and Metals - Dare To Buy Oil At Current Level?
by OilNGold
Last week was a week full of surprises: The Fed reduced policy rates unprecedentedly to a range of 0-0.25% followed by the Bank of Japan’s return to ZIRP by cutting the overnight lending rate by 20 bps to 0.1%. The Organization of the Petroleum Exporting Countries decided to lower oil output by 2.2M bpd, more than expectation of 1.5-2M bpd. However, oil price, instead of rebounding, dived to 4.5 years low of 35.98 (though partly due to January contract expiry). Over the week, the RJ/CRB index dropped 3% to settle at 220.08.
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4:40 pm : The Federal Open Market Committee’s decision to slash key lending rates and make a commitment to remedy the ailing U.S. economy bolstered investor optimism and sent stocks sharply higher. The major indices traded in positive ground for the entire session and finished just off their session highs.

The FOMC was expected to slash its fed funds target rate by 50 basis points Tuesday, which would have brought the overnight borrowing rate banks charge one another down to 0.50%. Instead, the FOMC stated it is targeting a fed funds rate ranging from 0.00% to 0.25%, though the effective fed funs rate was already within this range ahead of the decision.

The decision to make the cut was unanimous and marks the first time the target rate has been below 1.00% in 50 years.

The highly stimulative rate is intended to help the economy get on track toward growth. The FOMC stated that data that indicate deteriorating labor conditions and declining consumer spending, business investment, and industrial production, and the outlook for economic activity has weakened further. However, the FOMC acknowledged it will essentially employ all available tools to promote sustainable economic growth and help relieve strains in the financial system.
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Gold’s rise from 741.2 extends further to as high as 835.3 before retreating mildly. Though, intraday bias remains on the upside as long as 798.1 minor support holds. Focus remains on 61.8% retracement of 936.3 to 681 at 838.8. Decisive break will will indicate that correction from 1033.9 might have bottomed out at 681 and stronger rise could be seen targeting 936.3 resistance first. However, bounce off from this fibo resistance will affirm original short term bearish case and indicate that fall from 936.3 is still in progress. Below 798.1 will turn intraday outlook neutral first. Further break of 741.2 support will indicate that corrective rise from 681 has completed and bring retest of this low first. Read the rest of this entry »

Daily Report: Asian Stocks Firm as Auto Bailout Deal Agreed, Dollar and Yen Soft
by ActionForex
Dollar and yen trade with a soft tone in Asia today as Asian stocks rally for the fourth day, supported by news that Democrats and White House agreed on a $15b bailout deal for the big three automakers in US. Congress could vote on the plan as early as Wednesday, which includes appointed of a “car czar” who could force the automakers into Chapter 11 bankruptcy if they don’t come up with a business plan by Mar 31. MSCI Asia Pacific index climbs mildly to 83.65. Dollar index is mildly down to 85.67 level. Crude oil and Gold recover mildly to 43.49 and 779.5 respectively.

Technically speaking, main focus remains on where Dollar index is completing a head and shoulder top (ls: 87.87, h: 88.46, rs: 87.68) reversal pattern, or it’s just unfolding as triangle consolidation. Dollar index continues to press neckline support (now at 85.67) but there isn’t follow through selling for a breakthrough yet. As mentioned before, sustained trading will add much credence to the case that a medium term rise from 71.31 has concluded at 88.46 already. Further break of 83.11 will confirm this case and bring deep medium term correction to 75.89/80.38 support zone. However, note that it’s usually hard to predict whether the pattern is a head and shoulder or a triangle before it’s completed. Even after a break of the neck line support, any strong rebound above 83.11, followed by break of 87.68 will indicate that medium term up trend in the dollar index is still in force. In short term, though, favor is on the downside as long as 86.47 minor resistance holds.

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Daily Report: Dollar at Critical Point ahead of Non-Farm Payroll

By : ActionForex

Short term outlook of the dollar is at a critical point ahead of non-farm payroll today. Dollar index’s sharp retreat from 87.68 argues that rebound from 84.78 might be completed and turned intraday outlook neutral for the moment. More importantly, the lack of decisive momentum is now raising the possibility that dollar index is completing a head and shoulder top formation (ls: 87.87, h: 88.46, rs: 87.68). However, we must emphasize that it’s not advisable to jump ahead before the pattern is formed. Firstly, any rise above 87.68 will dampen the chance of this head and shoulder top scenario and indicate that recent up trend is still intact. Secondly, break of the neckline support at 85.38 will be be an important alert that such head and shoulder pattern has completed. While one could enter short in such case, this should not be taken as the confirmation that a medium term top is formed yet. Sustained break of 83.11 is still needed to be the confirmation. Thirdly, any strong rebound above 83.11 will argue that dollar index could indeed be just unfolding as in triangle consolidations. In any case, head and shoulders look-alikes are always tricky to trade. The non-farm payroll report to be released today could be the trigger.

Elsewhere, the themes in the forex markets are pretty much unchanged. Yen remains firm against dollar and in crosses. EUR/USD’s consolidation continues with the support from Euro’s strength in EUR/GBP which hit record high of 0.8723. Commodity currencies are mixed with clear weakness seen in the Canadian dollar as crude oil dived to as low as 43.36. AUD/USD, on the other hand, continues to trade in tight range.

Job market in US is expected to lose 320k jobs in Nov unemployment rate would have risen to 6.8%, the worst in 7 years. However, as employment surveys have shown signs of aggressive job cuts by employers recently, we think it’s possible that the actual data will surprise on the downside. In November, initial jobless claims reached a 16-year high at 543k, 64k higher than October. Although initial jobless claim came in better than expected at 509k, the data was affected by Thanksgiving holiday and should not be used as an indicator for recovery. Indeed, the 4-week moving average for initial jobless claims rose to 525k and continuing claims rose to 4.09M, the highest since 1982. Also, note that employment component of both ISM indices hit record low in Nov. ADP private job report showed 250k losses, a record. Challenger report showed 148% jump in planned layoffs, highest since 2002. There’s nothing to cheer about.

Technorati : dollar, forex, forex outlook, market overview, report

Mid-Day Report: Yen Surges after Poor Services and Job Data from US
by ActionForex
Japanese yen strengthens across the board today after another round of poor services data from around the world. Released in US session, ISM non-maufacutring index dropped to record low of 37.3 in Nov, suggesting contraction in services section is accelerating. Price paid index dropped sharply from 53.4 while employment component also dived further in sub-50 region from 41.5 to 31.3. Also released from US, ADP employment showed largest contraction since 1991 by -250k in Nov. Challenger planned job cut rose 148% to over 181k in Nov, hitting the highest level in six years. While most major currencies, except dollar and yen, remains weak, there is another round of free Canadian selling in early US session, dragged down by crude oil’s fall to below 46 level. Though, EUR/USD and AUD/USD remains in range so far. Market’s focus will turn to Fed’s Beige book later in US afternoon as well as RBNZ’s rate decision in the comming Asian session.

UK services PMI surprised on the downside to 40.1(consensus: 41.2, Oct: 42.4), the 7th straight month of contraction and the lowest level since the index began in 1996. Readings of employment, incoming new business, outstanding business and business expectation were all at record lows. Earlier this week, the UK reported manufacturing and construction PMI whose declines were sharper than market anticipated. Poor data indicated weak economic conditions in the nation and underscored BoE’s aggressive rate cut in the meeting tomorrow. Markets expect another 100bps cut but the BoE might surprise the market again by a deeper cut.

Other data saw retail sales in Eurozone shrank -0.8% in October, worse than consensus of -0.4% and 0% (revised from -0.2%) in September, amid rising unemployment and weakening consumer confidence. On annual basis, the figure came in at -2.1%, also lower than market’s expectation of -1.4%. September figure was also revised upward to -1.4%. Sales of food, drinks and tobacco products fell 0.5% that of non-food products lost 0.9% in October. Read the rest of this entry »

Flaherty Says Planned January Budget Will Contain Economic Stimulus
(CEP News) Ottawa - Finance Minister Jim Flaherty says it would likely take a new government in Canada months to get its first budget developed and in place.

In a televised interview Wednesday evening, Flaherty said he and his cabinet colleagues have been consulting extensively in preparation for the budget he plans to present to Parliament Jan. 27.
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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: 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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Traders will be anxious over the weekend as financial turmoil once again dominates the markets and data takes a back seat. The U.S. Thanksgiving holiday will also impact trading this week as markets will be closed Thursday and Friday.
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