FOREX analysis US session 20090327

OVERVIEW

U.S. stocks rose on Thursday, with the Nasdaq turning positive for the year-to-date, as a batch economic data that was not as dire as expected fed optimism the economy's worst days were behind. Best Buy jumps on results; retailers rally Final Q4 GDP, weekly jobless claims data roughly in line. The Dow Jones industrial average rose 174.75 points, or 2.25 percent, to 7,924.56. The Standard & Poor's 500 Index gained 18.98 points, or 2.33 percent, to 832.86. The Nasdaq Composite Index added 58.05 points, or 3.80 percent, to 1,587.00.

Gains in banks and miners prompted by recovering risk appetite on Thursday outweighed weakness in oils, retailers and utilities, to leave Britain's FTSE 100 closing 0.6 percent higher. Britain's blue chip index closed 24.95 points higher at 3,925.20, having lost 11.21 points, or 0.3 percent on Wednesday. The index is down 11.5 percent this year but remains over 13 percent higher than this year's trough.

Japan's Nikkei average rose 1.8 percent to hit a 2-1/2-month closing high on Thursday as exporters such as Sony Corp gained after unexpectedly strong U.S. economic data sparked hopes for an economic recovery. The benchmark Nikkei ended up 156.34 points at 8,636.33, its highest close since Jan. 9. The Nikkei has jumped nearly 1,600 points or over 22 percent from a 26-year closing low hit near 7,000 on March 10. The broader Topix gained 1 percent to 826.81.
The dollar and euro advanced against the yen on Thursday, as investors grew more comfortable buying risky assets such as stocks and commodities, dampening the Japanese currency's safe-haven appeal. Sharp gains on wall Street led by consumer shares along with the surge in oil, gold, and other base metals have offset persistent concerns about the viability of the U.S. banking system. The increase in risk appetite has also triggered gains in commodity currencies such as the Australian and New Zealand dollars. In early afternoon trading, the dollar rose 1.0 percent against the yen to 98.53 yen while the euro rose 0.7 percent to 133.42 yen. The yen along with the dollar have been a refuge for investors in times of financial distress, rising as traders unwind risky bets in stocks and oil financed in both currencies' low rates. The euro slipped 0.3 percent against the dollar to $1.3538, after going as low as $1.3522. Sterling fell 0.8 percent against the dollar to $1.4444, also pressured by data showing UK retail sales were much weaker than expected. The New Zealand dollar surged to a 10-week high against the dollar at US$0.5801 and touched more than nearly a four-month peak of 57.09 yen, according to Reuters data, as NZ government debt yields surged in a sign investors were reining in expectations for lower rates.
U.S. Treasuries rose on Thursday, snapping a five-session losing streak as they benefited from a decent debt auction and hopes of profiting from Federal Reserve government bond purchases. The yield on one-month Treasury bills briefly slipped into negative territory, according to TradeWeb, as banks and money managers built up cash before closing their books at the end of the first quarter. Benchmark 10-year Treasury notes were up 19/32 in price, pushing yields down to 2.73 percent from 2.80 percent at Wednesday's close. Still, the 10-year yield has retraced roughly half of the near 50-basis-point drop last Wednesday, the biggest in more than two decades, in reaction to the Fed's surprise announcement it will buy $300 billion in Treasuries over the next six months.

Gold ended higher after a volatile session on Thursday, underpinned by growing investment appetite and gains in other commodities such as oil and metals. Spot gold was at $938.05 an ounce at 3:00 p.m. EDT, up 0.5 percent from its last quote $933.15 in New York late Wednesday. U.S. gold futures for April delivery settled up $4.20 at $940.00 an ounce on the COMEX division of the New York Mercantile Exchange.

Copper surged 3 percent to hit 4-½ month highs on Thursday, boosted by a rise in U.S. durable goods orders and a jump in new home sales which lifted the outlook for the economy and demand. London Metal Exchange copper for three-month delivery rose to close at $4,085 a tonne versus Wednesday's close of $3,990. Prices for the metal used in the power and construction industries earlier matched Monday's 4-½ month high of $4,135.

Oil prices touched a four-month high over $54 a barrel on Thursday tracking Wall Street as better-than-expected economic data improved investor sentiment. U.S. crude rose $1.57 to $54.34 a barrel after hitting $54.66 a barrel earlier in the session -- its highest since Nov. 28. London Brent crude rose $1.71 to $53.46 a barrel.

ASIA

Japanese retail sales plunged in February, further proof that with an economy mired in recession, Japanese consumers are pulling back. The 5.8% annual decline was the steepest decline in years, and worse than the 3% decline expected by economists. In January, retail sales fell 2.4% year-over-year. Large retailers' fared the worst, seeing a 6.7% year-over-year decline in sales, worse than the 6.5% drop forecast. That follows a 3.8% decline in January. According to the Cabinet office, the survey's headline confidence index has been falling steadily since September 2008.

Japan's national inflation rate fell in line with expectations in February compared to a year earlier, while Tokyo CPI declined less-than-expected. According to data from the national statistics bureau, the annual inflation rate fell to -0.1% in February from a flat reading in January, in line with expectations. Meanwhile, CPI excluding fresh food fell remained flat at 0.0%, as expected, while CPI excluding fresh food and energy came in at -0.1%, slightly better than the 0.2% decline expected and the 0.2% contraction seen the month prior. The report had more timely information available for Tokyo. The city's headline inflation for March in grew by 0.2% year-over-year, slightly less than the 0.3% rate expected and down from the 0.5% rate in February. CPI excluding fresh food was up 0.4%, in line with expectations for a 0.4% gain and below the previous month's 0.6% gain. Tokyo CPI excluding fresh food and energy declined 0.4%, against expectations for a 0.3% drop and January's -0.1% figure.

Meanwhile the decline in New Zealand imports in February outpaced the drop in exports, resulting in a larger-than-expected trade surplus, Statistics New Zealand reported. The NZ$489 million surplus was larger than the NZ$75 million surplus expected. January's deficit of NZ$187 was revised down to a NZ$104 deficit. The report showed February's imports were down to NZ$2.97 billion, smaller than the NZ$3.30 billion worth of imports expected. Imports in January were revised down to NZ$3.28 billion from the initially-reported NZ$3.36 billion figure. Exports were higher than expected, up to NZ$3.46 billion from the revised NZ$3.17 billion in January. Expectations had been for a rise to NZ$3.35 billion.

Compared to a year ago, merchandise exports fell 6.6%, or NZ$243 million, Statistics New Zealand reported, while the value of merchandise imports fell 14.2%, or NZ $490 million over the same period. This is the first fall in exports since August 2007, the statistical agency said. The trade balance year-to-date came in at -NZ$5.161 billion from a revised -NZ$5.408 billion in January. Expectations had been for a -NZ$5.5 billion reading. New Zealand's GDP fell by 0.9% in the fourth quarter, against expectations for a 1.1% decline and following the revised 0.5% drop in the third quarter. On an annual basis, GDP fell by 1.9%, against expectations for a 2.0% decline and following the 0.1% annual decrease in the third quarter.

COMMODITIES

Gold prices are holding on to gains despite a stronger U.S. dollar and rising equity markets on Friday morning. It has been a relatively quiet day for gold as prices remain in a fairly tight range. The precious metal is holding on to the gains made Wednesday after a sharp sell-off in the U.S. dollar. At the start of the North American session, gold prices showed a strong rally, hitting daily highs at $945.55 per ounce. Although prices are well off their highs, they remain strong, hovering around $937.

Mike Glaser, futures broker at LaSalle Futures, said gold appears to be stuck in a broad range, with investors buying at around $900 and selling at $960. He said he expects the trend to continue. According to some strategists, gold could still be reacting to misinterpreted comments from Treasury Secretary Timothy Geithner on Wednesday. Media outlets reported that he was "open" to exploring the Chinese proposal to move towards an SDR currency system and away from the U.S. dollar as a reserve currency. Commodity strategists at Barclays Capital said comments from mining company Hochschild yesterday could help support gold prices. The company announced it has a production target of 19.1 million ounces of silver and 148,000 ounces of gold. The company also said that "fundamentals for silver and gold are strong."

Inflationary pressure and dollar's outlooks are 2 major factors affecting gold price's movement. Since the Fed's announcement on debt purchase program last week, inflation expectation has been shot up again. The difference in yield between 10-year Treasury Inflation- Protected Securities (TIPS) and comparable securities, known as the breakeven rate has widened to 139.23 yesterday, compared with 123.82 last Friday. However, speech by policymakers may damp such expectations. Janet Yellen, President of the San Francisco Federal Reserve Bank, said in an occasion that 'for some time to come, disinflation, and even deflation, will represent greater risks than inflation' as economy will remain sluggish 'for several more years'. The president added that while the US may not experience the kind of deflation happened in Japan in last decade, the government will need to monitor the situation and make preventions. The market has vigorous debates after China's push for a global reserve currency. Some believed as G20's powers have been growing rapidly, china's proposal will receive serious consideration in next week's G20 summit. Others expect the US will not give up its reserve currency position and will not allow another other currency to compete for the USD's position.

Earlier this week, Zhou Xiaochuan, China's central bank governor urged the IMF to use its Special Drawing Rights to create a reserve super currency as the nation, which is holding US Treasury of $739.6B as of January (up from $535B in June 08), concerns about inflation and depreciation in USD. Special Drawing Rights refers to issuance of IMF's in-house reserve asset. On one hand, China this time looks very serious about putting the USD-ruling era to an end; on the other hand, other sources showed that the Chinese Government has sharply increased their holdings of US Treasuries over the past month. Therefore, the main purpose for Chinese Government's speech is not looking for a replacement of the dollar but to warn the US to take measures to guarantee its 'good credit'.

Crude oil price continues to hold above 52.5 despite unexpected build in crude inventory as driven by rallies in stock markets. In Asia, the MSCI Asia Pacific Index gained 1.5% while Nikkei 225 Stock Average and Hong Kong's Hang Seng Index added 1.84% and 3.57% today as corporations' earnings results beat estimates. In European morning, UK's FTSE 100 opened slightly higher despite weaker-than-expected retail sales data which contracted -1.9% mom in February which annual gain came in at +0.4%, the smallest in 13 years.

In the mining sector, spot gold is trading up $0.96 to $934.98 USD. In Canadian dollars, gold is down $2.14 to C$1149.00. Silver contracts at the CBOT are up $0.08 to $13.58.
WTI Crude oil is up $1.41 to $54.18, while ICE crude oil is trading up $1.62 to $53.37.

Meanwhile, ICE RBOB gasoline futures are unchanged at $149.50 and Globex natural gas is down $0.01 to $1.35.

Heating oil at the ICE is down $3.49 to $146.47.

In the mining sector, spot gold is trading up $0.96 to $934.98 USD. In Canadian dollars, gold is down $2.14 to C$1149.00. Silver contracts at the CBOT are up $0.08 to $13.58.

Bloomberg's index for base metals is up 3.80 points to 124.78.

CURRENCIES

Dollar strengthens mildly in early US session but remains bounded in range so far. Treasury Geithner said that the US needs comprehensive reform in face of the most server global financial crisis in generations. Geithner proposes a major expansion of federal authority over the financial system and impose tougher standards on financial institutions. Federal regulations will also be extended to financial derivatives, exotic instruments as well as hedge funds. Data released in US session saw final Q4 GDP revised slightly down to -6.3% annualized rate. Personal consumption was unchanged at -4.3%. Initial jobless claims rose slightly to 652k while continuing claims rose to new high of 5.56m.

Sterling remains pressured after worse than expected retail sales data from UK. Retail sales slid -1.9% mom in February, worse than market expectation of -0.4% and upwardly revised gain of +0.8% a month ago as deteriorating economic and employment conditions constrained consumer spending. On annual basis, the gain of 0.4% during the month was the smallest increase since 1995. Growth of Eurozone's money supply M3 slowed to +5.9% yoy in February from +6% in January, indicating lower demand and easing inflation in the economy. Germany Gfk consumer confidence dropped to 2.4 in Apr. Japan's CSPI had the deepest fall in 7 years to -2.6% in February, the 5th consecutive monthly plunge, following a downwardly revised -2.4%drop in the previous month. In its half-yearly Financial Stability Review, the RBA stated that the Australian banking system is 'considerably better placed to weather the current challenges than many other systems around the world' though it's still facing a more difficult environment than it has for some years'. Regarding problem loans, RBA said they have risen from 'very low levels'.
Technically, note that while we're continuing to look for reversal signal above 81/82 key support, a break above 84.64 resistance is still needed to confirm that the dollar index has bottomed out. On the other hand, DOW is displaying some loss of momentum is hourly MACD and RSI which argues that recent strong rebound might be near to a halt. A break below 7550 support (yesterday's low) will provide an important sign of near term topping and will bring pull back to retest 7000 psychological level. In such case, the dollar would probably be lifted up by risk aversion. Also, note that New Zealand dollar remains the strongest currency today and focus will turn to key data from the country including Q4 GDP as well as Feb trade balance.
-------------------------------------------------------------------------------------------------------------------------------------
TECHNICAL ANALYSIS
DOW JONES INDEX

The Dow closed higher on Thursday following yesterday's key reversal up and extended this month's rally. The high-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signalling that additional gains are still possible near-term. If the Dow extends this month's rally, the reaction high crossing at 7970 is the next upside target. Closes below the 20-day moving average crossing at 7163 would confirm that a short-term top has been posted. First resistance is today's high crossing at 7923. Second resistance is the reaction high crossing at 7970. First support is the 10-day moving average crossing at 7504. Second support is the 20-day moving average crossing at 7163.

S&P500

The June S&P 500 index closed higher on Thursday and the high-range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signalling that sideways to higher prices are possible near- term. If June extends this month's rally, the reaction high crossing at 833.20 is the next upside target. Closes below the 20-day moving average crossing at 745.60 would temper the near-term friendly outlook. First resistance is today's high crossing at 829.00. Second resistance is the reaction high crossing at 833.20. First support is the 10-day moving average crossing at 786.96. Second support is the 20-day moving average crossing at 745.70.

NASDAQ

The June NASDAQ 100 closed sharply higher on Thursday as it extends this month's rally. The high-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought but are neutral hinting that a short-term top might be in or is near. If June extends this week's rally, February's high crossing at 1285.25 is the next upside target. Closes below the 20-day moving average crossing at 1153.60 would confirm that a short-term top has been posted. First resistance is today's high crossing at 1278.00. Second resistance is February's high crossing at 1285.25. First support is the 10-day moving average crossing at 1210.40. Second support is the 20-day moving average crossing at 1153.58.

TAIWAN INDEX

The Index has reached our previous target objective at 200.57 (38.2% Fibonacci - 15/10/08 low) as mentioned yesterday and a high of 202.17. Note: Price is moving in ascending formation however as we noted the bull steam seems to be waning and we will be watching closely for the next 5 hours. As mentioned previously if price is able to close and hold above 200.57, 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

Daily Pivot PointsNormal Range Last Bar
CommodityR3R2R1PPS1S2S3HLCDate
Crude Oil56.7255.6954.8253.7952.9251.8951.0254.6652.7653.9527/3
Gold957.93952.27943.33937.67928.73923.07914.13946.60932.00934.4027/3
Silver14.03813.89213.69313.54713.34813.20213.00313.74513.40013.49527/3
Copper1.97271.92481.89321.84531.81371.76581.73421.87701.79751.861527/3

GOLD

Gold moved according to our expectation as of yesterday after reaching a high at 946.70. Note: Currently price is moving into the Senkou clouds and Ichimoku studies indicates a possible upside move as we noted the intersection of the Tenkan-Sen and Kijun-Sen on a 4h chart which is supported by Stochastic and MACD. As mentioned previously if price breaks low at 922 we anticipate further downside movements towards 907.00 (intraday basis initial support areas); particularly if it succeeded to make a 4 hour candle stick close below 930.00 zones (38.2%) Fibonacci of the short term wave started at 1006.00(Feb.20th -2009) to 889.00 (Mar.18th -2009).
The trading range for today is among the key support now at 915.00 and key resistance now at 963.00.
The general trend is to the upside as far as 820.00 remains intact with targets at 1035.00 and 1060.00.
Support: 925.00, 916.00, 912.00, 907.00, 900.00
Resistance: 940.00, 952.00, 956.00, 966.00, 977.00
Note: We will update the movement in our evening note.

COPPER

News: Mitsubishi Materials Corporation will continue a 10 percent output cut at its smelters in Japan for the next six months and raise exports as domestic demand tumbles. Combined output from the Tokyo-based company’s Naoshima and Onahama smelters was reduced by 10 percent in February as global demand slowed. Japan’s manufacturers are slashing production as the economy heads for its worst recession since 1945. Exports plunged by a record 49.4 percent in February, the Finance Ministry said yesterday, as deepening slumps in the U.S. and Europe reduced demand. Output of copper alloy products fell by a record last month, an industry group said today. “Output tumbled as demand from the semiconductor and auto industries deteriorated,” Keizo Tani, research section manager at the Japan Copper and Brass Association, told reporters. Mitsubishi Materials may increase exports by as much as 31 percent next fiscal year to 85,000 tons because of shrinking domestic consumption, Kobayashi said. The company’s major export markets include China, Taiwan and Southeast Asia, he said.
Technical: Noted changed. The price have previously broken the resistance at 1.8410 and as mentioned previously we revert our perspective to the upside. Note: we see a laddering candlestick formation in place and the key resistance at 1.8745 have been broken successfully. Ichimouku studies indicates a probability of further incline. Currently we keep our outlook towards 2.00 levels as mentioned previously and ceteris paribus we expects this level to be tested near term.
The trading range for today is among the key support now at 1.8670 and key resistance is now at 2.000 level.
The general trend is to the upside as far as 1.6460.00 remains intact with targets at 2.0060.
Support: 1.8680, 1.8555, 1.8465, 1.8345, 1.8255, 1.8155
Resistance: 1.8750, 1.8865, 1.8945, 1.9045, 1.9115
Note: We anticipate further upside as far as 1.8555 remains intact.

SILVER

This morning we noted a new upside reactionary wave is under construction and its highly anticipated on the intraday basis that it will move to the upside again retesting 13.80 areas once more. Carefully note that stochastic shows a positive sign forming while ichimoku studies support this outlook as we noted Tenkan-Sen and Kijun-Sen is generating a upside bias as of this hour.
The trading range for today is among the key support at 12.95 and key resistance now at 14.25.
The general trend is to the upside as far as 12.00 remains intact with targets at 16.50.
Support: 13.35, 13.25, 13.12, 13.06, 12.95
Resistance: 13.66, 13.74, 13.90, 14.00, 14.05
Note: We will update the movement in our evening note.

MAY CRUDE

Oil is rising gradually and succeeded to breach first resistance area at 53.80 and the next level at 54.00. Hence we keep our morning bullish overview towards 55.90 followed by the initial resistance of the ascending channel at 56.70 as far as 52.65 remains intact.
The trading range for today is among the key support at 53.55 and the key resistance at 57.60.
The general trend is changing to the upside as far as 52.60 remains intact with targets at 64.50.
Support: 54.00, 53.55, 53.10, 52.80, 52.65
Resistance: 55.45, 55.90, 56.70, 57.25, 57.80
Note: Our morning position is still valid and we see a possibility of testing targets at 55.90.
FX :
DXY : The June Dollar posted an inside day with a higher close on Thursday as it consolidates above the 62% retracement level of the December-March rally crossing at 84.10. The high-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signalling that sideways to lower prices are possible near- term. Closes below the weekly uptrend line crossing near 83.00 would confirm that a major top in the Dollar has been posted while opening the door for a larger-degree decline this spring. Closes above the 20-day moving average crossing at 87.23 would temper the near-term bearish outlook in the market. First resistance is the 10-day moving average crossing at 85.28. Second resistance is the 20-day moving average crossing at 87.23. First support is last Thursday's low crossing at 83.14. Second support is the weekly uptrend line crossing near 83.00.

GBP/USD

An intraday top should be in place at 1.4778 in GBP/USD. Intraday outlook is turned neutral for the moment and some deeper pull back could be seen towards 4 hours 55 EMA (now at 1.4370). However, note that rise from 1.3654 is still expected to continue as long as 1.4230 cluster support holds. Such rise is treated as the third leg of consolidation from 1.3503, is expected to extend further towards 1.4984 resistance next. However, break of 1.4230 will argue that it has completed and will turn short term outlook bearish for 1.3654 support.
In the bigger picture, a medium term bottom is in place at 1.3503 after GBP/USD completed the five wave sequence from 2.0158 (1.7445, 1.8668, 1.4557, 1.5722, 1.3503). Consolidation from 1.3503 is still in progress and has started the third leg which could extend to 100% projection of 1.3503 to 1.4984 from 1.3654 at 1.5135 or further to 1.5722 resistance. On the downside, below 1.4230 will turn focus back to 1.3503 low. But after all, decisive break of 1.3503 is needed to confirm long term down trend resumption. Otherwise, further range trading could still be seen. .

AUD/USD


AUD/USD's consolidation from 0.7091 is still in progress and another retreat might be seen to 4 hours 55 EMA (now at 0.6825). Nevertheless, downside should be contained above 0.6564 support and bring rally resumption. Current rise from 0.6248, which is treated as part of consolidation from 0.6008, is still expected to extend further to 0.7267 cluster resistance (161.8% projection of 0.6248 to 0.6849 from 0.6284 at 0.7256) before completion.
In the bigger picture, rise from 0.6248 is treated as the third leg of consolidation from 0.6008 low (0.7267, 0.6248, ...) and should target 0.7256/67 cluster resistance. But upside is expected to be limited by 38.2% retracement of 0.9849 to 0.6008 at 0.7475 to complete the consolidation and bring down trend resumption. Below 0.6564 will argue that such rise has completed earlier than we thought will turn short term outlook bearish again for retesting 0.6008 low).
Thank You
Best Regards