FOREX analysis US session 20090324

OVERVIEW

US Equities staged their largest one day rally since the beginning of the new Presidential administration, with S&P futures closing above 800 for the first time since mid February, as the US Treasury outlined its plan to work with the private equity community to deal with the toxic assets that continue to plague the global financial system and fuel the ongoing credit freeze up. The plan was well received by a number of major private equity entities such as Pimco and Black Rock Private Equity. Both of these financial management firms offered their support for the plan and stated their commitment to participate. The acceptance of the plan triggered a broad based rally led not surprisingly by the financial sector. Bank of America rose over 20% and Citigroup rallied near 18%. The exceptional support for the plan appears to stem from the notion that the government would be taking control of the financing terms for the joint ventures on extremely generous terms. This perceived winning strategy is perceived as a strong draw to bring back a lot of the “smart money” which pulled out of the market in mid 2008 and has been waiting for the right terms and structure to be put into place in order to draw back working funds into the financial markets.

Key points of the plan include initial joint investment from private equity and Tarp funds creating a public private fund worth about $500 billion. The investors as well as the fund will buy the bad loans at auction using loans that will be guaranteed by the FDIC. The financial institutions will have the ability to decide which of the toxic assets they wish to offer and which they will try to make a go of on their own. The markets have been at this crossroads before. A sustainable rally will likely be contingent upon how quickly the financing program can be put into place. Even more significant will be the measure of the banking sectors ability to raise and offer credit once these assets have found new homes.

US Treasuries traded in relatively narrow range on Monday, continuing the pullback from last week record post FOMC rally, as the details of the Treasury Plan to create a market for the balance of toxic assets on financial institutions books was met with a resounding cheer in the equity markets. With the major indices rising over 4% today, it would seem that lower yielding fixed income should have fallen a greater amount than the near 1 basis point lost in the longer yielding 30 year today, This was not the case, due to the fact that Treasuries continue to hold a bid in the market in expectation of the Federal Reserve becoming a major purchaser of Treasury Debt.

This week, the US Treasury is scheduled to auction of $134 billion worth of government debt. The two key auctions that the markets will be watching will be the nearly $75 billion of US 2 and 5 year notes scheduled for auction this week. Market direction for the week could be determined by the Federal Reserve making its presence known as a buyer within these auctions. If the markets perceive that the Federal Reserve is not going to jump right out of the starting gate with purchases of Treasury Debt, then overall supply concerns will likely reenter market and could cause further erosion of last week’s upward spike in prices.

US AND CANADA

Today will see a chorus of speakers in North America, including testimony on AIG from Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner to the U.S. House Financial Services Committee. AIG has come under severe attack for awarding multimillion-dollar bonuses to executives following a $180 billion bailout from the U.S. government.

Also on Tuesday, markets will receive information on the Richmond region manufacturing sector. The Richmond Fed manufacturing index is expected to remain unchanged at -51 in March, deep in contractionary territory. The index is nevertheless better than the record low -55 level set in December. The Federal Housing Finance Agency will also release its house price index for January on Tuesday. House prices are expected to fall 0.9% against a 0.1% increase in December. Bullard, President of the Federal Reserve Bank of St. Louis, will speak in London.

In Singapore Time:
18:00 US Fed's Evans Speaks on Economic Outlook at Czech National Bank
22:00 US House Price Index (M/M) January Exp: -0.9% Prior: +0.1%
22:00 US Richmond Fed Manufacturing Index March Exp: -51 Prior: -51
22:00 US Bernanke, Geithner Testify About AIG
23:30 US Treasury to Sell 4-Week Bills
01:00 US Treasury to Sell $40B 2-Year Notes
02:35 US Bullard Speaks at Cass Business School in London
05:00 US ABC Consumer Confidence W/E March 22 Prior: -47

UK AND EUROPE

The focus on Tuesday in the euro zone will be on manufacturing and services purchasing managers indexes while in the UK, economists will look for further confirmation that inflation is easing further. At 5:00 p.m. Singapore Time, Markit Economics will publish its "flash" estimates for the euro zone March PMIs. Ahead of the release, expectations are for the manufacturing PMI to have stabilized, coming in unchanged at the 33.5 level. The services PMI is also expected to remain unchanged after slipping to an all-time low of 39.2 in February. Economists at Citigroup, however, expect the manufacturing PMI will drop substantially, while the services index will probably be largely unchanged.

"Other parts of the report probably will show a further decline in the employment plans and the assessment of prices," the economists added. In the UK, expectations are for inflation to ease to 2.6% in the 12 months to February, down 0.4 percentage points from January's print. On a monthly basis, the price growth rate is expected to have slowed to 0.3% in February from 0.7% previously.

The retail price index will also be released for the month of February. Currently, expectations are for the RPI to contract 0.7% year-over-year, down from January's 0.1% gain. Month-over-month, economists expect retail prices to have fallen 0.1% following January's 1.3% decline. "Despite a rise in petrol prices on the month, the year-on-year inflation rate should fall," Morgan Stanley analyst Melanie Baker said. "For RPI, further falls in house prices and mortgage interest payments help inflation decline by more on that measure," Baker added. "We continue to expect a further significant decline on both measures in coming months, bottoming out in the Autumn."

Shortly after the CPI and RPI releases, Bank of England Monetary Policy Committee members Mervyn King, Tim Besley, Paul Tucker and David Blanchflower, along with BOE chief economist Spencer Dale will testify to the House of Commons Treasury Select Committee.

In Singapore Time:

16:30 DE PMI Manufacturing March Advance Exp: +32.0 Prior: +32.1
16:30 DE PMI Services March Advance Exp: +41.0 Prior: +41.3
17:00 EU ECB Euro-Zone Current Account SA January Prior: -€7.3B
17:00 EU PMI Manufacturing March Advance Exp: +33.5 Prior: +33.5
17:00 EU Euro-Zone Current Account (NSA) January Prior: +1.4B
17:00 EU PMI Services March Advance Exp: +39.2 Prior: +39.2
17:00 EU PMI Composite March Advance Exp: +36.2 Prior: +36.2
17:00 EU ECB Council Member Liikanen Speaks in Helsinki
17:30 GB CPI (M/M) February Exp: +0.3% Prior: -0.7%
17:30 GB CPI (Y/Y) February Exp: +2.6% Prior: +3.0%
17:30 GB Core CPI (Y/Y) February Exp: +1.3% Prior: +1.3%
17:30 GB Retail Price Index February Exp: +209.2 Prior: +210.1
17:30 GB RPI (M/M) February Exp: -0.1% Prior: -1.3%
17:30 GB RPI (Y/Y) February Exp: -0.7% Prior: +0.1%
17:30 GB RPI Ex Mort Interest Payments (Y/Y) February Exp: +1.9% Prior: +2.4%
17:30 GB BBA Loans for House Purchase February Prior: 23376
17:45 GB BOE's King, Tucker, Dale, Besley, Blanchflower to testify
02:00 EU ECB's Constancio Speaks at University in Lisbon
02:30 GB Bank of England's Blanchflower to Make Speech
March 24-31 GB Nationwide House prices (M/M) (SA) March Exp: -1.5% Prior: -1.8%
March 24-31 GB Nationwide House prices (Y/Y) (NSA) March Exp: -18.1% Prior: -17.6%
March 23-27 DE Import Price Index (Y/Y) January Exp: -6.0% Prior: -5.1%
March 23-27 DE Import Price Index (M/M) January Exp: -0.4% Prior: -4.0%

ASIA

Asia markets rallied as the Dow closed higher on Monday on announcements of the plan to deal with the toxic assets.
The Bank of China, the world’s third-largest lender by market value, received initial government approval for its delayed 236 million-euro ($322 million) investment in La Compagnie Financiere Edmond De Rothschild, two people with knowledge of the matter said. The purchase of a 20 percent stake in the Paris-based asset manager was endorsed by China’s State Council ahead of an April 1 deadline, the people said, declining to be identified because the matter is private. Bank of China was forced to extend an original Dec. 31 deadline for the deal, announced in September, after failing to get state approval. The move may be a sign the Chinese government is easing curbs on overseas acquisitions by financial firms that were imposed after almost $10 billion of losses on investments, including in Morgan Stanely and Barclay. Bank of China, which is expected to report today that 2008 profit climbed 21 percent to 67.8 billion yuan ($9.9 billion) according to a Bloomberg survey of analysts, rose 0.9 percent in Hong Kong at 2:30 p.m. Financial stocks rallied worldwide after the U.S. yesterday unveiled a plan to remove $500 billion of toxic assets from its banks.
Compagnie Financiere Edmond de Rothschild, the French fund- management unit of closely held LCF Rothschild Group, and Bank of China will begin an asset-management and private-banking venture to sell Rothschild’s financial products through the Chinese lender’s 10,800 branches, according to a Sept. 18 statement announcing the investment. The French firm managed 29.6 billion euros in assets at the end of 2007. Chinese banks are more confident about making acquisitions over the next 12 months than rivals in other parts of the Asia- Pacific region because of their “comparatively stronger balance sheets,” PricewaterhouseCoopers LLP said yesterday, citing a survey done this year. Chinese Banks posted a 31 percent increase in combined profit for 2008 and will continue to outperform overseas rivals, Liu Ming Kang chairman of the China Banking Regulatory Commission, said last month. The nation’s three largest banks held a total of $570 billion in cash and cash equivalents as of Sept. 30, more than the combined market value of the world’s seven biggest non- Chinese lenders. The last overseas bank acquisition to receive approval was China Merchants Bank's purchase of Hong Kong’s Wing Lung Bank Ltd. in September. That acquisition was completed only after China Merchants twice extended a deadline.

COMMODITIES

A 4% rise in U.S. equities is not providing much of a drag on gold prices yesterday. Risk appetite is receiving a boost following the positive news about both the U.S. housing sector (existing home sales surprised to the upside in February) and the Treasury's plan to purchase up to $1 trillion in toxic assets from major banks. Despite this major announcement from the Treasury, it has been a relatively quiet session for CBOT spot gold prices, as they bounce between session highs at $959.00 an ounce and support at $945.52. Prices are hovering in the middle of the range, heading into the last few hours of the North American trading session.

George Gero, senior vice-president of global futures, said the fact that gold is not selling-off - on a day with a more than 4% rally in the Dow Jones and S&P 500 stock indexes - indicates the commodity is still seen as a safe haven investment against inflation concerns. Although prices are struggling to move higher, Gero still has a positive outlook on prices. He says it is only a matter of time before gold hits $1,000 an ounce, and he added the question is if prices will be able to sustain that level once it is attained. "Investor interest is the only thing that is driving gold prices higher," he said. "The demand outlook is weak and the question is will higher prices support the future jewellry demand." Commodity strategists from Barclays Capital said they are expecting to see more gains in gold prices as the U.S. dollar remains weak. Technical analysts from Citigroup are also looking for further gains in gold prices and have a target of $1,122. In the mining sector, spot gold is trading down $0.51 to $951.70.
The rally also led to a the rally in oil prices started at 10 p.m. on Monday. Prices dropped near session lows ahead of the existing home sales report and rebounded sharply following the better-than-expected data. Existing home sales rose 5.1% in February against expectations for a 0.9% decline, according to the National Association of Realtors. The positive news helped WTI crude break through $53 per barrel, hitting session highs at $53.84. Prices remain near the session highs and are holding above the $53 mark. Prices have been on a strong uptrend since March 15 with strong support at $51.

Rising risk appetite could suggest that underlying investor confidence is improving. Commodities market could also be moving higher in anticipation that global supply and demand will move back into balance. US crude oil has broken through $53.00/bbl yesterday, and out of a trading channel that has been in place since December. While a measured move suggests $71.00/bbl may be attainable over time, nearer term resistance looms near $60.00/bbl. Analysts from Citigroup said the technical indicators are pointing to further gains in oil prices. They noted that last week oil prices closed above $50 per barrel, and they believe this opens the way for $68.
In Canadian dollars, gold is down $8.98 to $1172.90. Silver contracts at the CBOT are up $0.02 to $13.83. WTI Crude oil is up $1.33 to $53.40 per barrel, while Brent crude oil is trading up $1.87 to $53.09 a barrel. Meanwhile, ICE RBOB gasoline futures are up $5.84 to $151.54 and Globex natural gas is unchanged at $1.36. Heating oil at the ICE is up $7.31 to $145.65. Bloomberg's index for base metals is up 1.27 points to 123.90. Wheat futures at the CBOT are up $5.25 to $555.50.

CURRENCIES

Overall, the majors were pulled higher by the rally seen in the equity markets yesterday. The move was extended in the Asian session, as traders re-priced the latest fundamental news coming from the U.S. session. As such, the currency market had a strong momentum in the Asian session, something not seen for a while. The European calendar looks very busy, and this will probably cause the currency market to trade on the same strong momentum and volume.
U.S. markets were pulled higher by the Treasury's plan to revive the mortgage and toxic asset markets by providing non-recourse loans to private investors. However, despite the joy experienced by the equity traders, most analysts and economists did not appear impressed by the new plan. the financials led the gains in the U.S. markets, as the Treasury is preparing to buy as much as $1 trillion of distressed assets. The S&P 500 rose 7.08%, capping its biggest 10-day gain since 1938. Additionally, the MSCI World Index rose tonight for the ninth time in the last ten days, gaining around 20% over this period.

In the mean time, some of the banks that needed to be bailed out remain in the spotlight. After causing a little riot in the Congress because of its bonuses, AIG announced that nine of the top ten beneficiaries agreed to return the money. Out of the $165 million paid in bonuses for AIG's activity in the last year, when it needed to be bailed out four times by the U.S. government, the insurer recovered $50 million and is probably (but not likely) to recover another $30 million. Learning from other's mistakes, J.P. Morgan took a different approach when deciding what is best for its employees. The bank, which received $25 billion in TARP funds, is going to buy two luxury corporate jets, worth of $120 million and build an $18 million hangar for them. This is great news for the two, especially when they are surviving on the taxpayer's money.
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TECHNICAL ANALYSIS

US INDICES

DJI closed sharply higher on Monday as it extended this month's rally. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signalling that additional gains are possible near-term. SPI closed sharply higher on Monday extending this month's rally. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signalling that sideways to higher prices are possible near-term. NDI closed sharply higher on Monday as it extended this month's rally. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signalling that sideways to higher prices are possible near-term.

Technically, June Dow futures settled near a key resistance level of 7750. If this level can be breeched and held above, look for the market to find significant resistance at 7910. Pullback in Dow could move back to 7580 before next move up. Support has reset at the 7310 level.
EQUITY RANGESOPENHIGHLOWCLOSECHANGE
DJM9 (JUNE DOW)7400774573657712+497
SPM9 (JUNE S&P)783.50821.00780.50817.30+53.20
NDM9 (JUNE NASDAQ)1214.001259.001202.001252.00+64.00






Technically, the move up in June 30 year futures is coming under pressure as the markets seemed poised to retrace the gap back to an initial support level of 127.290. A break of this level could leave the contract open to retest a long term support level at 125.12. Look for an upward resistance level at 130.145. If this breaks, market could be on track to test 133.050.

US DEBT FUTURESOPENHIGHLOWCLOSECHANGE
US M9 (US 30 YRS)129.030129.235128.075128.195-20.5/32nds
TY M9 (US 10 YRS)124.165124.270124.030124.090-08/32nds

TAIWAN INDEX

Nothing changed, as current movement supports our earlier view as we anticipate a possible test at with targets at 200.57 (38.2% Fibonacci - 15/10/08 low) and if this level is able to hold successfully, we may see subsequent move higher towards the 215.22 (50% Fibonacci - 30/9/08 low). On the downside, if 180.31 breaks, we will likely see a move lower towards the 178/175 cluster zones subsequently.

COMMODITIES
GOLD

By placing a low yesterday at 935.25 the price proved that it respects the technical target of the head and shoulder appeared on the hourly chart. Now we see a sideway action confirmed by the bearish candle stick pattern appearing on 4h chart in addition to the overlapping sign on Stochastic. At this point, we are watching closely at the 925 support level. A drop below this level will accelerate the downside move towards 920/910 cluster zones. However if the price is able to move and sustain above 935/936 this will be accelerated if the price breached 50 % Fibonacci successfully at 945.00. Note: MA’s of RSI moves in a neutral areas preparing to support the price.
The trading range for today is among the key support now at 925.00 and key resistance now at 1000.00.
The general trend is to the upside as far as 820.00 remains intact with targets at 1035.00 and 1060.00.
Support: 930.00, 925.00, 916.00, 912.00, 907.00
Resistance: 945.00, 956.00, 963.00, 973.00, 984.00
Note: According to our analysis, a move and close above 945.00 with supports the probability of testing the level at 970.00.

COPPER

News : Comex copper is higher on general optimism also pushing stocks higher, says Bill O'Neill, one of the principals with LOGIC Advisors. One of the catalysts is the Treasury's plan on dealing with toxic real-estate debt on banks' books. "There are still indications of Chinese interest in the market," he adds. "There have been some reports of copper shipments going out to China." Overnight data shows the country imported 270,948 metric tons of refined copper last month. "We're seeing very good interest from China, and China is a driving force in the market," O'Neill says. Also constructive is the weaker U.S. dollar lately, he adds. "So there are a lot of factors going into this gradual move," he says. Still, the analyst says he fears the overall 2009 demand outlook for copper remains "questionable."
Technical : Copper have retraced over last few hours led partially by the rebound in USD during the Asia trading hours. The price have dropped below the 1.8355 support and as of now we are focusing on the next level of key support which comes at 1.8145. Note: Based on the laddering formation, we expect of the continuation of the bullishness in copper. We will be keeping track of the closing price as of today and currently we maintained an upside bias remains unchanged towards targets at 2.00. However we would be watching cautiously of any potential signs of correction.
The trading range for today is among the key support now at 1.8145 and key resistance is now at 1.9135 level.
The general trend is to the upside as far as 1.6460.00 remains intact with targets at 1.8785.
Support: 1.8230, 1.8145, 1.8055, 1.7920, 1.7865
Resistance: 1.8455, 1.8750, 1.8885, 1.8940, 1.907
Note: At point in time we keeping close watch of the movement and any indications of a possible start short term correction.

SILVER

Silver is definitely supported via previous mentioned Fibonacci expansion level as shown in the chart and as we expected yesterday the price moved downside aiming to gather the proper momentum to complete the upside action again in particular after it succeeded to close 4h candles above 13.50. Therefore additional upward action is now highly anticipated towards testing 13.90 critical areas followed by 14.30 and we notice that the camarilla studies on shorter time frames support our bullish overview today as far as 13.25 remains unbroken.
The trading range for today is among the key support at 13.25 and key resistance now at 14.60.
The general trend is to the upside as far as 12.00 remains intact with targets at 16.50.
Support: 13.55, 13.45, 13.35, 13.25, 13.00
Resistance: 13.74, 13.88, 13.95, 14.15, 14.25
Note: According to our analysis, a close above 13.65 opens the probability of testing targets at 14.25.

MAY CRUDE

The price achieved a sharp break out above 52.55 again and started to move steadily above 53.00. Hence this stability above 52.55 shows that the short and medium term trading systems change the direction to the upside inside the inclining channel targeting 55.25 and 56.50 as far as 52.60 remains unbroken.
The trading range for today is among the key support at 51.60 and the key resistance at 56.50.
The general trend is changing to the upside as far as 52.60 remains intact with targets at 64.50.
Support: 52.60, 52.20, 51.60, 50.95, 50.25
Resistance: 53.95, 54.55, 55.20, 55.95, 56.50
Note: According to our analysis, if price move and close above 52.60 it will open the targets at 55.20.

FX
Dollar index: DXY has turned neutral and is currently trading near 83.77, below the resistance of 84.60. The support stays at 82 levels which if broken can turn the outlook majorly bearish for DXY. The stochastic is flat in over-sold region at 12.34%.
Euro: Euro retraced to a low of 1.3485 in the early US session yesterday from where it rebounded and is now trading at 1.3660. Euro could not hold the lows despite disappointing Trade Balance data of Eurozone and strong Retail Sales of US. The stochastic in daily and weekly chart has flattened indicating further upmove. Immediate cluster resistance remains at 1.3867 (100 Weekly EMA & 61.8% Retracement of the fall) which could hold temporarily. Breaking of this resistance may push Euro towards 1.4180.
Pound: Cable as expected bounced back from 1.4448 lows (55 Hourly EMA) yesterday and is currently trading higher around 1.47 levels. The daily stochastic is extremely overbought, however, not indicating a sell yet. Immediate support comes at 1.4588 (21 hourly EMA & 38.2% of the recent rise) and then at 1.4458 (21 4-hourly EMA) whereas the resistance is traced around 1.4960 (100 Daily EMA & previous high as on Feb 9th, 2009) which could be held.
Yen: The Usd/Jpy pair surged almost 170 pips in yesterday's session from the bids of 95.62 to 97.35 highs. This morning the pair further strengthened and is trading close to the 200 Daily EMA at 98.16. The daily and 4-hourly charts are indicating further upside. As long as 95.50 support holds, further rally upto 100.10 levels (55 Weekly EMA) is still in favour of the Pair.
Swiss Franc: The Usd/Chf pair held strongly below the 200 daily EMA (1.1341) and fell to close the session at 1.1247. The 4-hourly chart indicates a downside while the daily chart is oversold. Resistance continues to be around 1.1330.
Australian Dollar: Aussie rose 156 pips yesterday from 0.6904 and breached the 0.70 mark. This morning it is sustaining above the 0.70 levels and is heading towards the next target of 0.7230 (200 Monthly EMA). Major charts are over-bought but room for further upside is still there.

Thank You
Best Regards
Alfred Wang