Europe

European Equities Decline Broadly for Third Day This Week

Europe Session Key Developments

•    Greek Debt Concerns Continue to Weigh on European Equities
•    European Confidence Indicators Generally Improve, German Unemployment Holds at 8.2%
•    Commodities Continue Slide, Dollar Gains Against European Currencies

Generally better-than-expected confidence readings for the Euro-Zone failed to buoy the region’s stock markets, which fell for a sixth time in the last seven trading days.  Losses took place across all sectors and pushed the broad Dow Jones STOXX 600 Index to its lowest close since December 10.  In the early going, European shares appeared to be headed higher after the European Commission released its latest confidence readings.  The data showed that the index of executive and consumer sentiment improved for a tenth month to 95.7, beating economists’ 92.3 expectation.  Shares failed to hold, however, as investor uncertainty returned due to the Greece debt problems and weaker-than-expected durable goods orders in the U.S.  Greek Prime Minister George Papandreou claimed today that the nation never asked for financial assistance from other EU countries and had no need for such aid; however, the country’s bonds and credit-default swaps suggest investors do not believe the rhetoric.  Greek  bonds have declined over 10 percent in the last three months, while credit-default swaps tied to the country are trading at similar levels to Dubai in December.  Furthering the decline in European stocks was an announcement from the U.S. that durable goods orders rose 0.3% in December, far short of the 2.0 percent expected for the month.  Overall, risk aversion was evident across the globe, as investors sold off stocks and commodity holdings in favor of bonds and U.S. dollars.  The greenback gained against both the Euro and British Pound during the session.

FTSE 100                      5145.74                   -71.73                    -1.37%
British stocks fell for the sixth time in seven days as the Basic Materials and Health Care sectors each declined over 2.6 percent.  BHP Billiton and Rio Tinto each fell over 2 percent as commodity prices continued to show weakness across the board.  Health care shares were led lower by AstraZeneca, after the drugmaker announced that its fourth-quarter earnings per share fell short of analyst estimates.  Overall, the FTSE has dropped nearly 5 percent this year due to a revival of investor uncertainty regarding global growth.

CAC 40                           3688.79                   -71.01                    -1.89%
Trading in Paris today resulted in a near 2 percent decline as falling commodity prices hurt the Basic Materials and Oil & Gas companies.  Only six of the forty CAC stocks avoided the bearish trading that pushed every French sector into the red.  Commodity companies were the worst performers on the index due to macro concerns regarding curbed lending in China and a potential slowdown in growth as a result.  Steel producer ArcelorMittal dropped over 3 percent during trading and Vallourec S.A. fell nearly 3 percent.

DAX                                 5540.33                   -102.87                -1.82%
German stocks declined for a second session on weakness in Telecommunications and Industrials.  The DAX fell to its lowest level in nearly three months as nine stocks fell for each that gained on the index.  Siemens AG, the largest engineering firm in Europe, fell about 3 percent to lead the decline in industrial shares.  The lone telecom stock on the index, Deutsche Telekom, fell 2.6 percent.  The best performer on the index was Infineon, which gained over 2 percent after investors forced the chipmaker’s chairman-designate to guarantee an early exit from the post.

IBEX 35                       10829.30                   -212.90                 -1.93%
The Spanish index posted the biggest loss of the major European indices for a second consecutive day as information technology firm Indra Sistemas fell over 5 percent.  Only three of the thirty-two IBEX stocks managed to close above water today as investors remain concerned that the pace of Spain’s recovery is slowing.  Spain is likely headed for a second year of economic contraction and remains weighed down by debt problems not unlike those in Greece.  Spanish Finance Minster Elena Salgado announced today her intention to cut the budget deficit by two thirds by 2013.

FTSE MIB                     21603.13                  -394.46                 -1.79%
The Italian benchmark index fell over 1.7 percent today to mark its third losing day this week.  Luxury goods maker Tod’s fell over 8 percent today after posting gains in the prior three trading sessions this week.  Ansaldo STS also experienced its first losing day this week, declining over 2 percent after Intermonte Sim downgraded the shares to “outperform” from “buy”.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Europe

Oil, Metals Look Vulnerable as Technicals Point to Weakness

Commodities – Energy

Crude Tests $79 but Technical Positioning Points to Correction Lower

Crude Oil (WTI)       +$78.55       +$0.02       +0.04%
Crude prices continue to trend firmly higher, but near-term technical positioning has started to hint that a bearish reversal may be brewing in the near term. Price action from last Thursday has formed a Rising Wedge with negative RSI divergence, hinting that (at least) a corrective decline to the bottom of the rising channel that has guided crude from the beginning of the month is likely in the days ahead. Significant event risk does not enter the picture until Tuesday with October’s US Housing Starts and Building Permits data (the US construction sector is the world’s largest consumer of oil) as well as inventory figures from the American Petroleum Institute. This leaves the window open for a downswing, and broad trends in risk-correlated assets (stocks, commodities, high-yielding currencies) will be important to keep an eye on. To that effect, watching the third-quarter outcomes for headline names like Texas Instruments and Apple could prove telling.

Commodities – Metals

Metals to See Consolidation Give Way to Renewed Bearish Momentum

Gold      $1055.56      -$1.90      +0.18%
After a brief bounce from $1045, a double bottom, gold prices look set to return to bearish momentum with after testing the top of a falling channel that has guided the recent downturn. A break below near-term support opens the door for a move to the channel bottom below the $1040 level. On the fundamental front, tomorrow brings a speech from Fed Chairman Ben Bernanke; while the central bank chief is not scheduled to make any general remarks on the economy at large, he may do so anyway (if only in passing). Traders will be particularly keen to hear what he has to say on rates and price growth expectations, as gold has been widely viewed as an inflation hedge.

Silver      $17.48      +$0.02      +0.11%
Silver looks even more prone to bearish momentum than that of its more expensive precious metal counterpart. Prices have failed to maintain momentum on a run above key resistance at $17.50, with continued stalling leaving the door open for the bears to capture momentum and engineer a push to the channel bottom near the $17.00 figure. Fundamentally, the drivers remain much the same as with gold, with traders eyeing Bernanke’s remarks tomorrow.

Europe

European Stocks Validate Bearish Bias, Break Past Key Support

Weekly Strategy

FTSE 100

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE has broken out of the Rising Wedge that we identified earlier this week, with prices now positioned to test the 38.2% Fibonacci retracement level at 4816.64. A break beyond that will target the 50% Fib at 4777.25.

DAX

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The German benchmark index has sold off as expected and is now positioned above the 61.8% Fibonacci retracement level at 53198. A break lower targets the 76.4% level at 52587.

CAC 40

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Our bearish forecast for the French equities has been validated: prices fell through the bottom of a rising wedge formation and taken out the 38.2% Fibonacci retracement level at 3599.14. From here, the bears will look to take the index to the 50% Fib at 3560.47.

IBEX 35

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

As with most other European exchanges, Spanish shares sold off to break beyond the Rising Wedge we identified at the beginning of the week. Prices now target the 38.2% Fibonacci retracement level at 1113.66.

FTSE MIB

Long-Term Technical Outlook

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE/MIB looks essentially the same as other European benchmark indexes: prices validated our bearish scenario, breaking below Rising Wedge support to challenge resistance-turned-support at 21981.13. A move lower from here would target the 21947.83 – 21762.62 congestion region.

Europe

European Stock Exchanges Position to Reverse Lower

Weekly Strategy

FTSE 100

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 4751, has been reached and is where the rally from 4096 is equal to 61.8% of the 3461-4521 rally.  The next level is 5156, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE is setting up a Rising Wedge chart formation indicative of a bearish reversal ahead. Negative divergence on the RSI oscillator bolsters the downward bias. Near-term support is seen at 4888.90.

DAX

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 5506, has nearly been reached and is where the rally from 4524 is equal to 61.8% of the 3589-5176 rally.  The next level is 6113, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

As with the FTSE, the German benchmark index is showing a bearish Rising Wedge with negative RSI divergence. A break of support at 55023 opens the door for a move to resistance-turned-support at 54420.

CAC 40

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 3535, has been reached and is where the rally from 2958 is equal to 61.8% of the 2466-3400 rally.  The next level is 3892, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Another rising wedge is seen on the CAC 40, again with negative RSI divergence. Near-term support is seen at 3668.40. A break below this will likely see a test of the psychologically significant 3600.00 handle.

IBEX 35

Long-Term Technical Outlook

There are 2 levels that most likely produce a top.  The first level, 1124, has nearly been reached and is where the rally from 925 is equal to 61.8% of the 670-993 rally.  The next level is 1247, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

Spanish shares fit in with positioning noted on other key exchanges: a Rising Wedge points to a bearish bias, and negative RSI divergence offers confirmation. A break below the wedge bottom at 1141.81 opens the door for a move to the 23.6% Fibonacci retracement level (1128.42).

FTSE MIB

Long-Term Technical Outlook

There are 2 levels that most likely produce a top and neither has been reached.  The first level, 22798, is where the rally from 17626 is equal to 61.8% of the 12332-20702 rally.  The next level is 25996, which is where the 2 bull legs would be equal.

Short-Term Technical Outlook

The FTSE/MIB looks essentially the same as other European benchmarks, with a Rising Wedge and negative RSI divergence clearly in place. A move below the wedge bottom at 22609.38 will aim below the 22500.00 handle.

Europe

Daily Commodities Fundamentals: Commodities Advance Following Euro-Zone GDP, Dollar Weakness

North American Commodity Update, Last Updated 8/13/2009 4:03 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Finishes Higher but Falls From Intraday Peaks

Crude Oil (WTI)   $71.010                         +$0.850                             +1.21%
Crude Oil future prices remained higher at day’s close despite falling significantly from intraday highs. The market for Crude had already been rather bullish following yesterday’s FOMC report; in its statement, the committee hinted that we are seeing a much slower rate of economic contraction and perhaps a turnaround in the near-term future. Future prices managed to surpass the $72-per-barrel level following the Euro-Zone GDP report – the EZ reported a 0.1% contraction for the 2nd quarter, a figure that exceeded the expected 0.5% contraction and last quarter’s 2.5% pullback. Speculators interpreted the report as a leading indicator for heightened Crude demand as the region escapes the prolonged economic recession (note that the IMF has forecasted the Euro-Zone’s recovery to be at a far slower pace than the United States). The commodity could not hold onto its gains through the US session, as prices fell back significantly following the US Advanced Retail Sales figure. Analysts had predicted a growth in retail sales by 0.8% only to find that, in reality, sales actually shrunk by 0.1%. the disappointing result is likely due to the expiration of government stimulus programs, removing a main source of disposable income for American consumers. Crude future prices should remain relatively stable tomorrow due to a shortage of market-moving fundamental data releases.

Department of Energy Inventories

Commodities – Metals

Gold Manages Slight Gain While Silver Wins Big

Gold                   $956.700                           +$4.200                           +0.44%
Gold future prices pushed higher during intraday trading, gaining an additional $4 to reach the $956-per-ounce level. A strong Euro-Zone GDP report coupled with a weak US Retail Sales figure did not bode well for the greenback, which lost against all of its major competitors (most noticeably to the high-yielding Australian and New Zealand dollars). Because Gold is a dollar-denominated commodity, it has historically traded inversely with the greenback as investors use the metal to hedge against dollar weakness/inflation. Yesterday’s BOE Quarterly Inflation Report and the FOMC’s statement both pointed towards low levels of inflation, which had temporarily applied downward pressure on Gold future prices. As we predicted yesterday, risk appetite/aversion guided the Gold market and will likely continue to do so barring any exceptional fundamental release or technical breakout.

Silver                 $14.970                          +$0.385                          +2.64%
Silver was the big winner during today’s trading session, testing the psychological $15-per-ounce level by adding another 2.5%. Price action happened early following the Euro-Zone’s GDP report and was sustained throughout the US session despite the disappointing Retail Sales figure. In addition to serving as a precious metal, Silver has its own industrial application that makes its price particularly sensitive to any changes in the global economic outlook. Within the EZ, both Germany and France had specifically encouraging GDP reports that showed QoQ growth by 0.3%. We could see moderate Silver price action tomorrow following the Euro-Zone and United State’s CPI reports. The US is also set to release July’s Industrial Production figure, but it will likely not be ultimately market-moving.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Europe

Daily Commodities Fundamentals: Commodities Open Week on a High Note

North American Commodity Update, Last Updated 8/3/2009 4:06 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Gain due to Chinese Consumption, European PMI Figures

Crude Oil (WTI)   $71.420                         +$1.970                             +2.84%
Crude Oil future prices shot up above $72-per-barrel during intraday trading, starting the new week by gaining an additional 3%. Crude prices begin climbing early on in Asian trading, as new reports emerged that Chinese consumption of Crude, which accounts for nearly 45% of all Asian consumption, had increased. Many analysts expect China to be the first country to successfully escape the global recession, so the country’s improved figure may be perceived as an indicator for near-term global growth. The European PMI figures exceeded expectations today, led by the UK number that reached 50.8. A reading above 50 actually indicates expansion as opposed to contraction; the reading had been below 50 since late last year. The PMI reports heightened risk appetite in the futures market, as any signal of near-term economic expansion will likely increase demand for Crude. However, recall that just last week, US Crude inventories were largely disappointing, leading to a substantial 6.5% decline in Crude future prices. If Wednesday’s new stockpile report reveals heightened demand for Crude, the market could see significant upside.

Department of Energy Inventories

Commodities – Metals

Precious Metals Push Forward Hit Recent Highs

Gold                   $959.300                          +$3.500                           +0.37%
Gold future prices reached a 2-month high today after closing up around $4 to $960. Prices increased marginally by 0.3%, significantly less than the gains realized by Crude and Silver. Widespread dollar weakness was most responsible for Gold’s increase today, as the greenback fell across the board (excluding the Japanese Yen). The Dollar Index appeared to experience a breakout during today’s trading, as numerous currencies (including the commodity-correlated Australian and Canadian dollars) hit new yearly highs. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness. Fundamental data does not seem to be supportive of Gold’s increase of late, as inflation remains subdued and physical demand remains low. Regardless, as long as risk appetite remains, investors could choose to ignore the facts and extend the rally. If they become satisfied with the price increase, supports could falter leading to a significant retracement.

Silver                 $14.250                           +$0.310                            +2.22%
Although prices retraced slightly since reaching 7-week highs during intraday trading, Silver futures traded upwards of $14-per-ounce after adding nearly $0.300. Like Gold, the dollar’s weakness contributed to Silver’s gain, but other factors played in that led to the metal’s significantly more notable price increase (about 2.5% compared to Gold’s 0.3%). In addition to serving as a precious metal, Silver also possesses an industrial application that makes it more sensitive to positive industrial reports. As mentioned, the European PMI figures exceeded expectations and heightened risk appetite. The US ISM Manufacturing report also came in better-than-expected, which further advanced Silver future prices. Tomorrow may be another volatile day for commodities; The RBA’s rate decision is due overnight, along with Swiss CPI. At 8:30 AM EST, the US Personal Income and Personal Expenditure reports could be market-moving.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Europe

Global Macro Weekly: Treasury Price Action More Reflective of Underlying Fundamentals

With the exception of the 10-Year, all other markets are pushing to fresh 2009 highs as investor risk appetite improves following the release of much better Q2 earning results and a more solid outlook for the global economy. However, we continue to remain suspicious of any rallies in risk appetite as reflected in the global macro markets. While we have seen some impressive buying back into risk, we still hang onto the idea that market participants will once again look to pare back risk, as the reality of uncertainty within the global economy persists. As such, we contend that price action in the 10-Year is more reflective of the underlying fundamentals.

EUR/USD
EUR/USD – Price action remains extremely choppy with the market whipsawing between 1.4000 and 1.4340 in recent trade. However, at this point it appears as though bulls are winning out, with any pullbacks easily met by intense buying. A closer look at the weekly suggests that we are on the verge of another major upside break following consolidation since May, which if broken, would project gains towards 1.5000. Look for a break above 1.4340 and close above the 100-Week SMA to confirm. Strategy: STAND ASIDE

S&P 500 INDEX

S&P 500 Index – The market is now trading back to some consolidation highs from October and November of 2008, and with daily studies trading into overbought territory, the greater risks from here are for a significant corrective pullback over the coming days/weeks. The broader trend is still bearish and a medium-term lower top is now sought out ahead of the next drop. At a minimum, more consolidation is to be expected which should result in a sell-off towards 850-900. Strategy: LOOK TO SELL

CRUDE OIL

Crude Oil – A minor sell-off in the previous week has now been fully negated with the market intent on retesting the 2009 highs above $73 from late June. At this point, daily studies still show room to run and we would expect to see a break back above $73 to fresh 2009 highs in the $75 area over the coming sessions. However, once $75 is reached, we would recommend looking for opportunities to fade and additional rallies. A break back below $63 is now required to take pressure off of the topside. Strategy: LOOK TO SELL

10-YEAR TREASURY

10-Year Treasury – While a compelling argument can be made for some bearish consolidation here ahead of the next major drop below the 2009 lows at 114-08, we continue to favor the bullish side, arguing for the formation of a major base. However, the market will need to break back above 119 to confirm our constructive outlook with the break to trigger a double bottom that will project fresh upside back towards the 124 area over the coming weeks. Below 114-08 negates. Strategy: LOOK TO BUY

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail jskruger@fxcm.com and you will be added to the “distribution” list.

Joel Kruger publishes 6 daily pieces:

“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)

“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)

“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)

“Midday Snapshot” – A Midday Fundamental Update, along with Technical Analysis of Selected Rates.
Monday-Friday (between 10:30am-11:30am EST)

“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact Nordic@fxcm.com if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)

“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)

Europe

Daily Commodities Fundamentals: Broader Commodity Market Retreats Amid CFTC Speculation and Falling Risk Appetite

North American Commodity Update, Last Updated 7/28/2009 4:00 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Fall As CFTC Hearings Begin

Crude Oil (WTI)   $67.230                         -$1.080                             -1.58%
Crude Oil future prices dropped significantly today, falling nearly 2.5% during intraday before paring some of its losses. Crude prices started off the day slightly higher only to begin a steady descent following the US Consumer Confidence report, which revealed worse-than-expected results (46.6 actual vs. 49.0 expected). Continued unemployment increases seem to be the primary reason for the disappointing confidence figure; just last week, Fed Chairman Bernanke said that the unemployment rate could increase for a few more years. European equity indices fell lower today, while the US indices appear to be following suit. Poor earnings from both Office Depot and US Steel Corporation discouraged investors even after the S&P Case Shiller Index improved for the first month in three years. However, while all of the above was market moving, the most influential price driver in the broader commodity market today was the beginning of the CFTC hearings regarding speculation restriction. Commodities fell across the board as investors fear that CFTC Chairman will attempt to impose strict position limits in energy markets. The results of the hearings will likely weigh heavily on Crude future prices.

Upcoming Department of Energy Inventories

Commodities – Metals

Precious Metals Decline Near 2% on CFTCSpeculation and Dollar Strength

Gold                   $939.600                           -$16.700                           -1.75%
Gold future prices retreated back below the psychological $950-per-ounce level today as part of a broad commodity pullback today. Investors are selling out of Gold and taking a “wait and see” approach as the CFTC hearings push forward. The results of the CFTC meetings this week will likely be the main driver behind Gold future prices in addition to risk appetite/aversion. The US dollar outperformed the Euro, Pound, and Franc today, but lost to the ultra-safe Japanese Yen and impressive Australian dollar. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. Tomorrow’s German CPI report will likely be a market mover for Gold future prices.

Silver                 $13.725                    -$0.265                          -1.89%
After breaking above the $14-per-ounce level yesterday, Silver followed the other commodities downward today, losing approximately 2% during intraday trading. Like Gold, tomorrow’s CPI report will move Silver future prices; however, the US Durable Goods Orders figure will serve as a leading indicator for future industrial production. Because durable goods are expected to last more than three years, an increase in orders will signal heightened optimism in the marketplace and potential growth. Tomorrow should be an interesting day for Silver, as the fundamental data reports will be measured against any news emerging from the CFTC hearings.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Europe

Daily Commodities Fundamentals: Risk Appetite Drives Crude, Metals Higher

North American Commodity Update, Last Updated 7/27/2009 3:40 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices End Slightly Higher, Testing $69 During Intraday

Crude Oil (WTI)   $68.300                         +$0.250                             +0.37%
Crude Oil future prices edged higher during today’s trading session, managing to close with slight gains after testing levels all the way up to $69-per-barrel. Early this morning, Crude soared on an extremely upbeat US Home Sales report, which showed an 11% increase compared to an expected 3%. Inventories were also the lowest they have been in over a decade. However, around the same time, disappointing earnings reports emerged from both Verizon and Aetna, causing Crude to pare its previous gains. As has been the case for weeks, investors seem to be ignoring the fundamental lack of demand for Crude when pricing the commodity; despite the extremely low demand, speculation continues to drive future prices higher. Further gains are certainly not out of the question, as any upbeat fundamental data will drive Crude higher.

Upcoming Department of Energy Inventories

Commodities – Metals

Silver Outperforms Gold on Good Day for Metals

Gold                   $957.500                           +$1.600                           +0.17%
Gold future prices spiked to nearly $962-per-ounce during the Asian trading session before falling back near opening levels near $956. Gold saw initial gains due to falling risk aversion; the US dollar was down across the board today (excluding the Japanese Yen) as investors flock to higher yielding currencies. The prospect of a global economic recovery led to a bid up of the Australian dollar in particular during today’s session. Gold and the greenback often trade inversely as investors use the metal to hedge against dollar weakness/inflation. It seems as if Gold futures are attempting to break away from the psychological $950 level, but the absence of a significant catalyst has muted any real gains.

Silver                 $14.025                               +$0.150                          +1.08%
For the first time this month, Silver future prices broke above the $14-per-ounce level before retracing slightly. Silver is currently trading above the $14 level, a result of heightened economic optimism. Positive fundamental data doubly affects the metal, which functions as both a hedge against dollar weakness and an input in industrial production. An encouraging US Home Sales report coupled with a better-than-expected German GfK figure calmed investors nerves resulting from poor corporate earnings today. Silver may fall back below $14 as investors take the opportunity to sell, but bullish fundamental data could serve as a support.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Europe

Daily Commodities Fundamentals: Crude and Silver Finish Strong; Gold Breaks Even

North American Commodity Update, Last Updated 7/17/2009 4:15 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Futures Cap Off An Impressive Week

Crude Oil (WTI)   $63.420                         +$1.400                             +2.26%
Crude future prices finished the week strong today, rebounding from last week’s heavy losses. After hitting 3% gains during intraday trading, Crude has stalled out around $63.50-per-barrel, a 2.5% increase. Today’s US Housing Starts report was the likely driver of Crude, as the report indicated a greater-than-expected number of new houses built in the United States. The US Building Permits figure was also larger-than-expected .Newfound optimism in the global marketplace was this week’s theme, as investors are becoming slowly convinced that the worst of the recession has passed. Demand for Crude has been exceptionally week this summer, but the Department of Inventories latest figures were encouraging. Investors will pay close attention as corporate earnings season continues, looking for any signal that the recession is finally coming to a close. In the meantime, expect Crude prices to push forward, potentially testing the psychological $65-per-barrel mark sometime next week.

Upcoming Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Holds on to Minor Gains

Gold                   $936.000                           +$0.600                           +0.06%
Gold traded mostly sideways during today’s session on conflicting fundamental data. The US dollar, which has recently been a good contrarian indicator for Gold future price direction, was up against all majors. Though not necessarily permanent, investors ended the week favoring risk aversion. Encouraging corporate earnings releases next week could weaken the dollar as investors favor higher yielding (riskier) assets. Usually a stronger dollar leads to a decline in Gold prices, but this was not the case today. The prospect of a global economic recovery has sparked inflationary fear, propping up Gold prices despite the greenback’s strength. Australian and German PPI reports come out early Monday; any indication of inflation will drive Gold. Also, if corporate earnings continue to impress, Gold could re-test the $950-per-ounce level this month.

Silver                 $13.365                    +$0.130                          +0.98%
After falling to recent lows just last week, Silver is looking to close today’s trading with a noticeable recovery. As is usually the case with Silver, economic optimism leads to significant gains in future prices. Like Gold, inflationary fear resulting from this week’s CPI reports has helped Silver move higher, back above the $13-per-ounce level. Impressive fundamental data (corporate earnings, unemployment figures, industrial production reports) also pushed Silver higher despite the dollar’s strength today. Continued upward movement in Silver future prices would not be surprising, especially if the good news continues to flow in.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Next Page »