US Dollar Index Forecast February 7, 2013, Technical Analysis

The US Dollar Index had a positive session on Wednesday, but failed to clear the 80 handle as we expected. We didn’t break the bottom of the shooting star from the Tuesday session, so we had no sell signal to begin with. At the end of the day, the candle looks suspiciously like another shooting star, and as a result we still believe that the path of least resistance will be selling this pair once we break down below the 79.50 level. Until that happens, we will be sitting on our hands and simply biding our time.

 

US Dollar Index Forecast February 7, 2013, Technical Analysis
US Dollar Index Forecast February 7, 2013, Technical Analysis

US Dollar Index (DX) Futures Analysis – February 6, 2013

After a steady opening, the March U.S. Dollar Index is trading higher. The index is getting its support from across the board weakness in all major currencies. The U.S. Dollar received a boost when the Australian Dollar fell nearly 1% after a poor retail report sent a signal to traders that the Reserve Bank is likely to cut interest rates next month.

The EUR/USD was also under pressure ahead of tomorrow’s European Central Bank meeting. Sellers have hit the Euro hard this week, helping to bolster the dollar on political and banking problems in the Euro Zone. Interest rates are rising leading to renewed sovereign debt worries.

Daily March U.S. Dollar Index
Daily March U.S. Dollar Index

The technical picture is looking bullish although the strong rise from the new swing bottom at 78.91 is only a counter-trend rally since the main trend is down. Over the past two days, the index has taken out a pair of downtrending Gann angles from previous tops and a minor retracement zone.

This morning’s strong rally is being guided by a steep uptrending Gann angle at 79.67. This price is the best support. A move through it will be a strong indication that momentum is shifting back to the downside.

After taking out a Fibonacci price level at 79.54, the March U.S. Dollar Index surged into a downtrending Gann angle from the January 18 top at 80.27. This angle is at 79.90. If the strong momentum continues then traders should look for a test of a major 50% price level at 79.95. Further upside pressure could mean a test of another Fibonacci level at 80.20. 

The Japanese Yen Continues to Tumble

The Japanese Yen Continues to Tumble
The Japanese Yen Continues to Tumble

The Japanese yen continues to decline this morning, setting annual records. The USD/JPY is trading at 93.87 headed to break above 94.00 during the European session. The EUR/JPY is trading at 1.2750 as it continues to climb adding 32pips so far today. The sharp tumble was kicked off with the announcement that the Bank of Japan Gov. Masaaki Shirakawa would step down three weeks before his term ends on April 8 in order to coincide with the departure of his two deputies. Shirakawa’s decision to leave at the same time as his deputy governors suggests that the Japanese government is close to announcing a successor, who will undoubtedly reinforce the central bank’s dovish message. Also Shirakawa is showing his outrage of government intrusion and threats against the independence of the central bank. The announcement fueled expectations that he may be replaced by someone who prefers more aggressive easing to pull Japan from an era of falling prices.

The yen headed towards a three-year low against the U.S. dollar on Wednesday as expectations that Japan will pursue more aggressive policies to end deflation sparked a wave of selling in the currency.

During his recent campaign newly elected Prime Minister Abe said that he would do whatever it takes to jumpstart the Japanese economy that has been stuck in deflation for a very long time. Many view his aggressive policies over the top, because he is not giving a moment to review the results of his actions. Economists believe that monetary stimulus continually needs to be adjusted as its effects and outcome are not always the same. A plan of unlimited stimulus is pushing the stock exchange to record levels while the drop in the value of the yen is helping exports move to profits while importers are hurting and prices are increasing on the domestic side.

The revised budget, which includes huge infrastructure projects will help increase jobs and the economic situation but these project will take months of not years to get off the drawing boards.

Mazda Motor Corp., the best performer on the Nikkei 225 Stock Average in the past three months, more than doubled its full-year profit forecast on a weaker yen and demand for its fuel-efficient vehicles. The yen has weakened about 14% versus the dollar the past three months, the biggest decline among 10 developed- nation currencies tracked by Bloomberg. Mazda revised its outlook for the yen against the dollar to 81 from 80, and 104 from 100 versus the euro.

BoJ member Takehiro Sato said this morning that the central bank is not seeking to directly weaken the yen to a specific level. “By easing monetary policy through increased asset purchases … the central bank is aiming to lower interest rates and make the yen less attractive as a safe-haven currency,” Sato said in a news conference. Many European leaders are saying that the Japanese government is forcing a currency war. Angela Merkel warned the Japanese leaders recently at the Davos Economic Forum that intentional weakening of the JPY would not be tolerated.

Crude Oil and Natural Gas Update

Crude Oil and Natural Gas Update
Crude Oil and Natural Gas Update

Crude oil was trading slightly higher tracking rise in benchmark contracts on the New York Mercantile Exchange, where weak US dollar against the euro supported recovery in oil futures. Crude is priced at 96.67 adding 3 cents so far today.  Brent’s premium to light sweet crude increased to $20.1 per barrel, the widest this year.

Crude oil futures closed higher on Tuesday, supported by positive economic data’s from the United States and Europe. The dollar index, which measures the greenback against a basket of six major global currencies, traded at 79.504. The euro pared early losses on Tuesday, to turn flat on the day against the dollar as investors bought back the common currency on dips after it fell on the previous day due to political worries in Italy and Spain. In the US, the Institute for Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index declined by 0.9 points to 55.2-mark in January as against a rise of 56.1-level in December

French President Francois Hollande urged the eurozone to set a mid-term target for its currency’s exchange rate and to forge a jobs policy to fight voter disillusionment.

Iran and world powers announced on Tuesday, new talks were scheduled for Feb. 26, but hopes for progress were limited by comments from an Iranian official suggesting the West’s goal in talking was to undermine the Islamic republic

The weekly EIA inventory is expected to show that crude oil added +3mn barrels on for the week ended February 1, 2013. The American Petroleum Institute (API) report last night, US crude oil inventories rose more than expected by 3.6 million barrels to 371.83 million barrels for the week ending on 1sr February 2013. Gasoline inventories gained around 1.6 million barrels to 233.53 million barrels and whereas distillate inventories declined by 1.4 million barrels to 128.81 million barrels for the same week.

Natural gas futures climbed to their highest price in more than a week, on forecasts of unusually cold weather that will stoke demand for the heating fuel. Natural gas is trading at 3.403 dipping 18pips, as traders took advantage of the price surge to sell off and book profits. Speculators can expect gas prices may continue its upside move on speculation of higher demand for electricity consumption in comparison to nuclear power. Inventory reports due today is expected to fall by 125 BCF, which may further support the upside move. However, according to the MDA weather service meteorologist, weather is likely to remain mild/ normal in the current week which may limit the upside.

Gold Flat As Risk On Risk Off Balance

Gold Flat As Risk On Risk Off Balance
Gold Flat As Risk On Risk Off Balance

Gold declined on Tuesday and is trading flat this morning trading at 1673.85. Yesterday gold retreated from an initial rally, as solid gains in US equities and an improving economic outlook weighed on the metal’s safe-haven appeal.

The Institute for Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) declined by 0.9 points to 55.2-mark in January as against a rise of 56.1-level in December. Investor’s Business Daily’s (IBD) Economic Optimism index increased by 0.8 points to 47.3-level in February from 46.5-mark in last month. Markets were also buoyed by a private survey which showed that growth  in  China’s  services  sector  hit  a  four-month  high  in  January.

The Dollar Index fell by 0.1% yesterday as a result of rise in risk appetite in the global market sentiments which led to fall in demand for the low yielding currency. Additionally, positive economic data from the eurozone showed signs of economic recovery and ease the region’s debt crisis along with US equities trading on a positive note which acted as a negative factor for the currency. The sharp downside in the DX was cushioned on the back of unfavorable non-manufacturing PMI data. The currency touched an intraday low of 79.49 and closed at 79.53 on Tuesday.

The euro rallied strongly against the dollar and yen on Tuesday as better than-expected euro zone data bolstered expectations the European Central Bank will keep monetary policy steady when it meets this week. French President Francois Hollande called on the euro zone on Tuesday to protect the currency from “irrational movements,” but German Economy Minister Philipp Roesler said countries must focus on boosting competitiveness and not on cutting the value of their currency.

Across the world, Bank of Japan governor Masaaki Shirakawa said he would step down on March 19, three weeks before the official end of his term. He is likely to be replaced with someone who is amenable to Prime Minister Shinzo Abe’s drive to ease policy aggressively.

Hong Kong’s net gold flow to mainland China jumped 47% in 2012 to a record high of 557.478 tons, indicating robust demand in China, while total gold imports has surged 94% to 834.5 tons on a y-o-y basis.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,328.09 tons, as on Jan 30. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,420.81 tons, as on Feb 4.

Precious metals remain flat and directionless, and react to risk on/risk off moods of the markets, with a bit of safe haven buying. US lawmakers have been quiet, while the debt ceiling and spending cuts still weigh on markets as the deadlines are slowly closing in with little action. Silver is taking its cues from rise in base metals pack along with weakness in the DX, silver prices increased by 0.2 percent. However, sharp upside in the prices was capped on the back of weak performance in the gold. Silver is trading at 31.773 moving against gold this morning as base metals seem to be losing some momentum.

US Dollar Index Forecast February 6, 2013, Technical Analysis

The US Dollar Index did rally during the session on Tuesday, but as you can see we fell lower and formed a nice looking shooting star. At the break of the bottom of the shooting star, we would be below the 79.50 level again, and this does suggest that we are going to make a serious attempt to break down and through the 79 handle.

If this happens, this would be a very bearish turn of events for the US dollar and send of this market much lower. We believe that the Euro is trying to take off against the Dollar again, and as a result this will more than likely send this contract down as the EUR/USD pair is roughly 40% of the ingredients to this contract. As for buying, we don’t see a scenario where we want to do so right now, because we believe that the 80 handle is now going to active significant resistance going forward.

 

US Dollar Index Forecast February 6, 2013, Technical Analysis
US Dollar Index Forecast February 6, 2013, Technical Analysis

US Dollar Index (DX) Futures Analysis – February 5, 2013

The March U.S. Dollar Index surged overnight to reach a key retracement level before settling into a range. Although there was some giveback, the index remained higher for the session. The move was buoyed when the dollar posted strong gains across the board against most major foreign currencies.

Growing political uncertainty in Spain and Italy was the catalyst behind the dollar’s rally versus the Euro. Traders continued to take profits in the EUR/USD for a second day, seeking the safe haven shelter of the Greenback. The dollar’s gains were paired when the Euro rebounded following better-than-expected Euro Zone data. The dollar may mount another challenge of the day’s high if investors decide to pare positions ahead of this week’s European Central Bank meeting.

Daily March U.S. Dollar Index
Daily March U.S. Dollar Index

Technically, the main trend is still down on the daily chart despite the two-day rally from 78.915 to 79.815. The move did make 78.915 a new swing bottom. The nearest swing chart breakout level is 80.275. A trade through this price will turn the main trend to up.

Upside momentum was strong enough overnight to trigger a breakout through a pair of downtrending Gann angles at 79.59 and 79.68 respectively. Despite taking out these angles, the buying pressure stopped after a brief penetration of a short-term Fibonacci price level at 79.54. Minor support moves up to a 50% level at 79.59, followed by an uptrending Gann angle at 79.42.

The bigger picture suggests the possibility of a rally into a major 50% level at 79.95. Before the market takes a shot at this price, it may have to correct back to at least 79.37 in order to attract fresh buyers. Holding a break back to this level will set up a secondary higher bottom which is a potentially bullish signal. 

Political Risk Kills the Euro Rally

Political Risk Kills the Euro Rally
Political Risk Kills the Euro Rally

Asian equities along with the euro have toppled into negative territory after witnessing the best start to a year in the last 2 decades. Political concerns of Europe and gains in greenback (0.54%) limited riskier assets. The correlation currency and commodities had improved in the last 5 sessions with equities and the weakness in the same might also limit gains in metals due to negative sentiments. From the economic data front, the Chinese HSBC services PMI increased to four month high, but markets remained relatively calm on the back of concerns from Europe.

As the day progresses, markets will keep an eye on economic releases from euro-zone and the developments in the political stage of Europe. Although the economic releases are likely to be supportive for riskier assets due to increased PMI numbers and higher retail sales. The peripheral economies including Spain and Italy pose huge threat to the shared bloc and the same is likely to drag the euro. From US, the ISM non-manufacturing is likely to remain at a blend and may keep gains under check later today.

The euro broke above 1.37 last week and started Monday off in the 1.3650 range, but political rumors and uncertainty saw the euro collapse by mid-day. Over the past weeks eurozone ministers and bankers have talked up the economic recovery, without much in the way of substantive data. Strong words by the ECB Director followed by compelling statements from the German central bank have bolstered the euro against the US dollar as traders moved to risk on sentiment pushing the euro to recent highs.

Over the weekend, the French Finance Minister commented that the euro was too strong, this comment started the crack that widened as Italy and Spain moved to the headlines. Spain scandals and rumors along with riots and strikes over austerity are pushing Spain to the edge with bond yields climbing while calls for Prime Minister Rajoy to resign. Pressure is mounting on Spanish Prime Minister Mariano Rajoy to resign amid a growing corruption scandal. Rajoy denies allegations that he and other members of his party accepted secret payments. 

Polls in Italy show the Italian Stallion, also known as the Italian Clown, Silvio Berlusconi gaining in the polls and headed to return to the leadership of Italy, is worrying global markets. Former Prime Minister Silvio Berlusconi’s party won strong gains in polls ahead of national elections later this month on promises he would refund a property tax paid last year. The strong result sparked concern about reforms in the country, just a few days ahead of a European Central Bank meeting.

The EUR/USD also fell on comments by German finance minister claiming that the euro‐zone crisis is far from over which dampened investor sentiments and forced them to book profits after reaching 15‐month high. The euro is trading at 1.3492 this morning and continuing to tumble. Support is seen at 1.3480

Eco and Political Pressures Weigh on Crude Oil

Eco and Political Pressures Weigh on Crude Oil
Eco and Political Pressures Weigh on Crude Oil

Light Sweet crude oil prices fell around 1.6% on Monday on the back of renewed concerns on the Euro region debt crisis which led to expectations of fall in demand for the fuel. Additionally, ease in the Middle East tension after Iran’s Foreign Minister Ali Akbar Salehi said it is considering an offer from US Vice President Joe  Biden to negotiate over its nuclear program also exerted downside pressure on crude oil prices.  Further strength in the DXalso acted as a negative factor for the crude prices. Oil prices touched an intra-day low of $95.89/bbl. and closed at $96.17/bbl. in yesterday’s trading session.

In a surprise announcement from Washington yesterday caught speculators off guard with a shift in the Iranian situation, with US and Tehran agreeing to enter into negotiation over the nuclear program, which will be headed by Vice President Biden, signaling these negotiations have moved up to higher levels and are more than just talks. This will help ease geopolitical tensions with the possibility of the reduction in the global embargo against Iran.

Higher supply expectations also weigh on the commodity. The American Petroleum Institute is scheduled to release its weekly inventories today and US crude oil inventories are expected to rise by 2.8 million barrels for the week ending on 1st February 2013. Gasoline stocks are expected to rise by 1.9 million barrels and distillate inventories are expected to gain by 0.5 million barrels for the same week. Besides that, there is an ongoing problem at the Seaway pipeline, which is connecting the Cushing, Oklahoma, terminal to the Texas coastline. The Seaway Pipeline has choked outflow from the Cushing depot even as production flows in.

Traders can expect crude oil prices to trade lower on signs of concerns over the eurozone which might cause risk aversion among the market participants coupled with bearish market sentiments. Strength in the DX might also add to the losses in the oil prices. This morning in Asian trading US crude oil continues to decline trading at $96.06 off by 11cents. Additionally, weak economic data from US and Euro region also led to downside pressure in the global market sentiments.  US Factory Orders rose less than forecasted by 1.8 percent in December as against a previous decline of 0.3 percent in November. Today markets will closely watch eurozone retail sales for a clue on consumer confidence while the US will release ISM non-manufacturing data later today.

Another more significant catalyst for recent spike in crude oil is the bubbling up of Middle East/North Africa (MENA) tensions. Violent protests in Egypt, terrorist attacks in Algeria and uprisings in Mali have all raised the geo-political risk premium embedded in oil prices. Algeria produces around 1.2mbd, and neighboring Libya at last count was producing c1.5mbd. . Western governments have warned their citizens of “imminent threats” in that country. Egypt’s oil production is only around 0.7mbd, although the Suez Canal and Sumed pipeline are significant choke points in the global oil supply chain.

Italy and Spain Push Gold Up and Risk Off

Italy and Spain Push Gold Up and Risk Off
Italy and Spain Push Gold Up and Risk Off

Gold is trading flat as Asian markets tumble this morning following cues from Wall Street and European bourses. Gold prices regained lost ground and finished moderately higher on Monday to trade at 1676.00, however silver prices remained under pressure, ending slightly off. Lackluster US economic data on Friday underpinned the buying sentiment in the yellow metal. In this regard, US factory order rose 1.8%, well below the expectations of 2.2% rise. Excluding defense, factory orders rose at a negligible rate of .3%. In currency markets, the euromoved lower against US dollar and closed just above $1.35. There are renewed political tensions in Spain, where a growing corruption scandal threatens to entangle Prime Minister Mariano Rajoy. Effectively, both Italian and Spanish sovereign bond yields spiked, reacting to these event, with Spanish 10‐year rates pushing to a six‐week high, while Italian 10‐year yields moving higher to 4.48%.

Confidence in the eurozone recovery, took a tumble yesterday with Spain and Italy taking center stage. Jitters in Wall Street flowed into the currency markets along with comments from the French Finance Minister saying that the euro was too high. Political turmoil in Spain raised worries amongst the market participants over the resolution of the debt crisis. Spanish Prime Minister faces corruption allegation which is raising worries over the continuation of the government’s policies and its leadership.  This increased the safe haven appeal of the gold. However, strength in the DX capped gains in the gold prices yesterday. US Dollar Index gained by 0.6 percent yesterday on account of rise in risk aversion in the global market sentiments which led to rise in demand for the low yielding currency. Additionally, rise in Spanish unemployment change data along with less than forecasted increase in the US factory orders also supported an upside in the currency. Apart from that, US equities also declined sharply around 1% which acted as a positive factor for the DX. The currency touched an intra-day high of 79.64 and closed at 79.57 on Monday

Asian markets are also worried about poor earnings reports and profit downgrades as the Asian markets are in the midst of their earnings season.

Last week gold was slightly up by 0.8% and the average rate reached $1,664.82 which is 0.83% below then its previous week. Gold ended the week at $1,669.. Silver also spiked during last week by 2.49% but the average rate decreased by 1.26% to reach $31.47 compared to last week’s average.

Gold zigzag all the week, starting Monday at 1660.85 and concluding the week at 1666.55 with a midweek high of 1684.35 and low of 1653.35. There was one step forward and two step backward actions had been seen with very little gain in gold. Friday, traders saw gold fall from one-week highs as some investor book profits on the recent rally while others took a cautious stance ahead of upcoming employment data.

Today traders can expect gold prices to trade higher due concerns over the Euro zone on the back of political crisis in Spain which might cause risk aversion among the market participants. Continuation of the stimulus measures by the US Federal Reserve might also support upside in the gold prices. Platinum has fallen from a 17 week high, while silver tumbled to trade under 31.60  silver fell 0.3 percent taking cues from strength in the DX and weakness in the base metals pack. However, fall in the silver prices was cushioned due to strength in the gold prices.

US Dollar Index Forecast February 5, 2013, Technical Analysis

The US Dollar Index rose during the session on Monday as the hammer from Friday was triggered to the upside. Because of this, it appears we could continue to gain slightly, perhaps as high as the 80 handle before running into massive pressure. Overall though, the breaking of 79 on Friday signals to us that we are eventually going to continue much lower. With this in mind, we are choosing to fade this rally when given the chance, not necessarily buy into it. Because of this, we are sitting on our hands, but do look for the selling opportunities as they come.

 

US Dollar Index Forecast February 5, 2013, Technical Analysis
US Dollar Index Forecast February 5, 2013, Technical Analysis

US Dollar Index (DX) Futures Analysis – February 4, 2013

The March U.S. Dollar Index is soaring this morning on the heels of a sharp drop in the Euro and the Japanese Yen. The Euro is falling on profit-taking fueled by overbought conditions and rising political tension in Spain. Over the week-end, the country’s political opposition called for the resignation of Prime Minister Mariano Rajoy after talk surfaced that he and members of his party accepted secret payments. The accusations contributed to a rise in Spanish government bond yields. With sovereign debt risks rising ahead of this week’s Spanish auction, investors felt the need to pare positions and head to sidelines.

Technically, the March U.S. Dollar Index is rebounding after establish support late last week following a test of the September 14 bottom at 78.945. The actual low was 78.915. The successful test subsequent rally has put the index in a position to test a pair of downtrending Gann angles at 79.65 and 79.74.

Daily March U.S. Dollar Index
Daily March U.S. Dollar Index

Based on the short-term range of 80.275 to 78.915, the first upside objective is the retracement zone at 79.593 to 79.754. Since the main trend is down, profit-taking or fresh selling pressure may stall the rally when this zone is tested.

If upside momentum can continue then look for a further rally into the 50 to 61.8 percent retracement zone at 79.955 to 80.20.

With traders exiting the Euro first and asking questions later, today ‘s action is likely to remain bullish throughout the session. 

Crude Oil Positive on Global Sentiment

Crude Oil Positive on Global Sentiment
Crude Oil Positive on Global Sentiment
On Monday morning crude oil prices are drifting down to trade at 97.52 off by 26 cents. Light sweet crude oil prices rose to a four-month peak on Friday, with traders citing optimism about the global economic recovery, while Brent’s premium over U.S. oil futures widened nearly $1 a barrel in heavy spread trading. Brent crude rose to a 4-month peak on optimism about the global economic recovery while Brent’s premium over US oil futures widened. Crude oil futures closed with a weekly gain of 2% and modestly higher in Friday’s session, as traders followed latest data on US jobs, manufacturing and consumer sentiment for cues on demand prospects. Nymex crude oil prices increased around 2 percent in the last week taking cues from optimistic statement from US Federal Reserve of continuing the plan of bonding buying coupled with weakness in the DX.

The upside was limited after the EIA report said that US crude oil demand fell by 2.49% in November and consumption of fuel products remained stagnant in US. Speculators can expect crude oil prices to go down as stocks at Cushing due to lower outflow through the Seaway pipeline can put pressure on prices.

Iraq’s oil exports climbed to 2.359 million barrels per in January from 2.340 million bpd the previous month, oil ministry officials said on Sunday. While Qatar, one of OPEC’s smallest producers, has notified at least two Asian buyers that it will supply Marine and Land crude at full contracted volumes for March, unchanged from February levels, trade sources said this morning.

Russia’s oil output, the world’s largest, edged down 0.1 percent to 10.47 million barrels per day in January as production increase at new fields failed to offset a decline in output at mature deposits, Energy Ministry data showed over the weekend.

Natural gas closed lower on Friday pressured by a mild outlook for this week that should slow heating demand. Natural gas futures extended losses as investors sold futures after supply data revealed supplies fell less than expected last week. Natural gas prices are likely to move in a range as lower than expected inventories last week can keep prices in check. Front-month gas ended down 3.8 cents, or 1.1 percent, at $3.301 per million British thermal units after trading between $3.278 and $3.387. This morning natural gas has added a few pips to trade at 3.3111. The number of rigs actively exploring for oil and natural gas in the US increased by 11 last week to 1,764. There are 1,332 rigs were explored for oil and 428 for gas while 4 were listed as miscellaneous, as per Oil-field services company Baker Hughes Inc.

The Euro Remains Positive On Fundamentals

The Euro Remains Positive On Fundamentals
The Euro Remains Positive On Fundamentals
This morning most Asian markets are trading higher on the back of favorable manufacturing and consumer sentiments economic data from the US on Friday. The US Non-Farm Employment Change declined by 39,000 to 157,000 in January as against a rise of 196,000 in December. The unemployment Rate rose to 7.9 percent in January from earlier rise of 7.8 percent in December. Average Hourly Earnings was at 0.2 percent in January as compared to rise of 0.3 percent a month ago.  The report was more or less market neutral with the prior revision offsetting the small dip in new jobs. While unemployment rise was more or less expected. The revised UoM Consumer Sentiment increased by 2.5 points to 73.8-level in January when compared to 71.3-mark in prior month. The Institute for Supply Management Manufacturing PMI rose by 2.4 points to 53.1-mark in January as against a rise of 50.7-level a month earlier. Total Vehicle Sales was at 15.3 million in January with respect to 15.4 million in December. Traders remain in a risk on mode, as sentiment continues to be positive, as most believe that there is a global recovery underway. European data remains weak but is starting to move in the right direction, while Chinese data continues to print on the positive side.

The euro appreciated by 1.3 percent in the last week on the back of rise in the Spanish and Italian manufacturing PMI along with decline in the region’s unemployment rate. The euro traded well within the 1.36 range and climbed to break above the 1.37 price but could not hold.  Additionally, weakness in the DX coupled with upbeat global market sentiments also acted as a positive factor for the currency. 

Spanish PMI increased by 1.5 points to 46.1-mark in January as against a rise of 44.6-level in December. Italian Manufacturing rose by 1.1 points to 47.8-level in January from earlier rise of 46.7-mark in December. European numbers increased by 0.4 points to 47.9-mark in last month as compared to earlier rise of 47.5-level in December. The Italian Unemployment Rate rose to 11.2 percent in December with respect to earlier gain of 11.1 percent a month ago. European Unemployment Rate declined to 11.7 percent in December from rise of 11.8 percent in November. Consumer Price Index (CPI) Flash Estimate rose at slow pace of 2 percent in January as against a rise of 2.2 percent in December. Over the weekend rumors of a new scandal in Spain sent workers to the streets to riot and strike, as more jobs are set to be lost, stories leaked that a huge monetary fund was have uncovered, funded by big business for payoffs to politicians. The rioters are calling for the Prime Minister’s resignation. Also the French Foreign Minister said that he sees the euro overpriced at 1.36. The euro rose to a 2-1/2 year high against the yen and a 14-month peak against the dollar on Friday, buoyed by better-than-expected eurozone data a firm US jobs number.

Gold Expected To Decline

Gold Expected To Decline
Gold Expected To Decline
Corporate earnings have exceeded expectations in the US and Japan is entering its earning season, as markets wait to see how the weak yen has bolstered profits, the US housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again. Heading into another busy week of earnings, the equity market is knocking on the door of all-time highs due to positive sentiment in stocks, and that can’t be ignored entirely. European markets will stick to the earnings forecast too. The Asian markets will however follow global cues and also reforms in specific countries that have been just taken. Spain has become the center of attention once again with riots in the streets over the weekend calling for Prime Minister Rajoy to resign as new scandals surface. This time the rumors say that there is a huge money stash funded by Spanish businesses that has been used to support political legislatures, while most of the country is unemployed.

The euro remains well above 1.36 while over the weekend, the French Finance Minister, said that the euro was too high. On Friday the US nonfarm payroll information for January and revisions to previous months’ showed even bigger gains as the US job market made further strides. Payrolls increased by 157,000 workers following a revised 196,000 gain the prior month and a 247,000 jump in November. Revisions added 127,000 jobs to the tally in the last two months of 2012. A separate survey of households showed the unemployment rate unexpectedly rose to 7.9% from 7.8%. Brighter employment prospects, which will help lessen the pain for consumers of a higher payroll tax.

Precious metals prices rose in unison with equities and commodities on Friday, notching a weekly gain, after U.S. nonfarm payrolls data showed modest job growth in January. U.S. gold closed up $8.60 an ounce at $1,670.60, with trading volume in line with its 250-day average. Consumer confidence improved along with better factory output. This pushed the US equity markets higher and also supported gold. The upside in gold was limited as signs of recovery in the US and global economy dented gold’s safe haven appeal. Gold is likely to go down as investors would move to riskier assets and positive employment data also raises concerns about continuation of Fed’s loose monetary policy.

India’s central bank RBI is planning to introduce three to four gold-linked products in the next few months, in an effort to bring 20,000 tons of gold held in households into the banking system. Turkish gold imports rose to 11.27 tons in January from 2.96 tons a year before – Reuters. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,328.09 tons, as on Jan 30.

US Dollar Index (DX) declined around 0.9 percent in the last week on the back of rise in risk appetite in the global market sentiments which led to decline in demand for the low yielding currency. Additionally, statement from US Federal Reserve that it will continue purchasing securities till outlook for employment improves sustainably along with favorable economic data from the US. The currency touched a weekly low of 78.92 and closed at 79.14 on Friday.

US Dollar Index forecast for the week of February 4, 2013, Technical Analysis

The US Dollar Index had a negative we can over the last five sessions, and as you can see by the chart, we are sitting right on top of the 79 support level. We believe this 79 level is very important to the future direction of market, and as a result we believe that a break of the lows from this we will usher in a new leg lower. We of course would be selling at that point, and as a result aiming for the 77 handle based upon the 200 point consolidation area we would be breaking out of.

 

US Dollar Index forecast for the week of February 4, 2013, Technical Analysis
US Dollar Index forecast for the week of February 4, 2013, Technical Analysis

US Dollar Index Forecast February 4, 2013, Technical Analysis

The US Dollar Index had a fairly back and forth session during the Friday trading hours, but this would’ve been typical considering that it was nonfarm payroll Friday. However, we find ourselves sitting on top of the 79 support level, and as a result it appears of this market is ready to start breaking down now. A daily close below the 79 handle would be the signal to start selling, and although we have punctured that level during the session, as of time of writing we have not closed below it. With this in mind, we are more than willing to sell a break of the Friday lows.

US Dollar Index Forecast February 4, 2013, Technical Analysis
US Dollar Index Forecast February 4, 2013, Technical Analysis

US Dollar Index (DX) Futures Analysis – February 1, 2013

The March U.S. Dollar Index is trading lower this morning ahead of the U.S. Non-Farm Payrolls report. Overnight the index took out the December 19 bottom at 79.01, putting it in a position to challenge the September 14 bottom at 78.945. A break through this level is likely to mean a test of the nearby futures contract bottom at 78.875.

The index is also trading on the bearish side of a downtrending Gann angle at 79.15. This angle is likely to put additional pressure on the dollar index. A reversal to the bullish side will indicate a shift in sentiment.

Daily March U.S. Dollar Index
Daily March U.S. Dollar Index

A strong rally in the Euro is contributing the most to the weakness in the dollar. The Greenback’s mixed moves against other major currencies is helping to curtail today’s loss. Overnight, a solid Purchasing Manager’s Index (PMI) helped the Euro surge because it gave investors a reason to be positive about the Euro Zone’s economic outlook.

Traders are also driving up the Euro against the dollar in anticipation of an increase of 165,000 U.S. jobs in January. Although the U.S. jobs growth is in an uptrend, the number is still too low to warrant any changes in the Federal Reserve’s loose monetary policy. This should keep the pressure on the dollar since it looks as if the European Central Bank will refrain from lowering its benchmark rate as well as implementing any new quantitative easing programs over the near-term. 

The USD under pressure ahead of NFP

The USD under pressure ahead of NFP
The USD under pressure ahead of NFP

The euro closed at $1.35. It traded as high as $1.3593. Signs of euro zone economic recovery and stability in financial system helped euro gain strength. Fed’s ultra-loose monetary policy along with higher unemployment claims weakened the dollar internationally. The euro is likely to gain strength as a strong reading on Germany’s labor market will offer support. Moreover, focus is now shifting to US Nonfarm payrolls data due later today. The dollar edged up 0.2 percent to 91.24 yen and the euro rose 0.3 percent to 123.92 yen. Early morning the Chinese state manufacturing declined unexpectedly which indicates concerns of Chinese slowdown after a quarter of better releases. The Chinese fixed asset spending has remained weak with slight fall in urban income compared to the rural household which might have weighed downside on the PMI. However the private PMI from HSBC have continues to increase indicating mild recovery in small and private businesses. The Chinese state producers are also likely to undergo mergers and domestic restructuring which might have limited the PMI reading. As the day progresses Japan’s vehicles sales is likely to decline due to slower demand for Japanese vehicles in China and euro-zone. Even the euro-zone and German PMI numbers are likely to remain at blend which may support downside.

The prime market focus today will be the US nonfarm payroll release. The US nonfarm payroll data will be the key to determine gold’s move today. Job creation is expected to increase by 165-170K which is not enough to reduce the unemployment rate. A monthly average of 250K is still looking very tough to achieve because of higher taxes, reduced government spending. We expect a likely increased labor force would be keeping the unemployment rate at 7.89%. Looking at the increased jobs figure we expect the USD to remain under pressure. However, a realization of a sustained unemployment rate over 7.8% may help the USD climb.

The euro rose to a 14-month high against the dollar on Thursday, after the release of the latest US jobs and consumer spending report. German Bund futures rose on Thursday, after the Federal Reserve left in place its $85bn per month bond-buying stimulus plan and said US growth had paused.

Weak German retail sales data slightly dented the bullish sentiment on the euro, but it was offset by a strong reading on the country’s labor market and did little to change to the currency’s rising trend. The dollar was on pace for a monthly gain of 5.3 percent versus the yen. The euro rallied for a sixth consecutive month against the yen, rising 8.3 percent in January, which marked it’s the best month since February 2012.

The overall outlook for the euro today, is towards the downside as traders book profits as the euro trades above the 1.36 price level.

Crude Oil Threatens 98.00 Again

Crude Oil Threatens 98.00 Again
Crude Oil Threatens 98.00 Again
This morning’s data release in showed that China’s PMI numbers has declined. The purchasing managers’ index (PMI) for China’s manufacturing sector fell to 50.4 percent in January from 50.6 percent in December, the China Federation of Logistics and Purchasing (CFLP) said Friday. January marked the fourth consecutive month that the PMI remained above 50 %, according to a statement from the CFLP. A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

However, the indicator also dropped for the first time since August when it hit a nine-month low of 49.2 percent.

Crude closed down 45 cents at $97.49 a barrel, down by 0.38%. Crude oil prices were down as higher unemployment change raised demand concerns from US after GDP data also disappointed investors. However today non-farm payroll data is will confirm the trend of US economy and can give a better demand outlook. Traders can expect crude oil prices to go down as very high inventories weigh on price and concerns about US growth can bring down prices. EIA commercial crude oil inventories increased by 5.9 million barrels for the week ending 25 January. The US Energy Information Administration said that at 369.1 million barrels, crude oil inventories are well above the upper limit of the average range for this time of year. US Unemployment Claims increased by 38,000 to 368,000 for the week ending on 25th January as against a rise of 330,000 in prior week. Employment Cost Index rose by 0.5 percent in Q4 of 2012 from rise of 0.4 percent in Q3 of 2012. Personal Spending increased at slow pace of 0.2 percent in December as compared to rise of 0.4 percent in November.

Chicago Purchasing Managers’ Index (PMI) increased by 4 points to 55.6-mark in January when compared to 51.6-level in December.  The US Dollar Index (DX) traded on a flat note and declined by 0.1 percent yesterday on account of mount in the Chicago PMI and mixed economic data from the US. However, sharp downside in the currency was cushioned on the back of rise in the US jobless claims data. Apart from that, US equities also traded on a weak note which also prevented further fall in the DX. In the initial part of the trade, the currency had appreciated as a result of rise in risk aversion in the global market sentiments which led to rise in demand for the low yielding currency.  The weak dollar helped support crude prices as they edged near 98.00 yesterday. German Retail Sales declined by 1.7 percent in December as against a rise of 0.6 percent in November but did not stop the euro from climbing.

Natural gas prices declined around 0.1 percent on the back of less than expected decline in the US natural gas inventories. Additionally, unfavorable economic data from US also exerted downside pressure on the prices. However, a sharp downside in the natural gas prices was cushioned as a result of weakness in the DX. Gas prices closed at $3.335.