##Crude oil, but can increase as markets Settle after Spain rescue volatility

12 June 2012 06:52 GMT Talking Points
Crude Oil, Copper May Rise as Sentiment Trends Settle After Spain Bailout Volatility Gold and Silver Could Drift Higher on Moderating Safe-Haven Flows into US Dollar Commodity prices are in negative territory overnight, mirroring a selloff across Asian stock exchanges. The MSCI Asia Pacific regional benchmark equity index fell 1 percent amid skepticism about the ability of Spain’s bank bailout deal struck with Eurozone finance ministers over the weekend to calm debt crisis fears gripping the region. Yields on benchmark 10-year Spanish bonds jumped to 648.7bps yesterday, marking the highest level in over a week and showing investors were not sold on the country’s sovereign stability profile despite the aid package. The proximity of Greece’s second attempt at electing a coherent government due June 17 – where the ailing country’s Eurozone membership seems to hang in the balance – likely reinforced the dour mood.
Looking ahead, S&P 500 stock index futures are pointing higher to suggest risk aversion may moderate as markets return toward a neutral setting after Monday’s seesaw volatility and await the next driving catalyst for price action. This opens the door for sentiment-geared crude oil and copper prices to correct higher while gold and silver find support amid easing safe-haven demand for the US Dollar. The bi-annual ECB Financial Stability Review looks to be the most significant bit of event risk on the economic calendar. While traders are unlikely to be particularly surprised by the risks that the central bank will probably identify, the intense focus on Eurozone-linked instability can nonetheless make for a sharp reaction from price action in the absence of other major drivers.
WTI Crude Oil (NY Close): $84.10 // -0.72 // -0.85%
Prices took out support at 83.30 the 14.6% Fibonacci expansion, to challenge the 23.6% barrier at 81.07. A break beneath this boundary targets the 80.00 figure and the 38.2% Fib at 77.33. The 14.6% expansion has been recast as near-term resistance.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1596.77 // +3.32 // +0.21%
Prices remain wedged between 1599.17 and 1582.10, the 50% and 38.2% Fibonacci retracement levels, respectively. A break higher exposes the 61.8% Fib at 1616.23, a barrier reinforced by a falling trend line in place since early March. Alternatively, a push downward through support targets 1554.73, followed by the 1522.50-1532.45 area.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $28.57 // +0.07 // +0.25%
Prices are treading water below resistance at 28.70. A break higher exposes 29.71. The overall structure appears to be showing a Flag chart formation, a setup indicative of bearish continuation. Confirmation is required on a daily close below the pattern’s bottom – now at 28.12 – which would expose 27.06 as the next downside objective.

Daily Chart - Created Using FXCM Marketscope 2.0
COMEX E-Mini Copper (NY Close): $3.344 // +0.058 // +1.77%
Prices continue to hover below resistance at the top of a falling channel set from the May 1 swing high, now at 3.334. A break higher initially exposes the 76.4% Fibonacci retracement at 3.426. Double bottom support lines up at 3.250, with a break below that targeting the 123.6% Fib extension at 3.080.

 123.6% Fib extension at 3.080.

Daily Chart - Created Using FXCM Marketscope 2.0

€€€ Euro highlights Extension open to fresh near weekly increase

23 April 2012 05: 56 GMT  Euro in puts positive weekly close; fresh upside ahead Yen finds renewed bids; purpose should be once again well offered China HSBC PMIs improve; help to supportive risk off dips Sarkozy takes hit in weekend election. renforce it Euro Aussie producer prices much softer; increases chances for rate cut We have seen a fairly quiet start to the week, with most currencies consolidating recent gains against the buck. However, Friday's bullish close in the Euro above 1.3215 does now open the door for fresh upside over the coming sessions back above 1.3300. Meanwhile, the Yen has been the one standout in Monday trade, with this currency reversing course and finding renewed bids. USD/JPY has broken back below Friday's low to end a sequence of consecutive daily higher lows. Nevertheless, any setbacks in this major could be limited, and the improved overnight China HSBC Flash PMIs have helped to support pullbacks.

Moving on, the fallout from the French election could factor in Monday trade, with incumbent Sarkozy putting to a poor showing over the weekend. Elsewhere, Australian PPI data came in much softer than expected earlier today, and the commodity currency has been a relative underperformer on the back of this news. The development increased the likelihood of a rate cut at the upcoming meeting. The producer price results now set the stage for the more important ICC release due tomorrow.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The latest round of setbacks have stalled ahead of some key multi-week support by 1.3000 and from here we still can not rule out risks for additional consolidation above 1.3000, before considering bearish resumption. Friday's close above 1.3215 opens the door for additional earnings over the coming sessions but ultimately, any rallies towards 1.3400 should be well capped. A break and closed daily back under 1.3000 is now required to put pressure back on downside and accelerate declines to the early 2012 lows at 1.2660.

USD/JPY: The latest pullback from the 2012, UST highs was viewed as corrective and it looks as though the market has finally found some solid support ahead of 80.00. The setbacks have stalled by the top of the daily and weekly Ichimoku clouds and we look for the formation of a fresh medium-term higher low somewhere around 80.00 ahead of the next major upside extension back towards and eventually through UST. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate. Any dips towards 80.00 should therefore be used as formidable buy opportunities.

GBP/USD: The recent break back above 1.6000 now opens the door for fresh upside towards the October 2011 peak at 1.6165. However, any additional gains beyond 1.6165 should prove hard to come by, and we once again see risks for a bearish reversal in favor of renewed weakness back down towards key support by 1.5800. A break and closed below 1.5800 will then accelerate declines. Ultimately, only a weekly close above 1.6165 would negate underlying bearish bias.

USD/CHF: Our core constructive outlook remains well intact, with the latest setbacks very well supported by psychological barriers at 0.9000. It now seems as though the market could be looking to carve a fresh higher low, and we will be watching for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

(((Sterling Strengthens as BOE’s Posen Drops Call for Easing Increase)))

THE TAKEAWAY: MPC member changes mind on easing; QE vote 8-1 as BOE minutes strike hawkish tone-> BOE wary of upside CPI risk -> Cable jumps on the news
Adam Posen ended his push for increased quantitative easing and the dovish David Miles appeared wary of upside inflation risks, minutes from the BOE’s most recent meeting revealed today. In an abrupt change of mind, Posen joined the majority of the Monetary Policy Committee in voting to leave easing unchanged, while Miles described his views on increased easing as “finely balanced.” All 9 MPC members voted to keep interest rates unchanged at ultralow levels.Sterling gained as an increase in quantitative easing became less likely.

 The BOE’s hawkish tone reflected recent comments made by MPC members suggesting that inflation may prove harder to control than previously believed. MPC member Tucker yesterday said inflation may not fall as fast as hoped, and described recent news on inflation as “bad.” Upside CPI risks come from oil and commodity price increases.
The recent comments struck a different tone than last month’s Minutes, in which the central bank said it sees inflation easing to manageable levels in the coming years.
The BOE Minutes additionally reckoned that GDP results in Q1 and Q2 may actually register a recession. The central bank said growth could contract in one or successive quarters because of weak construction during the Jubilee holiday.The Minutes also said that the global recovery is proceeding broadly as expected, concerns out of the Eurozone are now greater if anything.

TradeTheNews.com European market update: IMF $1.0 t of the next G20 Summit to propose increase financing resources.

 Wednesday, January 18, 2012 5:52:21 AM
 ***Economic Data***
- (EU) ECB: €2.3B borrowed in overnight loan facility vs. €1.6B prior; parked in deposit facility (fresh record highs) vs. €501.9B prior
- (ZA) South Africa Dec CPI (all items) M/M: 0.3%e v 0.3% prior; Y/Y: 6.3% v 6.1% prior
- (MA) Malaysia Dec CPI Y/Y: 3.0% v 3.1%e
- (IT) Italy Nov Total Trade Balance: -€1.6B v -€1.1B prior; Trade Balance EU: -€386M v -€195M prior
- (ZA) South Africa Dec Kagiso PMI: 49.451.6e
- (ES) Spain banks November bad loans ratio 7.51% vs. 7.42% prior month
- (UK) Dec Jobless Claims Change: +1.2K v +7.0Ke; Claimant Count Rate: 5.0% v 5.0%e
- (UK) Nov Average Weekly Earnings 3M/Y: 1.9% v 2.0%e; Weekly Earnings ex-Bonus 3M/Y: 1.9% v 1.9%e
- (UK) Nov ILO Unemployment Rate: 8.4% v 8.3%e
- (EU) Euro Zone Nov Construction Output M/M: +0.8% v -1.4% prior; Y/Y: +0.2% v -2.5% prior
- (CH) Swiss Jan Credit Suisse ZEW Expectations Survey: -50.1 v -72 prior
- (IE) Ireland Nov Trade Balance: €4.3BNo est v €3.7B prior
- (ZA) South Africa Nov Retail Sales M/M: -0.3% v 0.5%e; Y/Y: 6.8% v 7.5%e
Fixed Income
- (RU) Russia sold RUB18.6B vs. RUB20.0B indicated in 2015 OFZ Bond; Yield 7.67%; Bid-to-cover: 2.4x
- (SE) Sweden sold SEK9.8B vs. SEK10.0B indicated in 3-month Bills; Yield 1.575%
- (EU) ECB allotted $5.9B in 7-Day USD Liquidity operation at fixed 0.59% vs. $5.7B prior
- (DE) Germany sold €3.44B in 0.25% Dec 2013 Schatz; Avg Yield 0.17% v 0.29% prior; Bid-to-cover: 2.2x v 1.4x prior
- (PL) Portugal Debt Agency (IGCP) sells €2.5B vs. €2.2-2.5B indicated range in 3-Month and 6-Month and 11-month Bills
- Sold €496M in 3-month Bills; Avg Yield 4.346% v 4.346% prior; Bid-to-cover: 4.1x v 2.40 prior
- Sold €754M in 6-month Bills; Avg Yield 4.740% v 5.250% prior; Bid-to-cover: 3.0x v 4.1x prior
- Sold €1.25B in 11-month Bills; Avg Yield 4.986%; Bid-to-cover: 2.1x - 6:00 (IE) Ireland Nov Trade Balance: € v €3.7B prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- World Bank lowers 2012 and 2013 global growth forecasts
- Goldman's O'Neill: JPY currency is probably 25% overvalued
- China begins 10-day Lunar New Year holiday break
- UK Jobless claims comes in slightly better than expectations
Equities:
FTSE 100 flat at 5695, DAX +0.50% at 6364, CAC-40 +0.50% at 3287, IBEX-35 flat at 8536, FTSE MIB +0.40% at 15,395, SMI +0.25% at 6071
- European shares traded cautiously albeit in positive territory following bleaker outlook from the World Bank. The latter cut its growth outlook for 2012 and 2013 warning against weaker developing country growth and EU crisis. The somber updated overshadowed more positive news regarding Greece whose government is closing talks with creditors and will resume talks with the Institute of International Finance in Athens today.
- In notable individual names, Commerzbank [CBK.GE] traded lower after Moody's placed its A2 ratings under review for a possible downgrade. ASML [ASML.NL] rallied after beating expectations and providing a robust outlook for 2012.
Speakers:
- IMF said to propose increasing lending resources by $1.0T and push for resource plan by the Feb G20 meeting
- Fitch director Settepani commented that a two-notch Italy sovereign downgrade was possible and that the decision to be based upon financing levels
- Fitch Sovereign Director Parker commented that he was encouraged by steps taken by Italy's PM Monti but country must enact fiscal, structural reforms. He noted that Italy was not an peripheral economy and was absolutely critical for Euro zone future
- German Econ Ministry updated its economic outlook which confirmed a cut in the 2012 GDP view to 0.7% from 1.0% prior. Germany set its official 2013 GDP growth outlook at +1.6%- German Econ Min Roesler commented that Govt to release proposal to limit solar subsidies
- France President Sarkozy commented that a major slowdown in France was seen from Q4 2011; Sees 2011 GDP should reach 1.7%
- ECB's Noyer commented that Euro zone would return to growth and added that the pressure on French banks were difficult to understand.
- Hungary IMF representative Fellegi: stated that he did discuss the country's central bank law with ECB's Draghi
- ECB Kranjec commented: Slovenia needed new government quickly and that could
not exclude that Slovenia would find itself in a similar situation like Hungary if sovereign ratings continued to fall without control
- EFSF Official commented that S&P downgrade would not impact leveraging plans (refutes press speculation)
- Russia Dep PM Shuvalov stated that he expected no decision on EU aid to IMF prior to the country's March presidential vote
- Poland Fin Min Rostowski commented that he saw the possibility of a sovereign upgrade for country during 2012 and noted the deficit to GDP to come in 'slightly below' the 3.0% level. He stated that indebted Euro members needed structural reforms and that the role of rating agencies must be changed
- Japan Fin Min Azumi commented that it was difficult for Japan to intervene in the forex markets like Switzerland did, hard to draw a line in fx rates
- Goldman Sach's O'Neill commented that the JPY currency was probably 25% overvalued. He also stated that Japan's days of trade and current account surpluses 'looked to be finished'
- IEA cut its 2012 Global Oil demand forecast by 200Kbpd to 90.0Mbpd with demand growth seen at 1.1M bpd. Maintained its 2012 Non-Opec Supply forecast at 53.7M bpd and stated that Dec OPEC Crude production was at 30.89Mbpd, highest reading in 3 years. IEA saw rising likelihood of sharp 2012 economic slowdown. Slowing oil demand outpacing decline in economic growth with one-third decline in GDP growth would mean flat oil demand for 2012
Currencies:
- The USD began the European session on softer footing but contained in recent ranges for the bulk of the morjing. The EUR/USD made another attempt to breech the 1.28 handle early probing the hourly downtrend line over the last three weeks. However comments from a senior director at Fitch who warned that a two-notch downgrade of Italy was an option. The Fitch comment and lingering concerns of the upcoming Portugal bill auction today and negotiations on Greek debt provided the excuse to curb Euro upside momentum. Risk appetite again found some footing after financial press report circulated that the IMF was prepared to propose increasing lending resources by $1.0T and push for resource plan by Feb G20 meeting. The EUR/USD entered the NY morning above the 1.28 level and above the former Jan downtrend line.
Political/ In the Papers:
- The Spanish Budget Minister Montoro said that the government will provide credit lines and other liquidity measures to the Spanish regions in need. It will use the state supported Official Credit Institute (ICO) to assist with various regions to settle bills, and allow regions more time to make payments. The government is finding ways to deal with legislation, which bans direct bailouts of the 17 regions, following the Spain missing its 2011 budget target. The Spanish regions control more than one third of the country's public spending. Note that several Spanish regions are shut out of public-debt markets.
- The Telegraph's Evans-Pritchard looked at the remaining options for Hungary. It is faced with the choice of meeting the EU's demands so that it can receive IMF funding or allow the country to default. The country's bond yields are trading at unsustainable levels at a time when the country needs to repay €5.9 billion in EU-IMF loans and raise external funding equal to 18% of GDP in 2012.
- The FT reported that credit default swaps (CDS) are pricing in a 65% chance that Portugal will default over the next five years. Portugal's bond prices have moved to levels which some investors see as default territory. Portugal's bonds are being impacted by contagion concerns related to Greece. With regards to today's Portuguese debt auctions, most investors expect the country to comfortably sell its debt, as the country's banks are expected to bid at the auction so they can use the debt to receive ECB funding. Portugal has a €10 billion bond repayment due in June.
***Looking Ahead***
- (BR) Brazil Central Bank (COPOM) Interest Rate Decision: Expected to cut the SELIC Target by 50bps to 10.50%
- (IS) Israel Dec Leading 'S' Indicator M/M: No est v 0.2% prior
- 6:00 (CZ) Czech Republic to sell up to CZK9.0B in new Floating Rate Bonds
- 6:15 (IE) Ireland Fin Min Noonan gives speech and holds panel discussion
- 7:00 (US) MBA Mortgage Applications w/e Jan 13th: No est v 4.5% prior
- 7:00 (EU) EU Barroso with Denmark PM Thorning-Schmidt
- 7:45 (US) ICSC Chain Store Sales
- 8:00 (PL) Poland Dec Employment M/M: -0.1%e v +0.1% prior; Y/Y: 2.4%e v 2.5% prior
- 8:00 (PL) Poland Dec Avg Gross Wages M/M: 9.3%e v 1.8% prior; Y/Y: 4.4%e v 4.4% prior
- 8:30 (US) Dec Producer Price Index M/M: 0.1%e v 0.3% prior; PPI Ex Food & Energy M/M: 0.1%e v 0.1% prior
- 8:55 (US) Redbook Retail Sales
- 9:00 (US) Nov Total Net TIC Flows: $50.0Bev -$48.8B prior; Net Long-term TIC Flows: $40.0Be v $4.8B prior
- 9:15 (US) Dec Industrial Production: +0.5%e v -0.2% prior; Capacity Utilization: 78.1%e v 77.8% prior
- 9:30 (US) Fed's Tarullo to testify on Volcker Rule
- 9:30 (BR) Brazil Central Bank Currency Flow Data.
- 9:45 (UK) BOE to buy £1.7B in 2022-2036 Gilts in reverse auction
- 10:00 (US) Jan NAHB Housing Market Index: 22e v 21 prior
- 10:30 (CA) Bank of Canada Monetary Policy Report
- 11:00 (US) Fed to buy $8.0-8.75B in Notes
- 11:30 (US) Treasury to sell 4-Week Bills
- 13:30 (DE) ECB member Weidmann
- 16:30 (US) API Weekly Energy Inventories
- (CN) EU Barnier continues official visit to Beijing, China
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