FOREX DAILY REVIEW

EUR/CHF
Daily Pivots: (S1) 1.4703; (P) 1.4728; (R1) 1.4745;
Break of 1.4701 support suggests that recovery from 1.4635 is already completed. Intraday bias is flipped back to the downside. Break of 1.4635 will bring decline resumption towards next key support level at 1.4577. On the upside, above 1.4579 will bring another round of rebound to 1.4808 resistance and above. Nevertheless, we'd still expect strong resistance near to 1.5007 support turned resistance and bring fall resumption.

In the bigger picture, with EUR/CHF still staying well below 55 weeks EMA, fall from 1.5880 is likely still in progress. Current decline should have a test on 1.4577 support first and break will target 2008 low of 1.4315. On the upside, break of 1.5007 support turned resistance is needed be the first signal to indicate that fall from 1.5446 has finished. Otherwise, medium term outlook will remain bearish.

USD/CAD
Daily Pivots: (S1) 1.0542; (P) 1.0591; (R1) 1.0618;
USD/CAD's break of 1.0638 minor resistance indicates that pull back from 1.0720 has likely completed at 1.0544 already. Intraday bias is flipped back to the upside. Break of 1.0720 will bring rally resumption to 1.0744 resistance first. As discussed before, break there will confirm that whole correction pattern from 1.0851 has already finished at 1.0223 and will bring stronger rally to retest this resistance next. On the downside, in case of another fall, we'd continue to expect strong support from 38.2% retracement of 1.0223 to 1.0720 at 1.0530 and bring rebound.

In the bigger picture, we're still favoring the case that whole medium term fall from 1.3063, which is viewed as a correction to long term rise from 0.9056, has completed at 1.0205 already. Break of 1.0851 will confirm this case by completing a double bottom reversal pattern (1.0205, 1.0223). In such case stronger rally should be seen to 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. Also, in such case, we'll tentatively treat rise from 1.0205 as resumption of the whole up trend from 2007 low of 0.9056 and focus on the structure of the rise from 1.0205 for confirmation.

EUR/USD
Daily Pivots: (S1) 1.3845; (P) 1.3935; (R1) 1.3984;
EUR/USD's decline is still in progress and intraday bias remains on the downside for key cluster support at 1.3737 next. On the upside, while some recovery might be seen, break of 1.4025 resistance is needed to indicate that EUR/USD has made a bottom. Otherwise, short term outlook will remain bearish.

In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall from 1.6039 should be resuming for a new low below 1.2329. On the upside, however, break of 1.4578 resistance will leave the fall from 1.5143 in three wave corrective structure and mixes up the outlook.

USD/CHF
Daily Pivots: (S1) 1.0527; (P) 1.0564; (R1) 1.0630;
Intraday bias in USD/CHF remains neutral for the moment and consolidation from 1.0640 might extend further. Another fall cannot be ruled out but downside is expected to be contained by 1.0367 support and bring rally resumption. Above 1.0640 should target 100% projection of 0.9916 to 1.0506 from 1.0131 at 1.0721 next.

In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already, on bullish convergence condition in daily MACD. Also, the three wave consolidation from 1.2296 should be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.0963). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 1.0131 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for another low below 0.9916.

USD/JPY
Daily Pivots: (S1) 90.28; (P) 90.77; (R1) 91.48;
No change in USD/JPY's outlook. Choppy recovery from 89.13 might extend further but still, fall from 93.74 is expected to continue as long as 91.86 resistance holds. Below 90.07 minor support will flip intraday bias back to the downside. Break of 89.13 will confirm fall resumption to 87.36 support next. As discussed before, break of 87.36 will also confirm the bearish case that whole rise from 84.10 has completed with three waves up to 93.74 already and that medium term down trend is resuming for another low below 84.81. However break of 91.86 will invalidate the bearish view and suggest that rise from 84.81 is still in progress for another high above 93.74.

In the bigger picture, USD/JPY is still trading below medium term trend line resistance at 94.18 and 55 weeks EMA at 93.79 Whole down trend from 124.13 is likely still in progress and a break of 84.81 will target 1995 low of 79.75. However, note bullish convergence condition is seen in weekly MACD. Sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.


GBP/USD
Daily Pivots: (S1) 1.5819; (P) 1.5944; (R1) 1.6012;
GBP/USD's break of 1.5829 support confirms that whole decline from 1.6875 has resumed. Intraday bias remains on the downside for the moment and further fall should be seen to 1.5706 key cluster support. on the upside, above 1.5918 minor resistance will turn intraday bias neutral and bring some recovery. But another fall is still expected as long as 1.6067 resistance holds.

In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503. However, note that break of 1.6456 resistance will in turn shift favor to the case that recent price actions from 1.7043 are merely developing into consolidations to the larger rise from 1.3503. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

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METALS AND CRUDE FORECAST

Investors dump risky assets amid renewed concerns about sovereign default risks in European countries. In Greece, although the government's plan to reduce deficit received support from the European Commission, it is opposed by local unions, indicating difficulties in implementation of the measures.

There are signs that the worries have been spread to other European countries. Stocks and bonds in Spain, Portugal and Hungary plummet amid worries that the governments may not be able to fund the heavy debts.

The euro dives to 1.3849 against USD, a level not seen since July 2009. High-yield currencies, such as AUD and NZD, also plunge after releases of disappointing economic data.

Commodities weaken as the dollar strengthens. The benchmark contract for gold slides -0.8% to 1103 in European session, following a -0.5% dip on the previous day. In our opinion, gold should benefit in the long-run of sovereign risk concerns persist. In fact, other than these small European countries, the US and the UK are also bearing heavy budget deficits. Investors should later realize that USD is not a safe haven as the US is seeking to expand stimulus measures which will result in a bloated budget deficit of $1.6 trillion this year.

Released Tuesday, the weekly financial statement of the Eurosystem indicated one of the Eurosystem central banks purchased gold, contributing to 1M euro increase in gold and gold receivables reserve. At the same time, sales of gold were minimal (below 2 metric tons) since the start of the 3rd CBGA on September 27, indicating official demand for gold remains stable.

We continue to see capitals flowing into US PGM ETFs. As of February 2, physical holdings of platinum surged to 244.9K oz, up +14% from the prior week. Correspondingly palladium holdings were flat at 399.9K oz, possibly a pause after a 40 times increase since the launch of the ETF.

Investment in ETF helps tightening supply of the metals as it's physically backed. According to Johnson Matthey's estimates total platinum supply was 6055K oz while demand was 5915K oz in 2009. During the same period, platinum holdings in platinum ETFs was around 910K oz, around 15% of total supply and demand. For palladium, total supply and demand were 7175K oz and 6520K oz, respectively, in 2009. Total holdings in palladium of 1.3M oz represents 18% of supply and 20% demand last year.

Launch of PGM ETFs should not end here. Rather, it's just the beginning of a new wave of PGM ETFs. In Japan, Osaka Securities Exchange will list an ETF tracking platinum futures contract, together with an ETF tracking gold futures, in mid February.

Despite slump in 2009, autocatalyst remains a major source of demand for PGMs. Anticipated recovery in auto sector should help tighten the market further. US auto sales surged +12% yoy in January to 10.78M units. Although Toyota's recall crisis caused a plunge in its US sales to the lowest in 10 years, it should not have much impact on the overall outlook of auto market. China surpassed the US in terms of car sales and became the biggest auto market in 2009. Many auto giants expressed their interests in focusing on China, as well as other countries in Asia, this year. Industry experts forecast Chinese auto market will grow as much as 15% this year while Volkswagen, the largest car maker in Europe, announced plans to raise sales of cars, sport-utility vehicles and vans to 10M units in India and China this year.

Robust growth in auto sake also boosted fuel demand. In 2009, auto sales increased +46% yoy, triggering apparent demand for oil by +3.7%. According to China National Petroleum Corp (CNPC) apparent oil demand may rise more than +5% to 427M metric tons in 2010, in which gasoline demand will surge +7.8% to 72.2M metric tons and diesel consumption will grow +7.7% to 149.7M metric tons.

Energy prices continue to fall. WTI crude oil price slips to 76.2 (-1%), while both of heating oil and gasoline prices are down -0.7%.

GOLD
Gold's sharp fall today and break of 1100.5 minor support indicates that recovery from 1074.4 has completed at 1126.4 already. Intraday bias is flipped back to the downside for retesting 1074.4 low first. Break there will confirm decline resumption and should target 100% projection of 1163 to 1074.4 from 1126.4 at 1037.8 next. On the upside, even in case of recovery, break of 1126.4 resistance is needed to indicate that gold has bottomed out. Otherwise, outlook will now remain bearish.

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 break of 16.015 support confirms that recent decline has resumed after recovery was limited by 4 hours 55 EMA. Intraday bias is flipped back to the downside and further fall should be seen to 61.8% retracement of 12.435 to 19.50 at 15.134 next On the upside, above 16.43 will turn intraday bias neutral again. But break of 16.95 is needed to indicate that Silver has bottomed. Otherwise, outlook will remain bearish.

In the bigger picture, current developments revived the case that silver has already topped out in medium term at 19.50. Decisive break of 16.19 projection target suggests that fall from 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. Also, 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. Fall from 19.50 is possibly the third leg of such consolidation pattern and might target a new low below 8.5 after taking out 12.435 key support level. On the upside, above 18.925 resistance is now needed to invalidate this view. Otherwise, outlook will remain bearish.

CRUDE OIL
Crude oil's rebound stalled just ahead of 50% retracement of 83.95 to 72.43 at 78.19 and retreats sharply. Intraday bias is turned neutral with 4 hours MACD crossed below signal line. Break of 75.44 minor support will suggest that rebound from 72.43 has completed and will flip intraday bias back to the downside. for retesting this support first. Break will put medium term trend line support (at 71/72 level) back into focus. On the upside, above 78.19 will bring rally resumption to retest 83.95 instead.

In the bigger picture, crude oil managed to hold above medium term trend line support and rebounded strongly from 72.43. The development argues that medium term rise from 33.2 might not be over yet even though upside momentum is clearly diminishing. Another high above 83.95 might still be seen. Nevertheless, as rise from 33.2 is treated as a correction to down trend from 147.27, we'd continue to look of reversal signal as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, break of 72.43 will now be an important signal that crude oil has topped out and will turn focus to 68.59 support for confirmation.

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