Technical Outlook

(Bid Price) (Today’s Intraday Range)

EUR/ USD            1.3560                   1.3597, 1.3440
USD/ JPY                88.98                 89.36,   88.88
GBP/ USD            1.4922                   1.4997, 1.4853
USD/ CHF            1.0785                   1.0885, 1.0756
AUD/USD            0.9028                   0.9057, 0.8956
USD/CAD             1.0331                    1.0441, 1.0307
NZD/USD             0.6953                   0.7004, 0.6922
EUR/ JPY              120.55                   121.32, 119.75
EUR/ GBP            0.9070                   0.9091, 0.9016
GBP/ JPY              132.88                   133.73, 132.49
CHF/ JPY                82.40                   82.92,   81.86

Support                                Resistance                          Support                         Resistance

EUR/ USD                                                                                 USD/ JPY

L1.          1.3480                                   1.3965                                      86.95                    93.20

L2.          1.3245                                   1.4200                                      84.85                    95.50

L3.          1.3085                                   1.4495                                      82.30                    98.85

GBP/ USD                                                                              USD/ CHF

L1.          1.5345                                   1.5880                                   1.0540                                   1.0830

L2.          1.5160                                   1.6215                                   1.0350                                   1.1045

L3.          1.4950                                   1.6530                                   1.0040                                   1.1315

AUD/ USD                                                                              USD/ CAD

L1.          0.8555                                   0.8860                                   1.0560                                   1.0960

L2.          0.8225                                   0.9005                                   1.0400                                   1.1140

L3.          0.8105                                   0.9325                                   1.0150                                   1.1360

NZD/ USD                                                                              EUR/ JPY

L1.          0.6535                                   0.6985                                   118.50                                   124.85

L2.          0.6265                                   0.7295                                   115.65                                   128.90

L3.          0.6160                                   0.7430                                   112.05                                   132.85

EUR/ GBP                                                                               EUR/ CHF

L1.          0.8500                                   0.9175                                   1.4575                                   1.4875

L2.          0.8320                                   0.9290                                   1.4305                                   1.5010

L3.          0.8190                                   0.9430                                   1.4110                                   1.5450

GBP/ JPY                                                                                CHF/ JPY

L1.          135.85                                   141.75                                     81.40                                       85.25

L2.          131.10                                   146.35                                     78.95                                       87.65

L3.          129.35                                   152.90                                     75.05                                      91.60

Crude oil future (March) prices witnessed a rally on Wednesday’s trading session and after making a high of 3707 it settled at 3689 levels.

It’s sjown a stiff resistance at 3730 levels on breach of the same likely to trade higher. The supports are at 3660 then 3630 levels.

We at fxcommodity expect prices to trade sideways to higher and recommend buying near support levels.

MCX Crude Oil Tip
Buy March at 3675
Tgt 3720
SL 3650

Technical Recap

Bulls really controlled the action last week beginning with a boost off of the 200-day moving average followed by reinforced settlements above the crucial $72.50 benchmark area.  Prices trended higher for the week through Thursday to $75.70 before pulling back on Friday on a round of profit taking ahead of the 50 and 100-day moving averages.  The market closed firm on the week just above the 7-week dowtrend channel at $74.00 level with a minor uptrend potentially developing early this week.

We are still maintaining settlements below the broken key longer term Quarterly trend lines at the $77.00 to 78.00 range leaves the market vulnerable to renewed selling.  With options expiration on Today (Wednesday), we anticipate rallies early this week, and then begin fade against $78.00 to 80.00 leading to a turnover later in the week.

Technical Outlook

Upside:

The market reversed the 7-week downtrend to start the week off rallying off the $74.00 level on Tuesday. Maintaining settlements above $74.00 to 75.00 supports advances this week targeting the key broken Quarterly trends in the $77.00 to 78.00 range.  Trade or settlements above $78.00 brings the $80.00 psychological mark easily in range for the week.  Any settlements above $80.00 will provide solid Bullish reinforcement with the potential to propel the market back to the Jan 2010 highs at $84.00.  If momentum fades out in the $77.00-78.00 range, longs should cover all positions.

Downside:

Failing rallies at the $77.00-78.00 range generates a sell signal for an initial drive back to the broken 7-week downtrend at $74.00.  Settlements below $74.00 reinforces short term weakness as it puts prices back the weekly downtrend channel while violating the minor daily uptrend.  The objective below $74.00 is placed at the key $72.50-71.75 Support range where shorts should initially scale back positions.  Trade and settlements below $72.50-71.75 will rekindle sustainable Bear forces triggering sell offs targeting the current 2010 lows at $70.00 to 69.50 while bringing the next major objective in range at $68.50-68.00.  A settlement below $70.00 on the week, or trade that takes out the $68.00 level, lines up for $65.00 oil in the coming weeks.

Whats Making the News

1. Crude futures ended sharply higher Tuesday as investors bet that Greece’s debt problems wouldn’t spill over to dent demand for commodities. Light, sweet crude for March delivery settled up $2.88, or 3.9%, at $77.01 a barrel on the New York Mercantile Exchange in its biggest one-day gain since Sept. 30. Brent crude on the ICE futures exchange settled $3.17, or 4.4%, higher at $75.68 a barrel.
2. Crude oil prices were higher Tuesday after a new report showing that manufacturing activity is on the rise in the New York region and on a weaker US dollar that made purchases in other currencies cheaper for buyers.
3. With no indication of a fuel price hike happening in the near future, the public sector oil refiners are hoping that crude prices do not spin out of control in 2010-11. Refiners still hope Crude Oil will stay at $75 in 2010-2011.
4. Bharat Petroleum Corp (BPCL) bought 1 million barrels each of Algerian and Libyan crude in a tender for oil loading in April, trade sources said on Tuesday.
5. Euro hits a high for the day at 1.3730 cable briefly breaks 1.5700 on the back of higher oil prices, now at 77.15

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3965 level and was supported around the $1.3885 level.  The common currency gained some ground on news the European Commission will support Greece’s deficit-reduction program that will be published tomorrow.  Greece’s budget deficit was 12.7% of GDP last year and is struggling to convince the markets it can bring that down to 3% by 2012.  Greek debt is now trading at a massive 400bps premium at the ten-year level over German bunds, the highest level since 1998.  Most traders expect the European Central Bank will keep monetary policy unchanged on Thursday.  Data released in the eurozone today saw EMU-16 producer price inflation up 0.1% m/m and off 2.9% y/y.  Also, January PMI construction improved to 48.6 from 47.1 and German December retail sales were up 0.8% m/m and off 2.5% y/y.  Some dealers were spooked into selling the euro last night after Reserve Bank of Australia surprised the markets by not raising interest rates last night on the premise that higher-yielding currencies like the Australian dollar could be weaker. 

In U.S. news, traders will pay close attention to testimony today from former Fed Chairman Volcker who will indicate hedge funds and private equity funds should be allowed to profit and fail.  Volcker is also a proponent of limiting the size of banks so that none are “too big to fail” and create unmanageable systemic risk.  Data released in the U.S. today saw December pending home sales print as expected at 1.0% m/m and up 10.5% y/y.  Tomorrow’s data will include MBA mortgage applications, January Challenge job cuts, and January ISM non-manufacturing data.

The big news this week will be Friday’s January non-farm payrolls data.

Euro bids are cited around the US$ 1.3740 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.25 level and was capped around the ¥90.90 level.  Finance minister Kan urged Bank of Japan to continue implementing “appropriate and flexible policies” and work closely with the government to combat deflation. 
Kan also said “it is possible that the yuan will be one of the agenda items. I will discuss it on the understanding that stable growth in China is desirable for Japan.”  Notably, bids fell short of the BoJ’s offer today in its open market operation as part of the central bank’s lending program announced in December.  Prime Minister Hatoyama said the budget environment in 2011 will remain “severe.” Bank of Japan Chief Economist Momma yesterday reported “the risk that the Japanese economy will fall off from a cliff is small, but there is still a long way to go.  Even if the global economy continues to recover, the spread of that to capital spending and the labour market will be limited.” 
The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥125.80 level and was capped around the ¥126.80 level. 
The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥143.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥85.45 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8271 in the over-the-counter market, down from CNY 6.8275.

A rumour circulated through the market last night that China will permit the yuan to appreciate after July. People’s Bank of China adviser Fan Gang yesterday reported China’s “real worry” remains asset bubbles that could emerge as China’s economy emerges from a crisis period into a “boom time.”

₤

The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5995 level and was supported around the $1.5900 figure level.  The big question facing traders is whether Bank of England’s Monetary Policy Committee will scale back, pause, or extend its bond purchase program when its monetary policy announcement is made on Thursday.

Many data were released in the U.K. yesterday.
First, January manufacturing PMI improved to 56.7 from 54.6, a fifteen-year high. 
Second, December mortgage approvals decreased to 59,020. 
Third, net lending to individuals rose by ₤1.2 billion in December.  Fourth, Hometrack January house prices were up +0.1%.  Cable bids are cited around the US$ 1.5720 level. 
The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8760 level and was supported around the ₤0.8710 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0540 level and was capped around the CHF 1.0605 level.  There was talk in the European session that Swiss National Bank lifted the euro/ Swiss franc cross to keep a lid on the Swiss franc.  Data released in Switzerland today saw the SECO consumer climate indicator improve to -7 from -14.  The media this week reported Swiss National Bank is unlikely to abandon its policy to keep a lid on the Swiss franc even though the domestic economy continues to improve.  U.S. dollar offers are cited around the CHF 1.0760 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.4740 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.6800 figure.

Technical Outlook at 1330 GMT (EDT + 0500)

(Bid Price) (Today’s Intraday Range)

EUR/ USD     1.3901                 1.3934, 1.3851
USD/ JPY        90.82                  90.87,   89.87
GBP/ USD     1.5904                   1.5977, 1.5849
USD/ CHF     1.0596                   1.0624, 1.0565
AUD/USD      0.8866                0.8877, 0.8787
USD/CAD      1.0645                 1.0720, 1.0637
NZD/USD      0.7101                0.7117, 0.7042
EUR/ JPY      125.93                 126.68, 125.80
EUR/ GBP     0.8735                 0.8760, 0.8708
GBP/ JPY      144.11                  145.18, 143.83
CHF/ JPY        85.47                 86.02,   85.43

Support                     Resistance               Support                  Resistance

EUR/ USD                                                          USD/ JPY

L1.       1.3795                                    1.4340                                       86.95                         93.20

L2.       1.3480                                    1.4495                                       84.85                         95.50
L3.       1.3085                                    1.4835                                       82.30                         98.85

GBP/ USD                                                       USD/ CHF

L1.       1.5755                                    1.6215                                    1.0350                                    1.0830

L2.       1.5355                                    1.6530                                    1.0040                                    1.1045

L3.       1.4950                                    1.6890                                    0.9920                                    1.1315

AUD/ USD                                                       USD/ CAD

L1.       0.8755                                    0.8960                                    1.0400                                    1.0780

L2.       0.8555                                    0.9190                                    1.0150                                    1.0960

L3.       0.8225                                    0.9425                                    0.9920                                    1.1140

NZD/ USD                                                       EUR/ JPY

L1.       0.6915                                    0.7295                                    122.45                                    128.90

L2.       0.6750                                    0.7430                                    118.50                                    131.50

L3.       0.6585                                    0.7645                                    115.65                                    132.85

EUR/ GBP                                                       EUR/ CHF

L1.       0.8500                                    0.9175                                    1.4575                                    1.4875

L2.       0.8320                                    0.9290                                    1.4305                                    1.5010

L3.       0.8190                                    0.9430                                    1.4110                                    1.5450

GBP/ JPY                                                        CHF/ JPY

L1.       141.10                                    149.20                                      83.35                                     91.60

L2.       135.85                                    150.60                                      81.40                                     93.60

L3.       129.35                                    152.20                                      78.95                                     97.95

Domestic Gold futures continued to shed as the Indian Rupee gained today ahead of the RBI monetary policy meeting tomorrow in which the central bank is expected to hike the CRR by 50 basis points.

India MCX February gold futures down 0.3% at INR16,395/10 grams on strong INR; at nearly two-month low. “The market is expected to stoop down toward INR16,350 levels in the near term,” says JRG Wealth Management in note; for day, likely to move in INR16,389-INR16,610 range. However, slight gains in overseas gold markets could aid recovery in domestic prices.

The Reserve Bank of India (RBI) will announce the third quarter review of the Annual Monetary Policy tomorrow. The repo rate (4.75%) and reverse repo rate (3.25%) are expected to be kept unchanged while the reserve requirement, i.e., cash reserve ratio (CRR, 5%), is likely to be increased by 50bps.

MCX- Other Gold Contracts

NCDEX-Other Gold Contracts

————-

After bringing good returns for investors late last year, gold exchange traded funds (ETFs) and gold funds are making a slow retreat.
Is it a time to start selling gold?

With prices of the yellow metal softening, returns from gold ETFs and funds have declined in the last two months. While gold ETFs have declined by 2.2% to 2.4%, gold funds that invest in stocks of gold mining companies have fallen by 3% to 7.8%.

Gold is currently in a consolidation phase. Trends are favouring the dollar on a short-term basis and so there is some sluggishness in gold. After hitting a record high of $1,226.1 an ounce in December , gold prices have come down to around $1,100 now.

MCX Gold prices recovered by INR 50 to INR 16,485 per ten grams at the Gold bullion market here today on fresh buying by stockists and jewellers despite weak trend in overseas gold markets.

On the other hand, silver prices dropped further down on lack of demand from industrial users.

Stockists grabbed the opportunity to buy the Gold  at current level, which moved the prices moderately up on the MCX gold market .They are expecting further fall in gold prices internationally, seeing overall bearish global trend.

In New York, gold for February delivery finished down by USD 13.50, or 1.2 per cent, to USD 1,089.70 an ounce on the Comex division of NYMEX.

Silver for March delivery fell down by 40 cents to USD 16.93 an ounce.

MARKET REPORT

Gold futures fell 1 percent on Friday, finishing the week on a weak note as a dollar rise dampened investor sentiment, but palladium rose sharply on strong investment demand related to the U.S. exchange traded funds. Silver holded its nerve in restricted its losses and ended a tad higher on COMEX.

NEW BITES

1. The world’s largest gold-backed exchangetraded fund, SPDR Gold Trust, said its holdings stood at 1,112.836 tonnes as of Jan 17, down 0.914 tonnes or 0.08 percent from the previous business day.
2. The world’s largest silver-backed exchange- traded fund, the iShares Silver Trust, said its silver holdings stood at 9,339.19 tonnes as of Jan 15, same as the previous business day.
3. Purchases from gold jewellers in India stirred up physical trade in Asia, while a drop in bullion prices ignited demand from other consumers in the region and kept premiums steady, dealers said on Friday.
4. Red Back Mining Inc said it forecast higher gold production in 2010 following the completion of major plant expansions at both its Chirano mine in Ghana and Tasiast mine in Mauritania. The African-focused gold miner expects total production for 2010 in the rage of 485,000 ounces to 525,000 ounces at a cash operating cost between $390 and $420 per ounce.
5. Gold jewellery exports from Italy likely declined 20 percent in value in 2009, figures produced for the Fiera di Vicenza jewellery trade fair showed on Saturday.
6. Italian jewellers are focusing on high-end design and innovation to fight off competition from mass-market manufacturers and see China as a key source of customers, according to the World Gold Council.

We expect dollar to trade firm for the day which may weigh on the rise in precious metals prices.

Commodity exchanges finding way to beat sun outage. The NCDEX is asking its members to connect through an alternative mode instead of VSAT (very small aperture terminal) starting February 20.

MCX has managed to overcome sun outage problem by using advance Data Networking technology jointly provided by the BSNL and MTNL for the last five years.

Sun outage occurs when a satellite and earth are in perfect position. During this period, the interference in satellite signals disturbs VSAT, a two-way satellite ground station, through which trading terminals are connected. Exchanges have been changing or suspending trade timing by 45 minutes during sun outage.

“The exchange has decided that during the sun outage period market would not be suspended and trading would continue in the normal course,” NCDEX said in a circular.

Barring VSATs, leased lines through point of presence, multi-protocol label switching and Internet remain unaffected during the sun outage, NCDEX added.

Crude oil

Crude oil prices rose to a new 15 month high on speculation that fuel demand will rebound as freezing temperatures in the northern hemisphere and weakening dollar also supported the prices.
The oil advanced for the second day as Chinese crude imports climbed to a record 203.8 million metric tons last year weighing over weak last weeks weak US NFP data. Chevron corp, the second largest US energy producer said the Makaraba-utonana pipeline it operates in the southern Nigeria’s delta state was breached on Jan 8, affecting 20,000 barrels of crude oil production a day. Attacks by armed groups in Nigeria’s oil rich delta region have cut the country’s output by more than 25 percent since 2006. Crude Feb month contract was trading at $83.5 gaining 1.57 percent. Crude oil mcx Dec contract was trading at Rs 3790 gaining 0.03 percent.

Base Metals

Copper futures prices rallied for the first time in last three days as Chinese imports and weak dollar boosted investors confidence in the metal. The china imported 369,368 metric tons of copper and its products in December, 27 percent increase from November. The Chinese exports of all products climbed for the first time in 14 months, according to census bureau. LME copper inventories rose by 4575 metric tons and mcx copper is trading at 348.10 gaining 0.96 percent.

Technical Trends

GOLD MCX Feb

While above 17000 prices could stay firm and could target 17080/17125 followed by 17250 levels. Unexpected fall below 16978 could see a move lower towards 16920 followed by 16870 levels.
Res: 17080/ 17160 Supp: 16970/16920

Silver MCX Mar:

As long as 28320 holds, prices could move up and find resistance at 28600 initially followed by 28730/29000 levels. If unable to hold 28300 expect a corrective move towards 28150/27980.
Res: 28610/28730 Supp: 28300/ 27980

CRUDE MCX Jan

Dips to 3763 may find support for a rise towards 3805 initially. Rallies above 3812 could invite fresh rallies towards 3848/3878. Falls below 3752 may cause doubts on the bullish view.
Res: 3812/3870 Supp: 3762/3736

Natural Gas MCX Jan

As long as support at 251/249 holds prices could stay firm and edge higher towards 258/261 followed by 264. Falls below 249 may negate the view and target 241.
Res: 258/264 Supp: 254/247

Copper MCX Feb

Dips to 347/345 hold downside expect to move up and find resistance at 349/350.50 followed by 354. If unable to hold 345 drag prices lower towards 343/341 levels.
Res: 349/351 Supp: 347/ 345

Lead MCX Jan

As long as 118.70/120 caps the upside expect a corrective fall towards 117/116 followed by 115.30. Needs to break 120 to negate the view.
Res: 118.70/120 Supp: 117/ 116

Nickel MCX Jan

Moves to 844 may find resistance for a fall towards 831/826. Break below 825 could invite fresh sell off towards 814/802. Needs to break 847 to negate the view.
Res: 845/862 Supp: 831// 824

Zinc MCX Jan

If 118 cap the upside expect a fall towards 116.50/115.50. Need to break 118.70 to negate the view.
Res 118/119 Sup: 116.70/115

Aluminium MCX Jan

If 105 expects to move up and target 106/106.80followed by 107.60 Needs to break 104.20 to negate the view.
Res: 106.20/107 Sup: 105/104.40