VnForex

Technical Analysis for Precious Metals

2009-11-06T19:13:00.001+07:00

Silver

Silver is moving between 61.8% and 76.4% Fibonacci levels of CD leg of the harmonica [Bat] pattern as seen on the provided daily chart. A pullback is needed before resuming the upside rally. Hence a potential downside corrective action is still in favor on the intraday basis based on the bearish harmonic formation appears on the secondary four-hour chart, supported by negative sign of OsMA.

The trading range for today is among the key support at 16.25 and key resistance now at 18.45.

The general trend is to the upside as far as 12.45 remains intact with targets at 19.40.

Support: 17.40, 17.35, 17.25, 17.18, 17.12
Resistance: 17.53, 17.60, 17.65, 17.72, 17.77

Recommendation: Based on the charts and explanations above our opinion is, selling silver from 17.50 targeting 16.95 and stop loss above 17.95 might be appropriate.

Gold

Gold is trapped within a very tight range, preparing for a downside correction based on facing the upper line of the ascending channel, the strong resistance around 1097.00 [161.8% Fibonacci of BC leg] for the daily bearish harmonic AB=CD pattern and the negative divergence appears on OsMA. Therefore we retain for a potential pullback over intraday basis, targeting 1069.00 before resuming the upside rally.

The trading range for today is among the key support at 1034.00 and key resistance now at 1155.00.

The general trend is to the upside as far as 865.00 remains intact with targets at 1155.00.

Support: 1085.00, 1080.00, 1074.00, 1069.00, 1066.00
Resistance: 1094.00, 1097.00, 1101.00, 1107.00, 1113.00

Recommendation: Based on the charts and explanations above our opinion is, selling gold from 1092.00 targeting 1074.00 and stop loss above 1107.00 might be appropriate.

FOREX analysis

2009-11-05T19:53:00.000+07:00

EUR/USD

Current level-1.4818

EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4134 and 1.3523.

With the break above 1.4850 resistance, the downtrend from 1.5063 was confirmed to be completed, so there is no current trend on the 2 and 4 h. charts. Nevertheless, the bottom at 1.4623 was a test of the 50-day SMA on the daily chart and the fact, that this test failed is a signal, that the major uptrend is intact and new highs are to be expected. Intraday bias is slightly negative for 1.4777 and we expect current corrective slide from 1.4910 to be limited above that zone before next leg upwards to 1.5063. Crucial on the downside is 1.4735.

Resistance		Support
intraday	intraweek	intraday	intraweek
1.4856	1.5063	1.4777	1.4623
1.4910	1.6040	1.4735	1.4444

USD/JPY

Current level - 90.33

A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated below the 50- and 200-day SMA, currently projected at 94.86 and 94.84

Our target at 91.30 was precisely hit and the pair reversed, breaking below 90.56 crucial support. The overall bias here is extremely negative for 89.82, en route to 88.83 with a risk-limit above 90.56.

Resistance		Support
intraday	intraweek	intraday	intraweek
90.56	92.40	89.83	89.17
91.30	97.79	88.83	83.53

GBP/USD

Current level- 1.6501

The pair is in a downtrend after peaking at 1.7042. Trading is situated above the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258.

Yesterday's uptrend broke through 1.6530 dynamic resistance and peaked few pips below 1.6604 high. Current intraday bias is negative, aiming at 1.6438 and a break there will target 1.6250 main support zone. We are rather neutral here, due to the trendless dynamics in the 1.6250-6605 zone. A break above 1.6604 will confirm a bullish set-up on the pair, towards 1.6752 and beyond.

Resistance		Support
intraday	intraweek	intraday	intraweek
1.6545	1.6752	1.6438	1.6250
1.6604	1.7042	1.6250	1.5706

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Gold and Forex Technical Update

2009-11-05T19:50:00.000+07:00

Rupee : The Indian Rupee is unable to hold clear strength seems to be in range of 46.80 to 47.80 levels. Please note that dollar is in correction mode in overseas markets only if euro/usd breaks 1.4453 levels / gold breaks 990 dollars and crude breaks 70 dollars and dollar index breaks 78 levels in the global market a scenario of rupee weakness may occur again till then the view remains bullish for rupee. Exporters sell 47.50 plus levels. (USDINR - 47.14).Bullish to rangebound

Euro : Euro took a false break below 1.4650 levels and moved up breaking the crucial resistance of 1.4850 levels. Until we see a close above 1.4850 levels on a closing basis the bias is still neutral to bearish.Selling on upticks is advised around 1.4850 levels for a medium target of 1.4550 levels with stops close to 1.4930 levels.(EurUsd-1.4830).Neutral to Bearish

Sterling : The Sterling also held strong after touching the crucial support of 1.6270 levels benefitting from euro rally yesterday 1.6600 levels still remains crucial for pound.Technically a break of 1.66 in pound would indicate further bullish pressure towards 1.6700 area and may be higher. Immediate support at 1.6520/00 area. Break below that area should lead us again into the bearish territory. On fundamental side, investors focus is now on whether the BoE is going to expand the quantitative easing program. If that happen, Sterling should be under heavy pressure and technical bullishness might fail.(GBPUSD 1.6515) Bearish.

Yen : JPY is facing strong resistance at 91.50 levels.(Trendline resistance and 55 Daily EMA) . Only a break and hold 2-3 trading session above 91.50 levels.would change the bias of Yen to bearish otherwise still bullish to rangebound.Cautious selling around 91.50 - 91.80 levels keeping stoploss 92.30 and target of 89.50.( USDJPY -90.30) Bullish.

Aud : AUD bounced back from the weekly trendline support of 0.8915 levels as expected from the last few days but does not seem to maintain bullishness above 0.9120 despite a rate increase from Australia. It is having a strong falling trendline resistance at 0.9120 .If aud breaks this resistance and closes above then it Aud is bullish in medium term. (AUDUSD- 0.9077) Bullish.

Gold : Gold made yet another record high of $1097 yesterday. The No change in Fed's Rate Decision did bring some momemtum in gold and is now trading at $1086 levels. This shine in Gold can allow it test $1120 levels soon from where correction is expected.(GOLD $1088). Bullish.

Dollar Index :Dollar index came down from 76.80 levels to 75.75 levels currently. This sell off is due to no change in the release of interest rate decision yesterday but the strength of selling is so far mild. Some consolidations would be seen in the greenback and the index could retest 76.50 levels soon as long as 75.56 minor support is held (DI- 75.80).Rangebound

Commodities Change Little Ahead of BOE and ECB Meetings

2009-11-05T19:48:00.000+07:00

Crude oil hovers around 80 in European morning after gaining more than +4% in the past 3 days. Others in the energy complex also pull back with RBOB gasoline sliding to 2 and heating oil to 2.07. On the other hand, gold price continues to trade firmly above 1080.

We may not see new high for gold today as price should consolidate for a little while after the 3-day rally. However, the correction should not be deep as supporting forces including central bank diversification, broad-based weakness in USD and rising inflationary expectations remain intact.

According to SPDR Gold Trust, bullion holdings rose to 1108.4 metric tons as of November 3, the biggest increase in a month.

Market's focus has turned to ECB and BOE meetings. USD recovers from yesterday's low as both European central banks are likely to keep interest rates unchanged. The ECB is expected to keep the main refinancing rate unchanged at 1% this month. As the Governing Council will release a new set of staff projections in December, we do not expect much new information to be sent out by policymakers. ECB President Trichet should continue to describe current interest rate as 'appropriate' while growth and inflation risks as 'broadly balanced'. At the press conference, however, investors may pay attention to questions about new 12-month tender operation. It's interesting to know if the central bank will charge a margin over the policy rate.

For BOE, the most important issue is whether the central bank will extend the 175B-pound asset purchase program as keeping the policy rate at 0.5% is widely anticipated. There have been rising bets on the expansion after the UK reported economic contraction of -0.4% qoq in 3Q09. The reading made the nation's economy worrisome as countries such as US, Germany and France have already returned to growth.

UK stocks decline despite better-than-expected industrial production in September. In the Eurozone, retail sales surprisingly contracted -0.7% mom (consensus: +0.2%) in September following a -0.1% decline a month ago. This translated in annual drop of -3.6%. As a result, Germany's DAX and France's CAC 40 slide -0.6% and -0.7% respectively.

Earlier in Asian session, the MSCI Asia Pacific Index dropped -0.4% as New Zealand's unemployment rose to 6.5% in 3Q09 from 6% in the prior month. Moreover, South Korea's Finance Minister said he's uncertain of the nation's economic growth is unsustainable as it remains too dependent on external demand. This diminished investors' risk appetite.

Federal Open Market Committee meeting

2009-11-05T07:55:00.000+07:00

Release Date: November 4, 2009

For immediate release

Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Report to the Secretary of the Treasury from the Treasury Borrowing Advisory

2009-11-04T21:25:00.001+07:00

Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association

November 4, 2009

Dear Mr. Secretary:

Since the Committee met in early August, the contraction in economic activity appears to have drawn to a close and financial conditions have continued to improve. Aggressive fiscal and monetary policies have played a critical role in helping to begin the process of normalization in key financial markets and the real economy. That normalization is highlighted in part by a return to pre-crisis spread levels in money and credit markets and the recently reported 3½% annualized gain in third-quarter GDP.

Despite the increase in third-quarter economic activity and the prospect of additional modest growth ahead, it remains unclear to what extent the economy can expand without the aid of aggressive policy support. Monetary and fiscal policy remains full throttle and contributed importantly to the latest quarter's growth spurt. For instance, "cash for clunkers" lifted consumer purchases of motor vehicles, the first-time homebuyers' tax credit is boosting home sales and traditional public sector automatic stabilizers are supporting household income, while on the monetary side, near zero interest rates and asset purchase and liquidity programs are shifting investor risk preference, improving the cost of capital.

With the federal funds rate at its lower nominal bound, the Federal Reserve is continuing its asset purchase program in an effort to further improve financial conditions. The Treasury purchase program begun in March has been completed but the purchase of mortgage backed securities is ongoing and will persist into the first quarter of 2010. These purchases will be a continued source of monetary stimulus.

Against this economic backdrop, the Committee's first charge was to examine what adjustments to debt issuance, if any, should Treasury make in consideration of its financing needs. The Committee felt that no meaningful change in the nominal coupon issuance schedule was necessary. Members felt that there was capacity to reasonably grow auction sizes as needed.

With regard to TIPS, the Committee recommends increasing TIPS issuance from $58 billion in 2009 to $70-$80 billion in 2010. The auction schedules for both 5 and 10-year TIPS would be maintained, although sizes would increase. However, 20-year TIPS issuance would be replaced with 30-year TIPS, on the same auction schedule, with larger sizes. The Committee felt that this would both lengthen the average maturity of Treasury's debt, while attracting investors interested in longer duration inflation protection. In the medium term, the Committee felt that the market could support increases in both auction sizes and frequency, growing gross TIPS issuance to $100-$130 billion per annum. These actions maintain, if not increase, the proportion of TIPS to total marketable debt outstanding.

There was lively debate among the Committee members regarding the GAO Report published September 2009 entitled "Treasury Inflation Protected Securities Should Play a Heightened Role in Addressing Debt Management Challenges." Committee members could not come to broad agreement on the findings of the report. While Committee members acknowledged the benefits of TIPS as a debt management tool, some members reiterated their higher cost to date versus nominal Treasury securities.

The second charge was to examine the implications of Federal Reserve exit strategies on the Treasury market. The Committee member's presentation (see attached) attributed investor demand across a variety of asset classes including Treasuries, largely in part to the Fed's zero interest rate policy, asset purchase program, and credit easing facilities. In particular, the member highlighted that after accounting for Fed purchases, net fixed income supply in 2009 was actually negative. Thus, exit strategies, whether it's a wind down of asset purchases, reverse repos, or raising the Fed Funds rate, must be carried out with extreme caution. Several members of the Committee debated the merits of the Fed engaging in reverse repos while continuing its asset purchase program.

The third charge was to examine Treasury debt portfolio characteristics. The Committee member (see attached presentation) was asked to contemplate the average maturity of Treasury's debt given structural financing needs coupled with the economic outlook in the medium and long term. In addition, the member examined financing and risk management by other sovereign nations and how it might apply to US Treasury debt management. The conclusions were that the potential for inflation, higher interest rates, and roll over risk should be of material concern. In most economic scenarios, lengthening the average maturity of debt from 53 months to 74-90 months was recommended. Committee members commented that while real progress has been made in terms of lengthening the average maturity of US Treasury debt to 53 months, [net issuance in coupons growing from $188.5 billion in 2008 to $1.246 trillion in 2009], more needs to be done in this regard.

In the final charge, the Committee considered the composition of marketable financing for the upcoming two quarters. The Committee's recommendations are attached.

Respectfully Submitted,

Matthew E. Zames, Chairman

Minutes of the Meeting of the Treasury Borrowing Advisory Committee Of the Securities Industry and Financial Markets Association

2009-11-04T21:24:00.000+07:00

The Committee convened in closed session at the Hay-Adams Hotel at 10:32 a.m. All Committee members were present. Deputy Assistant Secretary (DAS) for Federal Finance Matthew Rutherford and Office of Debt Management Director Karthik Ramanathan welcomed the Committee, introduced the new Chairman Matthew Zames and the new Vice Chairman Ashok Varadhan, and then gave them the charge.

The first item on the charge asked the Committee what adjustments to debt issuance Treasury should make in consideration of its financing needs and uncertainty regarding the fiscal outlook.

Given the cumulative deficit over the next three fiscal years of nearly $3.5 trillion according to OMB, Director Ramanathan stated that Treasury will need to remain extremely agile through its debt management approach and actions to confront challenges related to the fiscal and economic outlook.

Director Ramanathan said that market participants should expect between $1.5 trillion and $2 trillion in nominal and inflation linked issuance again this year; at the same time, bill issuance may marginally decline while shorter dated coupons stabilize at current levels. Treasury debt managers will continue to remain aggressive in managing financing needs while minimizing potential market implications.

As an example, Director Ramanathan outlined Treasury's successful strategy in addressing the $1.4 trillion deficit in fiscal year 2009. Noting the $1.9 trillion in nominal coupon issuance this past fiscal year, Director Ramanathan stated that Treasury was able to raise $1.25 trillion in new cash in tenor beyond two years, nearly six times the amount raised in fiscal year 2008, while at the same time meeting unexpected borrowing needs through bills.

Director Ramanathan pointed out that outlays in FY 2009 were nearly $550 billion higher (an 18% increase) versus fiscal year 2008 while receipts fell by over $400 billion (or 17%), versus the prior year – just short of a $950 billion financing swing in just one year.

Outlays related to fiscal stimulus and financial stability measures were the drivers of expenditures, including TARP related spending of over $300 billion as well as additional spending related to unemployment benefits which are up approximately 150% year over year. Outlays increased across the board, including Medicaid (25% higher), Medicare (10% higher), Social Security benefits (9% higher), and Defense spending (7% higher). Net interest on public debt was lower though by 10%.

At the same time, all receipt categories fell significantly including withheld taxes (7% lower year over year), non-withheld receipts (28% lower), and corporate taxes (55% lower).

Ramanathan noted that as of today, the gross cost basis of Treasury's marketable financing was less than 1.0 % given the large amount of bills issued. Even with nearly $8 trillion in gross issuance across the portfolio, bills averaged 0.16%, notes averaged 1.9% while bonds averaged 4.2% in fiscal year 2009.

Director Ramanathan then turned to OMB's midsession review, which included a table illustrating the effect of budget proposals on projected deficits. The updated 2010 projections' baseline estimates placed the deficit to GDP just above 4% for 2010-2014. Ramanathan noted that any significant variation in debt to GDP or decline in GDP growth in the coming years could increase Treasury's funding cost.

Despite these significant headwinds as well as issuance for Federal Reserve liquidity initiatives, the multi-tiered approach implemented by Treasury to meet these large financing needs ultimately served to stabilize Treasury's average maturity and actually shifted its direction higher. The reintroduction of the 3-year note and 7-year note as well as aggressively moving to two reopening in the 10-year note and 30-year note took place in an extremely compressed period of time, but led to minimal market disruption.

Moreover, if non-marketable debt such as state and local government issuance reverses course or the economy strongly recovers, these increases in coupon sizes could potentially end sooner. Director Ramanathan then explicitly stated that all of these estimates are subject to change given the uncertainty in policy and fiscal expectations, and any shifts would be gradual.

DAS Rutherford continued the presentation to the Committee, outlining cumulative net financing flows since FY 2007 and noting the transition from bill issuance to coupon issuance in greater detail. The large financing needs and lumpy nature of cash flows has led to large cash balances which remain elevated and volatile. DAS Rutherford noted that Supplementary Financing Program (SFP) bills would gradually decline to $15 billion as previously announced from $200 billion to in anticipation of the constraints surrounding the debt ceiling legislation.

DAS Rutherford reviewed the composition of the portfolio, noting that bills as a portion of the debt outstanding fell to about 27%, while bills excluding the SFP program fell to close to historical averages of 23%. DAS Rutherford noted that Treasury will work in close consultation with the Federal Reserve in considering the future path of the program.

Furthermore nominal coupons have risen to 65% from 57% of the portfolio, with particular reliance on the 5-year coupon, while TIPS have fallen to about 8% of the portfolio. Given recent dealer estimates of $1.4 trillion for the fiscal year 2010 deficit and marketable borrowing needs estimates between $1.2 trillion and $1.75 trillion, DAS Rutherford expected the current trends in issuance to continue but cautioned that the outlook remained uncertain as demonstrated by the $550 billion range in marketable borrowing expectations.

DAS Rutherford noted that deficit projections remain unacceptably high and that he expects the FY2011 budget to outline ways to address this. He did inform the Committee, however, that given the number of TIPS coming due early next year and Treasury's sizable borrowing need, TIPS as a proportion of the overall portfolio may continue to decline.

To better understand the reason for the shifts in the composition and profile of the portfolio, DAS Rutherford reviewed the circumstances of last year that sparked the decline in average maturity, noting that the bulk of bill issuance occurring last fall. DAS Rutherford discussed Treasury's maturity profile, noting that over the next 5 years, 73 days will have maturities greater than $20 billion and 46 days will have maturities greater than $30 billion DAS Rutherford noted that approaches to addressing these sizable maturities will be a topic for TBAC discussion in the future.

Looking at the a number of forecasts for the next three years, DAS Rutherford pointed to continued reliance on nominal coupon issuance as well as additional issuance of inflation indexed securities to meet the large borrowing needs while shorter dated issuance eased. By gradually increasing coupons incrementally over the next three years, DAS Rutherford expected the average maturity of the debt to increase back to the historical average of 60 months by fiscal year-end 2010. Eventually, though it could take five to six years, Treasury's marketable debt portfolio will stabilize at a new level between six to seven years.

DAS Rutherford then discussed a change in policy relating to Treasury bill issuance. After repeated rescheduling of the 4- and 52-week auctions this year, Treasury proposed moving all bill auctions to 11:30 a.m. from 1:00 p.m. to minimize conflicts with coupon auctions. DAS Rutherford presented a chart depicting improved coverage ratios in the 4-week bill auctions that occurred at the 11:30 a.m. close.

DAS Rutherford then addressed Treasury's intention to eliminate the 20-year TIPS and reintroduce the 30-year TIPS. Citing an internal ODM report, DAS Rutherford noted zero-coupon inflation swaps data depicts inflation to be upwardly sloping. Assuming that 10-year forward and 20-year forward inflation expectations are not much different, Treasury would be capturing more inflation risk premium by extending issuance from 20-year to 30-year, making 30-year TIPS more cost effective for debt management.

With the presentation complete, DAS Rutherford asked the Committee for its thoughts on debt issuance and the policy changes being considered.

The Committee turned its attention to what changes to the current auction calendar, if any, were needed in order address Treasury's future borrowing needs. Members agreed that at this time, no additional securities to the nominal calendar were necessary, and that gradual increases in coupon sizes would be sufficient to address the large borrowing needs. Any coupon issuance to increase the average maturity should also take place in a gradual manner, and market participants should not be surprised with slow shift.

The Committee opened with a discussion on TIPS and the idea of eliminating the 20-year TIPS in favor of 30-year TIPS. One member began by discussing the September 2009 GAO Study "Treasury Inflation Protected Securities Should Play and Heightened Role in Addressing Debt Management Challenges" (http://www.gao.gov/new.items/d09932.pdf) . One member stated that the study was generally balanced and that the study highlighted reasons why there were market perceptions that the Treasury was not committed to the program.

Another member stated that the GAO study pointed out that there are two potential valid ways of considering the cost of TIPS – an ex-post analysis and ex-ante analysis. Ex-post analysis, over the last 13 years, had shown that TIPS were an expensive form of financing for the government; by other metrics, including asset swaps and auction tails, Treasury was paying a premium to issue TIPS. Another member stated that on an ex-ante basis, TIPS appeared to be less expensive than on an ex-post basis. Another member stated that it would take years to determine if ex-ante analysis is the correct way of measuring TIPS costs.

A member stated that the measure of TIPS cost should perhaps be broadened so as to consider any positive externalities associated with the government accepting the risk to sell inflation. The member stated that investors may perceive the government's willingness to short inflation as a sign that policy makers are confident that inflation is contained. Also, issuing TIPS may be pro-cyclical and serve as a hedge to the government's balance sheet. Another member pointed out, however, that the government currently issues significant amounts of short-dated Treasury bills which are less expensive to the taxpayer and could be considered to be "pro-cyclical issuance". The member noted that the "pro-cyclical benefits" argument for issuing TIPS also breaks down in stagflation environments.

A majority of TBAC members generally believed that despite legitimate concerns surrounding TIPS costs and liquidity, given its funding requirements Treasury would need to increase the size of the TIPS program. In addition, TIPS could help Treasury in its stated goal of extending the average length.

In terms of TIPS issuance, there was general consensus by committee members to eliminate the 20-year TIPS and replace it with 30-year TIPS issuance. This change might allow Treasury to capture a greater inflation-risk premium and would also create a TIPS issue that could be better compared to a comparable on-the-run nominal issuance point. The additional duration associated with a 30 year TIPS would also be consistent with Treasury's desire to increase average maturity.

The committee generally recommended that the overall issuance of TIPS be increased over the next couple of years. For FY2010, TIPS issuance should be increased from the current run rate of $58 billion per year to an overall issuance amount of between $70 and $80 billion per year across securities. In FY2011, overall TIPS issuance should be further increased to between $100 and $125 billion.

In addition, given that TIPS auctions are liquidity events in the TIPS market, Treasury should consider increasing the frequency of TIPS auctions so that there is either a 5-, 10- or 30-year TIPS auction once a month. One member suggested that Treasury could issue a new 5-year TIPS in April with August and November reopenings; a new 30-year TIPS in February with June and October reopenings and new 10-year TIPS in January and July, with March/May and September/November reopenings, respectively. Some members, however objected to increasing the size of the TIPS program so dramatically, citing concerns about costs.

Members recommended that it was important to continue to extend average maturity but there was no need to change the nominal auction calendar to achieve such an increase. One member stated that there was some confusion in the markets regarding how fast Treasury was intending to increase the average maturity and that Treasury should provide some clarity around that issue.

Director Ramanathan reiterated that market participants should expect between $1.5 trillion and $2 trillion in nominal and inflation linked issuance again this year; at the same time, bill issuance may marginally decline while shorter dated coupons stabilize at current levels.

The Committee then turned to a presentation by one of its members on the likely form of the Federal Reserve's exit strategy and the implications for the Treasury's borrowing program resulting from that strategy.

The presenting member began by noting the importance of the exit strategy for financial markets and fiscal authorities. It was noted that the near-zero interest rates driven by current Federal Reserve policy was pushing many financial entities such as pension funds, insurance companies, and endowments further out on the yield curve into longer-dated, riskier asset classes to earn incremental yield. Treasury securities have benefitted from the resultant increase in demand, but riskier assets have benefitted even more. According to the member, the greater decline in the indices for investment grade and high-yield corporate debt relative to 10-year Treasuries and current coupon mortgages displays this reach for yield. A critical issue will be the impact on the riskier asset classes as market interest rates move away from zero.

The presenting member then looked at the likely sequence of the Federal Reserve's exit strategy. The member acknowledged that the central bank must address the uncertainty and fragility of the economic recovery and the dependence of the housing market on low rates. It was suggested that the most likely sequence would be the draining of excess reserves from the banking system, the cessation of the mortgage-backed securities purchase program, and only then raising the Fed funds target rate.

Several members at this point asked why draining reserves before ending the MBS program made sense. The presenting member noted that the program was already set to expire, and other measures, such as a revival of the Supplementary Financing Program, could be utilized by the Federal Reserve at the same time.

The presenting member then addressed the options for draining reserves from the banking system. The problem of excess reserves could persist through the end of 2011 with up to one trillion in excess reserves remaining after liquidity facilities and on balance sheet securities have rolled off. One approach, raising the Fed funds rate to increase the opportunity costs of banks using their reserves, carries the attendant problems of increasing interest rates too soon in the economic recovery. A second option, taking in term deposits, lacks a clear mechanism for rate setting and bank use. Selling assets may run into difficulties if the public appetite for debt at that time is sated, especially considering the impact on the housing market and the major role the Federal Reserve currently plays in the market.

According to the presenting member, these less than optimal solutions leaves the Federal Reserve the option of reverse repurchase agreements (reverse repos) as the most likely option although the potential of the mechanism for draining reserves is unclear. If it is to undertake these reverse repos, the selection of counterparty is important. Depending on how the program is designed, whether it is made to work with dealers or money market funds or to pursue a TALF model with banks as agents, there will be different impacts on the scope of the program, the ease with which it can be set up, and the term of the contracts. In all cases, the program will compete with other short-term investments and put upward pressure on Treasury bill rates according to the presenting member. Moreover, draining excess reserves may dampen the demand for Treasury securities by banks given that banks are investing in securities – particularly Treasuries - in the absence of loan demand.

Several members noted the graph discussing net fixed income supply in 2009 and 2010, and how issuance will ramp up dramatically in 2010. Federal Reserve purchases have taken an enormous amount of supply out of the market this past year across fixed income markets, but next year, financial markets should expect even greater issuance with no support. Such an outcome could pressure rates.

The presenting member then addressed the Treasury market implications of this likely strategy by the Federal Reserve. Using information from the Flow of Funds data and internal projections, the presenting member suggested that the program of Federal Reserve purchases of securities has artificially reduced the supply of fixed income securities coming into the market. According to the member, by contrasting 5-year/5-year forward TIPS expectations with skew data for the 1-year/10-year high and low strikes, the real concern in the market is higher real interest rates rather than inflation.

The presenting member then offered several recommendations to possible market outcomes given the outlined scenario. According to the member, the Treasury should increase TIPS issuance to diversify and broaden its base in light of future competition for market demand. Further, Treasury should extend the average maturity of the Treasury portfolio. These actions must be balanced with the risk that further disinflation or deflation could impact the concentrated TIPS buyer base when it is most needed. The presentation then concluded.

Members generally agreed with the recommendations offered in the presentation as well the potential outcomes from pursuing specific exit strategies in relation to Treasury demand. One member noted that the end of the mortgage purchase program could impact overall rates by 50 to 100 basis points depending on the economic outlook and housing situation. Another member noted that Treasury rates could simply remain stable as other rates fell as the exit strategy took place or if less of an inflationary scenario took place.

The Committee then turned its attention to the third item on the Charge regarding characteristics of Treasury's debt portfolio. Specifically, given recent trends in the economy and the government's fiscal position, the charge asked members to discuss Treasury's plan to lengthen the average maturity of the portfolio in the medium to long term. In addition, Treasury sought the Committee's opinion on the optimal range for average maturity given structural financing needs in the medium and long term. Another Committee member gave the presentation.

The presenting member began by stating the four conclusions of the analysis. Namely:

1. Inflation, higher interest rate and roll over risk should be the primary concerns in Treasury's debt management strategies.

2. In most scenarios, it is prudent to lengthen maturities significantly in a gradual manner from the current average maturity of 50 months. The base case recommends an extension to 74 months, while more pessimistic scenarios suggest an extension to 96 months.

3. The objective of lowest borrowing cost could lead to higher yields that conflict with monetary policy objectives.

4. Clever debt management strategy could potentially reduce debt service cost meaningfully, but still can't completely substitute for prudent fiscal policy.

The presenting member then went on to provide background material before discussing a model developed to help in determining optimal average maturity.

The Committee member noted that in doing a review of G7 countries' debt management strategies, several facts were notable. One point was that the United States had the lowest average maturity. Another point was that the U.S. had the largest percentage of foreign ownership of its debt. The member also noted that while the UK economy appeared to be in similar straits as the United States, it had the highest average maturity of all the G7 countries. Finally, the member noted the general lack of use of an asset-liability management framework for debt management.

The Committee member went on to review charts depicting various characteristics of Treasury's debt portfolio. The member presented charts showing that the current average maturity is lower than it has been in nearly 25 years, that the federal debt to GDP ratio was only higher than it is presently during World War II, and that this ratio is poised to increase significantly according to current Administration and CBO forecasts.

The member stated that much of the increase in the government's expenditures was structural in nature rather than temporary and presented charts indicating that mandatory spending was growing five times faster than discretionary spending. The rapid growth in entitlement spending as a percent of GDP beginning between 2010 and 2020 also remained a major challenge. The member then presented a chart showing an alternative possible budget outlook that indicated that the debt to GDP ratio could grow to as high as 98 percent by 2019.

The member continued by noting that the budget deficit has benefited from low rates but cautioned that this could change in the future since approximately 40 percent of the debt will need to be refinanced in less than one year.

Director Ramanathan noted that a significant portion of the shortening of the average debt was related to over $1 trillion in Treasury bill issuance as a result of Federal Reserve liquidity initiatives, fiscal stimulus, and financial stability measures. Director Ramanathan noted that the transition from bill financing to coupon financing was in process, but would not take place in an abrupt manner.

The member ended the background discussion with a chart that warned that historically, large fiscal expansions that were coupled with debt monetization could lead to inflation.

The presenting member went on to discuss a model developed to help in determining the optimal average maturity of debt issuance and began by issuing a disclaimer that the model was a stylized model meant to aid in how to think about the problem rather than to determine the actual optimal average maturity. The member also indicated that the model was developed over a very short period of time and therefore some simplifications were necessary, including using only 3-month and 10-year securities to finance the debt and excluding factors that would likely affect the output of the model.

The model projects funding needs across 15 economic and credit scenarios over the next ten years and attempts to find the optimal average maturity of debt issuance given different risk scenarios over the next three years in order to minimize the total debt cost of debt service over the ten-year period. The model employs assumptions for the determinants of the 3-month and 10-year rates. The presentation focused on four scenarios a base case, a low growth, a low inflation case similar to Japan, a moderate growth, high inflation case and, finally, a high credit loss case.

The results from the model indicate that in the low growth, low inflation scenario average maturity of issuance should be as low as possible, while in the high inflation scenario, average maturity should be extended to lock in low rates.

The member said that the model indicated that the macroeconomic environment had the most impact on average maturity. The model indicates that real growth of 2% combined with inflation of 2% results in an optimal average maturity of issuance of 55 months, while 2% real growth combined with 5% inflation increased the optimal average maturity to 116 months. In contrast, given a 0% real growth and 0% inflation environment, credit losses of $575 billion lead to a debt maturity of 26 months and losses of $1.4 trillion only increase the optimal debt maturity of issuance to 34 months. Interestingly, optimal average maturity of debt issuance is not significantly reduced by an increase in tax receipts of 30%.

The model results are highly dependent on the impact of duration supply on yields and, all else equal, if issuing more long-dated debt has a larger impact on rates, the optimal average maturity of issuance will be shorter.

The member noted that the lowest cost strategy for optimizing average maturity may lead to yields that conflict with monetary policy goals, and that constraining near-term yields would lead to shorter average maturity.

The member noted that the model indicated that clever debt management could reduce costs by a surprisingly high 13% of government revenues in a high credit loss, high inflation scenario by issuing long-dated debt from 2009 through 2011. However, the member also noted that even with optimal debt maturity, debt service cost would be unbearable and that prudent fiscal policy was needed to bring debt service costs under control.

The presentation ended with the member noting that there were many areas that could me more fully explored. The model did not fully consider entitlements and state and local government as potential contingent liabilities. And, therefore, the risk to the model is to the upside. The model can be enhanced on duration supply going forward. The member noted that current literature is focused on historical regression.

The Committee members all agreed that the Treasury should extend the average maturity of the debt an indicated that the presentation just solidified that view. Members however noted that this process would not take place in a very short period, but may take time to occur over several years.

_________________________________

Karthik Ramanathan

Director, Office of Debt Management

United States Department of the Treasury

Gold 03/11/2009

2009-11-03T20:46:00.001+07:00

Yesterday's explained duplicated hourly bearish harmonic pattern has been completed around 1066.00 zones as seen on our provided chart. The potential reversal zone [D] of the pattern has been capable of forming a heavy negative divergence as seen on OsMA and RSI 9 indicators, accompanied by negative candlestick structure. Therefore the intraday overview is to the downside, targeting 1054.00 followed by 1046.00 areas

The trading range for today is among the key support at 1011.00 and key resistance now at 1100.00.

The general trend is to the upside as far as 865.00 remains intact with targets at 1129.00.

Support: 1058.00, 1053.00, 1047.00, 1042.00, 1037.00
Resistance: 1066.00, 1068.00, 1070.00, 1074.00, 1080.00

Recommendation: Based on the charts and explanations above our opinion is, selling gold from 1064.00 targeting 1048.00 and stop loss above 1075.00 might be appropriate.

Gold Weekly Technical Outlook

2009-11-02T11:17:00.001+07:00

Gold fell further to as low as 1026.9 but was supported above mentioned 38.2% retracement of 931.3 to 1072 at 1018.3 and recovered. An intraday low should be in place and initial bias is neutral this week. While some more sideway trading might still be seen, short term outlook will remain bullish as long as 1018.3 fibonacci support holds. Break of 1072 high will bring rally resumption to 1100 psychological level next. On the downside, however, decisive break of 1018.3 will indicate that recent rise has completed and deeper decline should be seen to 985.5 cluster support (61.8% retracement at 985.0) instead.

In the bigger picture, the long term up trend in Gold has resumed after taking out 1033.9 resistance firmly. Rise from 681 would likely develop into another set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is expected to extend to 61.8% projection of 681 to 1007.7 from 931.3 at 1133.2 first and then 100% projection at 1258 next. On the downside, though, break of 985.5 support will dampen this bullish view and will turn focus back to 931.3 support instead.

In the long term picture, as discussed before, rise form 681 is treated as resumption of the long term up trend from 1999 low of 253 after interim consolidation from 1033.9 has completed in form of an expanding triangle. The strong break of 1033.9 resistance affirms this case and should pave the way to 61.8% projection of 253 to 1033.9 from 681 at 1160 and then 100% projection at 1460 level. However, break of 931.3 support will indicate that medium term rise from 681 has possibly completed. This will also open up the case that long term consolidation from 1033.9 is not completed yet and has just started the third falling leg.

Comex Gold Continuous Contract 4 Hours Chart

Comex Gold Continuous Contract Daily Chart

Comex Gold Continuous Contract Weekly Chart

Comex Gold Continuous Contract Monthly Chart

FOREX Weekly Review and Outlook- Risk Aversion Back ahead of an Important Week

2009-11-02T11:12:00.002+07:00

Top 5	Current	Last	Change (Pips)	Change (%)
NZDJPY	64.60	69.40	-480	-7.43%
CADJPY	83.09	87.36	-427	-5.14%
NZDUSD	0.7172	0.7538	-366	-5.10%
AUDJPY	81.04	84.89	-385	-4.75%
EURJPY	132.64	138.14	-550	-4.15%
Dollar
EURUSD	1.4721	1.5007	-286	-1.94%
USDJPY	90.10	92.04	-194	-2.15%
GBPUSD	1.6441	1.6304	+137	+0.83%
USDCHF	1.0261	1.0086	+175	+1.71%
USDCAD	1.0839	1.0533	+306	+2.82%
Euro
EURUSD	1.4721	1.5007	-286	-1.94%
EURGBP	0.8951	0.9201	-250	-2.79%
EURCHF	1.5106	1.5137	-31	-0.21%
EURJPY	132.64	138.14	-550	-4.15%
EURCAD	1.5954	1.5805	+149	+0.93%
Yen
USDJPY	90.10	92.04	-194	-2.15%
EURJPY	132.64	138.14	-550	-4.15%
GBPJPY	148.12	150.07	-195	-1.32%
AUDJPY	81.04	84.89	-385	-4.75%
NZDJPY	64.60	69.40	-480	-7.43%
Sterling
GBPUSD	1.6441	1.6304	+137	+0.83%
EURGBP	0.8951	0.9201	-250	-2.79%
GBPCHF	1.6870	1.6443	+427	+2.53%
GBPJPY	148.12	150.07	-195	-1.32%
GBPCAD	1.7819	1.7170	+649	+3.64%

Dollar and yen rode on a wave of deteriorating risk sentiments last week and surged sharply across the board. Stronger than expected Q3 GDP from US triggered some optimism in the markets on Thursday but the impact faded on Friday as stocks ended a strong but rather brief rebound and resumed the fall on Friday. S&P 500 closed the week more than -4% lower at 1036.19 in the end. VIX, the fear index, had the strongest rise in a year to close at the highest level in three months above 30.69. Dollar index managed to extend recent rebound and reached as high as 76.57 before turning sideway. Risk aversion will likely continue to dominate the markets initially this week as Asian markets react to Friday's sharp fall in US stocks. More volatility would be triggered in this important week considering the string of key events including FOMC, RBA, BoE, ECB as well as Non-farm payroll.

While dollar was strong, the Japanese yen was even stronger, boosted by sharp fall in commodity yen crosses, in particular NZD/JPY. Also, yen is additionally supported by BoJ's announcement to exit unconventional measures. The corporate bonds and commercial paper purchase program will be left expired at the end of December as scheduled since crude markets are improving. The program of providing unlimited collateral-backed loans to banks will be extended one last time through March 31.

New Zealand dollar was the weakest currency last week after RBNZ left rates unchanged at 2.5%. The tone in the accompanying statement was less dovish than expected but some what missed market expectations of something stronger. While RBNZ acknowledged recovery domestically and internationally, the bank also mentioned that 'in contrast to current market pricing, we see no urgency to begin withdrawing monetary policy stimulus, and we expect to keep the OCR at the current level until the second half of 2010'. That is, RBNZ might not start tightening again until Q3 of 2010 which disappointed markets which expect a high in the first half.

Canadian dollar was the next weakest currency as BoC continued to stress the risk of strong Loonie to recovery of the economy. In addition, August GDP report was disappointing. GDP unexpected dropped -0.1% mom which suggest that recovery is still fragile and lacks sustainable momentum. The Loonie was also pressured by weakness in crude oil that dropped further away from 82 level.

Euro, Swissy and Aussie also weakened against both dollar and yen and paid little attention to solid data last week. Swissy spiked lower on Friday, possibly from intervention by SNB but the weakness quickly faded. Sterling was relative resilient last week as supported by sharp pull back in EUR/GBP cross.

Looking at the charts, S&P 500 fell sharply last week and broke the medium term trend line support decisively. Medium term rebound from 666.79 should have completed with three waves up to 1101.36 on bearish divergence conditions in daily MACD and RSI. Deeper decline is now expected to be seen to 869.32/956.23 support zone in medium term.

VIX, the fear index, had the sharpest rise in a year on Friday and surged to 30.69. VIX also broke recent high of 29.56 which argues that investors are getting more risk averse.

Looking at global stocks, Nikkei 225 is possibly completing a head and shoulder top (ls: 10170, h: 10767, rs: 10397). The index is vulnerable to gap lower on Monday, which follows weakness in US stocks. And a break below neckline support at 9780 level will confirm the reversal pattern and trigger deeper selloff and an increase in risk aversion.

Shanghai stocks could have completed the three wave consolidation from 2770 to 3278 and steep decline might be seen this week for a test on 2770. Note that weakness in China stocks will have additional impact on Australian dollar.

The above charts argue that global stock markets has possibly completed the medium term rebound after the crash in financial crisis bottomed. Break of near term support levels will likely trigger further sell off and will give additional boost to dollar and yen on risk aversion.

Looking back at the dollar index, rebound from 74.94 extended further last week and the development affirms the bullish case that the index has bottomed out at 74.94. The five wave sequence from March high of 89.62 has likely completed already. Further is expected initially this week and break of 77.47 resistance will confirm this case. In the least bullish scenario, rebound form 74.94 should extend to 38.2% retracement of 89.62 to 74.94 at 84.54. In the most bullish scenario, three wave consolidation from 88.46 has completed at 74.94 too and rise from there represents the long term rise from 08 low of 70.70. The final structure of the rise from 74.94 will provide more information of which case it is.

Currency Heat Map Weekly View

	USD	EUR	JPY	GBP	CHF	CAD	AUD
USD
EUR
JPY
GBP

The Week Ahead

It's an important week that's full of market moving event risks. Development in stock markets would be the background driver in risk sentiments and thus the direction in dollar and yen. Initial weakness in Asian equities is anticipated in reaction to the sharp fall in US stocks and thurs dollar and yen would like open the week firm. Latter development would be driven by the string of important economic data to be released from US. In addition, a number of key events are scheduled in Eurozone, UK, Canada, and Australia which would affect the relative strength and weakness of respective currencies.

In US, FOMC rate decision and statement will be one of the highlights. While rates are expected to be unchanged, markets will be particularly interested in whether the language of keeping rates low for an "extended period" be changed. On the data front, ISM Manufacturing and Non-Manufacturing Indices will provide some guidance to traders in the earlier part of the week. Meanwhile, the employment components in both indices, and ADP employment report will be closely watch as leading indicators to Friday's highly anticipated Non-Farm Payroll. It would be interested to see if US unemployment rate would rose to a 2 digit figure in October.

ECB rate decision and press conference will be the highlight from Eurozone. Main focus will be on whether Trichet would hints on the timing of ending unconventional measures.

Pound has been relatively resilient last week. Nevertheless, it would be vulnerable to another sharp fall considering the risks this week. There has been increased speculation that BoE would expand quantitative easing after GDP disappointment. Markets are expecting BoE to raise the asset purchase program by another GBP 50b to GBP 225b. Manufacturing and Services PMI will also be closely watched.

Canadian dollar has been the weakest major currency in October and dropped even further after GDP disappointment last week. Employment report to be released on Friday will be an important event for the Loonie going forward.

RBA is expected to have another 25bps hike this week but that should be priced in the exchanged rate already. Main focus would be on any hints from the statement on how far the cycle would go.

Monday: Swiss SVME PMI; Eurozone Manufacturing PMI Final; UK Manufacturing PMI; US ISM Manufacturing, Pending Home Sales, Construction Spending
Tuesday: RBA Rate Decision; US Factory Orders
Wednesday: Australia Retail Sales; Eurozone Services PMI Final, PPI; UK Services PMI; US ADP Employment, ISM Non-manufacturing, FOMC Rate Decision; New Zealand Employment
Thursday: BoJ Minutes; Australia Trade Balance; UK Manufacturing, Industrial Production, BoE Rate Decision; Eurozone Retail Sales, ECB Rate Decision; US Productivity; Canada Ivey PMI
Friday: RBA Monetary Statement; Swiss Unemployment Rate: UK PPI; Canadian Employment; US Non-Farm Payroll, Wholesale Inventories

USD/CAD Weekly Outlook

USD/CAD's rise from 1.0205 extended further to as high as 1.0846 last week and closed strongly. Initial bias will remains on the upside this week and further rise should be seen to 1.1123 resistance next. On the downside, below 1.0652 support will indicate that a short term top might be in place and bring pull back. But downside is expected to be contained well above 1.0205 low and bring rally resumption.

In the bigger picture, the strong break of 1.0631 resistance and sustained trading above 55 days EMA indicates that a medium term bottom might be in place at 1.0205, with bullish convergence conditions in daily MACD. As noted before, fall from 1.3063 is viewed as a correction to long term rise from 0.9056. Such correction might have already completed with three waves down to 1.0205 already (1.0784, 1.1732, 1.0205). Break of 1.1101 resistance will confirm this case and target 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. On the downside, break of 1.0205 will invalidate this view and bring down trend resumption to parity instead.

In the longer term picture, the three wave structure of the fall from 1.3063 to 1.0205 revived the case that it's a correction to rise from 0.9056. Sustained trading above 61.8% retracement of 1.3063 to 1.0205 at 1.1971 will indicate that whole rise from 0.9056 might be resuming for another high above 1.3063.

Special Master for TARP Executive Compensation

2009-10-29T10:23:00.000+07:00

Special Master for TARP Executive Compensation Kenneth R. Feinberg
Testimony before the House Committee on Oversight and Government Reform

Mr. Chairman:

I thank you and the Committee for the opportunity to testify today. The subject of executive compensation continues to be a top priority of the American people and the international business community, so I welcome your invitation and look forward to participating in this hearing.

As you know, in June of this year, I was asked to serve as Special Master for TARP Executive Compensation by the Secretary of the Treasury. In that capacity, I have a number of responsibilities under the relevant statutory^{^[1]} and regulatory^{^[2]} authority. These responsibilities include interpreting the regulations, and evaluating and making determinations regarding compensation payments to, and compensation structures for, certain employees of TARP recipients receiving exceptional financial assistance.

In these capacities, I have spent the past five months carefully considering the terms and conditions of the 2009 executive compensation for senior executives at those seven corporations that received exceptional financial assistance from the federal government: AIG, Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC. These executives include five "senior executive officers" and the twenty "most highly compensated employees." My mandatory jurisdiction under the regulations is limited to the senior executives at these seven companies and only these seven companies. Although I do have interpretive authority under the Standards, and advisory authority under the law to make recommendations and nonbinding determinations as to officials of other companies who received TARP financial assistance, I have no legal authority to make final determinations pertaining to executive compensation for any companies other than these seven.

Mr. Chairman, I refer you and the Members of the Committee to the Report of the Special Master for TARP Executive Compensation: 2009 Executive Compensation Determinations for the TARP Exceptional Assistance Recipients, dated October 22, 2009, a copy of which is included with my prepared testimony. This Report includes my compensation determinations concerning senior executives at each of the seven companies referenced above, and provides a comprehensive explanation and analysis of the reasoning which underlies such determinations. I welcome any inquiries you may have concerning my Report.

In your letter of October 15, 2009, inviting me to testify, you raised three questions for me to focus on during my appearance here today. I treat these questions in the order you presented them in your letter.

I. What standards and considerations are you using to evaluate employee compensation at the seven companies that submitted such plans for review?

I was guided by the rules and principles in the statute and the Treasury regulations in evaluating employee compensation at the seven companies. For example, the Treasury regulations expressly make clear that I must consider competitive market forces in determining compensation levels that will permit the seven companies to remain in business, to thrive financially, and to eventually repay the taxpayers for TARP financial assistance. These companies must be able to attract sufficient talent to prosper. At the same time, however, the law requires me to take into account whether the terms and conditions of compensation are performance-based and tie compensation to the companies' prospective performance and financial success. In addition, the regulations make clear that my compensation determinations should be made in such a way that considers whether senior executives are provided incentives to avoid taking excessive risks to receive greater amounts of compensation. The law also anticipates that a portion of compensation be tied to the repayment of TARP financial assistance, and requires companies to "claw back" incentive compensation that is based upon inaccurate financial statements or performance metrics.

In sum, the standards and considerations I used in evaluating employee compensation at the seven companies can be found in the statute and the accompanying Treasury regulations: in these laws, Congress and the Treasury provided me the guidance needed to make my final determinations. Based on this guidance, I determined that a new compensation regimen should be implemented at these seven companies: guaranteed compensation is to be replaced by performance-based compensation designed to tie individual executives' financial opportunities to the long term overall financial success of each Company. Short-term profits must give way to longer-term financial stability and success.

II. What specific proposals have been received from the seven companies and what specific actions have you taken with respect to those proposals?

Mr. Chairman, I refer you and the Members of the Committee to my Report (attached) which details the individual submissions made by each of the seven companies, and also describes in comprehensive fashion my response to each of these submissions. The general conclusions I reached after careful evaluation and analysis of the submissions were the same for six of the seven companies--I concluded, pursuant to the statute and the Treasury regulations, that each submission would result in payments contrary to the "Public Interest Standard," and should, therefore, be rejected. The "Public Interest Standard" is the term I used in my Report to describe the regulatory standards that I am required to apply in making determinations. Instead, as my Report spells out, I made important revisions to the submissions as a precondition to approving compensation structures and payments for each individual covered executive at these six TARP recipients. (Chrysler Financial has unique circumstances, and I determined that its proposal was appropriate in light of them.

I can summarize the flaws in the six individual company submissions as follows:

1. The companies requested excessive guaranteed cash – salaries and bonuses – for company executives;
2. The companies requested that stock issued to these executives be either immediately redeemable or redeemable without a sufficient waiting period;
3. Many of the companies did not sufficiently tie compensation to performance-based benchmarks and metrics;
4. Many of the companies did not sufficiently limit or restrict financial "perks," such as private airplane transportation, country club dues, golf outings, etc., and in some cases provided excessive levels of severance and executive retirement benefits;
5. The companies did not make sufficient effort to fold guaranteed compensation contracts – entered into prior to the enactment of the current compensation regulations – into 2009 performance-based compensation.

In modifying these six submissions in order to satisfy the "Public Interest Standard," I made important changes designed to tie compensation to prospective company performance:

1. I greatly reduced the amount of 2009 guaranteed cash compensation made available to senior executives. On the whole, cash (which, in the past, included cash base salaries and cash bonuses) was reduced by approximately 90%. Overall total compensation was reduced by approximately 50%.

2. In place of cash, I substituted "stock salary" which, in accordance with Treasury regulations, vests immediately upon issuance but may only be redeemed in three equal, annual installments beginning in 2011, with each installment redeemable one year early if TARP obligations are repaid. The objectives are clear – to tie individual compensation to longer-term performance metrics, and to encourage senior executives to remain at the company for a period of years to maximize their personal benefit from the overall profitability of the company itself. The value of "stock salary" will depend on the companies' financial success in coming years. At the same time, I also permitted incentive payments of "long-term restricted stock." This long-term incentive stock vests only if executives remain employed for three years after grant, and it can be cashed in only in 25% increments for each 25% of TARP obligations repaid by their employer. Again, the goal is to tie individual compensation to the overall financial success of the company.

3. By implementing the ideas of "stock salary" and "long-term restricted stock," only redeemable after multiple years of company performance, I tied individual compensation to long-term company success.

4. I reined in "perks" by expressly requiring that any such perks beyond $25,000 per individual must first receive the approval of the Office of the Special Master. No longer will senior executives be entitled to excessive use of private planes and other compensation-related financial benefits.
I also prohibited additional company contributions to executive retirement programs..

5. I succeeded in almost all cases in getting the companies to agree to restructure guaranteed contracts and other forms of guaranteed compensation into prospective, performance-based compensation packages. These companies agreed, in almost all cases, to transfer guaranteed forms of compensation – entered into with company officials before the enactment of current legal requirements – into "stock salary."
I am very reluctant to even attempt to invalidate the sanctity of contracts entered into well before enactment of the current law; however, I did work closely with the companies in an attempt, cooperatively, to restructure these "grandfathered" financial guarantees by making them part of my 2009 final compensation determinations.

Mr. Chairman, I refer you and the Members of the Committee, to my Report which spells out in further detail how we modify company submissions to comply with the "Public Interest Standard."

III. What recommendations do you have for oversight of TARP recipient employee compensation schemes in the future?

The Treasury regulations speak quite clearly to this question.

First, the Standards require that the Office of the Special Master now turn its attention to reviewing compensation structures for the remaining executive officers, and 75 next most highly compensated employees, in each of the seven companies. The regulations do not require the Special Master to make individual compensation determinations for these individuals; instead, the regulations require that the Special Master approve the compensation structure for these individuals. The law affords me 60 days to do this from the time that I deem the company submissions with respect to these individuals "substantially complete." I have received all of these pertinent submissions from each of the seven companies but have not yet concluded that they are "substantially complete," thereby triggering the 60-day limitation.

Second, the Office of the Special Master must soon turn its attention to the process for determining the 2010 compensation for the senior executives at each of the seven TARP exceptional assistance companies. I believe we have made important progress in this regard as a result of completed efforts at 2009 compensation. Nevertheless, there will undoubtedly be new compensation issues which will confront us in 2010. (For example, we anticipate dealing once again with claims of "grandfathered" retention contracts and other guaranteed forms of compensation which will have to be considered by the Special Master as part of 2010 submissions for the senior executives; in addition, it is anticipated that the list of senior executives for each Company will undergo some modification, requiring a new evaluation of certain individual compensation packages submitted by each company.)

Finally, I do not recommend that my responsibilities related to compensation determinations for senior executives, as currently defined by Treasury regulations, be expanded beyond the current seven companies receiving exceptional TARP financial assistance. I believe Congress and the Treasury have already spoken with respect to the compensation restrictions that apply beyond this group of firms. My limited mandatory jurisdiction involving just these seven companies is justified by the fact that the American taxpayers have a vested interest as particularly significant stakeholders in these seven companies. But, the federal government should not enter the business of micromanaging compensation practices beyond these seven companies by expanding my jurisdiction or broadening my discretionary authority. Hopefully, the individual final compensation determinations I make may yet be used, in whole or in part, by other companies in modifying their individual compensation practices. I believe the final compensation determinations I make and discuss in my Report are a useful model to guide others in the private marketplace. But that is where my authority should end. I do not believe it necessary or wise to broaden my jurisdiction or make my legal authority more pervasive.

Mr. Chairman, this concludes my formal written statement, and I welcome any questions from you and the Members of this distinguished Committee.

Thank you.

Weekly Review and Outlook 26-30/10

2009-10-25T19:48:00.002+07:00

Top 5	Current	Last	Change (Pips)	Change (%)
NZDJPY	69.41	67.29	+212	+3.05%
CHFJPY	91.28	89.25	+203	+2.22%
EURCAD	1.5803	1.5459	+344	+2.18%
AUDCAD	0.9711	0.9505	+206	+2.12%
EURJPY	138.21	135.47	+274	+1.98%
Dollar
EURUSD	1.5008	1.4904	+104	+0.69%
USDJPY	92.08	90.89	+119	+1.29%
GBPUSD	1.6309	1.6354	-45	-0.28%
USDCHF	1.0086	1.0181	-95	-0.94%
USDCAD	1.0531	1.0373	+158	+1.50%
Euro
EURUSD	1.5008	1.4904	+104	+0.69%
EURGBP	0.9201	0.9111	+90	+0.98%
EURCHF	1.5138	1.5175	-37	-0.24%
EURJPY	138.21	135.47	+274	+1.98%
EURCAD	1.5803	1.5459	+344	+2.18%
Yen
USDJPY	92.08	90.89	+119	+1.29%
EURJPY	138.21	135.47	+274	+1.98%
GBPJPY	150.17	148.64	+153	+1.02%
AUDJPY	84.92	83.27	+165	+1.94%
NZDJPY	69.41	67.29	+212	+3.05%
Sterling
GBPUSD	1.6309	1.6354	-45	-0.28%
EURGBP	0.9201	0.9111	+90	+0.98%
GBPCHF	1.6449	1.6649	-200	-1.22%
GBPJPY	150.17	148.64	+153	+1.02%
GBPCAD	1.7172	1.6963	+209	+1.22%

Sterling dominated the headline last week and had a roller-coaster ride as expectation on BoE quantitative easing program flip-flopped. While dollar dipped through 1.5 level against Euro, it was mixed in general and managed to close higher against Japanese yen and Canadian dollar. The Japanese yen was the worst performer last week and weakened broadly. Canadian dollar, on the other hand, failed to ride on persistent strength in crude oil and weakened on BoC's comments on intervention.

Fed Beige Book released last week showed that stabilization or modest improvements are seem in housing and manufacturing sectors. However, commercial real estate markets remained weak. There is also little or no price pressures for the moment. Credit quality is having further erosion. Housing data from US was weak with housing starts and rose a mere 3k to 590k in September while building permits dropped 7k to 573k annualized rate. House price index dropped -0.3% mom in August. Though, existing home sales rose strongly from 5.09m to 5.57m in September. PPI unexpectedly dropped -0.6% mom, -4.8% yoy while core PPI also dropped -0.1% mom with yoy rate slowed to 1.8%. Jobless claims unexpectedly rose to 531k.

Euro extended recent rally against dollar and managed to close above 1.5 psychological level last week. Solid data from Eurozone gave some help to the strength of the common currency. Strong rebound in EUR/GBP also helped Euro. Manufacturing PMI and Services PMI improved to 50.7 and 52.3 in October respectively. Germany Ifo business climate also rose to 91.9 in October. Nevertheless, Euro has lost some momentum after breaching 1.5. While there is no indication of reversal, we'd expect a short top term to be around the corner.

Sterling had a roaster coaster ride last week, rallied on speculation that BoE will pause the quantitative easing program in November but was sold off sharply after much worse than expected Q3 GDP report. The less dovish than expected BoE October minutes, which showed unanimous vote to keep rates and the GBP 175b asset purchase campaign unchanged, lifted sterling to an intraweek high of 1.6692 against dollar and 0.8996 against euro. However, sterling's rally halted after disappointing retail sales report which showed 0% growth mom in September. Pound then reversed and fell sharply on Friday after shocking poor Q3 GDP report, which unexpectedly contracted for the sixth consecutive quarters by -0.4% qoq, the longest losing streak since record began in 1950s. Year-over-year rate also disappointed by contracting at -5.2%. The poor GDP report revived speculations that BoE might be forced to extend the asset purchase program in November. Technically, GBP/USD and GBP/JPY both held below key near term resistance level and thus retained the bearish outlook in spite of strong rebound last week. EUR/GBP also held above key support level will retain the bullish outlook. After all, the pound would likely remain pressured leading to November's BoE meeting.

The Japanese yen was broadly lower this week on carry trades as investors are already looking at prospect of rate hikes from some centrals banks going forward. NZD/JPY was the biggest winner last week after RBNZ Governor Bollard said that the strength of NZD won't be impediment to raising interest rates. AUD/JPY also extended recent strength to close higher at 87.87 while EUR/JPY rose sharply to 138.16. USD/JPY also rode on broad based weakens in yen and climbed to 92.04. While yen crosses will likely extend recent rise, the risk of reversal is increasing in case of much overdue correction in global equities.

Canadian dollar was another weaker currency last week on central bank comments. The Loonie indeed closed lower broadly even though oil priced managed to made another high at 82 last week. BoC Governor Carney expressed his concern on the strength of the currency on recovery as well as inflation and stressed that intervention is "always an option". BoC left rates unchanged at 0.25% last week and reiterated the conditional commitment to keep rates low until Q2 of 2010. The accompanying statement, as well as the Monetary Policy Report released on Thursday, noted the threat of rising Canadian dollar to recovery in the economy. On thing to note is that USD/CAD is so far still staying below 1.0590 resistance and another fall could still be seen before it bottoms out.

Looking at the charts, US stocks managed to edge higher last week but failed to sustain gain and closed the week lower. Upside momentum is clearly diminishing as seen in bearish divergence condition in daily MACD in S&P 500. At this point, there is no indication of reversal yet with 1040.92 support intact. But we'd continue to expect further loss of moment in case of another rise and upside would likely be limited by 50% retracement of 1580 to 667 at 1123 and finally bring long awaited correction.

Crude oil turned sideway after edging higher to 82. There is no sign of topping at this moment yet. But as we'd expect rebound from 33.2 to conclude inside fibonacci zone of 76.77 and 90.4, crude oil will likely lose momentum on next rise.

Gold was bounded in sideway trading last week but after all, there is no sign of reversal yet. Current rally could still extend further to 1133 projection target next. As gold has likely resumed the long term up trend, current rise is in favor to continue further to next projection target of 1258 after taking out 1133.

Downside momentum in the greenback was seen diminishing last week. While EUR/USD closed above 1.5 level, the move was note accompanied by rally in the strong AUD/USD, not even USD/CAD. GBP/USD's failure below 1.6740 suggests that more downside is in favor this week. The developments argue that greenback is possibly close to a bottom and this is inline with the view that stocks and crude oil should further lose momentum on next rise and bring long awaited correction. The biggest uncertainty will lie in gold which may extend recent rally after completing the current sideway consolidation.

Dollar index dropped to new 2009 low of 74.94 last week but turned sideway since then. Initial bias remains neutral this week with 4 hours MACD staying above signal line. In case of another fall, we're expecting further loss of momentum and dollar index should draw support from the lower trend line (now at 74.82) and rebound strongly. A break of 75.76 will indicate that a short term bottom is formed and strong rally should be seen to upper trend line resistance at 76.51 first. However, strong break of the lower trend line will target 74.31 support next.

In the bigger picture, dollar index's five wave decline from 89.62 should be near to complete and a rebound is due. Strong support should be seen at around 74.31 support level and bring near term reversal. Though, a break of 77.47 resistance is needed to confirm that a short term bottom is formed and bring rebound to 78.33/81.47 resistance zone. Otherwise, outlook will remain bearish.

Currency Heat Map Weekly View

	USD	EUR	JPY	GBP	CHF	CAD	AUD
USD
EUR
JPY
GBP

The Week Ahead

Main focus of the week will be on Advance Q3 GDP report from US. Expectation was rather high with consensus at 3.1% qoq growth which leaves more room for downside surprise. Dollar would likely be supported in case the data missed expectation as stocks would probably use that an excuse to trigger the long awaited correction. Another main focus will be on RBNZ rate decision. While markets are all expecting the bank to keep rates unchanged, focus will be on hints of when RBNZ would start to remove policy accommodation. The accompany statement would possibly trigger some volatility in yen crosses on carry trades. Australian CPI will also be closely watched and any upside surprise there will trigger speculations that RBA would speed up the rate hike cycle for meeting the inflation target.

Other important data to watch include:

Monday: Australia PPI; German Gfk consumer confidence
Tuesday: Eurozone M3 money supply; US S&P Case-Shiller price index, Conference Board consumer confidence
Wednesday: Japan retail sales; Australia CPI; Germany CPI; US durable goods, new home sales, RBNZ rate decision
Thursday: Japan industrial production; Germany unemployment; Eurozone confidence; US advance Q3 GDP
Friday: BoJ meeting, Japan CPI, Manufacturing PMI; UK Gfk consumer confidence; Germany retail sales, Eurozone CPI; Swiss KOF; US personal income and spending, Chicago PMI

EUR/GBP Weekly Outlook

EUR/GBP's pull back from 0.9410 extended further to as low as 0.8996 last week but after all it was held above mentioned 0.8983 cluster support (61.8% retracement of 0.8722 to 0.9410 at 0.8985) as expected. Friday's strong rebound and break of 0.9190 minor resistance indicates that such pull back is completed. Initial bias is on the upside this week for a retest of 0.9410 resistance first. Break will confirm that whole rally from 0.8399 has resumed and should target 0.9799 high next. On the downside, however, a break of 0.8996 will now indicate that rise from 0.8454 has completed and bring deeper fall towards 0.8704/8837 support zone.

In the bigger picture, medium term correction from 0.9799 has completed with three waves down to 0.8399 already and rise from there is tentatively treated as resumption of long term up trend. Break of 0.9799 bring rally to next medium term target at 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416. We'll hold on to this bullish view as long as 0.8704 support holds.

In the long term picture, long term up trend in EUR/GBP might be resuming as correction from 0.9799 has completed at 0.8399. Decisive break of 0.9799 high will confirm this bullish view and target 261.8% projection of 0.5680 to 0.7258 from 0.6535 at 1.0666.

The Special Master for TARP Executive Compensation Issues First Rulings

2009-10-23T06:29:00.000+07:00

Today, the Special Master for TARP Executive Compensation Kenneth R. Feinberg released determinations on the compensation packages for the top executives at firms that received exceptional TARP assistance. Under the Emergency Economic Stabilization Act (EESA) as amended in 2009, the Special Master has a mandate to review all forms of compensation for five most senior executive officers and the next 20 most highly compensated employees at the seven firms that received exceptional TARP assistance (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial).

The determinations announced today for the top 25 most highly paid at the seven firms receiving exceptional assistance:

1. Reform Pay Practices for Top Executives to Align Compensation With Long-Term Value Creation and Financial Stability

· Reject cash bonuses based on short-term performance, as required by statute, in favor of company stock that must be held for the long term

· Restructure existing cash "guarantees" into stock that must be held for the long term

2. Significantly Reduces Compensation Across the Board

· Average cash compensation down by more than 90 percent

· Approved cash salary limited to $500,000 for more than 90 percent of relevant employees

· Average total compensation down by more than 50 percent

· Exceptions where necessary to retain talent and protect taxpayer interests

3. Require Salaries to Be Paid in Company Stock Held Stock Over the Long Term

· Stock is immediately vested, requiring executives to invest their own funds alongside taxpayers

· Stock may only be sold in one-third installments beginning in 2011--or, if earlier, when TARP is repaid--aligning executives' interests with those of taxpayers

4. Require Incentive Compensation to be Paid in the Form of Long Term Restricted Stock – and to be Contingent on Performance and on TARP Repayment

· Require executives to meet goals set in consultation with the Special Master, and certification of achievement of goals by an independent compensation committee

· Any incentives granted paid only in stock that requires three years of service and can be cashed in only when TARP is repaid

5. Require Immediate Reform of Practices Not Aligned with Shareholder and Taxpayer Interests

· Limits "other" compensation and perquisites

· No further accruals under supplemental executive retirement plans or severance plans

1. Reforms Pay Practices for Top Executives to Align Compensation Practices With Long-Term Value Creation and Financial Stability: The Special Master's rulings represent a fundamental transformation from the pay practices of the past. These decisions will significantly alter the way that executives covered by the Special Master's decisions--including the senior executive officers and next 20 most highly compensated employees of each of the seven recipients of "exceptional" assistance under the TARP (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial)--are paid.

· Rejects Cash Payments Based on Short-Term Performance, as required by statute: Traditionally, compensation for these employees has included large cash amounts, including significant cash bonuses. These payments gave executives incentives to take short-term risks and little reason to protect the long-term the health of the company or financial stability. After today's rulings, as required by statute and Treasury regulations, these executives will receive the overwhelming majority of their pay in company stock that may only be sold over the long term, aligning their interests with those of taxpayers and shareholders.

· Restructures Existing "Guaranteed" Cash Payments into Stock Held For the Long Term: Under the pay practices of the past, several executives in this group were awarded cash "guarantees" in 2009. Guaranteed minimum amounts give employees little downside risk in the event of poor performance--but upside when times are good. The Special Master required these agreements to be restructured. Under today's rulings, these amounts will be paid in company stock that must be held over the long term.

· Citigroup and Phibro: At Phibro, Citigroup's commodities trading unit, the Chief Executive Officer was to receive a significant cash bonus based on the short-term results of significant risk-taking. The Special Master rejected this approach, and Citigroup agreed to sell Phibro to a company that has not received taxpayer funds. Under today's ruling, nothing may be paid to the Phibro CEO until the sale is complete.

2. Significantly Reduces Compensation Across the Board: To break from the pay practices of the past, the Special Master has reduced compensation across the board--both in terms of cash and the total compensation executives will receive.

· On Average, Cash Compensation Decreased by More Than 90 percent: The Special Master rejected cash payments based on short-term results that may prove illusory, and cash guarantees that separate pay from performance. Overall, the Special Master reduced cash pay by more than 90 percent from 2008 levels--and, as required by Treasury regulations, cash bonuses may no longer be paid to any of these employees.

· Approved cash salary generally limited to $500,000: Consistent with the Administration's February 4 guidance on executive compensation at TARP recipients, the Special Master approved base salaries of $500,000 or less for more than 90 percent of the employees in this group. Base salaries greater than $1 million were approved in just three cases: for the new CEO of AIG, as previously announced, and for two employees of Chrysler Financial, which will wind down its operations in the near term and cannot grant employees long-term incentives.

· On Average, Total Compensation Decreased by More Than 50 percent: Even including the value of stock that must be held for the long term, the Special Master reduced the total compensation packages for executives in this group to less than half of 2008 levels.

· Exceptions Where Necessary to Retain Talent and Protect Taxpayer Interests: Although the Special Master's rulings generally emphasize decreases in both cash and total compensation across the seven companies, increases in compensation were permitted where shown to be necessary to retaining key talent critical to a company's long-term success--and, ultimately, ability to repay the taxpayer.

3. Requires Salaries to be Paid in Company Stock Held Over the Long Term: The Special Master's rulings fundamentally change the structure of compensation at these firms. Rather than cash, today's rulings require that the majority of salaries be paid in stock that must be held for the long term--giving executives incentives to pursue long-term value creation and financial stability.

· Stock is Immediately Vested, Requiring Executives to Put Their Own Funds at Stake: Rather than just cash, executives will earn base salaries in the form of vested stock in their companies. In effect, the Special Master is requiring each executive to invest their base salary in the long-term future of the firm, alongside taxpayers. These structures ensure that executives do not have incentives to take the excessive risks that contributed to the financial crisis.

· Stock May Only Be Sold in One-Third Installments, Beginning in Two Years: Unlike the pay practices of the past, which allowed executives to sell stock in their companies immediately, the Special Master's rulings require stock to be held for the long term. Stock received as salary may only be sold in one-third installments that will not begin until 2011, unless the taxpayer is repaid earlier.

4. Require Incentive Compensation to be Paid in the Form of Long Term Restricted Stock – and to be Contingent on Performance and on TARP Repayment: As the Secretary noted in his June 10 statement, incentive pay can be undermined by compensation practices that set the performance bar too low or simply reward rising tides. The Special Master's rulings require that incentives be paid only if executives reach objective goals agreed upon in consultation with the Special Master--and only if TARP is repaid.

· Requires Achievement of Goals Set in Consultation with the Special Master: The Special Master's rulings permit these executives to receive incentive pay only if the executives attain objective, predetermined performance goals set in consultation with the Special Master. Achievement of these goals must be certified by each company's compensation committee--which, under Treasury regulations, must be composed solely of directors fully independent from management.

· Requires Three Years of Service, and TARP Repaid, Before Payment: To ensure that taxpayers continue to receive the benefits of the executives' talents, the Special Master's ruling requires that any incentive awards be paid only if the employee provides at least three years of service to the company after the award is made. And, under Treasury regulations, the awards must be paid in the form of restricted stock that may not be paid unless the company repays its TARP obligations.

5. Requires Immediate Reform of Practices Not Aligned With Shareholder Interests: As the Secretary noted in his June 10 statement, in some cases golden parachutes and supplemental executive retirement plans have expanded beyond their original purpose, and may not enhance the long-term value of the firm or allow shareholders to easily ascertain the full value of the "walkaway" pay an executive will receive when departing the firm. The Special Master's rulings place tough new restrictions on these payments--as well as perquisites and other personal benefits--for executives at companies that have received exceptional taxpayer assistance.

· Caps perquisites and "other" compensation: Several experts, including the Conference Board Task Force on Executive Compensation, have concluded that executives--and not companies--should generally cover the costs of personal expenses. The Special Master's rulings generally cap these types of payments at $25,000, with limited exceptions for unusual circumstances that can be justified to the Special Master.

· Additional limitations on "golden parachute" payments: Large "golden parachute" or severance payments often serve to enrich executives rather than provide reasonable compensation during unemployment, and often do not enhance the long-term value of a company. Tough new Treasury regulations prohibit these payments to the senior executive officers and five most highly compensated employees at all companies that have received taxpayer assistance. The Special Master's rulings go further, however, and prohibit companies from increasing the amount of any "golden parachute" payable to any of the top 20 most highly compensated executives during 2009.

· Freezing supplemental executive retirement plans: Supplemental executive retirement benefits can provide substantial cash guarantees to departing executives, regardless of performance. And, as the Secretary noted on June 10, these complex benefits can make it difficult for shareholders--and, in the case of exceptional assistance companies, taxpayers--to ascertain the full amount of pay an executive will receive upon retirement. The Special Master's rulings conclude that that executives should provide for their retirements with wealth based on performance while they are employed, rather than being guaranteed substantial retirement benefits beyond those provided to everyday workers. As a result, the Special Master's decisions prohibit additional accruals under supplemental executive pension programs and company credits to other non-qualified deferred compensation plans following the release of today's rulings.

Technical Analysis for Major Currencies

2009-10-21T16:28:00.000+07:00

EURO

The resistance level at 1.4990 halted further inclines yesterday for the Euro versus Dollar pair, which resulted in a downside correction to reach the 61.8% correction. This correction hit the key support for the bullish channel that the pair has been trading within, where we see positive signs on the stochastic indicator making us believe the pair is to incline on the intraday basis targeting 1.5100 as far as 1.4785 is intact.

The trading range for today is among the key support at 1.4675 and the key resistance at 1.5280

The general trend is to the upside as far as 1.4135 remains intact with targets at 1.6000

Support: 1.4905, 1.4825, 1.4785, 1.4745, 1.4675
Resistance: 1.4990, 1.5020, 1.5080, 1.5130, 1.5205

Recommendation: Based on the charts and explanations above, our opinion is buying the pair from 1.4905 to 1.5020 and stop loss below 1.4825 might be appropriate.

GBP

The Cable attempted to breach the pivot resistance yesterday at 1.6445, yet the negative pressure continued to drag the pair to the downside to consolidate within 1.6430 and 1.6380 once again, seen in the above image. Momentum indicators are still negatively pressuring the pair, yet we expect the general trend today is to the upside confirmed with the breach of 1.6430 to target 1.6740.

The trading range for today is among the key support at 1.6100 and the key resistance at 1.6740

The general trend is to the upside as far as 1.4840 remains intact with targets at 1.7100

Support: 1.6380, 1.6320, 1.6270, 1.6210, 1.6165
Resistance: 1.6430, 1.6500, 1.6600, 1.6635, 1.6660

Recommendation: Based on the charts and explanations above, our opinion is buying the pair with the breach of 1.6430 to 1.6600 and stop loss below 1.6320 might be appropriate.

JPY

The USD/JPY pair surged to the upside yesterday within a minor bearish channel, which delayed the pair from reaching the key support for the key bullish channel currently residing at 89.85. The stochastic indicator is showing a bearish crossover, which may take the pair to the mentioned key support before rebounding back to the upside targeting 92.00. This uptrend remains valid as far as 89.85 is intact on the four hour charts.

The trading range for today is among the key support at 86.75 and the key resistance at 93.30

The general trend is to the downside as far as 102.60 remains intact with targets at 84.95 and 82.60

Support: 89.85, 89.45, 88.90, 88.35, 87.80
Resistance: 90.80, 91.30, 92.00, 92.80, 93.30

Recommendation: Based on the charts and explanations above, our opinion is buying the pair from 89.85 to 91.30 and stop loss below 88.90 might be appropriate

CHF

The Dollar versus Swissy attempted to breach the resistance level at 1.0125, yet failed to do so due to the negative pressure that held the pair below this level. Momentum indicators are currently neutral and we are waiting for the bearish signs to support the short term downtrend targeting 1.0000. This decline remains as far as .0285 is intact.

The trading range for today is among the key support at 0.9880 and the key resistance at 1.0450

The general trend is to the downside as far as 1.1225 remains intact with targets at 0.9600

Support: 1.0080, 1.0000, 0.9935, 0.9880, 0.9840
Resistance: 1.0125, 1.0185, 1.0260, 1.0285, 1.0350

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 1.0125 to 1.0000 and stop loss above 1.0185 might be appropriate

CAD

The Dollar versus Loonie pair surged yesterday, after the interest rate decision to support the bullish technical pattern, seen in the image above, which took the pair near the key resistance at 1.0565 to complete the upside correction that we expected. The short term trend remains to the downside as far as 1.0565 is intact; therefore we expect the pair to reverse to the downside after reaching this resistance to target 1.0300 initially. The stochastic indicator supports our overview.

The trading range for today is among the key support at 1.0200 and the key resistance at 1.0670

The general trend is to the downside as far as 1.1870 remains intact with targets at 1.0000

Support: 1.0435, 1.0380, 1.0255, 1.0205, 1.0150
Resistance: 1.0565, 1.0625, 1.0670, 1.0720, 1.0800

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 1.0560 to 1.0435 and stop loss above 1.0625 might be appropriate

Ecpulse

Technical Analysis for Precious Metals

2009-10-21T16:27:00.000+07:00

Silver

Silver also collapsed downwards, approaching the defined technical target of 17.20, influenced by the hourly bearish harmonic [Bat] pattern as we discussed yesterday. Now, breaching the uptrend line of this harmonic structure has cleared the path for further bearishness over the intraday basis. Note that the current correctional movement may extend towards 17.55-17.60 zones in order to re-test the broken trend line before resuming the downside rally, targeting 16.90 zones.

The trading range for today is among the key support at 16.40 and key resistance now at 18.50.

The general trend is to the upside as far as 12.45 remains intact with targets at 19.40.

Support: 17.35, 17.28, 17.16, 17.05, 17.00
Resistance: 17.52, 17.60, 17.67, 17.76, 17.80

Recommendation: Based on the charts and explanations above our opinion is, selling silver from 17.55 targeting 16.90 and stop loss above 18.10 might be appropriate

Gold

Three dollars separated between yesterday's recorded low of 1051.00 and our first detected technical target of the internal [C] wave of our captured Elliott sequence-check the analysis here-. Now, further declines are to be witnessed over the intraday basis, particularly after breaching the harmonic uptrend line of the hourly bearish formation as shown on the secondary image. AROON up has penetrated the value of 70.00 downwards, supporting our scenario which is targeting 1025.00 areas.

The trading range for today is among the key support now at 1009.00 and key resistance now at 1100.00.

The general trend is to the upside as far as 865.00 remains intact with targets at 1129.00.

Support: 1053.00, 1047.00, 1042.00, 1035.00, 1025.00
Resistance: 1058.00, 1062.00, 1066.00, 1070.00, 1074.00

Recommendation: Based on the charts and explanations above our opinion is, selling gold from 1058.00 targeting 1042.00 and stop loss above 1071.00 might be appropriate.

Ecpulse

Technical Analysis for Precious Metals

2009-10-20T11:01:00.001+07:00

Gold

As we mentioned, the metal is building the right shoulder of the classical head and shoulders top pattern as seen on the above four-hour chart. Now, its facing the upper line of the recently established bearish channel that we think will be capable of forcing the metal to move downwards for the rest of the day to resume the suggested Elliott cycle.

The trading range for today is among the key support now at 1006.00 and key resistance now at 1100.00.

The general trend is to the upside as far as 865.00 remains intact with targets at 1129.00.

Support: 1050.00, 1045.00, 1042.00, 1037.00, 1030.00
Resistance: 1058.00, 1062.00, 1066.00, 1070.00, 1074.00
Recommendation: Our mornig expectations remain valid

Silver

As we discussed in our morning report, the metal has retested the previous broken support level of 17.50. Now, we think that the strength of the potential reversal zone for the bearish harmonic pattern is to force the metal to the downside targeting 16.70 -61.8% fibonacci level of CD leg-. Areas of 17.90 should hold to keep the negative outlook valid.

The trading range for today is among the key support at 16.45 and key resistance now at 18.50.

The general trend is to the upside as far as 12.45 remains intact with targets at 19.40.

Support: 17.35, 17.28, 17.16, 17.05, 17.00
Resistance: 17.52, 17.60, 17.70, 17.76, 17.80
Recommendation: Our mornig expectations remain valid

Ecpulse

Daily Technical Analysis

2009-10-20T10:56:00.000+07:00

EURUSD Outlook

The EURUSD slipped above the range are of 1.4850 - 1.4950 yesterday, topped at 1.4980. The bias is bullish in nearest term targeting 1.5080 and 1.5140 but we need a consistent move above 1.4950 to confirm the bullish scenario. Like I said yesterday, the market has been quite volatile lately produced some false break so be careful and execute stop losses without any doubt. Any movement back below 1.4930 area should lead us back into no trading zone, re-testing 1.4850/30, but the mode remains bullish and short position is not recommended. Buy on dips but do not short on rallies

GBPUSD Outlook

The GBPUSD continued it's bullish momentum on yesterday, topped 1.6433 and closed at 1.6422. On my daily chart below we can see that price is now testing the upper line of the bearish channel, which is the final resistance of my bearish outlook. I think we have a nice place around that area to place a short position targeting at least 1.6300 area. The risk-reward ratio also looks good with tight stop loss above the bearish channel. A violation to the bearish channel should be seen as the end of the bearish scenario and the beginning of bullish phase back towards 1.7042 area in longer time frame.

USDJPY Outlook

The USDJPY continued the downside consolidation yesterday. On h4 chart below we can see that after violated the bearish channel (red) the pair has been moving a new bullish channel (blue) but the price now is challenging the lower line of the bullish channel and 90.40 area. As long as the pair stay above 90.40 and the bullish channel remains valid, I still prefer a bullish scenario targeting 91.50 and 92.50 area. Break below 90.40 and violation to the bullish channel should lead us into no trading zone as direction would become unclear.

USDCHF Outlook

The USDCHF had a bearish momentum yesterday. On h4 chart below we can see two false breakout followed by a significant bearish momentum. The bias is bearish in nearest term and still targeting 1.0000 area. Immediate resistance at 1.0166. Break above that area should lead us into no trading zone but long position is not recommended at this phase.

EURJPY Outlook

The EURJPY didn't make a significant movement yesterday, indicating that the pair is still consolidate. I still prefer a bullish scenario with 136.88 and 138.67 area as potential bullish targets. Immediate support around 134.70/50 area. Break below that area should lead us into no trading zone but short position is not recommended.

GBPJPY Outlook

We have volatile market yesterday. Price break below my support level 148.00, bottomed at 147.07 but closed higher at 148.88, a case of a false breakdown, which usually trigger significant bullish momentum. The bias is neutral in nearest term and I don't like high volatile market since for me volatile market indicating unclear direction, so I think I will stay out for now and wait for further development today. I still prefer bullish scenario and short position is not recommended at this phase. Immediate support at 148.00 followed 147.07. Initial resistance (potential target) at 150.35.

AUDUSD Outlook

The AUDUSD had a significant bullish momentum yesterday. On h4 chart below we can see that the pair has made a breakout above range area indicating potential bullish continuation. The bias is bullish in nearest term targeting 0.9350 before aim for 0.9540 area. Immediate support at 0.9270. Break below that area should lead us into no trading zone but short position is nor recommended and the mode remains strongly bullish

FX Instructor LLC
www.fxinstructor.com

Chairman Ben S. Bernanke' statement

2009-10-19T22:11:00.001+07:00

At the Federal Reserve Bank of San Francisco’s Conference on Asia and the Global Financial Crisis, Santa Barbara, California

October 19, 2009

Asia and the Global Financial Crisis

The rise of the Asian economies since World War II has been one of the great success stories in the history of economic development. Japan's transition to an economic powerhouse was followed by the rapid ascent of the Asian tigers, and subsequently by China taking a prominent place on the world economic stage.¹ Since the beginning of this decade, Asia has accounted for more than one-third of the world's economic growth, raising its share of global gross domestic product (GDP) from 28 percent to 32 percent.² Importantly, its economic success has resulted in large-scale reductions in poverty and substantial improvements in the standards of living of hundreds of millions of people. China and India, which together account for almost 40 percent of the world's population, have seen real per capita incomes rise more than 10-fold and 3-fold, respectively, since 1980. As would be expected given the increasing size and sophistication of their economies, the nations of the region have also begun to exert a substantial influence on global economic developments and on international governance in the economic and financial spheres.

It is widely agreed that a key source of Asia's rapid advancement has been the openness of countries in the region to global trade and finance. Notwithstanding this consensus, the considerable progress of these countries in developing domestic institutions, policies, and industrial capacity--together with their strong growth in the initial phase of the ongoing global financial crisis--led some to speculate that the Asian economies had "decoupled" from the advanced economies of North America and Europe. Of course, in hindsight, given the magnitude of the shocks that have struck these advanced economies over the past two years, as well as their strong economic and financial links to Asia, it should not have been surprising that Asia was ultimately hit quite hard by the global downturn, even though the origins of the turmoil were elsewhere.

As a prelude to the papers and discussions to follow, I will provide a brief overview of the Asian experience during the global financial crisis. I will highlight the diversity of experiences, both within Asia and between Asia and other regions, and draw some inferences about the different channels through which the effects of the financial crisis were transmitted around the world. I will discuss Asia's policy response to the economic and financial consequences of the crisis. Finally, I will focus on medium-term challenges. For both Asia and the United States, perhaps the greatest medium-term challenge is to achieve more balanced growth and, in the process, to further reduce global imbalances.

Asia's Experience in the Crisis

During the years following the financial crisis of the late 1990s, many emerging market economies, in Asia and elsewhere, took advantage of relatively good global economic conditions to strengthen their economic and financial fundamentals; they improved their fiscal and external debt positions, built foreign exchange reserves, and reformed their banking sectors. Hence, at the onset of the financial turmoil in the summer of 2007, the Asian economies appeared well-positioned to avoid its worst effects. Although global financial markets, including Asian markets, deteriorated sharply following the start of the crisis, Asia's recovered swiftly, with equity prices reaching new highs early in the fourth quarter of that year. Moreover, economic activity in the region continued to expand.

However, toward the end of 2007, at about the same time that the United States entered a recession, the headwinds facing the Asian economies appeared to strengthen. Asian equity markets began to fall again--they were to underperform global markets throughout much of 2008--and other signs of financial stress, such as widening credit spreads, appeared as well. By the second quarter of 2008, many of the region's economies were slowing, and growth in Hong Kong, Singapore, and Taiwan--small, open economies particularly sensitive to shifts in global conditions--had ground to a halt.

In September and October 2008, as you know, the global financial crisis intensified dramatically. Concerted international action prevented a global financial meltdown, but the effects of the crisis on asset prices, credit availability, and consumer and business confidence resulted in sharp declines in demand and production worldwide. Reflecting this worsening economic climate, Asian GDP growth slowed further in the second half of 2008. For the region as a whole, the economic contraction in the fourth quarter of 2008 was pronounced, with activity falling at an annual rate of nearly 7 percent.³ The fourth-quarter declines were especially dramatic in Taiwan and Thailand (more than 20 percent at an annual rate) and in South Korea and Singapore (more than 15 percent at an annual rate). Among the major Asian economies, only those of China, India, and Indonesia did not contract during the crisis.

Early this year, with many of the Asian economies in freefall, a quick recovery seemed difficult to imagine, but recent data from the region suggest that a strong rebound is, in fact, under way. Although the regional economy continued to contract in the first months of 2009, it expanded at an impressive 9 percent annual rate in the second quarter, with annualized growth rates well into double digits in China, Hong Kong, Korea, Malaysia, Singapore, and Taiwan.⁴ At this point, while risks to the economic outlook certainly remain, Asia appears to be leading the global recovery.

Diversity of Experiences

This brief review of Asia's experience during the crisis raises a number of important questions: Through what channels were the effects of the financial crisis transmitted across the globe? In particular, why was Asia, whose financial systems largely escaped the serious credit problems that erupted in the United States and Europe, hit so hard by the global recession? What enabled the Asian economies to bounce back so sharply more recently? And why did some countries--around the world and within Asia--suffer much deeper contractions than others? Some light can be shed on these questions by examining the diversity of experiences among both Asian and non-Asian economies during the downturn.

Transmission Channels: Trade and Finance

The crisis that began in the West affected Asia through various transmission channels, whose relative importance depended in some degree on the particular characteristics of each economy. However, for virtually all of the Asian economies, international trade appears to have been a critical channel. Exhibit 1 shows the course of global merchandise exports since the beginning of this decade. As the exhibit shows, after a period of strong growth, international trade plunged about 20 percent in real terms from its pre-crisis peak to its trough in early 2009 (the dashed red line), and about 35 percent in U.S. dollar terms (the solid blue line).⁵ The trade-dependent economies of Asia could certainly not be immune to the effects of such a decline.

Why did global trade fall so abruptly? The severe recession in the advanced economies greatly restrained aggregate spending, including spending on imports, but the decline in international trade appears surprisingly large even when the depth of the recession in the advanced countries is taken into account. One possible explanation for the outsized decline in trade volumes lies in the extreme uncertainty that prevailed in the darkest months of the crisis. Consumers and businesses knew last fall that economic conditions were poor, but, in light of the severity and the global nature of the financial crisis, many feared outcomes that might be much worse. Perhaps to a greater extent than they might have otherwise, households and firms put off purchases of big-ticket items, such as consumer durables and investment goods. Durable goods figure prominently in trade and manufacturing, so these sectors may have been particularly vulnerable to the elevated uncertainty and weakened confidence that prevailed during the height of the crisis.

Credit conditions also likely affected the volume of trade, through several channels. The turmoil in credit markets doubtless exacerbated the sharp decline in demand for durable goods, and thus in trade volumes, as purchases of durable goods typically involve some extension of credit. Manufacturing production, a major component of trade flows, may have been cut back more sharply than would otherwise have been the case as producers, concerned about credit availability, attempted to preserve working capital. Finally, although it is difficult to assess the size of the effect, problems in obtaining trade finance may have also impeded trade for a time.

With trade falling sharply around the world, economies particularly dependent on trade were hit especially hard. Exhibit 2 illustrates this point for a group of Asian and non-Asian economies. The vertical axis of the figure shows real GDP growth, measured relative to trend, during the most severe stage of the downturn, and the horizontal axis shows a measure of openness to trade.⁶ Combinations of growth and openness observed in various economies are indicated by red squares for a number of Asian countries and by black dots for several non-Asian countries. The exhibit shows that countries most open to trade (those located further to the right in the figure) suffered, on average, the greatest declines in growth relative to trend. The most extreme cases are Hong Kong and Singapore, shown to the far right; the economies of Korea, Taiwan, Thailand, and Malaysia, which are also very open, suffered significant growth deficits as well.

Indeed, the GDP contractions in some Asian economies during that period rivaled those during the Asian financial crisis of the late 1990s. Relative to pre-crisis trend, the six Asian economies just mentioned plus Japan experienced declines in real GDP growth of about 13 to 20 percentage points at an annual rate during the last quarter of 2008 and the first quarter of 2009. Growth fell somewhat less severely in the Philippines and only moderately in Australia and New Zealand. As noted earlier, real GDP growth remained positive throughout the crisis in China, India, and Indonesia, but, as exhibit 2 shows, even those fast-growing economies experienced noticeable declines in growth relative to their earlier trends. The exhibit shows that a similar relationship between growth and openness to trade holds for non-Asian countries; for example, more trade-dependent nations like Germany saw sharper declines in output during the crisis than other less-open economies.

Variations across countries in trade openness do not fully explain the diversity of growth experiences during the downturn, suggesting that other factors were also at work. Notably, although financial institutions in emerging market economies were not, for the most part, directly affected by the collapse of the market for structured credit products and other asset-backed securities, financial stress nevertheless affected these countries. As international investors' appetite for risk evaporated, the flow of capital shifted away from countries that had historically been viewed as more vulnerable, including some emerging Asian and Latin American economies, even though many of these countries appeared to be much better positioned to weather an economic crisis than in the past. Moreover, regardless of perceived risks, financial institutions pulled money from risky assets in advanced and emerging markets alike in an effort to strengthen their balance sheets.

Following the reversal in capital flows engendered by the crisis, strains in banking appeared across Asia, leading to severe credit tightening in some countries. Fears of counterparty risk disrupted interbank lending in many countries, intensifying already existing funding difficulties. The drying up of the wholesale funding market hurt Korea's banking system in particular; prior to the crisis, it had accounted for about one-third of Korean bank funding. In Japan, some banks' exposures to equity markets damaged their capital positions. With Asian banks experiencing dollar funding pressures similar to those arising elsewhere in the world, the Federal Reserve established 5 of its 14 liquidity swap lines with central banks in the region: Australia, Japan, Korea, New Zealand, and Singapore. The reversal in capital flows also caused rapid exchange rate depreciation in some countries, particularly Korea, Indonesia, and Malaysia. The Korean won depreciated 40 percent against the dollar from the beginning of 2008 through its trough in March of this year, and it has only partially recovered. Over the same period, the Indonesian rupiah fell 22 percent against the dollar.

Exhibit 3 shows the relationship between rates of GDP growth during the downturn, relative to trend, and financial openness, as measured by the sum of each country's international assets and liabilities relative to its GDP.⁷ The exhibit shows that, for both Asian and non-Asian economies, financial openness was associated with greater declines in output, though the linkage appears somewhat less tight than that for trade.⁸ Again, the most extreme cases are Singapore and especially Hong Kong (which is not shown, as it is more than twice as open as even Singapore). Taiwan is another example of a financially open Asian economy that experienced a particularly severe downturn. By the same token, China, India, and Indonesia, the three Asian countries in which output expanded throughout the crisis, are among the least financially open.

Trade and financial channels influenced other emerging markets as well, such as those in Latin America and Eastern Europe. Many of these economies also contracted sharply, but thus far they have recovered more slowly than economies in Asia. In the case of Latin America, closer links to the U.S. economy (especially in the case of Mexico) and greater dependence on commodity exports (whose prices declined during the most intense phase of the crisis) were additional sources of weakness. In Eastern Europe, preexisting macroeconomic imbalances and structural weaknesses likely magnified the effects of the adverse global shocks.

It is important not to take the wrong lesson from the finding that more open economies were more severely affected by the global recession. Although tighter integration with the global economy naturally increases vulnerability to global economic shocks, considerable evidence suggests that openness also promotes stronger economic growth over the longer term. Protectionism and the erecting of barriers to capital flows should thus be strongly resisted. Instead, as I will discuss, striking a reasonable balance between trade and growth in domestic demand is the best strategy for driving economic expansion.

Policy Responses

By and large, countries in Asia came into the crisis with fairly strong macroeconomic fundamentals, including low inflation and favorable fiscal and current account positions. Good fundamentals, in turn, provided scope for strong policy responses in many countries. China, Japan, Korea, and Singapore were among those employing relatively aggressive policy strategies; in particular, China undertook a sizable fiscal program, supplemented by accommodative monetary and bank lending policies. The stimulus packages in China and elsewhere have lifted domestic demand throughout the region, boosting intraregional trade.

Not all Asian nations responded so aggressively to the crisis. Some countries with weaker fiscal positions no doubt felt constrained in the extent of fiscal stimulus they provided. Similarly, monetary policies were likely influenced by differences in inflation performance. On the one hand, countries experiencing low inflation or deflation, such as China, Japan, and Thailand, were able to implement expansionary monetary policies without concerns about increasing inflationary pressures. Indeed, Japan used unconventional monetary easing in part to avoid deeper deflation. On the other hand, inflation concerns were more pressing for Indonesia, the Philippines, and Korea, with the result that their monetary policy responses may have been more muted than would otherwise have been the case. The national variation in policy responses likely also reflected differences in the severity of the crisis across countries.

Generally speaking, the Asian response to the crisis appears thus far to have been effective. Importantly, as I have suggested, the Asian recovery to date has been in significant part the result of growth in domestic demand, supported by fiscal and monetary policies, rather than of growth in demand from trading partners outside the region. To illustrate the point, for each of the countries in the region, exhibit 4 shows industrial production (the solid blue bars) and exports (the striped red bars) measured relative to the pre-crisis peak.⁹ You can see that the blue bars are generally taller than the red bars, indicating that, except for New Zealand and Hong Kong, industrial production has rebounded by more than exports. Indeed, industrial production in China, India, and Indonesia has already reached new highs, and it is within about 5 percent of its previous peak in Australia and Korea. We would expect to see this pattern if growth in domestic demand, rather than growth in exports, was the predominant driver of increases in domestic production.¹⁰ The revival of demand in Asia has, in turn, aided global economic growth.

Despite the initial successes of Asian economic policies, risks remain. As in the advanced economies, unwinding the stimulative policies introduced during the crisis will require careful judgment. Policymakers will have to balance the risks of withdrawing policy support too early, which might cut short a nascent recovery, against the risks of leaving expansionary policies in place for too long, which could overheat the economy or worsen longer-term fiscal imbalances. In Asia, as in the rest of the world, the provision of adequate short-term stimulus must not be allowed to detract from longer-term goals, such as the amelioration of excessive global imbalances or ongoing structural reforms to increase productivity and support balanced and sustainable growth.

Lessons from Crises and Medium-Term Challenges

For now, Asian countries look to be weathering the current storm. In part, their successful responses reflect the lessons learned during the Asian financial crisis of the 1990s, including the need for sound macroeconomic fundamentals.

One crucial lesson from both that crisis and the recent one is that financial institutions must be carefully regulated, transparent, and sufficiently well capitalized and liquid to withstand large shocks. In part because of the reforms put in place after the crisis of the 1990s, along with improved macroeconomic policies, Asian banking systems were better positioned to handle the more recent turmoil. With the increased prominence of the Group of Twenty (G-20) as a forum for discussing the global responses to the crisis, emerging market economies, including those in Asia, will play a larger role in the remaking of the international financial system and financial regulation.

Another set of lessons that Asian economies took from the crisis of the 1990s may be more problematic. Because strong export markets helped Asia recover from that crisis, and because many countries in the region were badly hurt by sharp reversals in capital flows, the crisis strengthened Asia's commitment to export-led growth, backed up with large current account surpluses and mounting foreign exchange reserves. In many respects, that model has served Asia well, contributing to the rapid growth rates in the region over the past decade. In fact, it bears repeating that evidence from the world over shows trade openness to be an important source of economic growth. However, too great a reliance on external demand can also pose problems. In particular, trade surpluses achieved through policies that artificially enhance incentives for domestic saving and the production of export goods distort the mix of domestic industries and the allocation of resources, resulting in an economy that is less able to meet the needs of its own citizens in the longer term.

To achieve more balanced and durable economic growth and to reduce the risks of financial instability, we must avoid ever-increasing and unsustainable imbalances in trade and capital flows. External imbalances have already narrowed substantially as a consequence of the crisis, as reduced income and wealth and tighter credit have led households in the United States and other advanced industrial countries to save more and spend less, including on imported goods. Together with lower oil prices and reduced business investment, these changes in behavior have lowered the U.S. current account deficit from about 5 percent of GDP in 2008 to less than 3 percent in the second quarter of this year. Reflecting in part reduced import demand from the United States, China's current account surplus fell from about 10 percent of GDP in the first half of 2008 to about 6-1/2 percent of GDP in the first half of this year.

As the global economy recovers and trade volumes rebound, however, global imbalances may reassert themselves. As national leaders have emphasized in recent meetings of the G-20, policymakers around the world must guard against such an outcome. We understand, at least in principle, how to do this. The United States must increase its national saving rate. Although we should deploy, as best we can, tools to increase private saving, the most effective way to accomplish this goal is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time. For their part, to achieve balanced and sustainable growth, the authorities in surplus countries, including most Asian economies, must act to narrow the gap between saving and investment and to raise domestic demand. In large part, such actions should focus on boosting consumption. Admittedly, just as increasing private saving in the United States is challenging, promoting consumption in a high-saving country is not necessarily straightforward. One potentially effective strategy is to reduce households' precautionary motive for saving by strengthening pension systems and increasing government spending on health care and education. Of course, such measures are likely to improve welfare and productivity as well as to contribute to more balanced, robust, and sustainable economic growth.

Conclusion

The United States has benefited significantly from Asia's rapid development and integration into the global economy, and the payoffs to the Asian economies from global economic integration have been substantial as well. Indeed, the financial crisis has starkly demonstrated the extent to which the fortunes of the United States, Asia, and the rest of the global economy are intertwined. These powerful economic linkages, as well as the importance of both the United States and Asia in the global economy, underscore the need for consultation and cooperation in addressing common issues and concerns. Our shared stakes in the prospects of the global economy bring with them a heightened responsibility to work together to maintain those prospects. I am optimistic that the United States and Asia will rise to the challenge and address in a mutually beneficial fashion the range of issues confronting the global economy. Conferences such as this one, which bring together policymakers and scholars from both sides of the Pacific, will further the cause of this cooperation.

Technical Analysis for Precious Metals

2009-10-19T16:31:00.000+07:00

Silver

The duplicated bearish harmonic formation has forced the metal to breach the pivotal support level of 17.50 as seen on the provided four-hour chart. The candlestick formation is still negative under the negative pressure of SMA 20 -currently valued at 17.60-. Hence we think that the downside movements are to continue, targeting 16.70 zones which represent 61.8% Fibonacci level of our suggested CD leg. Stochastic supports our intraday bearish overview. Note that the correction may extend towards the broken support level before resuming the downside rally.

The trading range for today is among the key support at 16.45 and key resistance now at 18.50.

The general trend is to the upside as far as 12.45 remains intact with targets at 19.40.

Support: 17.28, 17.16, 17.05, 17.00, 16.96
Resistance: 17.45, 17.52, 17.60, 17.70, 17.76

Recommendation: Based on the charts and explanations above our opinion is, selling silver from 17.45 targeting 16.80 and stop loss above 18.00 might be appropriate

Gold

The strength of the potential reversal zone of the bearish harmonic pattern along with breaching the minor upside channel has forced the metal to move downwards sharply as seen on the above four-hour chart. Now, the possibility of forming a classical head and shoulders top pattern is in progress as we think that it is forming the right shoulder. We can't ignore the Elliott count which shows that the 4th wave is underway for the time being, targeting 1016.00 and may extend further towards 984.00 zones. For all those reasons, the intraday outlook is to the downside.

The trading range for today is among the key support now at 1006.00 and key resistance now at 1100.00.

The general trend is to the upside as far as 865.00 remains intact with targets at 1129.00.

Support: 1045.00, 1042.00, 1037.00, 1030.00, 1022.00
Resistance: 1055.00, 1058.00, 1062.00, 1066.00, 1070.00

Recommendation: Based on the charts and explanations above our opinion is, selling gold from 1055.00 targeting 1037.00 and stop loss above 1070.00 might be appropriate.

Ecpulse

Technical Analysis for Energy Markets

2009-10-19T16:29:00.000+07:00

Crude continued to push upwards within a bullish channel, organizing the short term bullish direction, seen in the image above. However, it managed to near the key resistance for this channel, which came inline with momentum indicators entering overbought areas; thus, making us expect to achieve some bearish correction targeting 77.60 – 61.8% Fibonacci for Friday's incline– then rebound to achieve a bullish intraday direction that supports the short term upside move, where its targets start at $80.00 per barrel to then witness some more upside movements towards $85.00. The expected upside direction for today will prevail if 76.20 remains intact.

The trading range for today is among the key support at 73.30 and the key resistance at 82.50.

The general trend is to the upside as far as 47.20 remains intact with targets at 85.00.

Support: 77.60, 76.75, 76.00, 74.75, 73.30
Resistance: 78.90, 79.50, 80.40, 81.65, 82.50

Recommendation: Based on the charts and explanations above our opinion is buying oil at 77.60 and targeting 78.90 and stop loss below 76.75, might be appropriate.

Technical Analysis for Major Currencies

2009-10-19T16:27:00.000+07:00

EURO

The Euro versus Dollar pair attempted to breach the pivot support at 1.4850, yet failed to do so due to the positive pressure seen from the stochastic indicator. We still see the pair in need for a downside correction towards 1.4745 before rebounding back to the upside on the intraday basis; targeting 1.5080 as far as 1.4745 is intact

The trading range for today is among the key support at 14675 and the key resistance at 1.5280

The general trend is to the upside as far as 1.4135 remains intact with targets at 1.6000

Support: 1.4850, 1.4785, 1.4745, 1.4675, 1.4650
Resistance: 1.4910, 1.4960, 1.5020, 1.5080, 1.5130

Recommendation: Based on the charts and explanations above, our opinion is selling the pair with the breach of 1.4850 to 1.4745 and stop loss above 1.4910 might be appropriate

GBP

The Cable continues to trade around the resistance level that has halted the bullish trend. The stochastic indicator is trending within overbought areas as it attempts to show a bearish crossover that may result in a downside correction to retest 1.6210 before rebounding on the short term, in an attempt to breach 1.6445 (the key resistance for the current downside channel) and targeting 1.7000. This incline remains as far as 1.6120 is intact.

The trading range for today is among the key support at 1.6050 and the key resistance at 1.6705

The general trend is to the upside as far as 1.4840 remains intact with targets at 1.7100

Support: 1.6270, 1.6210, 1.6165, 1.6120, 1.6045
Resistance: 1.6385, 1.6445, 1.6500, 1.6600, 1.6635

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 1.6385 to 1.6210 and stop loss above 1.6445 might be appropriate

JPY

The USD/JPY pair continues to pressure to the downside after reaching the 91.30 resistance level, which resulted in the formation of a bearish technical pattern with a neckline at 90.55 targeting a correction towards 89.80 to relieve momentum indicators before continuing the short term uptrend. From here we see the trend is still to the upside as far as trading is above 89.45, yet requires a slight correction.

The trading range for today is among the key support at 86.75 and the key resistance at 93.30

The general trend is to the downside as far as 102.60 remains intact with targets at 84.95 and 82.60

Support: 90.55, 89.80, 89.45, 88.80, 88.35
Resistance: 91.30, 92.10, 92.80, 93.30, 93.80

Recommendation: Based on the charts and explanations above, our opinion is buying the pair from 89.80 to 90.95 and stop loss below 89.30 might be appropriate

CHF

The USD/CHF pair continues to gradually incline in an attempt to complete the bearish harmonic pattern indicated in our previous report, where we still expect it to reach 1.0260 as it represents a cluster resistance that may force the pair to decline on the intraday basis to support the short term trend that is targeting 1.0000. Momentum indicators are supporting the bearish outlook ,yet note that trading must remain below 1.0305 on the daily charts for the decline to continue.

The trading range for today is among the key support at 0.9880 and the key resistance at 1.0450

The general trend is to the downside as far as 1.1225 remains intact with targets at 0.9600

Support: 1.0175, 1.0120, 1.0080, 1.0030, 1.0000
Resistance: 1.0260, 1.0305, 1.0350, 1.0390, 1.0450

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 1.0260 to 1.0120 and stop loss above 1.0350 might be appropriate

CAD

After successfully breaching the neckline for the bullish technical pattern at 1.0370, the pair is currently fluctuating around this level in an attempt to gather more bullish momentum. From here we expect the pair to incline on the intraday basis; targeting 1.0530 – 1.0600 as far as 1.0370 is intact on the four hour charts.

The trading range for today is among the key support at 1.0000 and the key resistance at 1.0600

The general trend is to the downside as far as 1.1870 remains intact with targets at 1.0000

Support: 1.0370, 1.0305, 1.0265, 1.0205, 1.0175
Resistance: 1.0400, 1.0450, 1.0500, 1.0530, 1.0575

Recommendation: Based on the charts and explanations above, our opinion is buying the pair from 1.0370 to 1.0530 and stop loss below 1.0265 might be appropriate

Ecpulse

Weekly Review and Outlook

2009-10-18T09:05:00.002+07:00

Top 5	Current	Last	Change (Pips)	Change (%)
GBPJPY	148.69	142.16	+653	+4.39%
GBPUSD	1.6354	1.5839	+515	+3.15%
AUDJPY	83.33	81.08	+225	+2.70%
GBPCAD	1.6949	1.6503	+446	+2.63%
CHFJPY	89.27	86.99	+228	+2.55%
Dollar
EURUSD	1.4903	1.4726	+177	+1.19%
USDJPY	90.92	89.75	+117	+1.29%
GBPUSD	1.6354	1.5839	+515	+3.15%
USDCHF	1.0182	1.0315	-133	-1.31%
USDCAD	1.0365	1.0420	-55	-0.53%
Euro
EURUSD	1.4903	1.4726	+177	+1.19%
EURGBP	0.9111	0.9295	-184	-2.02%
EURCHF	1.5175	1.5191	-16	-0.11%
EURJPY	135.50	132.18	+332	+2.45%
EURCAD	1.5444	1.5342	+102	+0.66%
Yen
USDJPY	90.92	89.75	+117	+1.29%
EURJPY	135.50	132.18	+332	+2.45%
GBPJPY	148.69	142.16	+653	+4.39%
AUDJPY	83.33	81.08	+225	+2.70%
NZDJPY	67.30	65.88	+142	+2.11%
Sterling
GBPUSD	1.6354	1.5839	+515	+3.15%
EURGBP	0.9111	0.9295	-184	-2.02%
GBPCHF	1.6651	1.6336	+315	+1.89%
GBPJPY	148.69	142.16	+653	+4.39%
GBPCAD	1.6949	1.6503	+446	+2.63%

Sterling was the biggest winner last week on the back of drastic turn in speculations on expansion of quantitative easing campaign from Bank of England. Dollar, on the other hand, dived to new 14 month low after risk appetite as DOW closed above 10000 level for two consecutive days before ending the week at 9995.9. The Japanese yen was even weaker as yen crosses were pushed higher by rise in treasury yields. Aussie and Kiwi were firm on solid data from New Zealand. Euro's rally lost steam as the common currency was pressured by sharp selling in EUR/GBP cross.

The FOMC minutes for September's meeting suggested that the Fed, while acknowledged that the economic outlook has improved, remained cautious about the downside risk. Moreover, policymakers stressed that uncertainty about growth and subdued inflationary pressure made the central bank decided to keep interest rate low at an extended period of time.

US advance retail sales showed less than expected contraction by -1.5% in September while ex-auto sales rose more than expected by 0.5%. CPI rose 0.2% mom, dropped -1.3% yoy in September with core CPI rose 0.2% mom, 1.5%. Empire state manufacturing index beat expectation by rising strongly to 34.57 in October but Philly Fed survey missed expectation and dropped to 11.5. INdustrial production rose 0.7% in September with capacity utilization rose to 70.5%. U of Michigan consumer sentiment disappointed and dropped to 69.4 in October.

German ZEW economic sentiment disappointed by dropping to 56 in October while German ZEW dropped to 56.9. Eurozone CPI was flat mom, dropped -0.3% yoy in September.

UK headline CPI slowed much more than expected from 1.6% yoy to 1.1%, a seven year low. Core CPI also dropped slightly from 1.8% yoy to 1.7%. Unemployment rate was unchanged at 7.8% in August versus expectation of a rise to 8.0%. Nevertheless, Sterling rebounded strongly on speculation that BoE may pause the quantitative easing program. BoE Markets Director Paul Fisher said that he's more confidence now that the GBP 175b asset purchase program was "having the scale and speed of impact that we would have hoped for when we started" in March. He hinted MPC might opt to pause the program to give themselves the option of "doing more later" rather than stopping the program. This echoed the comments from Deputy Governor Charles Bean that BoE "will need gradually to remove the large monetary stimulus that we have imparted to the economy, otherwise we will be in danger of overshooting our 2 percent inflation target".

BoJ left rates unchanged at 0.1% as widely expected.

Canadian CPI was flow mom in September, dropped -0.9% while core CPI rose more than expected by 0.3% mom, 1.5% yoy in September

New Zealand Q3 GDP rose an impressive 1.3% qoq, 1.7% yoy, much stronger than expectation of 0.8% qoq, 1.1% yoy. Retail sales rose much more than expected by 1.1% mom in August, with ex-auto sales rose 1.2% mom.

Technically, while dollar index managed to recover mildly after dropping to as 75.21, there is no sign of bottoming yet. We're holding on to the view that dollar index is in the fifth wave of the five wave fall from 89.62, it now looks like it will dive further into 71.31/74.31 support zone before conclusion. In any case, a break above 77.43 resistance is needed to be the first sign of bottoming. Otherwise, near term outlook will remain bearish.

The Week ahead

A few things to note going ahead. Firstly, while Sterling's rebound was impressively strong last week, it's vulnerable to another sharp fall considering the event risks of BoE minutes, retail sales and more importantly, Q3 GDP report to be released this week. Sterling's strong was based on speculations that BoE might pause the QE campaign after completing the GBP 175b asset purchases. However, disappointing GDP report and dovish MPC minutes will flip the sentiments 180 degrees and send trigger some selloff in the pound.

Secondly, note that dollar's managed to find some footing towards the end of the week even though stocks confined to make new high while crude oil broke through 75 level to as high as 78.75. The greenback was just mildly down against Euro, Swissy and Canadian and even managed to close higher against Japanese yen. While there is no sign of bottoming yet, the greenback is quite oversold in near term and make be staging for a bounce. A number of Fed officials are scheduled to speak this week and will provide the guidance on whether Fed is preparing for exit and that will likely trigger some volatility in the greenback.

Thirdly, Canadian dollar lost some momentum even though crude oil maintained its strength. CPI report released last week was a bit disappointing but markets are still leaning towards that case that BoC will revere policy accommodations earlier than expected. This week's BoC rate be important in a way that focus will be on whether BoC will change its conditional commitment to hold rates at record low till Q2 of 2010.

Here is a summary of the key events this week

Monday: BoJ Minutes; Bernanke speaks, NAHB housing market index
Tuesday: RBA minutes; German PPI; US PPI, new residential construction, Fed Warsh speaks; BoC rate decision
Wednesday: BoE minutes; Fed Lacker, Tarullo speaks, Beige Book
Thursday: Japan trade balance; UK retail sales; Canada retail sales, BoC monetary policy report; Fed Lockhart, Dudley, Evans speak
Friday: Eurozone PMIs, German Ifo; UK Q3 GDP; Fed Bernanke, Kohn speak, Existing home sales

GBP/USD Weekly Outlook

GBP/USD rebounded strongly after dipping to 1.5706 and reached as high as 1.6398. Initial bias remains mildly on the upside this week and further rise could be seen to falling trend line resistance at 1.6485. Nevertheless, upside should be limited there and bring pull back. On the downside, below 1.6212 will turn intraday outlook neutral first. Further break of 1.5919 support will flip intraday bias back to the downside for retesting 1.5706 low. However, note that sustained trading above the trend line will be the first sign that whole fall from 1.7043 has completed and will turn focus to 1.6740 resistance instead.

In the bigger picture, with 1.6740 resistance intact, there is no change in the bearish outlook. GBP/USD should have made a medium term top after completing a head and shoulder top reversal pattern (ls: 1.6742, h: 1.7043, rs: 1.6740). Whole rise form 1.3503, which is treated as correction in the long term decline form 2.1161 has completed too. Fall from 1.7043 is tentatively treated as resumption of the long term down trend, which should target a new low below 1.3503 eventually.

On the upside, however, break of 1.6740 resistance will indicate that fall from 1.7043 has completed already. The three wave structure will in turn suggest that it's merely a correction to the medium term rise from 1.3503. In other words, another high above 1.7043 should be seen before GBP/USD tops.

In the longer term picture, the corrective nature of the multi-decade advance from 1.0463 (85 low) to 2.1161 as well as the impulsive nature of the fall from there suggests that GBP/USD is now in an early stage of a long term down trend. Rebound from 1.3503, which is treated as correction in the larger down trend, has likely completed and fall from 1.7043 is tentatively treated and resumption of such down trend that will send GBP/USD through 1.3503 low eventually.

Weekly Review and Outlook

2009-10-11T12:22:00.003+07:00

Top 5	Current	Last	Change (Pips)	Change (%)
GBPAUD	1.7525	1.8422	-897	-5.12%
AUDUSD	0.9036	0.8651	+385	+4.26%
AUDJPY	81.04	77.67	+337	+4.16%
GBPCAD	1.6526	1.7211	-685	-4.14%
USDCAD	1.0434	1.0795	-361	-3.46%
Dollar
EURUSD	1.4725	1.4575	+150	+1.02%
USDJPY	89.73	89.79	-6	-0.07%
GBPUSD	1.5841	1.5942	-101	-0.64%
USDCHF	1.0315	1.0348	-33	-0.32%
USDCAD	1.0434	1.0795	-361	-3.46%
Euro
EURUSD	1.4725	1.4575	+150	+1.02%
EURGBP	0.9296	0.9140	+156	+1.68%
EURCHF	1.5191	1.5090	+101	+0.66%
EURJPY	132.14	130.87	+127	+0.96%
EURCAD	1.5359	1.5753	-394	-2.57%
Yen
USDJPY	89.73	89.79	-6	-0.07%
EURJPY	132.14	130.87	+127	+0.96%
GBPJPY	142.14	143.15	-101	-0.71%
AUDJPY	81.04	77.67	+337	+4.16%
NZDJPY	65.86	64.36	+150	+2.28%
Sterling
GBPUSD	1.5841	1.5942	-101	-0.64%
EURGBP	0.9296	0.9140	+156	+1.68%
GBPCHF	1.6337	1.6501	-164	-1.00%
GBPJPY	142.14	143.15	-101	-0.71%
GBPCAD	1.6526	1.7211	-685	-4.14%

Last week's headlines were dominated by the strength in commodity currencies and weakness in dollar. The greenback was sold off for most of as G7 disappointed the markets by giving no explicit support to the dollar. Further pressure was seen on speculation of secret talk by Gulf States and other countries to price oil in a basket of currencies including Gold even though that was later denied. Nevertheless, weakness in the greenback was seen mainly against commodity currencies. Dollar was pretty much in range against European majors and comments from Bernanke helped the greenback to recover mildly towards the end of the week. Dollar index also managed to hold on to recent support of 75.83 despite a brief breach. Australian dollar was the star performer, boosted by unexpected rate hike from RBA, record high in Gold, and solid employment data. Canadian dollar caught up later in the weak with support from rebound in crude oil as well as a good job report. Euro was firm after a rather non-eventful ECB meeting. Sterling, on the other hand, was the weakest currency on speculation of further stimulus measures from BoE even though everything was left unchanged in the meeting last week.

RBA surprised the markets by raising interest rate by 25bps to 3.25% last week as global economic growth has resumed, market sentiment has improved while concerns on unemployment has not been as worrisome as previously anticipated. In the accompanying statement, the RBA said that 'the recovery will likely continue during 2010 and forecasts are being revised higher…Economic conditions in Australia have been stronger than expected and measures of confidence have recovered…Medium-term prospects for investment appear, moreover, to be strengthening. Higher dwelling activity and public infrastructure spending is also starting to provide more support to spending. Overall, growth through 2010 looks likely to be close to trend'. Aussie further strengthened across the board, with support from solid employment report, which showed the job market expanded by 40.6k and unemployment rate dropped to 5.7%. AUD/USD breached 0.9 psychological level and remains firm.

The ECB left its main refinancing rate at 1% and as in previous meeting, President Trichet said the current interest rate is 'appropriate'. Concerning macro-economic outlook, policymakers acknowledged improvement but did not want tighten policy until recovery proved to be self-sustaining. According to the press conference statement, economic activities have continued to stabilize after sharp contraction earlier in the year. 'The Eurozone should 'benefit from a recovery in exports, the significant macroeconomic stimulus under way and the measures taken to restore the functioning of the financial system… the inventory cycle is expected to contribute positively to real GDP growth in the second half of the year. BOE also announced to keep its policy rate unchanged at 0.5% as well as to maintain the asset purchase program, which will end in a month, at 175B pound. As expected the accompanying was short and discussed nothing about the economic outlook.

While dollar has been pressured across the board for most of the week, it found some footing after Fed Bernanke said "as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road." Though, at this moment, "accommodative policies will likely be warranted for an extended period." Nevertheless, the comment raised some speculation that Fed officials has shortened the time frame of policy reversal and gave the greenback some support.

Elsewhere, Canadian dollar was boosted sharply higher on stronger than expected employment report which showed 30.6k expansion in September. Unemployment rate also dropped sharply from 8.7% to 8.4%.

Let's look at the dollar index chart before looking at other markets. The dollar index dropped to a marginal low of 75.78 last week but drew support from 75.83 and recovered towards the end of the week. The development raised the possibility of a double bottom formation even though it's still far from being confirmed. Nevertheless, initial bias is neutral this week. A break above 76.64 minor resistance will indicate that fall form 77.47 has completed and strong rebound should be seen towards 77.47 resistance. Break there will confirm the case of bottoming.

In the bigger picture, we're still treading the current fall in dollar index as the fifth wave in the five wave sequence from March high of 89.62. Such decline from 89.62 is expected to conclude after hitting 75.89 key resistance. Break of 77.47 resistance is the first solid sign of reversal while further break of 78.93 will confirm. The least bullish case will bring rebound to 38.2% retracement level at around 81. However, note that sustained break of 75.89 will invalidate our view and will open up the case for a retest of 2007 low of 70.70 in medium term.

Gold soared to new record high of 1062.7 last week and remains firm so far. The strong break of 1033.9 indicate that long term up trend is resuming and further rise would be seen to next near term target of 61.8% projection of 681 to 1007.7 from 931.3 at 1133.2 first. One thing to note is that Gold's strength is mainly translated into strength in commodity currencies but not that much in weakness in dollar. That is, we're note seeing equivalent strength in European majors. Hence, further rally in gold might not trigger sharp rally in EUR/USD or fall in USD/CHF. But strength in gold would likely limit recovery in the greenback.

Another major development to note was the weakness in Japanese yen towards the end of the week, with risk appetite as a major driving force. The strong rebound in DOW last week suggests it's not topped out yet and the medium term rebound from 6467 is possibly still in progress to 50% retracement of 14198 to 6467 at 10334 before completion.

In addition, Treasury yield rebound strongly last week and the sharp rally on Friday is particularly impressive. The development argues that yield on 10 year note has possibly bottomed out at 3.106 after completing the three wave fall from 4.014. Further rise in yield would possibly be seen in near term which pressure the yen. The most interest part to look at is whether rebound in USD/JPY would outpace other yen crosses which gives the greenback some additional support.

The Week Ahead

Main focus this week will be on whether to extend the current recovery to a meaningful rebound. 75 in the dollar index is an import level to defend the view that it's bottoming. Strong CPI and retail sales are needed to give the greenback a lift in the rebound. Also, traders will look into Fed minutes for any discussion on exit strategies. On the other hand, Sterling is vulnerable to another sharp fall in case of disappointments in the next round of data including CPI and job report. Canadian dollar traders will also look into this week's CPI report on readjusting their view on the timing of policy reversal by BoC. In addition, New Zealand retail sales and CPI will also be closely watched and markets will see if strength in the Kiwi would help push Aussie to another new higher together.

Monday: New Zealand Retail sales
Tuesday: UK RICS House Price Balance, CPI; German ZEW Economic Sentiment;
Wednesday: BoJ Rate Decision; UK Employment Report; US Retail Sales, FOMC Minutes
Thursday: New Zealand CPI; Swiss ZEW Economic Expectations; Eurozone CPI, US CPI, Empire State Manufacturing
Friday: Canadian CPI; US TIC Capital Flow, Industrial Production

GBP/USD Weekly Outlook

GBP/USD continued to engage in sideway consolidation between 1.5769 and 1.6119 last week. Nevertheless, Friday's sharp fall argues that such consolidation might have completed at 1.6119 after touching inner trend line resistance. Initial bias is cautiously on the downside this week and break of 1.5806 minor support will affirm this case. On resumption , decline from 1.6740 should target 161.8% projection of 1.7043 to 1.6111 from 1.6740 at 1.5232 next. On the upside, above 1.5937 minor resistance will delay this bearish view and indicate that some more consolidation should be seen first.

In the bigger picture, bearish outlook remains unchanged. Decisive break of 1.6111 support confirmed the case that GBP/USD has topped out in medium term by completing a head and shoulder top reversal pattern (ls: 1.6742, h: 1.7043, rs: 1.6740). Also, note that medium term rise from 1.3503 is treated as a correction in the long term decline from 2.1161 and should have completed too. Medium term outlook is turned bearish and the current fall from 1.7043 is tentatively treated as resumption of the long term down trend, which should target a new low below 1.3503 eventually. On the upside, break of 1.6740 resistance is needed to invalidate this bearish view.

FuturesPulse market recap

2009-10-10T07:59:00.003+07:00

***BOND MARKET RECAP - 10/9/2009
December Bonds finished down 1-240 at 119-310, 2-030 off the high and 0-110 up from the low.

December 10 Yr Treasury Notes closed down 0-280 at 118-090. This was 0-060 up from the low and 0-315 off the high.

Technical Outlook
BONDS (DEC) 10/12/2009: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close below the 18-day moving average is an indication the intermediate-term trend has turned down. The close below the 2nd swing support number puts the market on the defensive. The next downside target is now at 118-010. The next area of resistance is around 121-080 and 122-280, while 1st support hits today at 118-270 and below there at 118-010.

10 YR TREASURY NOTES (DEC) 10/12/2009: The daily stochastics have crossed over down which is a bearish indication. Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. The close below the 9-day moving average is a negative short-term indicator for trend. There could be some early pressure today given the market's negative setup with the close below the 2nd swing support. The next downside objective is now at 117-100. The next area of resistance is around 118-275 and 119-205, while 1st support hits today at 117-225 and below there at 117-100.

***STOCK INDICES RECAP - 10/9/2009
December S&P closed up 4.3 at 1068.1. This was 8.9 up from the low and 0.8 off the high. December S&P E-Mini finished up 4.25 at 1068, 0.5 off the high and 9.5 up from the low.

December Dow finished up 63 at 9810, 2 off the high and 100 up from the low.

Technical Outlook
S&P 500 (DEC) 10/12/2009: Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 1075.92. The next area of resistance is around 1073.45 and 1075.92, while 1st support hits today at 1063.55 and below there at 1056.13.

S&P E-MINI (DEC) 10/12/2009: Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 1076.00. The next area of resistance is around 1073.50 and 1076.00, while 1st support hits today at 1063.50 and below there at 1056.00.

NASDAQ (DEC) 10/12/2009: Momentum studies are rising from mid-range, which could
accelerate a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The upside closing price reversal on the daily chart is somewhat bullish. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside objective is at 1742.75. The next area of resistance is around 1736.50 and 1742.75, while 1st support hits today at 1715.50 and below there at 1700.75.

DOW (DEC) 10/12/2009: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The market could take on a defensive posture with the daily closing price reversal down. The market's close below the pivot swing number is a mildly negative setup. The next upside target is 9795. The next area of resistance is around 9754 and 9795, while 1st support hits today at 9690 and below there at 9667.

***CURRENCY MARKET RECAP - 10/9/2009
December US Dollar closed up 0.49 at 76.620. This was 0.490 up from the low and 0.105 off the high.

December Euro closed down 0.57 at 147.18. This was 0.48 up from the low and 0.75 off the high.

December Japanese Yen finished down 1.61 at 111.4, 1.83 off the high and 0.11 up from the low.

December Swiss finished down 0.4 at 96.99, 0.52 off the high and 0.36 up from the low.

December Canadian Dollar finished up 0.73 at 95.83, 0.23 off the high and 1.06 up from the low.

December British Pound closed down 2.24 at 158.38. This was 0.18 up from the low and 2.33 off the high.

Technical Outlook
JAPANESE YEN (DEC) 10/12/2009: A bearish signal was triggered on a crossover down in the daily stochastics. Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is now at 109.89. The next area of resistance is around 112.36 and 113.76,
while 1st support hits today at 110.43 and below there at 109.89.

EURO (DEC) 10/12/2009: Positive momentum studies in the neutral zone will tend to reinforce higher price action. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next upside objective is 148.47. The next area of resistance is around 147.79 and 148.47, while 1st support hits today at 146.57 and below there at 146.02.

***PRECIOUS METALS RECAP - 10/9/2009
December Gold closed down 7.7 at 1048.6. This was 3.8 up from the low and 4.9 off the high.

December Silver finished down 0.125 at 17.69, 0.145 off the high and 0.115 up from the low.

Technical Outlook
COMEX SILVER (DEC) 10/12/2009: The upside crossover of the 9 and 18 bar moving average is a positive signal. Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside objective is at 1799.5. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1787.5 and 1799.5, while 1st support hits today at 1759.5 and below there at 1743.5.

COMEX GOLD (DEC) 10/12/2009: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market's close below the pivot swing number is a mildly negative setup. The next upside target is 1062.4. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1056.1 and 1062.4, while 1st support hits today at 1044.1 and below there at 1038.4.

***ENERGY MARKET RECAP - 10/9/2009
November Crude Oil closed up 0.60 at 72.29. This was 1.67 up from the low and 0.06 off the high.

November Heating Oil closed up 1.92 at 186.61. This was 3.98 up from the low and 0.44 off the high.

November RBOB Gasoline finished up 0.29 at 178.26, 1.01 off the high and 3.12 up from the low.

November Natural Gas finished down 0.19 at 4.77, 0.22 off the high and 0.02 up from the low.

Technical Outlook
CRUDE OIL (NOV) 10/12/2009: A positive indicator was given with the upside crossover
of the 9 and 18 bar moving average. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 73.61. The next area of resistance is around 73.15 and 73.61, while 1st support hits today at 71.43 and below there at 70.16.
RBOB GAS (NOV) 10/12/2009: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The next upside target is 181.86. The next area of resistance is around 180.32 and 181.86, while 1st support hits today at 176.20 and below there at 173.61.

HEATING OIL (NOV) 10/12/2009: The cross over and close above the 60-day moving
average is an indication the longer-term trend has turned positive. A positive indicator was given with the upside crossover of the 9 and 18 bar moving average. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 190.14. The next area of resistance is around 188.82 and 190.14, while 1st support its today at 184.40 and below there at 181.31.

Technical Analysis for Energy Markets

2009-10-09T15:21:00.001+07:00

Crude achieved a decline yesterday, slightly nearing the awaited support level at 69.00 and pushing to the upside to touch the key resistance level 72.50 (the previously breached main support level for the upside direction); where crude closed below resistance level for the bearish channel, which organizes the trading of the short term bearish waves, shown in the image above, - in yellow-. From here, we still see that crude is heading to the downside over an intraday basis and initially targeting 68.85. As long as the daily close is below 72.75, chances of achieving this downside direction will prevail; where the stochastic supports the bearish trend for today.

The trading range for today is among the key support at 67.00 and the key resistance at 74.80.

The general trend is to the upside as far as 47.20 remains intact with targets at 85.00.

Support: 70.45, 69.85, 68.85, 67.45, 66.50
Resistance: 71.30, 72.75, 73.15, 73.80, 74.60

Recommendation: Based on the charts and explanations above our opinion is selling oil at 71.30 and targeting 68.85 and stop loss above 72.75, might be appropriate

Ecpulse