Precious Metals Update

Gold advances strongly off 641.10, Tuesday's low and poised to clear shooting star top at 654.60, Jan 25 high.

Amid risks of toppish indicator, a firm clearance of Aug 2006 highs at 655.00/656.20 is essential to avert potential pullback.

Beyond there will accelerate to 676.35, Jul 2006 top. Losing 642.50, Wednesday's low confirms unwinding of the indicator for further break of 639.25, Jan 24 low, before exposing 633.70, Jan 23 low.

Silver is edging higher off 13.090, Tuesday's low and break of 13.535, Jan 25 shoot star top bodes well for extension beyond 13.650 and 13.692, Wednesday's high/Fib.764 level.

However, note that momentum remains overbought and a break of 13.692 is likely to meet tough barrier at 13.845, Dec 15, 2006 high.

Under 13.300, trend-line support warns of deeper fall to 13.090, Tuesday's low and 12.775, Jan 22 low.

Paulson speech

Paulson says Chinas holdings of US Treasury debt not a top US concern.

Gold gets boost due to Contract Rollover

Comex gold futures are getting a boost from the rollover of the Feb contract into April.

7,000 contracts lost in the rollover but that is small as some 20,000 were added over the last few weeks, there is some hesitation at the open in gold due to the FOMC meeting later.

Though with the rollover and the buy stops being put in there is upward pressure.

April gold is up $6.60 at $656.80 an ounce, while Feb gold is up $9.30 at $653.50.

Crude Oil Inventories out

Crude Oil out at 2684K vs 1500K expected
Gasoline out at 3819K vs 1800K expected
Distillate out at -2648K vs -2100K expected
Refinery Utilization out at -0.32% vs 0.0% expected

Paulson goes again

The dollar is slipping against the yen following the release of prepared comments from Treasury Secretary Paulson in which he said China needs more currency flexibility and that the pace of China's reforms is too slow.
The market is also reaction to news that U.S. construction spending unexpectedly fell 0.4% in December versus an expected flat reading.
Recently, the euro stood at $1.2965 from $1.2964 late Tuesday while the dollar stood at Y121.46 from Y121.59.

Paulson speech

Paulson says China Moving towards flexibility but not fast enough.
This is fairly typical commentary.

Chicago PMI out

Chicago PMI out at 48.8 vs 52.0 expected. 51.0 (revised from 52.4) prior

Gold / Silver Update

Comex gold and silver slipped after stronger-than-forecast U.S. GDP.
Gold was flat before the data, and as soon the data was released it pushed slighter down.
The dollar is above 85.00 on the dollar index. That's a level everyone is watching.
The Nybot dollar index is up 22 ticks to 85.25.
April gold is down $1.90 to $648.30, and March silver is down 6.5 cents to $13.31.

US Data out

GDP MoM out at 0.2% vs 0.3% expected
GDP Annualized out at 3.5% vs 3.0% expected.
GDP Price index out at 1.5% as expected

Personal Consumption out at 4.4% vs 4.4% expected
Employment Cost Index out at 0.8% vs 1.0% expected

Important US Data coming out in few mintues

Important Figure
US GDP and Core PCE coming out in 4 minutes

Precious Metals FUTURES Update

Silver rejected the lower end of the daily range yesterday and made a convincing move towards the upper end of the daily range.

We see this as strength in the markets as the net longs in the market continue to build.

The market illustrated, once again, the inherent demand for physical is very much supportive in the short and longer term, as any setbacks towards the lower end of the distribution is met by strong buying.

We favor the long side today against any further setback in the daily upward trend.

Buy March Silver at 13.210. Targeting 13.500 & 13.685. Stops below 13.120. Although we could see some intra-day downside, major support at 13.210 (5 day lows & 50 day MA) will be hard to break. Alternatively, shorter term long trades can be entered at 13.340.

Energy Futures Update

Yesterday's rally in WTI Crude was a true sign of strength.

Much as the market was eyeing a bearish engulfing pattern on the daily Crude chart, the bears were party to a rude awakening.

The lows were rejected and the resistance broken with relative ease, as Crude moved in excess of 5% to the upside on the day.

Inventories are expected to be in line with expectations, although keep an eye on distillates, as a draw of 2100K is expected.

However, it is hard to anticipate whether the recent cold weather front in the US will have an adverse affect on inventory data.

Crude & Gasoline are expected to show moderate builds according to the market Consensus vote.

Even ahead of weekly inventory data we favor the upside. Buy WTI Crude at 55.75. Targeting 58.50. Stops below 55.00. Good until the end of the week.

Market Update

USD weakening a tad before the important cluster of data today and tomorrow.

Bunds are still below the important bullish trend line since 1994. This is not a fake break. US 10-year Treasuries are also close to major trend line support. Higher global yields = USD strength.

DAX making new highs. S&P500 also higher despite closeing below trend line support early this week.

Oil making a very strong reversal yesterday.

FOREX EUROPE UPDATE - USD

The dollar was mixed overnight, trading in a tight 1.2956-1.2975 range against the EUR and a weaker 121.25-121.75 range against the JPY.

Yesterday's data showed a rise in consumer confidence (probably still weather-related), and given the recent string of rather buoyant data, our economists believe there is little doubt the Fed will hold rates.

Additionally, the statement tone will probably continue to highlight risks to growth, which will keep the USD under pressure.

The recent performance of the US economy has raised expectations the Fed may adopt a more hawkish stance in its outlook - the implied yield on the May 07 Euro$ contract has risen 17.5bp since the beginning of the month.

However, with core CPI remaining weak, the case for tightening by the inflation-targeting FOMC is not strong and risks to growth still remain to the downside.

Our economists believe that the inflation indices contained in today's GDP report (released at 13:30 GMT) will likely reflect very weak headline inflation numbers-especially a 0.9% decline in the overall PCE price index-given the recent decline in energy prices.

The US housing market also continues to show signs of weakness, as yesterday the S&P/Case-Shiller home price composite 20 index showed the index fell at a 3% annualized rate over the past four months, compared with +11.8%y/y in H1(06).

As such, the Fed statement will likely again highlight continued weakness in the housing market and moderation in growth.

The other key event today is Paulson's testimony on the Treasury's semi-annual FX report and his December China trip at 15:00GMT.
Given the current fervour of JPY rhetoric in Europe and the new Democrat-dominated Congress, the risk is that Paulson will have to field questions not only on the perennial favourite China, but also on the weak yen.

While he is most likely to repeat Under Secretary Adams' assessment that Japan's cautious economic policy is appropriate, such pressure on the Treasury Secretary will reflect the broader sentiment in the US legislature.
Paulson's comments on the JPY should be watched. Nevertheless, we continue to think that lack of will in Japan and the US to address the weak yen issue would make it hard for the upcoming G7 meeting to have any lasting impact on the JPY or precipitate any sharp carry unwind.

Ahead today, key data include the full GDP report, Chicago PMI and the ADP labour report

Precious Metals Update

Gold's retreat from shooting star top at 654.60 Jan 25 high and 648.00 Monday's high was contained at 641.10 Tuesday's low temporarily.
However, toppish indicator hints of a completion of up-leg off 602.20 Jan 5 low and any upside will be tightly capped at 654.60.
Hence, expect an eventual break of 641.10 and 639.25 Jan 24 low, before exposing 633.70 Jan 23 low, which should hold to resume bull leg over Aug 2006 highs at 655.00 and 656.20.

Silver's pullback from 13.425 Monday's high was mitigated swiftly at Tuesday's low at 13.090 and a strong rebound to 13.384 bodes well for bull leg resumption to 13.535 Jan 25 shoot star top.
However, note that momentum remains overbought and a break of 13.535 is likely to meet stiff resistance at 13.692, fib.764 level.
Loss of 13.090 warns of deeper fall to 12.775, Jan 22 low.

Future Gold Update

Comex gold futures closed slightly higher with prices likely buoyed by news that Saudi Arabian oil official will cut oil output more than certainties that the Fed may initiate a mid-winter stimulus cut in rates.

In addition, news that two companies have received approval from India's securities regulator for the launch of gold exchange-traded funds added underlying support to the market.

Although the ETFs are not likely to impact retail gold consumption, traders say it will attract buying interest from financial institutions that may not have invested in gold previously.

But despite any support, gold remains confined to a $640-$650 an ounce range and continues to be defined by trends and expectations in other markets.

Crude Oil Update

Crude traded to a low $53.82 after the comment from Saudi Prince Turki al-Faisal saying current oil prices are adequate for consumers and producers.
Further added that he doesnt consider crude as a political tool. Short term support at $53.80 with resistance at $56.00

FOREX ASIA UPDATE - USD

The dollar is little changed against most major currencies since European trading opened yesterday.

EURUSD has traded up to a high of 1.2968 from 1.2908, while USDJPY traded to a new 4-year high of 122.20.

USDJPY 3-month implied vols are still at relatively elevated levels of 7.1%, up from 6.5% last week and versus much tamer 6.2% vols for EURUSD.

However, of greatest interest was the decline in oil prices overnight, with the benchmark Nymex crude futures contract now trading at US$53.85/bbl, down from Friday's close of US$55.42 and again failing to break through the US$56 resistance level.

Developments in the oil market are worth watching since weather appears to be normalising and global growth expectations have not deteriorated this year.

It still seems then that we are in a fragile environment for speculative trades, and the potential for position adjustment on unprofitable trades remains high.

Our core view for the dollar is that we expect US data to take a turn for the worse in the weeks ahead, as weather effects fade and the spillover from the housing slowdown continues. However, our economists note that this week's heavy slate of US data will continued to reflect good weather, and we look for stable to strong numbers from the key payrolls release (190k), ISM (51.5), and Q4 GDP (+3.0% q/q ann.).

Precious Metals Update

Gold's shooting star top at 654.60 Jan 25 high coupled with bearish candle off 648.00 Monday's high signals completion of up-leg off 602.20 Jan 5 low.
Weighed down by falling momentum, losses beneath 639.25 Jan 24 low will expose 633.70 Jan 23 low.
Further loss of 626.93 Jan 18 low negates potential bull leg over Aug 2006 resistances at 655.00 and 656.20.

Silver's deep bearish candle close off 13.425 Monday's high confirms near term pullback from 13.535 Jan 25 shoot star top.
Along with falling momentum, expect corrective dips to former resistance at 12.955/12.965 ahead of 12.880 Jan 23 low, which should hold.
Rebound from there will resume bull trend on rising lows formation for gains to 13.845 and 13.995, Dec 2006 resistance zone.

Futures Gold Update

Comex gold futures are sluggish as traders await economic data due out later this week. We are seeing a quiet start to the week.
We've got a slew of data out on Wednesday, Thursday and Friday...one key to the data will be the FOMC meeting, adding that all eyes will be on the dollar's movements after the Fed's statement is released following the rate decision.
But for now gold is drifting around on a lack of interest. Doubt that we will see much action ahead of the data.
The FOMC rate decision is expected at 2:15 p.m. EST (1915 GMT) Wednesday.

Precious Metals Update

Gold's shooting star top off 654.60 Jan 25 high hints completion of up-leg off 602.20 Jan 5 low.

Despite bounce from Jan 26 low at 641.10, toppish momentum warn of near term top in place and risks losses beneath 641.10 and 639.25 Jan 24 low ahead of 633.70 Jan 23 low.

Loss of 626.93 Jan 18 low, however, negates potential bull leg over Aug 2006 resistances at 655.00 and 656.20 for 659.65, Jul 14, 2006 low.

Silver is cautious of the 13.535 Jan 25 shoot star top ahead of 13.692 Fib.764 level.

Momentum indicator is at overbought zone and may unwind for corrective pullback to former resistance zone at 12.955/12.965 ahead of 12.880 Jan 23 low, which should hold.

Rebound from there will resume bull trend on rising lows formation for further gains towards 13.845 and 13.995, Dec 2006 resistance zone.

US Data : 13:30 GMT out

Durable Goods Orders out at 3.1% vs 3.0% expected
Durables ex. Transportation at 2.3% vs 0.5% expected

US Data coming out in few minutes

US Durables coming out at 13:30 GMT. Expected 3.0% in Headline vs 1.6% prior
Core at 0.5% vs -1.1% prior

US Data Starts at 13:00 GMT

US data starts at 1300 GMT with the building permits revision for December, followed at 1330 GMT by durable goods orders, which are expected to jump 3.0% in December after rising a revised 1.6% in November. Boeing orders surged to 212 in December from 58 in November.

At 1400GMT, US Treasury Deputy Secretary Robert Kimmitt is due to takepart in a panel on the G20 agenda for 2007 at the annual World EconomicForum in Davos.

More US data at 1500GMT, when new home sales are expected to rise very modestly to a 1.05 million annual rate in December after a surprise 3.4% gain in December. Despite the recent improvement, home sales remain below their year-ago pace, while supply remains relatively high.

Precious Metals Update

Gold's shooting star top off 654.60 Thursday high signals possible completion of up-leg off 602.20 Jan 5 low.

Toppish momentum poised to unwind lower and risks pullback beneath former trend-line barrier at 642.23 for 639.25 Wednesday's low ahead of 633.70 Tuesday's low.

Only a break of 626.93 Jan 18 low negates the potential bull leg beyond Aug 2006 resistance zone at 655.00 and 656.20 for 659.65, Jul 14, 2006 low.

Silver is likely to be weighed down by 13.535 Thursday' shoot star top for corrective pullback to former resistance zone at 12.955/12.965 ahead of 12.880 Tuesday's low.

Expect rebound from there to resume bull leg along on the rising lows formation for a break of 13.535 preceding 13.692 Fib.764 level.

Gold clears triangle resistance

The outlook looks increasingly positive with the focus next on 656.20 and 658.91.

Gold has continued to strengthen and has recently cleared key triangle resistance at the 640.80 level.

This has also resulted in a break of resistance at 645.00, the Jan 3 high.

With momentum conditions continuing to provide a positive backdrop, further gains are favoured with the focus now on 656.20, the Aug 2, 2006 high.

A break of this level would pave the way for a climb towards 656.20, Aug 2 high where a break would open 676.35, the July 17 high.

Support has been defined at 640.89, the former triangle resistance and this would be expected to hold near-term.

Below this level, support is at 633.70, the Jan 23 low.

Silver Update

Silver focus is to 13.80/14.00 after breaking the 13.30 resistance acting now as support
Buyers poured in and stops were triggered above 13.30 resistance.

Gold Update

Even as the dollar recovers against select currencies (euro, sterling, etc...) gold maintains a toehold over $650, holding at$653.00/oz, on the high side of a $646.50 to $654.00.
The rally Tuesday over trendline resistance at $642/$643 saw some accounts "buying the break" and Thursday's further rebound above the Dec peaks at $649.50 appears to further confirm the new uptrend.
The next hurdle ahead of the summer highs at $676 will be the August peaks at $654/$655.50.

FOREX EUROPE UPDATE - USD

The carry trade suffered further overnight as BoJ hawk Suda said prolonging low rates could cause currency risks.

During the Asia session the dollar traded in a firm 1.2953-1.2972 range against the EUR, and a weaker 120.19-121.21 range against the JPY.

Policymakers globally upped the stakes against the carry trade yesterday, beginning with a Reuters report citing unnamed sources that the Europeans will seek a more forceful repetition of the message that the yen should trade in line with economic fundamentals, at next month's G7 meeting.

Meanwhile, carry sentiment has been hit by a string of bad economic news among the high-yielding bloc. Australian CPI was soft yesterday, the BoE MPC minutes were more dovish than expected, and the RBNZ kept rates on hold this morning. However, as has been demonstrated countless times over the past year, the underlying appetite for carry is not dented so easily.

As long as global financial market volatility remains low, and yield differentials between high- and low-yielders remain wide, then the fundamental arguments for a continuation of the carry trade remain.

With the outlook for global growth taking a turn for the better in recent weeks, elevated levels risk appetite may not easily diminish-our Risk Index for FX has stayed in risk-seeking territory since August. We are always wary however of a major carry breakdown.

The "big unwind" of carry could have many different catalysts. Positioning in the carry trade is very high, so a small economic development could trigger big ramifications regardless of other fundamentals. Otherwise, a reduction in liquidity provided by hedge funds (a fear of many central banks) could also unnerve investors, while a natural disaster or a geopolitical event could also prove a catalyst. An evolution in FX policy by Japan and the SNB to the point of threatening intervention to buy the yen and Swiss franc would also have a significant impact.

However, with Japan PM Abe struggling in opinion polls and the Upper House election approaching in summer, Japan's political appetite to counteract the weak yen is not there, and hence the G7 meeting is unlikely to mark the peak in the yen-funded carry trade. An unwind in carry when it eventuates will be negative for the dollar, but our principle arguments for a weaker dollar rest on expectations of slowing US activity data and the likelihood of Fed rate cuts from May onwards.

Today we have weekly jobless claims at 1330 GMT and existing home sales for December at 1500 GMT.

Precious Metals Update

Gold is holding well above former trend-line resistance near 641.29 Wednesday's low and likely to extend gains on the back of strong bounce off 633.70 Tuesday's low.
Rising momentum indicator suggest further upside towards 650.20 ahead of Aug 2006 resistance zone at 655.00 and 656.20, before capping.
Downside, loss of 633.70 risks 627.60, Jan 19 low and 620.40, Jan 17 low instead.

Silver retains its bullish bias on break of bear trend off 14.195 and former resistances at 12.955/12.965 underpin further advance.
Buoyed by series of rising lows from 12.775 and 12.635, expect next break of 13.381, Fib.618 level, ahead of 13.455, Dec 7 former low before a possible pullback.
Under 12.965/955, however, risks basing at 12.576 trend-line support.

Gold Update

Our Yesterday Short sell order has been booked in profit as mentioned, we shall see gold to target 637/640 level
With Retracement looks done, Gold is following Crude Oil movements, as mentioned earlier to follow it.
There isnt any Gold Specified fresh news driving news, and Dollar is slight Strong today, due to yesterday reaction.
Buy at dips is always favorable as gold stands at 637+

Crude Oil Pushed down

WTI crude oil prices are lower in the wake of the DoE weekly oil inventory report, which showed stronger than expected build in gasoline and distillate supplies.
However, the crude oil build was less than expected, but nonetheless, showed an increase. Natural gas prices are leading the decline.
WTI Nymex crude oil is at $54.20, down 84 cents.

Crude Oil Inventories out

Crude Oil out at 789K vs 1300K expected
Gasoline out at 4009K vs 1500K expected
Distillate out at 750K vs -250K expected
Refinery Utilization out at -0.54% vs -0.40% expected

OPEC Update

Reported comments from OPEC President Al-Hamli in Davos

- Says no extra cuts needed before March meeting

- Sees no need for action with WTI oil at $55.00/barrel

- OPEC is implementing earlier agreed cuts.

Gold Update

Gold just looking for consolidation right now as crude oil eases.
February gold is down $2.50 to $643.60 a day after hitting a 1 1/2-month high of $648.20.
Technically, nothing has happened so far this morning, with the metal within Tuesday's range.
2-3 Dollar is not that big move.
With crude oil inventories coming out today, its important to watch for it.
Gold had Technical Resistance breakout Yesterday, so its just a consolidation.

Precious Metals Update

Precious metals put in a strong showing yesterday breaking through some key levels, with signs that the longer term converging market in Gold has been broken.

An increase in physical demand and China's pledge to accumulate a commodity reserve are both dominant factors, however, a sell off in the US dollar should prove the most important factor in the short term.

The break through 642.00 in Gold was watched by all yesterday, with eager anticipation. The long awaited break came with some ease, as the market moved through with little extra volume.

We see 642.20 as support and a good opportunity for fresh longs, targeting 655.50 in the short term and 670.00 in the medium term. Keep stops against short term longs at 637.00.

Energy Futures Update

The main feature to President Bush's State of the Union speech, from a macro approach, was a "call for a diversification of the nation's energy supply".

US will expand its strategic Petroleum reserve from roughly 700 million barrels to 1.5 Billion, however note that this will be over 20 years. Purchasing of the additional supply is scheduled to begin in Spring, assuming market conditions remain unchanged. The Department would need to buy 100k barrels a day.

The market reaction for energy yesterday was bullish, however, today's weekly inventory data needs to be supportive, otherwise some downside could be seen again.
We do not anticipate the cold weather front to be factored into the weekly inventories quite yet, which could point to bearish data this afternoon.

Current levels are pivotal, as the market really is not illustrating any short term bias in either direction. We have elected a wait and see approach to short term trading.
A bullish number sets up for a move towards 58.65, whereas a bearish number could bring about losses targeting the lower end of the distribution at 51.75.

Market Update

Soft CPI reading has AUD tumbling overnight spilling over into carry trades which also reversed strongly.

JPY rising firmly as BoJ’s Fukui supports higher interest rates.

March 07 Crude touching $55/bbl shortly after the Energy Secretary Bodman said that the US government will begin increasing their strategic oil reserves.

Stocks tried lower early on yesterday but recovered strongly as the US opened.
Markets continue to consolidate and we could be in for more downside soon

Precious Metals Update

Gold staged a strong bounce off 633.70 Tuesday's low and surged above key trend-line resistance off 650.20 Dec 1 doji top.

With support zone located near 641.61/637.09, rising momentum indicator suggest further upside towards 650.20 ahead of key resistance zone at 655.00 and 656.20, before capping.

Downside, loss of 633.70 dampens and triggers pullback to 627.60, Jan 19 low and 620.40, Jan 17 low instead.

Silver's continues to surge high on break of bear trend off 14.195 and breach of 12.955/12.965 underpins a clearance of 13.200 Jan 3 high.

Buoyed by series of rising lows from 12.775 and 12.635, expect next break of 13.381, Fib.618 level, ahead of 13.455, Dec 7 former low before a possible pullback.

Under 12.965/955, however, risks basing at 12.576 trend-line support.

Futures : Energy Update

US to buy 100,000 Barrel of Oil a day for reserves
US will expand its Strategic Petrolem reserve from roughly 700 million barrels to 1.5 Billion but over 20 Years.
Purchase should begin in Spring.
Assuming similar market condition the Department would need to buy 100K a day.

Another reason for Precious Metal rise is Bolivia News

Comex gold and silver futures remain sharply higher on the day due in part to news that Bolivia plans to hike taxes on mining, while also saying the government may nationalize companies that violated privatization rules.

The news about two gold exchange-traded funds planned in India is also adding to the upside in the market. That will take more metal out of the market.

With this news also, the path of the resistance has been cleared up.

Gold Update

We short-sell gold at 644/647 with a stop above 651.00
Target 642/640
After a nice run, we expect gold to retrace, being short term overbought

Gold Update

We cleared the 645 resistance level, which was the Jan 3 high.
We are ready for a good bullish run, we shall see a slight dip, and again a rally steep ahead, the decision is Buy at Dips.
With Heavy Dollar weakness, and Crude Oil Movements, we expect Precious Metals to push higher, And as mentioned earlier this month, we mentioned around few days remaning of end of this month, we shall see a Boost in the prices.
Next month Is Very Important.

If you want more information email us at owaissivany@yahoo.co.uk

Precious Metals Futures Rally

Comex gold and silver futures are rallying as the dollar weakens versus the euro.

Dollar weakness began overnight, attributing it to a number of factors, including market talk of central bank demand from Asia and the Middle East and solid euro-zone data.

The precious metals complex responded with a rally as Feb gold jumped to a $644.80 an ounce high -- its best level in three weeks.

Feb gold is trading $9.30 higher at $643.20, while March silver is up 22 cents at $13.22

Gold Update

Gold nears the resistance zone level at 642.51 and further resistance lies at 645 - Jan 3 high.
Clearing these resistance, we are good to go for a good bullish run.
As Dollar weakness, with EUR/USD pushing up ahead 1.30 Again.

Crude Oil Futures Update

March Crude contract testing bottom of the range in overnight trading.
Yesterdays sharp reversal after hitting a high of $54.65/bl likely to see some bullish retracement to 53.00
Look to buy below 52.40, with stops under 52.10
Long term support at 51.00

FOREX ASIA UPDATE - USD

A further decline in Japanese bond yields helped boost the relatively high-yielding dollar. USDJPY traded to a high of 121.80 from 121.47, while EURUSD traded down to a low of 1.2923 from 1.2968.

US bond yields were little changed overnight with the 2 and 10-years down by 1 and 2bp on Friday's close.

However, Japanese 2-year bond yields are down by a further 3bp and a total of 10bp lower since before the BoJ decision not to lift rates last week.

Fed President Yellen mostly repeated comments she made on Jan 17 that the tight job market continues to threaten inflation but that the Fed funds rate is "well positioned" to slow inflation.

Meanwhile, oil prices closed lower at US$51.99/bbl, while the CRB index also slid, suggesting that a recovery in commodity prices may not be as fast as many had hoped.

Though recent data in the US has been firm, financial markets remain reluctant to aggressively price in a more hawkish Fed.

Core CPI and PPI numbers last week were tame, and comments from Fed officials have started to suggest that the risks to core inflation rising further are subsiding.

As policymakers globally continue to emphasise price stability, currencies will weaken where central banks loosen monetary policy.

We see the Fed as the only major G10 bank likely to cut interest rates significantly this year.

In the near term, the market is unlikely to see any significant shifts in the absence of macro events, so we expect relative value trades to continue to do well.

One near-term risk event for the dollar, however, is the planned changes to the management of China's FX reserves and the fate of the US$500bln-plus of Treasurys the PBoC is estimated to be holding.

It has been confirmed that a new investment vehicle will be established and that it has a mandate for high-yield overseas investments.

Obviously the worst-case scenario for the dollar would be for existing holdings of US assets to be sold as part of China reserve diversification attempts, but it's more likely that future accumulation of reserve assets will be on a more profit-maximizing basis, gradually removing a pillar of support for the dollar as US yields fall.

Precious Metals Update

Gold stays firm despite rejection off 640.00 Monday's high.

Holding well on series of higher lows from 627.60, Jan 19 low and 620.40, Jan 17 low, expect a push to trend-line resistance at 642.51 ahead of 645.00, Jan 3 key high, before capping for pullback.

630.00/627.60 will contain dips for now and losing 620.40 sours for deeper setback.

Silver's sustained break of bear trend off 14.195 signals further gains and breach of 12.955/12.965 bodes well for break of 13.120 Monday's high ahead of 13.200 Jan 3 high.

Rising lows from 12.775 and 12.635, Monday/Friday lows will underpin up-leg over 13.200 for 13.381, Fib.618 level, before a pullback emerges.

Beneath 12.635, however, risks a break of former trend-line resistance at 12.576, risking 12.390 and 12.320, Jan 17/12 Jan lows.

Crude Oil Update

March Crude Oil trading on strong resistance at 54.35/50, if broken up next target is 55.40.
Short term support at 53.70
Precious Metals leads higher.

Futures : Metals Update

Gold grinding higher, each retracement is used to make a higher high and Friday low to 627.3 was a platform to jump $10 higher to 637.

USD is the main driver and Gold is still extremely inversely correlated to the currency.

We expect Gold to find some strong resistance against 642.00 and its behavior around this level will be interesting to find out if we can extend towards 650 and potentially higher.

Resistance is at 631 level for Today and Intraday resistance at 637.

Energy Futures Update

February WTI Crude expiry today may add some volatility to the contract. After a few days testing the 50.00 level, Oil bounced sharply from a new low in Friday on news winter has finally settled in in the US and more recently in Europe.

Is it too little too late and this bounce only corrective? If March Crude can break the 54.00/50 area in the next few days we will look at this move up more seriously.

Until then any rally could be treated as suspect.

Natural Gas opened with a gap at $7.18 and it should have found a seasonal low point at 6.19 (double bottom). $7.50 is Target for the next days.

Gold Update

Gold dip should stop at around 631.45 level, however its a relation to buy at dips for the moment, as expected rally to flow in soon for precious metals.
Keeping with tight stop order is essential.

Market Update

USD stronger after the preliminary U. of Michigan figures, but despite the strong data, EURUSD unable to break 1.2900. Friday lows at 1.2915. The market is still looking for confimation of the USD-strength. Watch the GDP at the 31st of January.

US stocks generally lower last week after disappointing earnings forecasts from technology stock. EU stocks gaining for the fourth week in a row, on earnings and M&A activity.

Oil coming back somewhat on the increased demand due to cold weather in the Northeast of US.

Precious Metals Update

Gold is holding well above 627.60, Friday's low and resumes the up-leg off 620.40, Jan 17 low, backed by rising momentum.

Aims to unlock Jan 18 high at 636.60 before exposing bear trend-line resistance at 642.51 ahead of an eventual test on 645.00, Jan 3 key high.

Meanwhile, 627.60 will contain dips.

Under 620.40 sours for dips below 616.10, Jan 12 high.

Silver recovers off 12.635 Friday's low and poised to uncover 12.955, Thursday's high, ahead of 12.965, Jan 12 high.

Buoyed by higher lows formation at 12.390 and 12.320, Wednesday's low/12 Jan low, positive momentum bodes well for gains to 13.200, Jan 3 high, ahead of 13.381, Fib.618 level.

Support at 12.500 and losing 12.390 dampens positive tone.

Gold Update

Spot gold holds at $629.75/oz after trading in a $627.40 to$630.60 range.

Its Important to look at oil because it has been one of the major drivers of commodity markets in 2006 and the correlation between oil and gold has been stronger than that of gold and the dollar.

This correlation has been more spotty, both oil and the dollar appear to be equal driving factors for gold - although neither is dominant.

This does illustrate that it is hard for gold to rally if both the dollar is firm and crude oil weak.
However it is expected for Gold to push high very soon, due to USD$ Index to start its weakning and Crude Oil to rally soon, with OPEC to cut production.

Its good to see how Gold is reacting, with further strength and interests developing in the Market.
A Key to Buy at Dips, With Strong Support at 626.70 and 620.40. Eventually its important to keep an Eye on Crude Oil Prices

FOREX EUROPE UPDATE - USD

The dollar was again mixed overnight, sliding against the EUR in a range of 1.2957-1.3002 while remain firm against the JPY in a range of 121.15-121.40.

The dollar was initially buoyed yesterday in light of even more strong data from the US: December inflation numbers meanwhile met expectations with 0.5% headline and 0.2% core prints and housing starts and housing permits rose 4.5% and 5.5%, respectively, while weekly jobless claims falling 8k to 290k.

However, rumours of a military confrontation in the Persian Gulf late into the London session prompted a wave of EUR buying and the dollar lost most of yesterday's gains.

In policy speeches yesterday, Fed Chairman Bernanke avoided discussing the near-term economy or monetary policy, sticking to the fiscal outlook.
Going beyond these numbers, we remain concerned that macro-economic signals will start to look less pleasing once the boost from the mild weather fades, highlighting instead the trickle-down effect of the weaker housing prices.

What was interesting overnight was the failure of yields to maintain the early rise which took the 2-year notes to within a whisker of 4.95%, before reversing to end the day at the lows.

Additional concerns may come from details of China's foreign reserve management reform - details of which are expected to emerge from the crucial Financial Reform Work Meeting over the weekend.

The risk environment continues to show resilience with JPY crosses remaining in a bid tone throughout the Asian session today and with considerable good news already priced into the dollar we do not believe there is much scope for the currency to make further gains.

Ahead today, we expect little change in the Michigan sentiment index in early January after 91.7 in all of December.
We would pay special attention to the home-buying conditions sub-index within the survey for signs of any moderation to the recent pick up in the housing market conditions following recent jumps in the HMI and mortgage applications.
Fed Presidents Lacker (1300GMT) and Hoenig (1815GMT) are scheduled to speak on the economy today.

Oil Update

Crude Oil is getting hammered once again after the US Inventories.
A test of 50.00 level is now on the radar which should be broken down.
In case of a rebound, Limited at at 51.00 area where short selling should occur

Crude Oil Update

WTI Nymex crude oil falls sharply after US DoE weekly oil inventory data, which showed crude supplies rising 6.8mln barrels vs expectations of 100k barrel increase.

WTI Nymex crude oil is at $50.95

This is taking the gold with it. Should hold at the Support.

DOE Inventories Out

Crude Oil out at 6768 vs 100K expected
Gasoline out at 3491K vs 2225K expected
Distillate out at 910K vs 1350K expected
Refinery Utilization out at -3.53% vs -0.50% expected
EIA Natural Gas Storage Change out at -89 vs -80 expected

Crude Oil Focuses on DOE report

Nymex crude falls in early open outcry trading after CNBC reports US denial of military skirmish with Iran.
Feb crude -15c at $52.09/bbl.
Prices ran up as high as $52.69 around 9:50 a.m. EST on rumors of some naval interaction between the two nations.
Traders now focusing on DOE report due at 10:30 a.m.

Bernake says:

Bernake warns U.S. budget deficits may imperil economy in a Senate Speech.

Iran - US Talks

As talks moving around regarding Iran and US vessels.
Newswires have US Defense officially denying rumours of Iran strike on US Naval Vessel.

Gold Update

Technical break of 634.90 level exposes for 641.25 level.
With further GeoPolitical Situation developing.
With further resistance at 645.00 level.
We have Crude Oil Inventories coming today, Remember if crude oil pushes high, we will have Dollar weakness, and Precious Metals pushes upwards.

Fed Reserve Ben Bernake testifies at 15:00 GMT

At 15:00 GMT Federal Reserve Chairman Ben Barnake will testify about long-term US fiscal challenges to the Senate Budget Committee, in Washington.

BUY GOLD is the call - Lots of Geo Situations

Some talk of incident between US and iranian vessels in the gulf
See the reaction on Gold
Booming upside.

US Data : 13:30 GMT out

US Housing Starts Dec out at 1565K vs 1642K expected
Building Permits Dec out at 1596K vs 1505K expected
US CPI Headling Rate Mom/YoY at 0.5%/2.5% vs 0.4/2.4% expected
CPI Core Rate (ex Food & Items) at 0.2%/2.6% as expected

CPI Coming out in few minutes

US CPI coming out in few minutes at 13:30 GMT.
Headline Rate MoM/YoY at 0.4%/2.4%
Core Rate MoM/YoY at 0.2%/2.6%

Market Update

BoJ surprised the market by keeping rates fixed at 0.25%, but not the Strategy Team. We still think the earliest hike will be at the March meeeting, depending on Q1 CPI figures.

Yesterday Fed’s Beige Book still suggesting moderate expansion since the last report with labor markets still remaining tight.

Profit taking in Nasdaq shares and generally we expect some rotation out of growth names and into commodity sectors in the short term.
Key support in Nasdaq 100 at 1824.

Precious metals coming back somewhat as investors buy gold to hedge their positions against downside in other assets.

Precious Metals Update

Gold charged higher on rebound from 620.40 Wednesday's low and cleared 630.75, Jan 4 high, before touching 633.83.

Beware of former trend-line support at 634.90 and only a break there exposes 641.25, bear trend-line resistance and 645.00, Jan 3 key resistance.

Dips should hold above 620.40 to keep the up-leg intact and only a loss of last Friday's low at 610.00 dampens.

Silver was rejected at 12.965, Jan 12 high but managed to spike higher off 12.390, Wednesday's low, shielding breakout point at 12.320.

While rising lows and positive momentum signal upside potential, it needs a break of 12.965 to confirm further strength towards 13.200, Jan 3 high, ahead of 13.381, Fib.618 level.

Hourly support at 12.500 and only a relapse 12.390 sours tone.

Fed Beige Book out

Fed beige book prepared for Jan 30-31 FOMC says most reports show "econ activity expanded at a modest pace." Dallas & Cleveland slowed, Boston was mixed, Minneapolis saw "slight growth," NY and SF sawmoderate growth. Nearly all areas saw "continued softening" in hsg and had high unsold home inventories. But sales are up, mfg growing outside construction products, lending is mixed, energy exploration high. Labor mkts tightened, prices were moderately up overall.

Data was gathered before Jan 8 and compiled by Minneapolis Fed.

-Prior beige book gathered before Nov 20 saw "continued moderate growth."Jan result appears to be more of the same.

Fed Beige Book coming out in few minutes

Fed Beige Book coming out at 19:00 GMT

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Gold Update

As we mentioned last week and this week along, Gold to push higher forming a good technical pattern after clearance of 620, formed a bullish pattern.
Which signalled further gains towards 630.75 levels Jan 4 high.
Next resistance at 634.90 and break there clears level for 641.25 zone.

Gold : Buy at Dips the Call

Spot gold holds at $626.50/oz, up from an earlier low of $621.20.
The precious metal will be driven by overall dollar direction, but for now seems to be a buy on dips

The earlier sell off in gold and silver in January led to profit-taking in both metals ETFs, with one day liquidations at times beefy.

Although we consider investors in precious metals ETFs to be 'stickier', i.e. mostly long term investors who 'buy and hold', there is some evidence of faster money at work.

Recent reductions are unlikely to reflect real change in behavior and demand for gold and silver ETFs should again be seen.

Russia Terror Alert

Russia on terror Alert after warning from 'foreign partners.'
Security forces have information that extremists may be planning attacks against surface transport and the metro, the FSB security service said today.
Russia has deployed police with bomb-sniffing dogs on Moscows subways and tightened security at international Airports.

Such GeoPolitical tension, is moving around the markets, supporting the precious metals on that basis.

US Data : 14:15 GMT out

Industrial Production out at 0.4% vs 0.1% expected
Capacity Utlization out at 81.8% vs 81.7% expected

US Data reaction

The US December PPI headline figures rose 0.9%, while the core rose 0.2%, which were higher than expectations at 0.5% and 0.1% respectively. The rise was cause by the high energy-related items such as the energy costs, crude good prices and intermediate prices.
US Treasuries were little changed and so is the dollar.
EUR/USD trading little lower after the figures at 1.2916, down 3 pips today.

US Stock futures trade has slipped to session lows in response to the higher than Expected PPI figures and now suggests negative opening for equities. Total PPI rose a larger than expect 0.9% in December, which leaves the year/year rate at 2.0% for the first time since Sept. 2005

US Data out

US PPI MoM/YoY out at 0.9%/1.1% vs 0.5%/0.7% expected
US PPI ex food & energy out at 0.2% vs 0.1% expected. 1.3% in November

US Data : PPI coming out in few minutes

US PPI coming out in 25 minutes at 13:30 GMT.
Headline rate is expected MoM/YoY at 0.5%/0.7% and the Core Rate is expected at 0.1%/2.0%

Curde Oil Making new lows

Crude Oil making new lows with a still strong overall bearish sentiment. Market is focused on OPEC announcements and possible production cuts than tightness in the stock levels.
We do not want to fight the trend. 50.15/49.55 remains the big target. Below not much before 45.50 levels.
Intraday Resistance 51.40.
US Inventories coming out tommorrow.
Precious Metals reacting on the downfall of crude.

Market Update - Important PPI figures today

JGB’s rising to highest level since September as BoJ looks likely not to raise interest rates tomorrow. Rates are announced tomorrow.

Despite the low Empire Manufacturing data, the USD continued higher. US PPI today and CPI tomorrow will prove whether or not the current dollar rally is for real.

Overall market range-bound but plenty of action at the sector level: technology and banks still firm while energy shares continues to be under pressure.

Gold Update

Last weeks sharp bounce has neutralised the recent bearish theme and the metal is likely to remain consolidative for now.
Key resistance has been defined at 645.00, the Jan 3 high where a break is required to reinstate a bullish theme.

Oil Update

Saudi Oil Minister Naimi reported saying that Saudi Feb spare capacity will be 3 mln bpd, adding that long term investments not moved by short term price movements.

FX Technical Levels

EURUSD holds below 1.3054.
Recent EURUSD upward correction from Friday's 1.2865 low is holding well below the 1.3016 to 1.3054 congestion resistance, the latter being a noteworthy reaction high on the hourly chart from last Tuesday.
Only a move above there would jeopardize the underlying bear trend.
Until then, our focus will remain on the 1.2865 short-term trend low.

USDCHF's recent pullback from 1.2530 is thus far holding above congestive support in the 1.2409 to 1.2400 area, keeping the underlying bull trend intact.
An eventual move above 1.2530-the current trend high-and then the Nov 17 1.2538 high would reinstate the bull trend for a push above the 1.2583 Nov 6 high.

GBPUSD broke initial mild support 1.9624 recent reaction low, but secondary support from the 1.9537 previous breakout high should limit the corrective pullback from 1.9707.
As long as it does, we'll keep our focus on the Jan 2 1.9753 tough reaction high. A move above there would expose key resistance at 1.9849, last year's high.

USDJPY posted a new trend high Tuesday but without much subsequent follow through. Nonetheless, hourly momentum indicators remain constructive and should aid a run toward the 121.41 high from December 2005.
Solid support from the bottom of the recent consolidation is in the 120.06 area.

AUDUSD recent corrective rise from 0.7759 is thus far holding well below resistance at 0.7897, the 61.8% retracement of the 0.7982-0.7759 decline.
Only a rise above this area would jeopardize the case for an eventual move towards support from 0.7705 to 0.7698, the Nov 22 low and the 50% retracement of the 0.7414-0.7982 rally, respectively.

USDCAD's recent bull trend has stalled thus far at 1.1805, Jan 11 high. The break of the Jan 12 1.1685 low exposes the Jan 2 1.1625 low.

Lower Oil Supports Dollar

The US dollar was given a lift by Japanese TV reports that the BoJ may opt to leave rates on hold at Thursday's meeting.

Lower oil prices may also have contributed with the benchmark Nymex crude contract now trading at US$51.25/bbl.

In the end EURUSD traded from a high of 1.2975 down to a low of 1.2908, while USDJPY traded up to a high of 120.77 from 120.42.

Yields are slightly lower on the session, due to a weaker-than-expected Empire Manufacturing survey, with the 2 and 10-years down by 2 and 3bp respectively on Tuesday's close.

Rate markets are pricing in little chance of a near-term easing by the Fed and are no longer even fully pricing a cut by the end of this year. Of course, there is always the risk that strong economic data will continue to surface, in which case the market could even consider pricing in the risk of a rate hike this year, in expectation that the Fed could adopt a similar path to the BoE.

The markets should also be a little wary of the ongoing decline in oil prices in the absence of real economic justification. It could be a signal that funding conditions are deteriorating, in which case the current favourable environment could be jeopardized to the detriment of the USD and other high-yielding currencies.

Looking ahead and PPI for December is due at 1330 GMT and the TIC report for November is due at 1400 GMT.

US Congeressional office Building was being evacuated...

The US Congeressional Office building was being evacuated earlier which was related to water problem, CNN said.

Rumor moving around the market

Rumor circulating that the US Congress has been evacuated

NYMEX Crude Oil Technical Levels

Head-&-Shoulders Targets $31.75

RES 4: $56.20 Daily high 9 Jan
RES 3: $54.73 Daily high 11 Jan
RES 2: $54.15 Neckline of head-&-shoulders pattern
RES 1: $53.55 Hourly high

LAST PRICE: $52.10

SUP 1: $51.56 Daily low 12 Jan
SUP 2: $50.90 Daily low 1 June 2005
SUP 3: $50.00 Psychological level & Daily Bollinger band base
SUP 4: $49.75 200-week moving average

Head-&-shoulder pattern break on continuation weekly charts now targets a measured move to $31.75 following break below neckline at $54.15. Ahead of this, key interim support is at the 200-week moving average at $49.75, which is seen stalling. The daily studies remain bearish. Initial resistance is at $53.55.

US Data : 13:30 GMT out

Empire Manufacturing out at 9.1 vs 19.3 expected

US Data coming out in few minutes

US Empire Manufacturing January figures coming out at 13:30 GMT. The Market expected a drop to 19.5 from 23.1 in December

Precious Metals Update

Gold retains bullish bias on its recent surge above 620.00, signaling firmer gains towards 630.75, Jan 4 high.

Watch out for former trend-line support at 634.90 and only a break there clears way for 641.25, bear trend-line resistance and 645.00, Jan 3 key resistance.

Dips should hold above 616.10 to keep the up-leg intact.

Relapse of last Friday's low at 610.00, however, threatens 607.07 and 602.20, Jan 5 low.

Silver cleared 12.950, bear trend-line off 14.195, Dec 5 high, and bullish momentum indicators are set to rise further.

Hence, expect next break of 13.000 to sustain latest up-move towards 13.200 Jan 3 high.

Former congestion between Jan 5 high at 12.750 and 11 Jan high at 12.535, will contain dips for now.

Market Buzz

Yen strength overnight as Japanese Finance Minister Omi says that he won’t oppose to a BoJ hike on Thursday.

We still expect US data should prove to us whether or not the current dollar rally is for real. Watch Empire Manufacturing today.

Quiet session in equity markets as the US was closed. Big tech-week wrt. earnings: Intel, Apple, IBM and Motorola.

The announcemenets from OPEC to make an early output call did not have any effect in the market. Still trading below $53/bbl.

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Crude Oil pushes lower

WTI Nymex crude oil is hitting fresh session lows below $52.65 following news that the fire in Chevron refinery has been contained.
The risk say traders is on fresh 20-month lows below $51.56 to test the 200-week moving average at $49.70, with thin volumes for remainer of the electronic session as Nymex floor trading is closed in observance of Martin Luther Day holiday.

Precious Metals FUTURES Update

Precious Metals finished Friday with a big Daily candle implying some further upside in the days to come.

Inversed correlation with the USD is still strong.

Traders had anticipated a solid US Retail Sales release were not disappointed.

It resulted in short covering in USD sending Gold and Silver higher.

Gold Futures is now supported at 615/617 and Target could be set at 642 on a break of 631 resistance
Silver Futures first support at 12.80 area and Target is 13.26.

Equities Update

This will be a short week for the US financial markets. Exchanges are closed today, monday in observance of the Martin Luther King, Jr. holiday.

Starting Tuesday, earnings season will start to heat up with a bunch of companies scheduled to report, the big names among are Intel, Apple and Merril Lynch.

All eyes on Apple: Apple seems to be on everybodys lips theese days, thus three brokerage analysts have positively revised their forecasts within the past 30 days. The current consensus estimate calls for the recently renamed company to report profits of 78 cents per share, a penny above the month-old projection. The Most Recent Consensus is more bullish at 80 cents per share. Apple has topped expectations by a margin of 10 cents or better during three outof the past four quarters. The stock rose notably this week following the unveiling of the iPhone, but federal authorities are investigating a back-dated option grant awarded to CEO Steve Jobs and the company is being sued over the "iPhone" name, so there are factors outside of earnings that could affect the stock price. Apple will report on Wednesday, Jan 17, after the close of trading.

Oil Update

Kuwaiti oil minister says OPEC may hold emergency meeting soon if oil prices fall further.

FOREX ASIA UPDATE - USD

The US dollar finished slightly weaker on Friday despite a strong retail sales report, with EURUSD trading up to a high of 1.2945 from a low of 1.2865, while USDJPY traded between 120.16 and 120.65.

Retail sales for December were released on Friday and rose by a strong 0.9% m/m, stronger than market expectations of a rise of 0.7% m/m.

While US markets are closed today for the Martin Luther King holiday, this is actually a very busy week for market data and events.

On the data side PPI, industrial production and the TIC report are due on Wednesday, jobless claims, CPI and Philly Fed on Thursday and the Uni of Michigan consumer sentiment index is due on Friday.

There are a number of Fed speakers this week too, with Bernanke testifying before the Senate Budget Committee on Thursday and Yellen, Poole, Pianalto, Lacker and Hoenig also speaking at various events.

Amid all this, Fed Chairman Bernanke seems unlikely to signal anything other than the "vigilant but on-hold" message adopted by the Fed over the past few months.

The implication is that we will need to be patient in trading our bearish USD targets although we remain of the view that economic data in the US will slow over coming months, and the risks are still biased towards the Fed cutting rates much earlier than current market expectations.

Gold Update

Gold earlier cleared the 622 Resistance level, with a good level of strength. Some talks were making the rounds among the traders that Russia is increasing the percentage of Gold holdings in their reserve mix, one of the factors behind the 15 USD rise today.

Comments from ECBs Gaspari

Comments on the wires from ECB's Gaspari
- Eurozone interest rates continue to be accommodative
- ECB needs to take into account incoming data, be pragmatic
- ECB has not taken decision about future interest rates
- Premature to judge if fall in oil prices will last
- Some signs effect of German VAT increase may be lagged, less strong
- Not all productivity gains should go into wage increases

US Data out : Business Inventories

Business Inventories out at 0.4% as expected.
October figures revised to 0.2% from 0.4%

NYMEX Crude Oil Technical Levels

Bears Eye 200-Week Moving Average
RES 4: $57.72 Daily high 8 Jan
RES 3: $56.20 Daily high 9 Jan
RES 2: $54.73 Daily high 11 Jan
RES 1: $53.95 5-day moving average

LAST PRICE: $52.08

SUP 1: $50.90 Daily low 1 June 2005
SUP 2: $50.00 Psychological level
SUP 3: $49.70 200-week moving average
SUP 4: $46.20 Daily low May 20, 2005

Bears remain in control with not much significant support seen until $50.85/90 and below key level downside target at the 200-week moving average at $49.70. Look for some short-covering off here initially ahead of the long-weekend break. However, m/t risks seen skewed lower to $45.35 -- 50.0% of Dec 98 to July 06 rally.

Gold clears the resistance

Gold Successfully clears 616.10 resistance level.
Next head comes at 622

Gold Update

As mentioned earlier, 616.10 stands a resistance point for gold.
Gold is facing hard time to cross this level.
Crossing this level hits 622, where another resistance lies, Confirming that, we shall see a rally upwards, clearing 620, which needed to confirm it comes up with a Solid fresh strength, and not a fake hit.

Dollar gets a lift

Dollar gets a kick higher on the better than expected retail sales report and high import price data.

Data out

Advance Retail Sales out at 0.9% vs 0.7% expected
Retail Sales Less Autos out at 1.0% vs 0.5% expected
Import Price MoM out at 1.1% vs 0.6% expected
Import Price YoY out at 2.5% vs 1.2% prior

US Retail Sales coming out in few mins

In 20 minutes (13:30 GMT), we have US retail sales figures for december coming out, the market is looking for 0.7%

Futures : Energy Update

Crude oil hitting a 19th month low at $51,80/bbl and still looks weak.. even if there will be some short covering going on pressing up the market intra day perhaps as high as 53,50 traders should be prepared for an attempt of the psychological level $50 next week.

From a technical point of view next support would come in at $49,75/bbl. what will be critical next coming up is OPEC concerns where falling price obviously effecting income severely.

Assuming further cuts in production would not be a too daring thing to say. U.S weather would be the second factor, with children playing soccer in New York dressed in T -shirts with a nice temperature of +21 Celsius does not exactly support oil prices but mid- winter as it is this could turn very quickly and be the joker for upcoming.

Precious Metals Update

Gold was rejected below the tough resistance zone between 616.10 and 620.00, Thursday's high and congestion.

The latest retreat bodes ill and signals bear leg extension off 645.00, Jan 3 and 626.30, Jan 5 highs.

Hence, expect an eventual clearance of 606.25 and 604.17, Tuesday and Monday lows.

Beneath there violates 602.20, Jan 5 low, preceding a drop to 594.54, Fib.618 of 560.13 to 650.20.

Beyond 620.0 needed to confirm fresh strength.

Silver's close on Thursday as a shooting star top off 12.535 warns of down-leg continuation.

Weighed by the falling moving averages, down-leg from Jan 3 bearish engulfing high at 13.200 is likely to unlock 12.215 Wednesday's low, before breaking 12.064, Monday's low for 11.965 and 11.899, Oct 31 low and fib.618 level.

Failure to hold there risks 11.695, Oct 25 low.

Market Buzz

The BoE surprised the market with a hike again yesterday. SNB’s Roth also very hawkish. EUR taking a hit, but the European rate outlook shold be supported mid-term.

Strong stocks showing lack of concern.

Fixed Income selling-off. Economic strength is being priced-in in all asset classes – except for Japan (for the time being).

AUDJPY going to 100.

FOREX ASIA UPDATE - USD

USDJPY broke 120 yesterday and has traded to a high of 1.2065, while EURUSD has traded to a low of 1.2882 in response to a less hawkish than expected ECB.

With central banks around the world prepared to surprise the markets, implied volatility for currencies should be higher.

The very low volatility in the currency markets over the past year is linked to both very low levels of macroeconomic uncertainty coupled with very high levels of liquidity, squeezing out returns wherever they appear.

However, liquidity and volatility are jointly determined in that a rise in volatility can trigger a reduction in liquidity and likewise a reduction in liquidity can trigger a rise in volatility.

The decline in oil prices (Nymex benchmark crude is trading at US$52.07) has many scratching their heads, with many analysts attributing the decline to warm weather conditions.

However, that doesn't explain the simultaneous decline witness in other commodity markets, and a more likely joint explanation is stop-loss selling by the hedge fund community.

Over the first two weeks of 2007 we have had both an increase in policymaker uncertainty and some tentative signs that liquidity could be reduced, but despite that currency vols have headed lower.

Retail sales are released later today and could have a fairly influential impact on Fed expectations for this year.

The link between the housing market and the broader economy is via the consumer, so while the improvement in payrolls last week raises hopes for the US economy, it will be consumption data where the debate over the US outlook is settled.

Looking ahead, and retail sales for December are due at 1330 GMT. The market expects a rise of 0.6% m/m, following the 1.1% m/m rise in November.

BOJ Governor Fukui is now speaking

BOJ Governor Fukui is now speaking at a meeting of Branch Managers in Osaka:
Saying Japans economy continuing to expand moderately
Can keep very low rates for a while

Futures : Metals Update

Precious metals are still range trading and the longer time that passes where we fail to break the $615 area for Gold and $12.60 for Silver, the greater is the risk to the downside.

Yesterday’s lack of reaction to follow the +13 cents jump in Copper is another factor of the short term weakness.

Need to move above $621/622 in gold, before the bulls begin to drive Gold.

Futures : Energy Update

Commodities as a whole continued their weak start to the year. WTI continued lower, trading below the $55.00 level with little sign of recovery.

The latest US weekly inventory data resulted in a strong number for gasoline, but it also shows further "builds in oil product inventories above seasonal norms due to the continuation of high refinery runs".

EIA data showed Crude inventories dropped by a huge 5000k barrels against forecasts of only 500k barrels.

Distillate stocks were up 5400k barrels against the expected 2200 barrel gain as a result of the drop in demand for heating oil, in line with the warmer weather spell in the US.

In lieu of the negative sentiment, we move our stance to neutral and await a signal in the market before entering into new positions.

Equities Update

Apple Computer (AAPL) continues to clogg news wires following their announcement of the company entering the mobile phone business. Today, Apple was sued by Cisco Systems over its new iPhone a day after Chief Executive Officer Steve Jobs introduced the device to major fanfare in San Francisco. Cisco says us of the name violates its trademark. The lawsuit was filed after talks to share the iPhone name ended, San Jose, California-based Cisco said in a statement. In other words, Apple asked first if they could use the name then, after being told "no", they went ahead anyway. Apple stock is a bit lower in pre-market trading, Cisco a bit higher. We'll stick with our call on Apple in the short-term: it should reach for $100/105 on pure momentum alone.

Looking at the broader market, the late-session rally in the US prompts us to believe that markets will continue higher today: S&P 500 trades in a narrow consolidation range 1402-1431 and break in either direction would mean acceleration. Chances are, that 1431 will hold before tomorrow's US retail sales data is released.

FX : EUR/USD

EUR/USD lower as the market are awaiting the "V" word from Trichet (V = Vigilant) no such word yet.
EUR/USD met some bids around 1.2950 and more at 1.2925/30 level where a large Asian names was seen yesterday

Trichet says :

Trichet says Acting in firm and timely manner is warranted

Trichet says :

Trichet says rising rates have only had limited effect on M3

Trichet says :

Trichet says renewed oil price increases are a price risk

Trichet says :

Trichet says 2007, 2008 inflation seen howering around 2%

Trichet says :

Trichet says firm, timely action needed to safeguard prices, anchoring price exprectations key for growth.
Situation in Labor market has improved further.
Robust Economic growth has continued

Risks to growth outlook lie mainly on downside

Trichet says :

Data confirm december rate increase was right,
Data confirm need for very close monitoring
ECB Interest rates still at low levels

ECB keeps rates unchanged

ECB keeps interest rates unchanged at 3.50% as expected

ECB Rate decision coming out in few minutes

ECB announces rates in 10 minutes.
It is expected that rates are unchanged at 3.50%.
However look out for Trichets comments at 13:30 GMT

BOE: Output continues to risk at firm pace

Output continues to rise at firm pace
- Broad money growth remains rapid
- UK domestic demand has grown steadily
- Sterling has risen, oil prices have fallen back
- UK spare capacity adding to price pressures
- Likely CPI will rise further over target near term- CPI falling back later

BOE Hikes rates 25bp

BOE Hiking rates 25bp to 5.25% vs 5.00% expected

UAE Central Bank governor says

UAE central bank governor reported saying,

- Bank pauses in euro buying, sees euro near peak vs dollar

- To wait for euro to dip vs dollar before resuming purchases

- Aims to hold 10.0% of reserves in euros by end Q3 vs 3.0% now.

IEA Chief Mandil Reported saying earlier

IEA Chief Mandil reported saying,
- Happy to see oil prices going down, should fall further
- Oil prices moving closer to fundamentals
- Agrees with OPEC that market is 'well supplied', but believes more stocks need.

FOREX EUROPE UPDATE - EUR

The market expects the ECB to hold rates steady at 3.5% today, but uncertain remains regarding when to expect the next hike.

Investors will be listening for the word "vigilance" and EUR performance ahead today will hinge on Trichet's speech scheduled at 13:30 GMT.

Yesterday French industrial production numbers for November came in weaker than expected, with manufacturing production down 0.2% on the month against expectations for a 0.5% rise.

The data is in contrast to strong German numbers earlier in the week and serves as an important reminder that Germany is not synonymous with the Eurozone.

The Bank of England will announce interest rates at 1200 GMT and we expect the recent run of weaker data will further dampen hawkish sentiment on the MPC.

UK November trade numbers came out worse than expected yesterday, which may raise concerns about the GBP's recent trade-weighted strength.

We continue to see downside risks to market pricing of further MPC tightening and upside risk for the EUR vs. a number of key crosses.

Market Update

Fed’s Officials are generally comfortable with the US economy, indicating that Fed is far from lowering rates.

Fixed Income did not move at all yesterday. Bearish tone in bunds.

Technology and banking taking US market higher. Apple pushing strongly higher on i-phone story.

FX Update : USD/JPY

USD/JPY is moving towards the 120.00 and we hear about stops above.
If taken out next resistance at 120.22

Crude Oil pushes down

Crude oil futures continue to trade sharply lower, with the front-month Nymex contract down almost a full dollar at $53.07.
At the overnight Asia low, the Feb contract was down $1.08 at $52.94.
Overnight data from the States, showing a rebound in stocks, helped push the price lower.

Precious Metals Update

Gold poised to extend fall from 645.00, Jan 3 high and 626.30, Jan 5 high.

Negative signals from the bear cross of the moving averages and falling momentum indicator are also suggesting further downside ahead.

While barriers at 615.76 and 620.00, Tuesday's high and congestion, stay intact, expect dips to 606.25 and 604.17, Tuesday and Monday lows.

Beneath there unlocks 602.20, Jan 5 low ahead of 594.54, Fib.618 of 560.13 to 650.20.

Beyond 626.30 needed to offset bearish pressure.

Silver entrenched within the down-leg from Jan 3 bearish engulfing high at 13.200.

Negative tone intact and remains vulnerable for another drop before corrective recovery emerges.

Hence, expect bounce off 12.064, Monday's low to repel off 12.550 congestion for pullback to 12.064 ahead of 11.965 and 11.899, Oct 31 low and fib.618 level.

Failure to hold bodes ill for 11.695, Oct 25 low.

FOREX ASIA UPDATE - USD

The US dollar strengthened further overnight on a smaller-than-expected trade deficit, and a recovery in investor sentiment.

The dollar was also likely given a boost on stop-loss buying as EURUSD broke down further and traded to a low of 1.2931 from a US session high of 1.2996. Measures of risk aversion eased further overnight, with the Vix index closing at 11.47, and implied currency vols came off further, with EURUSD 3-month implied vols now at 6.25%, the lowest since Nov 21. US equity markets also managed to finish higher despite yesterday's sharp decline in the Nikkei.

We are still cautious however and view yesterday's drop in the Nikkei as suggestive that equity investors are quite amenable to taking profits given the right excuse.

We are not convinced that the global growth outlook is as rosy as policymakers would have us believe and think that investor sentiment could easily take a turn for the worse on any negative economic developments, particularly as trading themes for 2007 have yet to be entrenched.

However, any deterioration in risk aversion at this juncture would likely be quite different from the May/June episode last year, when EM currencies fell sharply, the yen weakened and the US dollar rallied. The May/June episode was triggered by confusion over a hawkish Fed Chairman Bernanke who was keen to emphasise his inflation fighting credentials. That caused US short-term yields to rise sharply and investors took profit on extended positions funded out of the dollar. Also, BoJ tightening expectations were at a peak prior to the episode and were scaled back due to perceptions the BoJ could not hike in the context of a falling Nikkei.

As such, the May/June bout of risk aversion was rather unique in that it triggered strength in the generally risk-averse dollar and weakness in the typically safe-haven yen. This time around, however, risk aversion is likely to be driven by concerns over the global economy and will occur at a time when BoJ tightening expectations are already quite flat.

Also US inflation expectations are quite stable and low relative to May last year and we think the Fed is more likely to swing to rate cutting mode than further tightening.

As such we would expect the US dollar to weaken against the yen and to also lose ground against the euro if investor sentiment were to deteriorate.

In general though high-yielding currencies should suffer the most and we would be cautious on NZDJPY and are currently long AUDNZD in the lead-up to the RBNZ meeting on Jan 25.

Looking ahead and President Bush will speak on his Iraq strategy, however, the details have already been widely flagged in the press so we are not expecting market moving comments. More important for the markets will be the BoE and ECB rate decisions, where we expect ECB President Trichet to adopt a hawkish tone.

Data reaction

The US Trade Balance was better than expected and confirming improvement in trade patterns for the US - at least including energy, which has been heading a lot lower in the last months.
This should be a positive for the USD, which is still not breaking the 1.2980 in EURUSD for real.
Look for a daily close below this level(since it already made two fake-breaks intraday) to point lower.

US Data : Trade Balance out

US Trade Balance for November out at -58.2B vs -60.0 Expected

US Data coming out in few minutes

US Trade Balance coming out in few minutes

Futures : Metals Update

Precious Metals had a relatively quiet session yesterday after trading -$2.21 in February Gold at the Comex Open. Support came from OPEC’s announcement that the production cut will be implemented immediately.

We note that a short-term bottom has been made in the past few days above 600 for Gold and 12.10 for Silver, however both metals did not manage to break strong resistances at 617/20 for Gold 12.60 for Silver.

We keep our bias skewed to the downside short term as we expect the OPEC announcement to have a very short term effect.

We could see some sideway trading before the US Retail Sales on Friday as the EURUSD slide was stopped close to the 1.29 level, on the negative hand lower Oil price could pressure the metals.

Market Update

Japanese 6-months rates making 10-year highs. While still low, this is a symbolic event that could stir up some of the most risky trades. Look for more EM weakness (ISK, ZAR, TRY already falling).

Stocks are not really moving.

US Trade Balance in focus today. Expectation is a deficit $60B, slightly worse than last month, but it would be a confirmation that the downtrend could now be broken (bullish USD).

EURUSD didn’t manage to close below 1.2980 (fake break twice on Monday and overnight).

FOREX ASIA UPDATE - USD

The US dollar strengthened overnight against all major currencies and in particular against the Swiss franc.

It appears that as the second week of the new year continues without drama, investors are feeling assured enough to return to the carry trade, helping to push USDJPY higher.

US crude prices dropped by US$2 to a 1-1/2 year low overnight of US$53.88, before settling at US$55.64/bbl, still down 45 cents on the previous session's close.

Meanwhile, measures of risk aversion have dropped further, with the Vix index now at 11.91 and EURUSD and USDJPY currency implied vols drifting lower on reduced demand.

The improvement in payrolls reported on Friday has contributed to the reduction in risk aversion this week. However, payrolls are a lagging indicator of the economy and in recent times have proved vulnerable to spectacular revisions.

Economic data was second tier overnight, and of greatest interest were reports that the issue of currency manipulation has surfaced again in Congress.

Two Republican congressmen have proposed legislation they call the Currency Harmonization Initiative through Neutralizing Action Act (CHINA).

The act would impose automatic tariffs on any country that is labeled a manipulator by Treasury (currently, the manipulator label carries no automatic sanction).

This will likely be a hot topic in Congress over the coming months.

We still expect US activity data ahead of the March 27-28 FOMC meeting to turn negative, contributing to both lower US yields and higher macro policy uncertainty.

The next key data release in the US is retail sales on Friday.

Looking ahead and Fed's Moscow speaks at 1730 GMT, but is unlikely to depart from the standard offering that inflation remains a concern. President Bush speaks on his Iraq strategy tomorrow morning Asia time (Wednesday evening US time). The BoE and the ECB announce rates on Thursday.

Futures : Oil Update

Interesting to note that the CFTC Report shows that Short positions have been built massively over the last week (+25.1K) and that 165.5K lots gross short position is not far from the highest of the year, highlighting the risk of short covering if the current wave of pessimism lessen

WTI Nymex Crude Oil Broker long term support

WTI Nymex Crude Oil Broke long term support at 54.90, nothing much before 50.00 level, we could see a big acceleration to the downside.

This downward shall bring precious metals to be pushed down.

Futures : Metals Update

After the massive sell-offs in Gold and Silver market finally halted its decline yesterday and corrected slightly, as both metals both look a bit overcooked there should be some room for corrections to the upside.

Feb Gold found supports above the $600 print where buyers once again entered the markets looking to offset at 618 area ( former supports level) on a short term notice.

A temporarily weakening of the USD should offer supports to higher gold.

Silver shows somewhat the same pattern as Gold where correlative levels in the March contracts would be 12,10 supports 12,57 resistance..

Silver correlations to Gold and the USD is of course vital but there is another factor to add in as well, Copper. the copper market has deteriorated significantly past three weeks as demand ( and outlook 2007) for the industrial metal predominantly from China, is declining..

However, current price levels at 253 cents/lb compared to 330 in early December is far more attractive to bullion buyers and should bring back Copper buyers to the market, at least for now, correcting levels to 280 cents/lb resistance area.

Energy Futures Update

Where will oil find supports ? this question is probably the most asked in the entire industry at the moment but for whatever its worth last three trading sessions has found a support around the $55/barrel in Feb WTI crude oil, if this proofs correct we should see a double bottom forming with the first leg from mid-November, with a correction factor back to $60 as a result.

Yesterday´s strong rejection of the $55 level gives an indication buyers are luring in the area.

However, if inventories and the mild weather in the U.S continues showing good numbers and extraordinary high temperatures further drops can be expected, leading to increased action from OPEC in an attempt pressing up prices once again.

Inventories tomorrow might give a lead.

Whats going in the market?

Fed’s Kohn did what we feared – that core inflation still is too high to start cutting rates and does not see the inverted yield curve as a sign of economic weakness. The inability of EURUSD to close below 1.2980 suggests a range bound FX market.

Stocks rose on the Fed comments. Technology leading the market higher. Energy sector also taking back some of last week’s heavy losses.

Precious metals correcting higher as the USD is picking up offers in the market.Gold and silver correcting highee Bunds closing below key support. Very bearish. US10Y’s likely to follow suit.

Precious Metals Update

Gold continues to retain bearish bias on reversal from 645.00, Jan 3 high and 626.30, Jan 5 high.

While rebound is capped at 612.17/615.51, Dec 18 and 19 former lows, expect further dips towards 598.50 and 594.54, Oct 31 low and fib.618 of 560.13 to 650.20.

Only a break of 626.30 negates bearish pressure.

Silver remains entrenched within the downtrend extended from Jan 3 bearish engulfing high at 13.200.

Falling momentum indicators suggest another down-leg before any meaningful corrective recovery emerge.

Therefore, expect rebound from 12.064 to repel off 12.550 congestion for pullback below 12.064 ahead of supports at 11.965 and 11.899, Oct 31 low and fib.618 level, respectively.

Failure to hold there bodes ill for 11.695, Oct 25 low.

NYMEX Crude Oil Technical Levels

So Far Capped By 5-day MA
RES 4: $61.55 Daily high 2 Jan
RES 3: $59.43 Daily low 17 Nov
RES 2: $58.58 Daily high 4 Jan
RES 1: $57.75 5-day moving average

LAST PRICE: $57.26

SUP 1: $56.00/05 61.8% of $57.75-54.90 & Daily Bollinger band base
SUP 2: $54.85 38.2% of $78.40 to $16.70 & YTD low 17 Nov in WTI
SUP 3: $53.05 Daily low 13 June
SUP 4: $52.22/30 Recovery low 9 June & 38.2% of $78.40 to $10.35

Price has squeezed up to the 5-day moving average at $57.75 in electronic session, and whilst this caps, the risk is perhaps on a resumption of the downtrend. The daily studies, whilst oversold, are still maintaining their bearish trends, and break below $56.00/05 support seen finally breaking key support at $54.85.

ECB's Trichet says :

ECB's Trichet, speaking in capacity as chairman of BIS, says that G10 Central bankers see global growth continuing this year, though some rebalancing seems likely

ECB's Trichet, says BIS expected US slowdown would be limited and unlikely to be contagious.
He warned that upside inflation risk remained clear.

Bullets from Trichet on press conf from G10 meeting

Bullets from Trichet on press conference from the G10 Meeting:
Global outlook is encouraging,
Trichet confident that global economy can cope with US slow down,
Global Liquidity is abundant
Unwinding of low-risk premia is risk to growth,
Probability of risks materializing is low.

Russia says Belarus is siphoning off oil..

Russia says Belarus is siphoning off oil from its European pipeline.
The Pipeline has been shut down in order to curb such further activity.
Support in Fed WTI Crude at 56.25, resistance at 57.15

Oman CBank Says

Reuters reporting the following comments from Oman CB chief, Öman plans to keep 80% of US$5 Billion CBank reserves in USD, and favors USD over EUR for reserves because of Higher Yield

Crude Oil - Saudi will reduce oil output

Wire reporting comments from a Saudi source
- Saudi Arabia will reduce oil output by 158,000 bpd from Feb, in line with OPEC accord.

Precious Metals Update

Gold continues to reverse sharply from the key bear trend extended off 676.35, Jul 17 top.

Fall from 645.00, Jan 3 high and 626.30, last Friday high ignited fresh round of losses which breached key 612.17, Dec 18 low.

Expect further dips towards 598.50 and 594.54, Oct 31 low and fib.618 of 560.13 to 650.20.

Barriers are located at 612.17 and 618.20.

Only a break of 626.30 negates bearish pressure.

Silver pullback from Wednesday's bearish engulfing high at 13.200 accelerates past 12.315, Dec 18 key support.

Failure to hold there bodes ill for deeper down-leg to 11.965, Oct 31 low and 11.899, fib.618 of 10.480 to 14.195 advance, preceding a test on 11.695, Oct 25 low.

Former supports at 12.315/12.415 will cap and only a break of 12.750, Friday's high offsets negative tone.

Comex Gold Futures pushed down by Fund Selling

Fund selling has occurred in Comex gold and silver as the dollar firmed after a strong jobs report.
Another influence has been soft crude oil.

The momentum is selling in gold, though the approach of the weekend is keeping buyers away due to concerns the recent dollar strength will continue.

Feb gold is down $9.70 to $616.50 an ounce, and March silver is down 29.5 cents to $12.54.

Gold Update

As mentioned earlier, gold is looking to push down towards 612.17 pivotal due to technical break down from 624.10 levels and setback to 618.20 levels which couldnt be hold well.
If 611-612 doesnt holds well we shall see 605.30 as next support

Dollar gets a lift

Dollar gets a lift as NFP surprises to the upside in significant fashion.

Very good figures out of the US NF Payrolls were beating all estimates and the previous figure for November was revised higher at the same time.

Very positive for USD and Negative for fixed income

This could set in motion another wave of speculations about rate hikes.

Remember, that jobs data from Canada and the Euro-Zone were also good today.

Look for new lows in fixed income

US Data : 13:30 GMT out

Unemployment rate out at 4.5% vs 4.5% expected
Average Hourly earnings MoM/YoY out at 0.5%/4.2% vs 0.3%/4.0% expected
Average Weekly Hours out at 33.9 vs 33.9 expected
Change Non Farm Payrolls 167K vs 100K
Change in Manufacturing Payrolls -12K vs -15K

US Data releasing in few minutes

US Data is releasing in 30 minutes at 13:30 GMT
Change in Nonfarm Payrolls
Unemployment Rate
Change in Manufacturing Payrolls
Average Hourly Earning MoM
Average Hourly Earnings YoY
Average Weekly Hours

We have other set of US Datas releasing today as well.

Crude Oil Update

Oil prices are still in focus on Friday.

Having bounced back from early lows in Tokyo trade, front-month NYMEX crude futures are still under pressure.

Any break below $54.86 would mean fresh lows since mid-2005. The Feb contract was last at $55.60, holding above the $55.27 session lows.

The contract rallied to $56.01 at one point in Asia on short-covering but mild weather and inventories data are still seen weighing.

FOREX ASIA UPDATE - USD

The US dollar has continued to firm, with EURUSD extending its decline to lows around 1.3076.

The CAD was the weakest currency overnight, losing out due to a rout in energy prices, with benchmark Nymex crude oil futures closing at US$58.32/bbl, not too far off 52-week lows of US$54.86/bbl.

Indeed commodity prices in general have collapsed and the Dow Jones AIG Commodity Index is now down 4.4% on the week.

The drop in commodity prices is further reducing global inflation pressures and US 2 and 10-year yields are down by 6 and 7bp respectively.

However, we should note that it wouldn't take much for concerns over Iran to cause oil prices to rise again, with President Bush warning that he does not see peace with Iranians developing nuclear weapons.

The dollar's better tone seems consistent with a market environment which is pricing relatively little risk of near-term Fed easing and which continues to favour higher yielding currencies.

We continue to expect US data going forward to show increasing signs of labor market weakness and this is key to realizing our expectation that the Fed will cut rates at its second meeting of the year in March.

Data in line would probably not be decisively weak enough to set markets off on a new round of Fed rate cut speculation, and we might need to wait for confirmation from more minor releases later in the month before we start to see dollar downside accelerate.

FX Update

USD/JPY next support for this cross is seen at 118.18

EUR/JPY next support is seen at 154.05

AUD/JPY next support seen at 92.37

NZD/JPY next 2 level support seen at 81.86 and 81.01

Precious Metals Update

Gold remains pressured on recent pullback from the key bear trend extended off 676.35, Jul 17 top.

The fall off 645.00 Wednesday's high broke 624.10, a key bull trend off 612.17, Dec 18 low and that signals deeper setback to 618.20, Dec 21 low before testing 612.17 pivotal low.

Resistance zone near 627.00, Dec 26 former low and 630.75, Jan 4 high, will cap for now.

Over 636.50 confirms renewed strength to 650.20.

Silver pulled back sharply from Wednesday's bearish engulfing high at 13.200, before stalling temporarily at 12.415, Thursday's low.

While resistance near Thursday's high at 12.837 stays intact, expect retest on 12.395 and 12.315 and failure to hold there exposes 11.965, Oct 31 low and 11.899, fib.618 of 10.480 to 14.195 advance.

Platinum is holding within the channel support near 1115.9 after being rejected off 1141.0 top.

While the overbought momentum look set to unwind, there is an increasing risks of losing the channel support for 1108.0, Dec 28 low and 1096.5, Dec 7 hammer low.

Beneath there bodes ill setback towards 1083.5, Nov 1 low and 1073.0, Oct 31 low.

A clearance of 1143.8 channel top, however, confirms a broader recovery towards 1164.0, Dec 5 top.

FOREX ASIA UPDATE - USD

The dollar was strong heading into the US session overnight and gained a further boost from better than expected data.

EURUSD traded to an initial low of 1.3219 prior to the US data, rose slightly on a soft ADP payroll estimate, and then fell again on a firm ISM, trading to a session low of 1.3146.

The ADP employment measure showed a 40k decline in private payrolls in December. Meanwhile, the manufacturing ISM index rose to 51.4 in December versus consensus of 50.0 and up from 49.5 in November, but still well below trend.

The US dollar reached its session highs ahead of the FOMC minutes, and together with yields fell slightly, on their release.

The FOMC minutes were similar to the message from the last Fed statement, with some acknowledgement of recent weakness in key data but still emphasizing inflation risks.

The yen was particularly weak overnight, while the high-yielding AUD and NZD have performed strongly, suggesting a healthy carry environment continues.

Payrolls on Friday are the main focus for the rest of this week.

Precious Metals Update

Gold repelled off the bear trend from 676.35, Jul 17 top and the fall off 645.00 Wednesday's high is threatening the up-leg initiated off 612.17, Dec 18 low.

Expect a test on the trend-line support near 624.10 and a loss there ignites setback to 618.20, Dec 21 low before 612.17 pivotal low.

Resistances at 632.30, Dec 29 low and 636.50, Tuesday's low will cap for now. Beyond 636.50 confirms renewed strength to 650.20.

Silver pullback sharply from yesterday's bearish engulfing high at 13.200, before settling at 12.535 temporarily.

The up-move initiated from 12.315/12.356, Dec 18 and Dec 19 lows, is now at risks and tightly capped below 12.775 former low.

Expect retest on 12.395 and 12.315 and failure to hold exposes 11.965, Oct 31 low and 11.899, fib.618 of 10.480 to 14.195 advance.

Platinum is weakened on retreat from 1141.0 and 1129.5, Tuesday and Wednesday highs. While it is holding above the trend-line support near 1115.5, negative momentum indicators warn of another drop to 1108.0, Dec 28 low and 1096.5 and 1097.5, Dec 7/Dec 18 lows.

Beneath there bodes ill for 1083.5, Nov 1 low and 1073.0, Oct 31 low. Only a break of 1129.5 offsets pressure for gains over 1141.0 ahead of 1164.0 top.

FOREX EUROPE UPDATE - USD

The dollar was little changed amid a quiet Asia session, remaining soft against the EUR in a 1.3270-1.3291 range, while holding ground against the JPY in a range of 118.67-118.86.

It is interesting to note the dollar's inability to rebound in the final weeks of the year given the sharp retreat in Fed easing expectations and the strong environment for carry trades.

Indeed, the implied yield on the December 2007 eurodollar contract rebounded 30bp over the course of December, and key carry trades such as AUDJPY, NZDJPY, and GBPCHF surged to new highs.

Against this, EURUSD retreated only marginally after setting new highs for the year in the first week of December, and even USDJPY has been unable to sustain upside momentum.

The dollar's failure to thrive in what should be a healthy cyclical environment for the US currency suggests heightened concern about structural vulnerabilities heading into the new year, and associated focus on diversification by Asian and petro economy reserve managers.

Should current dollar weakness and worries regarding the US economy persist, it is unlikely that reserve managers, especially in developing nations (which now hold 57.5% of the world's reserves), who are increasingly under pressure to obtain higher returns for state welfare, will start looking elsewhere.

The Q4 data will provide an interesting read to see whether the Thanksgiving dollar sell-off prompted a surge in diversification effots.

We think the dollar is likely to remain vulnerable to these themes, and its downside will accelerate once markets begin to price Fed easing more aggressively again.

Looking ahead and we expect today's ISM at 1500 GMT to post a still-lacklustre 50.0 headline, up only slightly from the prior month's 49.5 reading.

The FOMC minutes to the Dec 12 meeting are due at 1900 GMT.

The ADP Employment Report at 13:15GMT will also be assessed as an (albeit imperfect) signal of how payrolls will fare relative to forecast on Friday.

Gold pushes higher

Gold reversed strongly from 612.17, Dec 18 low on a probable impulsive wave 5 up and the clearance of 638.10, Dec 8 high, reinforces further upswing towards 644.12, bear trend from 676.35, Jul 2006 top.

Expect minor pullback from 644.12 which will hold well above 636.50, Tuesday low, before triggering another surge towards 650.20, Dec 1 high and potentially 656.20, Aug 2 lower top.

Only a loss of 632.30, Dec 29 low risks deeper setback to 627.00, Dec 28 low.

EUR/USD set to break 1.3368

We remain USD bears versus the European currencies and expect EURUSD will challenge 1.3368 once more.

USDCHF should continue to trade heavily below 1.2291, targeting 1.1984 en route to 1.1879 and we believe GBPUSD will overcome the 1.9849 trend high for an extended up-move to 2.0100.

AUDUSD remains bullish, with the focus on the cluster of resistance between 0.7990 and 0.8005, while USDCAD stands out as the lone USD bull as long as 1.1430 continues to provide a floor.

FX Update : New Year, New Budgets

The dollar's fortunes for the New Year will largely hinge on the direction of the US economy and the Federal Reserve rate outlook.

To that end, payrolls on Friday and the FOMC minutes on Wednesday will be the main highlights of this week. The labour market has shown resilience in the latest weeks but we doubt whether it can be sustained.

The FOMC minutes for the Dec 12 meeting will be scrutinised to see whether inflation risks remain the key focus or sluggish growth and potential easing is entering the fray.

However, given the relatively positive tone of data leading up to the Dec 12 meeting, it seems unlikely that there will be a marked shift in tone by Fed officials in favour of near-term rate cuts.

Investors will be only returning gradually from their holidays this week and typically market liquidity and price action occurs in the second week of the New Year. We suspect that many clients remain bearish on the dollar, and the New Year brings fresh budgets and a new appetite to trade underlying conviction.

To that end, the dollar will be particularly vulnerable to any downside disappointment in this week's payrolls, or a surprisingly dovish tone to the FOMC minutes.

Looking ahead, and former US President Ford's funeral is held today. Equity markets will be close and bond markets half open. However, FX markets will operate as per normal.

Gold Update

Gold continues to surge higher since staging a trend reversal from 612.17, Dec 18 low.

An immediate break of 638.10, Dec 8 high, will open up scope for 641.10, Dec 6 high before testing the key trend-line resistance at 645.40.

Intraday dips should stall above 632.30, Dec 29 low and only a loss of 627.00, Dec 28 low dampens for 618.20, Dec 21 low.

HAPPY NEW YEAR 2007

HAPPY NEW YEAR 2007 TO EVERYONE.

AND TO OUR MUSLIM FELLOWS HAPPY EID.

WISHING YOU ALL HAPPINESS, JOY AND CHEERFUL LIFE WITH YOUR FRIENDS AND FAMILY.