September 2009

Daily Commodities Fundamentals: Commodities Rise on Dollar Weakness While Diverging from Equity Decline

North American Commodity Update, Last Updated 9/30/2009 4:40 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Rallies on Inventory Data as Gasoline Stockpiles Fall

Crude Oil (WTI)   $70.34                               +$3.63        +5.44%
Oil initially saw slight upside before being propelled to a rally of more than five percent amid dollar weakness and favorable inventory data. While the Department of Energy release showed stockpiles of oil increasing by approximately 2.8 million barrels, gasoline inventory surprised forecasters with a plunge for the first time in four weeks, a possible sign that demand may be returning to the market. The commodity saw initial resistance at the $68 dollar mark but moved quickly to close near the highs of the day above $70 per barrel. Of note today, equities in Europe and the US fell, while commodities diverged with gains. Fundamental data could hardly explain this as several key data points registered worse-than-expected. US job losses in September may be less of an improvement than expected, according to a recent ADP release, while Chicago PMI in September surprised with contraction. Also, despite tension with Iran regarding its secret nuclear facility, there was little as far as new developments on the hot topic. Ultimately, further movement in the US dollar will have to be closely watched as that remains a key factor in the nominal price of the commodity.

Commodities – Metals

Metals Advance Despite Weakness in Equity Markets

Gold                   $1008.2                           +$13.80                              +1.39%
Gold rose to the highest level in four days following trading below $1000 per ounce early in the week. The metal saw minor volatility in the session while the trading range proved considerable at more than $15 per ounce. Affecting the move was a return to weakness for the US dollar, along with lower equities that may involve a shift to safer assets including commodities. Data today relating to gold included the Euro-Zone CPI estimate at a decline of 0.3% for September. The release highlights that inflation concerns remain muted and that deflation continues to persist in the region. Ultimately, the short-term trend may signal that another top has formed above $1020 per ounce, while support may be found as early as $980. With the metal having recently declined for the first time in six weeks, caution is high going into October.

Silver                 $16.675                   +$0.497                              +3.07%
Silver prices on the day closed sharply higher following a volatile session with a range of nearly half a dollar. Ultimately the metal ended near the top of its range as the greenback suffered along with equity markets. The recent dip on Monday below $16 per ounce may have marked a short-term bottom and it will be carefully watched over the next few days for confirmation for further upside. The commodity has rallied sharply in recent months, with a move from $13.453 in mid-August to over $17.50 in early September. The rapidity with which silver has come off its recent high has taken the metal far from overbought levels, however oversupply and a weak auto sector may limit potential price growth in the months ahead.

-Written by Roman Kadinsky, CFDTrading Research
Questions/Comments about this article? Send them to Rkadinsky@fxcm.com

European Stocks Fall on US Data While Maintaining Strong Quarterly Gain

Europe Session Key Developments

•    Markets Lose Steam on US Data
•    Crude Rallies on Fall in Gas Stockpiles

European Markets pared initial gains following dismal data from the US including higher job loss figures from ADP employer services and Chicago region PMI that came as a complete surprise to forecasters. Other indicator releases, including those of UK confidence, German job losses and Swiss Leading Indicator, came in better-than-expected. Also adding to overall sentiment early in the session was an IMF semi-annual report that trimmed the large $4.1 trillion previously expected for total credit losses. Further optimism in the financial sector was added through ECB’s latest auction, which lent €75.2 billion to banks, well below the €137.5 billion economists had expected. While interbank lending has certainly improved along with capital ratios, the small figure is likely also attributed to a weak lending environment in which consumers continue to retrench from previous spending habits. Ultimately, optimism remains high while third quarter earnings due to begin reporting in late October have investors concerned. While economic growth in the second half appears cemented, it remains questionable whether gains in profit and top-line growth will follow.

FTSE 100                      5,133.90                   -25.82               -0.50%
Stocks in the UK closed the session lower while ending the third quarter up nearly 21%. Most sectors today fell, while Industrials gained the most at 0.70%. Hedge fund Man Group rose the most at more than seven percent on news the firm’s assets rose through September. Other winners included insurer L & G, up 6.10%, along with a 3.92% rise in Aviva. Looking ahead, the Index appears to be forming a top and a breakout higher or lower will be carefully watched for.

CAC 40                     3,795.41                   -18.69                 -0.49%
French stocks closed lower with just three sectors advancing while 40% of stocks gained. Large winners included luxury goods maker PPR, up more than three percent as RBS upgraded the firm to “hold” from a previous “sell” rating. Insurer Axa climbed more than two percent while other financials, including BNP Paribas and Societe Generale, fell more than two percent. Overall the index has rallied nearly 19% in the past three months while remaining close to its 2009 high for two weeks.

DAX                         5,675.16                    -38.36             -0.67%
German equities fell two-thirds of a percent as just over half of stocks fell while only two sectors posted gains. Basic Materials and Industrials fell more than one percent each with firms including Siemens and automakers BMW and Volkswagon down more than two percent. Also, Deutsche Bank fell 2.35% despite reports today that add to fundamental optimism in the financial sector. Overall, the index remains up more than 18% in the past three months and a retracement lower may be forthcoming.

IBEX 35                     11,756.10                   -97.60                -0.82%
Spanish equities fell the most of the five majors with a drop of nearly 1% as all sectors fell, with the exception of utilities. Losers outnumbered winners 2:1 while the biggest loss was a 3.09% move in Tecnicas Reunidas following news the firm is among biggers for a LNG terminal. The nation’s leading banks, meanwhile, BBVA and Santander both fell more than one percent each. Overall the index has rallied more than 20% in the past three months and reached a new 2009 high on Tuesday.

FTSE MIB                        23,472.73                    -92.89                  -0.39%
The Italian index posted the smallest loss of the five majors as just over half of stocks fell on the session. Leading losers included banks, UniCredit fell nearly two percent as the firm announced its intention to raise 4 billion euros. On the other side of the board, third-largest bank BMPS climbed 1.81% along with a 1.47% rise in UBI. Ultimately the index has rallied the most among the five main indices tracked, with a gain of more than 23% as the index remains below its 2009 high set on September 17.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to RKadinsky@fxcm.com

European Equity Technical Outlook

WEEKLY STRATEGY

FTSE 100 Pivot Table

DAX 30 Pivot Table

CAC 40 Pivot Table

FTSE 100

Long-term Technical Outlook

The FTSE has reached the 100% extension of the 3461-4521 rally (5156).  Parallel channel resistance at this level reinforces this level and increases the risk of a top and reversal.  5339 would be the next level of potential resistance.

Short-Term Technical Outlook

The FTSE may be on pace to put in a Double Top at 5189.88 as the RSI oscillator shows sharp negative divergence. A reversal lower would see initial support at 5082.28, the lower boundary of a rising channel established from mid-August.  Alternatively, a break higher would face the channel top at 5305.42.

DAX

Long-term Technical Outlook

The DAX has yet to reach its measured resistance point of 6113, which is where the 2 bull legs from the March low would be equal.  Potential resistance prior to that point is 5870 (50% of decline from 8152).  The mentioned 6113 is reinforced by 6168 (former support line in gray).

Short-Term Technical Outlook

Judging by strong negative divergence on the RSI oscillator, German benchmark index looks to be on pace to set a major Triple Top at 57490. Initial support is seen at 56788, the 14.6% Fibonacci retracement level.

CAC 40

Long-term Technical Outlook

Similar to the DAX, the CAC 40 has yet to reach its measured resistance point of 6113, which is where the 2 bull legs from the March low would be equal.  However, price is close and potential parallel channel resistance reiforces the current area as one that may provide the supply required to produce a reversal.

Short-Term Technical Outlook

As with the DAX30, divergence with momentum studies on the CAC is hinting that a downward reversal is ahead as prices test 3847.86 once again. Initial support is seen at 3753.11, a rising trend line established from the swing low in mid-August.

IBEX 35

Long-term Technical Outlook

The IBEX has reached the January 2008 low.  Former support is now resistance.  RSI divergence warns of a trend change as well.  Watch the trendline and top channel line as potential end points for the rally in the event that the advance continues.  1247 (100% extension) is also a level to expect a reversal if reached.

Short-Term Technical Outlook

A Rising Wedge with negative RSI divergence points to a bearish reversal ahead for Spanish issues. Initial support is seen at 1161.47, the wedge formation bottom.

S&P/MIB

Long-term Technical Outlook

The FTSE/MIB index encounters resistance from channel midline.  Additional levels to watch are 24916 to 26464.  The 100% extension of the 12332-20702 rally is near the top of this range.

Short-Term Technical Outlook

The FTSE/MIB looks essentially the same as most other European benchmark indexes, with negative RSI divergence suggesting prices are on pace to forming a near-term top. A reversal sees initial support at 22828.86 at a rising trend line established from mid-August.

Contact Jamie at jsaettele@dailyfx.com if you would like to receive his reports via email.

Dollar Finds Demand on Dips

Euro / US Dollar

I wrote yesterday that “the EURUSD is testing short term channel support.  A daily close below the line would increase confidence in the bearish bias and expose 1.4450.  Price should stay below 1.4650 at this point.”  The line held and the EURUSD spiked through 1.4650 and tested 1.4680 resistance.  With channel support holding, the midline/former congestion zone in the 1.4720/40 zone is now resistance.  Coming under the channel would set sights back on 1.4450.

British Pound / US Dollar

Former support held as resistance (1.6111).  I wrote yesterday to “watch for resistance at the top of a potential channel as well (drawn a line across recent lows and extend a parallel from the 9/23 high in order to construct this line).”  That line held and the GBPUSD remains on a path lower.

Australian Dollar / US Dollar

The AUDUSD broke to a new high and levels to keep in mind that could produce reversals are .8950 and .9030.  .8950 is a former support level and .9030 is the 78.6% retracement of the decline from the 2008 high.

New Zealand Dollar / US Dollar

NZDUSD price action since its 2009 high has been choppy.  The topline of a channel since July and the midline of a channel since March rejected the NZDUSD advance but the NZDUSD has yet to come off much.  Coming under .7100 would probably induce selling pressure and send the pair to .6900.  Until then, the waters are murky.

US Dollar / Japanese Yen

Former support has held as resistance in the USDJPY thus far.  “While the trend is bearish below 91.65, the strength of the rally from channel support warrants consideration that a more important low is in place.  Trading above the short term resistance line extended from the 9/21 and 9/24 highs would be a sign that something more constructive is taking place.”  For this reason, move risk on shorts to 90.50.

US Dollar / Canadian Dollar

Maintain a bullish bias above 1.0650.  The rally from 1.0588 could be a series of 1st and 2nd waves.  This count is extremely bullish and gives scope to an extended rally from current price.

US Dollar / Swiss Franc

The USDCHF daily wave count warns (and has been warning) of a significant low.  I wrote yesterday that “trading through the top of short term channel resistance would be a sign that a low is in place.”  The USDCHF has broken through the line, so favor the upside.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday mornings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.

Contact Jamie at jsaettele@dailyfx.com if you would like to receive his reports via email.

Stocks in Asia/Pacific Mixed as IPO’s Falter, China Pledges to Maintain “Moderately Loose” Monetary Policy

Asia Session Key Developments

• Japanese Industrial Outputs Expands for Sixth Month
• Australia Retail Sales Jumps in August

Asian stocks ended mixed on Wednesday as the latest IPO on the Hang Seng plunged lower, while the Chinese government announced that it will maintain a “moderately loose” monetary policy, which push stocks higher ahead of the holiday. At the same time, the Nikkei closed higher as factory outputs in Japan climbed 1.8% in August, with the Nomura/JMMA manufacturing PMI expanding for the third month in September. Meanwhile, the ASX tipped lower following the slew of economic data as retail spending in jumped 0.9% in August to top expectations for a 0.5% rise, while building approvals unexpectedly fell 0.1% during the same period amid forecasts for a 2.5% clip.

Nikkei 225                          10,133.23

The Japanese equities market gained for the second day, with the Nikkei rising 33.03 points (0.33%) to close at 10,133.23 as 5 of the 10 components pushed higher on the day. Health care surged 1.40% to lead the rise, with utilities and consumer Goods advancing 1.27% and 1.04% respectively. Shares of NGK Insulators advanced 8.84% after raising its full-year net income forecast by 14%, while CSK Holdings Corp gained 6.94% on speculation that the information services firm will form an alliance with Sumisho Computer.  At the same time, Fuji Electric shed 5.68% after ending its alliance with Toenec, while Sumitomo Realty & Development shed 2.55% after UBS lowered the firms rating to “neutral from “buy.”

Hang Seng                        20,955.25

The Hang Seng slid 57.92 points (0.28%) to 20,955.25 as the fourth initial public offering this week fell sharply on its first day of trading. China South City Holdings Ltd., a developer and operator of logistics and trade centers, plunged 27% on its debut, with the decline weighing on the overall market. Oil and gas slipped 1.50% to lead the decline after the National Development and Reform Commission in China lowered the price of gasoline, with telecommunications shedding 0.87% on the day. Trading volume was thin ahead of the holiday in China, and traders in the region will be offline for the remainder of the week in observance of National Day. Nevertheless, shares of PetroChina slipped 1.6% as the government cut energy prices, while Cosco Pacific slumped 4.79% as employees at Piraeus Port Authority plan to hold a 48-hour strike as the firm reaches an agreement to takeover some operations at the biggest port in Greece.

S&P/ASX 200 Index           4,743.60

Stocks in Australia declined on Tuesday, with the ASX shedding 9.50 points (0.20%) to end at 4,743.60, led by a 0.51% drop in basic materials. Shares of Billabong International increased 3.99% following the rise in retail sales, with David Jones advancing 1.92%, while Goodman Group jumped 9.02% as credit conditions improved. At the same time, Fortescue Metals slumped 2.05% as the firm failed to meet the deadline to raise funds from Chinese lenders, while Emeco Holdings advanced 4.2% after UBS increased its rating on the firm to “buy” from “neutral.”

Notable Asian Session Event Risk / Economic Releases

Dow Looking To Test 10,000 As Current Channel Holds

The Dow has slowly, yet steadily climbed higher since the early July low (8087).  Hardly deviating from its channel midline, divergent RSI warns that the index might not reach the top end of the channel.  In any event, levels to watch for resistance are 10495 and 10828.

The Dow ran into channel resistance which may lead to a test of the lower bound today before a bullish move above 10,000.

The S&P is in the same position.  The index looks vulnerable (slowing momentum, channel midline holding as resistance).  1159 would be a level to expect supply if reached.

The S&P 500 found short-term trendline support which it may look to re-test today before continuing its upward trend.

The NASDAQ is in a similar position as the other US equity indexes.  The rally has carried further than the Dow and S&P rallies, reaching former support at 2167.  Former support is now resistance.  The next level of potential resistance would be 2341.Former support is now resistance.  The next level of potential resistance would be 2341.

The NASDAQ found support ahead of former resistance at 2,063 the 50.0% Fibo extension of 2,861- 1,265, which may now serve as support. A break above 2,167-9/23 high would leave potential to 2,251-61.8% Fibo retracement.

Daily Commodities Fundamentals: Commodities Have Mixed Close

North American Commodity Update, Last Updated 9/29/2009 5:45PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Falls Slightly as Equities Stall

Crude Oil (WTI)   $66.71                               -$0.13        -0.19%
Oil traded in a relatively tight range of less than two dollars today, closing just slightly below its open.  The decline in oil’s price was in line with stalling U.S. equities as well as the U.S. dollar showing some strength against most of its major crosses.  In addition, expectations were revised upward for the Department of Energy Inventories release tomorrow and predict that crude inventories rose by two million barrels last week.  The American Petroleum Institute said today that U.S. crude inventories rose unexpectedly on a large increase in oil imports from Canada.  Crude oil has many fundamental drivers that should keep the price suppressed as production capacity is far from its limits.  From a technical perspective, crude oil has showed a floor at $65 that was tested, but not broken on August 17th and again on September 25th.  Although oil may stay above this level as a product of global recovery, the commodity has little fundamental bearing for further price growth right now aside from small gains as a result of dollar weakness returning to the marketplace.

Commodities – Metals

Precious Metals Post Slight Gains as Investors’ Jitters Remain

Gold                   $993.10                           +$0.60                              +0.06%
Gold traded with no real sense of direction as traders seem unsure where to price the safe-haven asset.  Potential bottoming in the greenback was offset by continued uncertainty over the strength of the economic recovery after mixed data today.  The CaseShiller Index showed home prices increasing in July, but the consumer confidence reading from this morning was well below expectations- a troubling sign.  As October approaches, gold will trade based on investor sentiment regarding the strength of the global economic recovery.  World Bank President Zoellick may have spooked investors today when he claimed that the dollar’s status as the reserve currency is ‘uncertain.’  It appears that dollar strength and inflationary expectations will continue to drive gold going forward.

Silver $16.178                     +$0.005                              +0.03%
Silver prices on the day closed slightly higher following a session that saw the metal trading below its open for much of the day. Much like gold, the metal seems to be trading without a strong sense of direction.  Today’s session was the second consecutive gain for silver, but caution abounds as the metal has had a trading range in the past two months of more than $4 per ounce.  The continuance of strength in the dollar did not seem to move the precious metals much as traders may still be cautious over the long-term prospects of greenback.

Written by James Russell, CFDTrading Research
Questions/Comments about this article? Send them to JRussell@fxcm.com

Nikkei and Hang Seng Test Support Lines

The Nikkei and Hang Seng are putting support lines from March to the test.  Divergence with momentum at recent highs suggests that breaks of these support lines could mark an end to the 6 + equity rally. 

Nikkei

 

Hang Seng

Euro Decline to Accelerate

Euro / US Dollar

The EURUSD is testing short term channel support.  A daily close below the line would increase confidence in the bearish bias and expose 1.4450.  Price should stay below 1.4650 at this point.

British Pound / US Dollar

Former support is now potential resistance in the 1.6110/65 zone (1.6050 is also potential resistance).  Watch for resistance at the top of a potential channel as well (drawn a line across recent lows and extend a parallel from the 9/23 high in order to construct this line).

Australian Dollar / US Dollar

The AUDUSD has been treading water since trading at .8797 on 9/23.  After breaking a short term channel, price has traded back towards the top of the range and the underside of the former support line.  Trading to a new high would expose .9032 (78.6% retracement).  It is worth noting that the rally from .6245 is exactly double the size (in price) as the .6005-.7275 advance (see yesterday’s daily chart).  A and C waves sometimes relate to each other by factors of .618, 1, 1.618 or 2.

New Zealand Dollar / US Dollar

The NZDUSD is similar to the AUDUSD in that price action since its 2009 high as been choppy.  The topline of a channel since July and the midline of a channel since March rejected the NZDUSD advance.  Last night’s high is now the risk level for bears and an initial target is .6900.

US Dollar / Japanese Yen

The USDJPY has reached former support, which is 90.10/34.  While the trend is bearish below 91.65, the strength of the rally from channel support warrants consideration that a more important low is in place.  Trading above the short term resistance line extended from the 9/21 and 9/24 highs would be a sign that something more constructive is taking place.

US Dollar / Canadian Dollar

Maintain a bullish bias above 1.0650.  The rally from 1.0588 could be a series of 1st and 2nd waves.  This count is extremely bullish and gives scope to an extended rally from current price.

US Dollar / Swiss Franc

The USDCHF doesn’t have the reversal characteristics of the other USD pairs (EURUSD and NZDUSD reversing from channels, AUDUSD breaking channel support, GBPUSD large h&s, USDCAD short term h&s) but the wave count warns (and has been warning) of a significant low.  Trading through the top of short term channel resistance would be a sign that a low is in place.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday mornings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.

Contact Jamie at jsaettele@dailyfx.com if you would like to receive his reports via email.

Asian Stocks Surge on Growth Optimism, Higher Commodity Prices

Asia Session Key Developments

• Retail Sales in Hong Kong Falls at Slower Pace
• Australia’s Public Deficit Widens Less Than Expected

Stocks in Asia/Pacific bounced back on Tuesday to follow the rally on Wall Street as investors held an improved outlook for global growth. Australian Treasurer Wayne Swan said that the nation’s budget deficit wasn’t as bad as expected, with the outcome coming in $5B better than forecast, but went onto say that the government will continue to support the economy in an effort to foster a sustainable recovery. Meanwhile,  retail spending  in Hong Kong fell at a slower pace in August, with the annual rate of consumption falling 0.2% from the previous year amid expectations for a 3.5% decline, while volumes slipped at an annualized pace of 1.0% after falling 5.2% in the previous month.

Nikkei 225                          10,100.20

The Japanese equities market gained on Tuesday, with the Nikkei rising 90.68 points (0.91%) to close at 10,100.20 as 7 of the 10 components rallied on the day.  Technology surged 2.18% to lead the rise, with industrials and basic materials advancing 1.99% and 0.79%. Shares of All Nippon Airways added 3.27% after Credit Suisse increased the rating on the firm to “neutral” from “underperform”, while Toshiba advanced 2.86% as the firm plans to relocate 700 engineers to lower research costs. At the same time, Kobe Steel rose 5.30% after the company publicize that it will raise output of copper for cars and home appliances to meet demands, while Dowa Holdings gained 3.80% after its rating was upgraded to “outperform” by Mitsubishi UFJ Financial Group.

Hang Seng                        21,013.17

The Hang Seng surged 424.76 points (2.06%) to close at 21,013.17, with all nine component pushing higher, led by a 6.29% rally in consumer goods. Shares of Li & Fung jumped 6.29% after retail sales in Hong Kong fell at a slower pace from the previous year, while shares of HSBC advancing 2.64% after a newspaper said new loans increased in China, with the Bank of Communications adding 2.03%. At the same time, Cnooc added 2.72% after its parent company, China National Offshore Oil Corp, said it will receive its first load from its Shanghai terminal, Hang Lung Properties gained 3.72% on speculation luxury home prices will rise 5-10% over the next 12months.

S&P/ASX 200 Index           4,753.10

Stocks in Australia advanced on Tuesday, with the ASX gaining 75.70 points (1.62%) to end at 4,753 as all 10 components pushed higher on the day. Financials rallied 2.00% to lead the advance, with basic materials gaining 1.65% on the back of higher commodity, while industrials added 1.55% after the government said the budget deficit was less than expected. Commonwealth Bank of Australia advanced 2.08% following the news, with share of National Australia Bank adding 2.03%, while BHP Billion rallied 2.40% following the rise in metal prices. Moreover, shares of Boart Longyear Group climbed 8.47% after Macquarie Group raised the firms rating to “outperform,” while CSL Ltd. advanced 1.38% after reaching an agreement with Merck & Co to sell its Afluria influenza vaccine in the US.

Notable Asian Session Event Risk / Economic Releases

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