OUTLOOK FOR THE DAY
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Apart from weekly oil inventory data, energy price movements will be directed by macroeconomic development as well as changes/anticipated changes in government policies this week. WTI crude oil price continues hovering around 74/75, lowest levels in a month, amid concerns about further tightening in China and USD recovery on weak data from Europe.
News said that some Chinese banks have begun limiting new lending as requested by the government to cool down the overheated economy. According to HSBC analysts, 5 major banks they contacted today confirmed that they received instruction form banking regulators last week to slow down new lending but not stop new lending as the market speculated. Moreover, officials refused to be identified from Bank of China and China Construction Bank admitted they have begun curbing new loans unless the borrowers have repaid previous borrowings.
The UK GDP grew +0.4% qoq in 4Q09, missing market expectation of a +0.4% expansion. The result was disappointing and raised the uncertainty whether the BOE will announce an end to QE at February's meeting. Even though it announces a pause in QE, it's still highly likely that the central bank will resume and extend stimulus measures if economic recovery fails to sustain.
The pound tumbles against USD amid the weak economic data and erases the gains made yesterday. Other major currencies also plunge against the dollar.
Recovery in USD weighs on precious metals in European session. Gold slips -0.4% to 1092 while silvers loses -0.7% to 16.85. For PGMs, platinum falls -1.2% while palladium amplifies the weakness by dropping almost -2% to 431.2. Palladium is a high-bets form of platinum and the relation between palladium and platinum is similar to that between silver and gold. Therefore, in and uptrend, palladium likely outperforms platinum while in a downtrend, palladium likely underperforms platinum.
Economic data to be released in NY session included S&P/Case-Shiller Composite-20 and consumer confidence. Decline in Case -Shiller home price index probably eased to -5% yoy in November from -7.3% and -9.3% in October and September respectively. The Conference Board is expected to report modest improvement of consumer confidence to 53.5 in January from 52.9 a month ago. FOMC members will meet today and is almost certain to announce that the policy rate will be kept at 0-0.25% for an extended period.
After market close, the industry-sponsored API will release its estimates on oil inventories. Last week, the agency said that crude stockpile dipped -1.8 mmb to 329.5 mmb in the week ended January 21. Distillate stockpile also drew -3.4 mmb to 163.4 mmb as cold weather over the past few weeks increased demand for heating oil. However, gasoline inventory continued to rise, although the magnitude was greatly reduced to +0.67 mmb.
GOLD
Intraday bias in gold remains neutral for the moment and some more sideway trading could be seen. Nevertheless, another fall is still expected as long as 1117.8 resistance holds. Current fall from 1163 is expected to continue to resume whole correction form 1227.5 and should target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1117.8 will bring stronger rebound and put 1163 resistance back into focus.
In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.
SILVER
Silver's fall resumes after brief consolidation and further decline is still expected. As noted before, whole fall from 19.50 is likely resuming. Break of 16.765 support will confirm this case and target 100% projection of 19.50 to 16.756 from 18.925 at 16.19, which is close to 16.12 support. On the upside, above 17.27 minor resistance will turn intraday bias neutral and bring recovery. But risk will remain on the downside as long as 18.925 resistance holds.
In the bigger picture, the sharp fall from 18.925 suggests that whole decline from 19.50 is still in progress and is resuming. The development revives that case that silver has already topped out in medium term at 19.50. Break of 16.19 projection target will suggest that fall fro 19.50 is developing into an impulsive move which further affirm the reversal scenario and bring deeper decline to lower medium term trend line at 14 level.
On the upside, above 18.925 will suggest that silver has not topped out yet. However, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside 19.55/21.44 resistance zone and bring another medium term fall.
CRUDE
While downside moment is diminsihing a bit, intraday bias is still on the downside. Crude oil's fall from 83.95 is expected to continue and sustained d break of 61.8% retracement of 68.59 to 83.95 at 74.46 will target a rest on 68.59 support. . On the upside, above 76.68 resistance will turn intraday bias neutral and bring consolidations. But break of 79.16 resistance is needed to indicate that fall from 83.95 has completed. Otherwise, short term risk will remain on the downside.
In the bigger picture, upside momentum is clearly diminishing as seen in bearish divergence condition in daily MACD. However, there is no confirmation that medium term rise has topped out yet as long as 68.59 support holds. Such medium term rise could still continue and above 83.95 will target 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. Nevertheless, even in such case, we'll continue to look for reversal signal and expect crude oil to top out finally as it approaches 90 level. ON the downside, break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.
DISCLAIMER: Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. we assumes no responsibility or liability from gains or losses incurred by the information herein contained.
News said that some Chinese banks have begun limiting new lending as requested by the government to cool down the overheated economy. According to HSBC analysts, 5 major banks they contacted today confirmed that they received instruction form banking regulators last week to slow down new lending but not stop new lending as the market speculated. Moreover, officials refused to be identified from Bank of China and China Construction Bank admitted they have begun curbing new loans unless the borrowers have repaid previous borrowings.
The UK GDP grew +0.4% qoq in 4Q09, missing market expectation of a +0.4% expansion. The result was disappointing and raised the uncertainty whether the BOE will announce an end to QE at February's meeting. Even though it announces a pause in QE, it's still highly likely that the central bank will resume and extend stimulus measures if economic recovery fails to sustain.
The pound tumbles against USD amid the weak economic data and erases the gains made yesterday. Other major currencies also plunge against the dollar.
Recovery in USD weighs on precious metals in European session. Gold slips -0.4% to 1092 while silvers loses -0.7% to 16.85. For PGMs, platinum falls -1.2% while palladium amplifies the weakness by dropping almost -2% to 431.2. Palladium is a high-bets form of platinum and the relation between palladium and platinum is similar to that between silver and gold. Therefore, in and uptrend, palladium likely outperforms platinum while in a downtrend, palladium likely underperforms platinum.
Economic data to be released in NY session included S&P/Case-Shiller Composite-20 and consumer confidence. Decline in Case -Shiller home price index probably eased to -5% yoy in November from -7.3% and -9.3% in October and September respectively. The Conference Board is expected to report modest improvement of consumer confidence to 53.5 in January from 52.9 a month ago. FOMC members will meet today and is almost certain to announce that the policy rate will be kept at 0-0.25% for an extended period.
After market close, the industry-sponsored API will release its estimates on oil inventories. Last week, the agency said that crude stockpile dipped -1.8 mmb to 329.5 mmb in the week ended January 21. Distillate stockpile also drew -3.4 mmb to 163.4 mmb as cold weather over the past few weeks increased demand for heating oil. However, gasoline inventory continued to rise, although the magnitude was greatly reduced to +0.67 mmb.
GOLD
Intraday bias in gold remains neutral for the moment and some more sideway trading could be seen. Nevertheless, another fall is still expected as long as 1117.8 resistance holds. Current fall from 1163 is expected to continue to resume whole correction form 1227.5 and should target 100% projection of 1227.5 to 1075.2 from 1163 at 1010.7 next. On the upside, above 1117.8 will bring stronger rebound and put 1163 resistance back into focus.
In the bigger picture, gold has made a medium term top at 1227.5 and correction from there is likely still in progress to 100% projection of 1227.2 to 1075.2 from 1163 at 1010.7, which is close to 1000 psychological level. However, we'd expect such correction to be contained there at around 1000 psychological level and bring resumption of the whole up trend from 2008 low of 681. A break above 1163 will indicate that such correction has completed and will turn outlook bullish for another high above 1227.5.
SILVER
Silver's fall resumes after brief consolidation and further decline is still expected. As noted before, whole fall from 19.50 is likely resuming. Break of 16.765 support will confirm this case and target 100% projection of 19.50 to 16.756 from 18.925 at 16.19, which is close to 16.12 support. On the upside, above 17.27 minor resistance will turn intraday bias neutral and bring recovery. But risk will remain on the downside as long as 18.925 resistance holds.
In the bigger picture, the sharp fall from 18.925 suggests that whole decline from 19.50 is still in progress and is resuming. The development revives that case that silver has already topped out in medium term at 19.50. Break of 16.19 projection target will suggest that fall fro 19.50 is developing into an impulsive move which further affirm the reversal scenario and bring deeper decline to lower medium term trend line at 14 level.
On the upside, above 18.925 will suggest that silver has not topped out yet. However, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside 19.55/21.44 resistance zone and bring another medium term fall.
CRUDE
While downside moment is diminsihing a bit, intraday bias is still on the downside. Crude oil's fall from 83.95 is expected to continue and sustained d break of 61.8% retracement of 68.59 to 83.95 at 74.46 will target a rest on 68.59 support. . On the upside, above 76.68 resistance will turn intraday bias neutral and bring consolidations. But break of 79.16 resistance is needed to indicate that fall from 83.95 has completed. Otherwise, short term risk will remain on the downside.
In the bigger picture, upside momentum is clearly diminishing as seen in bearish divergence condition in daily MACD. However, there is no confirmation that medium term rise has topped out yet as long as 68.59 support holds. Such medium term rise could still continue and above 83.95 will target 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. Nevertheless, even in such case, we'll continue to look for reversal signal and expect crude oil to top out finally as it approaches 90 level. ON the downside, break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.
DISCLAIMER: Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. we assumes no responsibility or liability from gains or losses incurred by the information herein contained.
