Crude oil continues trading sideways around 79 in European session. Firmness in USD and lack of upside surprises in economic data hinder investors from adding long positions in commodities today. Supply disruption caused by an earthquake in Chile might tighten oil fundamentals but the actual impact will likely be limited.
USD remains firm against several major currencies. EURUSD continues trading at 9-month low around 1.35 as the market is skeptical about Greece's ability to solver the deficit challenge. Inflationary pressure in the Eurozone remains benign. Released earlier today, CPI rose +0.9% y/y in February, moderated from +1% in the prior month. PPI rose +0.7% in January on monthly basis but contracted -1% from a year ago. It's unlikely for the ECB to adjust it monetary policy outlook at Thursday's meeting.
The pound remains under pressure after slumping Monday. GBPUSD extends weakness below 1.5 even though the pair is deep in oversold condition. Construction PMI missed market expectation and fell to 48.5 in February from 48.6 a month ago.
2 oil refineries were closed after the earthquake hit Chile last Saturday. The 2 refineries amount to 220K bpd of capacity, representing around 0.25% of global oil demand. High distillate inventory and huge excessive refinery capacity can easily cover such amount. Therefore, price rally driven by the news was short-lived.
Gold trades narrowly for a second day. Price lacks direction as strong dollar limits upside while subdued inflationary pressure reduces the precious metal's appeal as storage of value. Gold refuses to decline decisively as low interest rate environment is positive for gold. At the same time, deficit problems in Greece, the UK and the US have driven investors to precious metals as they lost confidence in holding currencies.
The Bank of Canada will likely leave its policy rate unchanged at 0.25% today while keeping the statement that 'conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target'.
Canada's GDP expanded +5% q/q (annualized) in 4Q09 from +0.9% in the prior quarter. The reading exceeded market expectation of a +4% growth and signaled the central bank's ultra low-rate policy has delivered its effect. Policymakers should acknowledge stronger-than-expected economic improvement in recent months and shed some light on tightening later in the year.
GOLD:
Intraday bias in gold remains neutral for the moment and focus is on 1131.5 resistance. Break there will indicate that rise from 1044.5 is resuming and will also strongly suggest that whole correction from 1227.5 is finished with three waves down to 1044.5 already. In such case, stronger rally should be seen to 1163 resistance for confirmation. On the downside, however, below 1088.5 support will shift favors back to the case that another low below 1044.5 would be seen before correction from 1227.5 concludes.
In the bigger picture, price actions from 1227.5 are treated as correction to rise fro 931.3 only. The question now is on whether such correction is finished after meeting 61.8% retracement of 931.3 to 1227.5 at 1044.4. Strong break of 1163 resistance will indicate that the long term up trend is likely resuming for another high above 1227.5. On the downside, even in case of another fall, we'd expect strong support at 1000 psychological level to conclude the correction and bring up trend resumption.
SILVER:
Silver's rise from 15.60 extends further today and at this point, intraday bias remains on the upside. Nevertheless, note that we're still treating price actions from 14.65 as a correction to fall from 18.925 only. Hence, even in case of further rise, upside should be limited by 16.95 resistance and bring fall resumption. Below 15.60 will flip intraday bias back to the downside for a retest of 14.65 low first. However, strong break of 16.95 resistance will indicate that fall from 18.925, as well as that from 19.50, has completed and will turn outlook bullish for retesting 18.925/19.50 resistance zone.
In the bigger picture, silver's medium term rise from 8.4 has possibly completed at 19.50 already, after just missing mentioned 19.55/21.44 resistance zone. As noted before, such rise is viewed 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. We'd expect such fall to extend beyond 12.435 support to confirm this case and target a new low below 8.4 eventually. On the upside, however, note that decisive break of 16.95 resistance will argue that whole fall from 19.50 has completed with three waves down to 14.65, after missing 161.8% projection of 19.50 to 16.765 from 18.925 at 14.50. The corrective structure will in turn argue that another rise to 19.55/21.44 resistance zone would be seen before silver tops out in medium term
CRUDE OIL:
Crude oil's break of 80.51 suggests that rise from 69.50 has resumed and intraday bias is on the upside for 83.95 high next. On the downside, however, below 77.05 support will argue that rebound from 69.50 is completed, possibly with bearish divergence conditions. In such case, focus will be shifted back to 69.50 support instead.
In the bigger picture, crude oil was supported above mentioned 68.59 key support and thus, there was no confirmation of medium term reversal. The strong rebound from 72.43 dampened our bearish view and argue that medium term rise from 33.2 might not be over yet. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish
USD remains firm against several major currencies. EURUSD continues trading at 9-month low around 1.35 as the market is skeptical about Greece's ability to solver the deficit challenge. Inflationary pressure in the Eurozone remains benign. Released earlier today, CPI rose +0.9% y/y in February, moderated from +1% in the prior month. PPI rose +0.7% in January on monthly basis but contracted -1% from a year ago. It's unlikely for the ECB to adjust it monetary policy outlook at Thursday's meeting.
The pound remains under pressure after slumping Monday. GBPUSD extends weakness below 1.5 even though the pair is deep in oversold condition. Construction PMI missed market expectation and fell to 48.5 in February from 48.6 a month ago.
2 oil refineries were closed after the earthquake hit Chile last Saturday. The 2 refineries amount to 220K bpd of capacity, representing around 0.25% of global oil demand. High distillate inventory and huge excessive refinery capacity can easily cover such amount. Therefore, price rally driven by the news was short-lived.
Gold trades narrowly for a second day. Price lacks direction as strong dollar limits upside while subdued inflationary pressure reduces the precious metal's appeal as storage of value. Gold refuses to decline decisively as low interest rate environment is positive for gold. At the same time, deficit problems in Greece, the UK and the US have driven investors to precious metals as they lost confidence in holding currencies.
The Bank of Canada will likely leave its policy rate unchanged at 0.25% today while keeping the statement that 'conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target'.
Canada's GDP expanded +5% q/q (annualized) in 4Q09 from +0.9% in the prior quarter. The reading exceeded market expectation of a +4% growth and signaled the central bank's ultra low-rate policy has delivered its effect. Policymakers should acknowledge stronger-than-expected economic improvement in recent months and shed some light on tightening later in the year.
GOLD:
Intraday bias in gold remains neutral for the moment and focus is on 1131.5 resistance. Break there will indicate that rise from 1044.5 is resuming and will also strongly suggest that whole correction from 1227.5 is finished with three waves down to 1044.5 already. In such case, stronger rally should be seen to 1163 resistance for confirmation. On the downside, however, below 1088.5 support will shift favors back to the case that another low below 1044.5 would be seen before correction from 1227.5 concludes.
In the bigger picture, price actions from 1227.5 are treated as correction to rise fro 931.3 only. The question now is on whether such correction is finished after meeting 61.8% retracement of 931.3 to 1227.5 at 1044.4. Strong break of 1163 resistance will indicate that the long term up trend is likely resuming for another high above 1227.5. On the downside, even in case of another fall, we'd expect strong support at 1000 psychological level to conclude the correction and bring up trend resumption.
SILVER:
Silver's rise from 15.60 extends further today and at this point, intraday bias remains on the upside. Nevertheless, note that we're still treating price actions from 14.65 as a correction to fall from 18.925 only. Hence, even in case of further rise, upside should be limited by 16.95 resistance and bring fall resumption. Below 15.60 will flip intraday bias back to the downside for a retest of 14.65 low first. However, strong break of 16.95 resistance will indicate that fall from 18.925, as well as that from 19.50, has completed and will turn outlook bullish for retesting 18.925/19.50 resistance zone.
In the bigger picture, silver's medium term rise from 8.4 has possibly completed at 19.50 already, after just missing mentioned 19.55/21.44 resistance zone. As noted before, such rise is viewed 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. We'd expect such fall to extend beyond 12.435 support to confirm this case and target a new low below 8.4 eventually. On the upside, however, note that decisive break of 16.95 resistance will argue that whole fall from 19.50 has completed with three waves down to 14.65, after missing 161.8% projection of 19.50 to 16.765 from 18.925 at 14.50. The corrective structure will in turn argue that another rise to 19.55/21.44 resistance zone would be seen before silver tops out in medium term
CRUDE OIL:
Crude oil's break of 80.51 suggests that rise from 69.50 has resumed and intraday bias is on the upside for 83.95 high next. On the downside, however, below 77.05 support will argue that rebound from 69.50 is completed, possibly with bearish divergence conditions. In such case, focus will be shifted back to 69.50 support instead.
In the bigger picture, crude oil was supported above mentioned 68.59 key support and thus, there was no confirmation of medium term reversal. The strong rebound from 72.43 dampened our bearish view and argue that medium term rise from 33.2 might not be over yet. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish
