Precious Metals Update

Gold bulls stay cautious as the momentum indicators continue to point down, despite Wednesday's rebound.

Resistance bounded by 689.00 high and 673.00 former low will cap and risks fall to 656.40 Feb 21 low.

A loss there exposes 648.00 ahead of 641.10, which should hold for bull leg resumption off 602.20 Jan 5 low.

A swift break of 685.00 instead triggers upswing to 692.27, projection target and 694.60 high.

Silver is likely to consolidate further on pullback off Tuesday's high at 14.710, delaying the longer term bull trend for now.

Corrective dips may be extended to 13.690, Feb 20 low which is near former trend-line resistance off 15.240 May 2006 top.

Expect consolidation there before bull leg resumes.

Sustained break of 14.410 Wednesday's high, however, will resume strength over 14.710 and 14.748 key resistance level.

Gold : What is happening in market?

A good piece of Weight shall be given to both factors of Buying and Selling Precious Metals, However looking the fact there are various GeoPolitical tensions emerging in the market, which shall hold the Precious metals.

Currently we do see the dive, due to OverBought Conditions in the market, As Market wants to Cross $700 with a Force, and not with a Peak OverBought Motion.

Once we are in tip of OverSold territory, the Market buys back again, with force, and we push the boundaries at $700, which is Phsycological Resistance.

Current factors for downwards momentum also include the Pressure of Profit-taking in Crude Oil as well.

The Dollar is Weak, however, Crude Oil Implies heavy force to Precious Metals.

In our earlier Update, We mentioned Support lies around 656.40 which is Feb 21 Low. Where we saw a Rebound Yesterday.
Crossing that we see at 648 Levels.

There are Chances for Rebound at 648 levels, Where GOOD Amount of Support is there, and We will be at Tip of OverSold Territory.

Gold Update

Given Tuesday's sharp slide in gold, traders wonder how long it will be before global investors re-enter a long position.

If last year's gold pattern is any indication, it may be a long while before the near-term target of $700 is seen.

In 2006, gold bottomed out around $533.60 in March and then rose to $730 mid-May.

Gold, in the wake of an emerging market/commodity meltdown, proceeded to steadily decline.

Market players tried to pick bottoms in gold, but these trades were painful as the precious metal ratcheted lower, hitting $543 on June 13.

Gold rallied to $676 in July and then saw steady declines to $559/$560 in October.

From October onward, gold rose, with only minimal slippage on any downward correction.

Nevertheless, it took 7 months for the precious metal to get back over last July's highs and even then gold stalled Fri, Mon, and Tues just under $690.

Nevertheless, with no change in metals "fundamentals" and geopolitical tensions high, we still see scope for a near-term test of $700. Spot gold holds at $665.75/oz

FED's Bernake Speaks

FEDs Bernake Speaking and sounding upbeat about the economy, says it is reasonable to expect a stronger economy over the course of the year.

US Data out: 15:00 GMT

New Home Sales out at 937K vs 1080K expected.
New Home Sales MoM out at -16.6% vs -3.6% expected

Precious Metals FUTURES Update

Precious Metals trading on the lows again.
Looks vulnerable and all over the place. Will stay volatile for a few days.
May Silver support at 14.18 and 14.05
April Gold is Breaking down the 671 support next stop at 660/662

Dollar Reaction after Data

Dollar holds about steady in the wake of the slightly softer than expected GDP revision and Tsys lift slightly off lows.
Stocks futures trim gains slightly.

US Data out : 13:30 GMT

Core PCE QoQ out at 1.9% vs 2.1% Expected
GDP Annualized out at 2.2% vs 2.3% expected, 3.5% prior.
GDP Price Index out at 1.7% vs 1.5 expected, 1.5% prior
Personal Consumption out at 4.2% vs 4.2% expected

Important US Figures coming out

Important US Figures coming out at 13:30 GMT
US GDP, Core PCE QoQ and Personal Consumption

Market Update

JPY strength leading to massive turmoil in markets. Japanese 6-months rates are making 11-year highs. Same mechanics as in May-2006.

Most overvalued currencies should correct even more (GBP, NZD). USD also vulnerable, but could be supported by PCE today.

Gold and silver very vulnerable to more JPY strength.

Stocks looking really ugly with half the move in May-2006 in one single day

Gold Corrects lower

Gold finally corrects lower as overbought indicator start to unwind.

Resistance zone bounded by 689.00 high and 673.00 former low will cap for pullback to 656.40 Feb 21 low.

Beneath there extends corrective dips towards 648.00 ahead of 641.10, which should hold for bull leg resumption off 602.20 Jan 5 low.

A swift break of 685.00, however, bodes well for upswing to 692.27, projection target and 694.60 high.

Silver pulls back from Tuesday's high at 14.710 will defer the longer term bull trend for the time being.

Corrective dips may be extended towards 13.690, Feb 20 low which is near former trend-line resistance off 15.240 May 2006 critical top.

Expect consolidation there before bull leg resumes.

Deeper fall under 13.500 congestion, however, exposes trend-line support near 13.00.

Return above 14.500 resumes strength.

Fed Funds Update

In one of the most volatile day in recent history in federal-funds futures, all near-term contracts posting gains between 1 and 13 BP.
April contract recently up 2 BP at 94.77, and pricing in an 8% chance for an FOMC rate cut to 5% at the Mar. 20-21 meeting.
May contract, recently up 3 BP at 94.79, prices in a 23% chance for a rate cut at the May 9 FOMC meeting.
July contract, recently up 13 BP at 94.93, prices in a 72% chance for a rate cut at the June 27-28 Fed meeting.
Current rate is 5.25%.

Iran Update - Tension Arises

An increased number of market players continue to think there is a "real possibility" of a US strike on Iran in coming months.

Last week, in the wake of comments by Vice President Dick Cheney saying "all options are still on the table", the market began to again consider the prospects of US military action against Iran.

A report in the Asian Times Tuesday asserts that barring an "unexpected turnabout by Tehran", President Bush is likely to announce a strike at military targets inside Iran.

The report offers "three US reasons to attack Iran." In the run-up to the start of the Iraq War, the dollar came under fierce downward pressure and then rebounded into the event.

The euro closed around $1.0500 on Dec 31, 2002 Fell to $1.0330 Jan 2, 2003 and then rose to $1.1084 on March 11. The pair closed at $1.0556 on March 19, 2003 - the day US led coalition forces invaded Iraq.

Gold Update

Spot gold is trading at $675.75/oz, on the low side of a $675.00 to $687.10 range. The precious metal was weighed earlier by the same increased risk aversion that prompted carry trade unwinds across the board overnight.

Gold dipped briefly below the July 2006 high at $676,now seen as pivot support but has since rebounded.

Bigger picture players have been active buyers on any dips, looking for gold to soon break over psychological resistance at $700 to revisit the May 2006 highs around $730.

Demand from global investors, looking at gold as an asset class, as well as from increased interest from India and China is expected to underpin gold going forward.

Monday, State Street Global Markets and World Gold Trusts (wholly owned sub of World Gold Council) announced that assets in the street TRACKS Gold Trust(NYSE:GLD) surpassed $10.0bn ($10.2 bn as per Feb 20) - making it the 7th ETF by assets in the US.

Crude oil lower on profit taking

Crude oil is lower on profit-taking following inability to break above the 100-day moving average decisively at $61.70.

Traders say the 23.7% rise in WTI Nymex crude oil prices since hitting $49.90 low in mid-January is now prompting profit-taking ahead of Wednesday's weekly US DoE oil inventory data.

WTI Nymex crude oil is at $60.28, down $1.11.

Precious Metals are also in Profit taking scene today.

US Data out

Durable Goods Orders out at -7.8% vs -3.0% expected. Prior at 2.9%.
Core Durables (ex transporation) out at -3.1% bs -0.2% expected. Prior figures at 2.7%

US Data coming out : US Durables Goods Orders

US Durables Goods Orders coming out at 13:30 GMT.
Headline Rate expected at -3.0% while the Cote is expected at -0.2%

Market Update

USD still weaker on back of concerns of a slump in the Housing market and the Durables Goods Orders today. EURUSD broke 1.3200 this morning. \

Fixed Income and FX remains exremely range bound despite yesterday’s solid reversal in the bunds.

Tomorrow will be the trend-setter for the USD as GDP and Core PCE figures should confirm whether or not the so-called rumours are right.

Four down days in a row now but more importantly US Financial sector has broken trend line from June ’06. This could easily spill over into indices.

Higher than expected PCE should kill the bull channel for good.

Gold close to nine-month highs.

Crude Oil Pushes higher

Oil prices continued to climb in Asian trading hours, although slipping from their best levels, as world powers worked on a tougher UN resolution to curb Iran's nuclear program Cold weather in the northern hemisphere and tightening supplies are also helping drive prices higher.

The front-month April Nymex contract was last up 10 cents on the day at $61.49, having touched an early high at $61.63.

Gold aims for $700

Gold bounced off 656.40 Feb 21 low and is likely to extend the major up-leg off 602.20 Jan 5 low beyond 688.40 Feb 23 high.

Underpinned by rising moving average, positive momentum bodes well for further gains to 692.27, projection target, preceding 694.60 high.

Beyond there exposes 716.50 and 720.10, May 2006 highs.

Supports are located at 673.00 low and 670.00 rising trend-line. Beneath 656.40, however, risks 645.00 zone.

Silver continues to advance on the breach of the trend-line resistance off 15.240 May 2006 critical top.

Former high at 14.100, Feb 14 high turns support to underpin current impulsive up-move towards 15.080, May 12, 2006 high ahead of 15.240, May 11, 2006 high.

Downside, a loss of 14.185 Feb 23 low dampens for deeper fall below 13.690 Feb 20 low.

Gold Update

As long as the precious metal holds above $676, the July 2006 high - now considered formidable support, the market is geared up for a move towards psychological resistance at $700 and then the May high at $730.00.

Extended positioning suggest that a deep and unforecastable correction in all four precious metals is likely at some point down the road - forecasting the timing of this remains impossible.

Longs appear comfortable with their positions, as evidenced by the rapid-paced recovery in the precious metal in recent sessions.

Equities Market Update

For the short-term view, WTI crude oil's break of 60.77 on Friday is important as it opens the door to much higher levels. Thus, our call on oil-related shares is as bullish as ever.
Last week, we entered both an Oil Drillers basket (PTEN, NBR, HP, UNT) and a core long in Anadarko Petroleum (APC:xnys).

With a rally in commodities and energies in particular, it doesn't take a whole lot of brain power to plot the direction of energy stocks in the short-term. We're quite happy to be long this sector while at the same time being bearish on the broader market in the next 2-3 months.

Inflationary fears are on the rise and all eyes are on Wednesday's slew of key US data, especially PCE core, the Fed's preferred measure of inflation. CPI surprised to the upside last week - the feeling here is that PCE might do the same. Potentially, this could mark the end of the maturing bull run.

It usually takes more than a single data point to change the direction of the broader market (and the Fed). This time it's no different. But, there are several signs in the market place that points to excessive optimism and usually that's a bearish setup.

With so much focus on Goldilocks, a sudden change of sentiment could lead to rather severe correction. Specifically for Europe, as Dresdner Kleinwort points out, the longer the Fed is on hold, the more the equity market is reassured and the current confidence in no change thus gives the equity market extra confidence.

However, using the last 6 occasions when the Fed was on hold for 10-months or more, European equities have faltered around the 8-to-10 month period. That period is now.

Precious Metals FUTURES Update

Still looking very strong with Dollar weakness and Oil trading higher.

Gold April looks ready to test the $700 level in the days to come.
We are currently at overbought level and a test of the 685/80 support would not damage the Bullish picture.

May copper had a very nice run the last three sessions from 257cents/lb after testing the 290 level on Traders betting the demand will accelerate with the end of the Chinese New Year.

Short Term we are looking to Sell May Copper around 290/292 with Target at 280.
Stop above 295.

Energy Futures Update

Geopolitical concerns come at the forefront again.

The rhetoric between the USA and Iran has ratched up during the week–end with the USA keeping all option open and Iran President Ahmadinejad talking of no “reverse gear” on the nuclear program.

Comments came as six World powers will meet today in London and devise about sanction to apply-probably a mandatory travel ban against some Iranians linked to nuclear work, and expanding the list of individuals and companies hit by economic sanctions.

Today’s session-April Crude Oil: Above 61.20 focus should turn towards 62.50 which is a key resistance Short Term. Below support is at 60.60.

April Crude Oil is still in a Bullish channel-$59-64 on a Daily chart.

Market Update

Weaker USD on concerns of slowing growth in the US and a deterioating housing market. US T-notes seems to agree to after Friday’s strong reversal.

We look for Wednesday to be the trend-setter for the USD as GDP and Core PCE figures should confirm whether or not the so-called rumours are right.

The US stock indices remains heavy but no sign of a real reversal just yet.

March ’07 WTI closed above $60.7/bbl. which gives scope for a test of the level around $65/bbl.

Precious metals getting a boost shortly after CPI, though still range bound.

Gold Futures: Buy on a break of 691/692)@; Target 698/700; Stop below 687

Gold Aims for $694-700

Gold rebounded off 656.40 Feb 21 low and is likely to extend the up-leg off 602.20 Jan 5 low beyond 688.40 Feb 23 high.

Expect a break there for further gains to 692.27, projection target, preceding 694.60 high.

Meanwhile, supports are located at 682.50/673.50 former highs and 670.00 rising trend-line.

Beneath 656.40, however, risks 645.00 zone.

Silver continues to ascend above the trend-line resistance off 15.240 May 2006 critical top.

Former high at 14.100, Feb 14 high turns support to underpin further up-side to 15.080, May 12, 2006 high ahead of 15.240, May 11, 2006 high.

Losing 14.185 Feb 23 low, however, dampens bullish tone for setback below 13.690 Feb 20 low.

Gold Update

When looking at the recent run up in gold, traders wonder if history is repeating itself.

Last March, when gold began to edge higher, traders blamed the gains on Mideast jitters and inflation.

Iran, Iraq, oil, inflation - all combined has global investors looking at gold as a solid bet, said one trader LAST YEAR.

Gold rose from $533.60 on March 10, 2006 to a 25-yr-plus high of $730.30 on May 12, 2006 - nearly 200 points in just two months.

By mid June, gold had falled back to $543.

This year, gold's rise has been far more orderly than the 2006 rally, which bodes well for the sustainability of the current move.

Gold has risen from a low of $601.70 Jan 5 to Friday's nine-month high at $688.20.

There could be quite a bit more upside for gold.
The precious metal to test $800 later in the year.
Spot gold holds currently at $682.50.

Comex Gold & Silver supported by Fund Buying

Comex gold and silver remain higher on fund buying, the commodity markets have been quite firm, there is a search for alternative assets after some hesitation back in January. That is a big factor contributing to the support we've seen.
The improved tone in the energy market lately, coupled with a softer U.S. dollar, Pushes the Precious Metals Upwards.
As mentioned earlier in Asia Morning, we were aiming for gold to push higher towards around 689 Level and Next 692

Gold Update

Spot gold holds at $684.30/oz, at the high of the day and up from an overnight low of $673.30.

Traders looked Thursday to buy dips around $676 (the July 2006 high/now seen as support), and this strategy proved wise.

The last Fibonacci retracement and swing targets come in around $690/$693. As long as gold holds above trough support at $657/$662, the uptrend remains in place.

COMEX open interest is running with the greater trend a run to $850 may be seen, The pattern of the last three years has been that following extreme position build up, profit taking eventually triggers a deeper correction, but thereafter, the secular uptrend kicks in with a vengeance.

Forex Market Update

Tight ranges have prevailed in overnight trade, with EURUSD holding between 1.3103 and 1.3131 and USDJPY stuck between 121.31 and 121.65.

The dollar has struggled this week despite a very healthy carry trade environment and a modest paring back of Fed easing expectations.

The implied yield on the December EuroDollar contract is up about 6 bp on net this week, with markets focusing on the firm reading on CPI Tuesday and ignoring Thursday's weaker claims number. Still, at 5.10%, the yield remains well below levels prevailing before January retail sales numbers and Bernanke testimony early last week.

The USD's failure to capitalize on this week's movement in yields suggests market participants remain concerned about structural vulnerabilities. We continue to expect the trend in key data to point in the direction of weakness and Fed easing in the weeks ahead, undermining the dollar further. Having said that, our economists note that they are not yet ready to conclude that the last two weeks of elevated jobless claims mark the beginning of the weakening in the labor market they have been looking for given the possibility that bad weather boosted the numbers. Moreover, they note, on balance, regional Fed surveys so far suggest some recovery in the ISM manufacturing index after the low January reading of 49.3.

Next week, the dollar may face a rough ride as much of Asia will return from holidays and the economic calendar is heavy. The market will be able to turn its eye towards indicators crucial to the Fed outlook such as the ISM and the core PCE deflator. We maintain our cautious 1.32 1-month target for EURUSD and prefer to trade our bearish USD view via USDCAD, with the CAD less susceptible to upside surprises on US data.

Ahead today, are no economic data releases scheduled. Dallas Fed President Fisher will speak about globalization and the US economy at 10:45 am EST and San Francisco Fed President Yellen will talk about the economic outlook at 3:35 pm. Yellen spoke earlier this week and was fairly hawkish, reaffirming her concern on inflation, while Fisher spoke last week of signs that the housing market is bottoming out.

Gold Pushing Higher, EUR/USD Gains, USD Weakness

EUR/USD Gains extended to 1.3150 amid slight but pervasive USD weakness across the board vs GBP, JPY and also gold pushing higher.

Crude Oil Update

Crude oil prices are trading at highest level for 2007, with WTI Nymex crude oil breaking above $61.50 level.

The move comes after supply data yesterday, which showed an unexpected fall in both US distillate and gasoline stocks.

Also pushing prices higher was report by the International Atomic Energy Agency (IAEA) which declared that Iran has failed to suspend uranium enrichment.

This together with announcement from the US DoE to increase the size of the Strategic Petroleum Reserve (SPR) is now seen pushing prices higher, with technical's pointing at a break-out of an inverse head-&-shoulders pattern -- targeting a move to $72.70.

Such move shall help the Precious Metals, we expect to hit $700 very soon, as traders interests is hugely coming back in the market.

Precious Metals Update

Gold resumes bull leg off 656.40 Wednesday's low and is likely to extend the up-leg off 602.20 Jan 5 low beyond 682.49 Thursday high.

Expect a break there for further gains to 688.60 May 19, 2006 high and 692.27, projection target, preceding 694.60 high.

Immediate supports are located at 673.50 former high and 664.00 rising trend-line.

Beneath 656.40, however, risks 645.00 zone.

Silver recovers swiftly above the trend-line resistance off 15.240 May 2006 critical top and was followed by ascend to 14.355 Wednesday's high.

Former resistance at 14.100, Feb 14 high turns support to underpin further up-side to 14.525 May 15, 2006 high ahead of 15.080, May 12, 2006 high.

Under 13.690 Tuesday's low, however, offsets current bullish structure.

Iran Says

Defiant words from Iran carried on a wire, Rtrs, sees the dollar and stocks both slip slightly.

Iranian official reportedly asserts that suspension of uranium enrichment is against Iran's rights.

We are not far from $700, and expect to hit it very soon, with all tensions emerging.

Crude Oil Update : Focus on Inventories

Attention turns US DoE weekly oil inventory data and EIA natural gas storage data at 1030EDT, delayed by 1-day given US Presidents' day holiday.

Looking for crude oil supplies to rise 1.0mln barrels for the week ended February 16. Gasoline supplies are seen down 50k barrels and distillate supplies expected to fall 2.8mln barrels.

As far as natural gas storage data is concerned, estimates vary from 216-233 Bcf withdrawal for the same period for an average estimate of 226 Bcf draw and compares to ICP/Nymex auction settlement of a 230 Bcf draw.

Gold Update

Spot gold holds at $679.00/oz, after trading in a tight $676.40 to $680.00 range.

Earlier this week, gold topped out at $673.20 Mon, and after failing to take out the July highs near $676, slid to $655.40 on unwinds Tues. Then Wednesday, gold stabilized and then began to edge higher in morning action on a combination of higher US inflation data and jitters about the deadline for Iran to end its nuclear enrichment program.

Momentum began to mount in afternoon action, with gold taking out $670 and then Monday's highs as well as the July high - with the move driven by insatiable Comex appetite.

As well a large variance was seen between the COMEX & CBOT April futures with the New York contract posting a high of $686.40 while the Chicago version touched $703.10; leaving a large arbitrage opportunity for those who could take advantage.

Market players now eye psychological resistance at $700. Beyond that lies the 25-yr pull high at $730 seen last May.

US Data out

Initial/Continuing Jobless Claims at 322K/2509K vs 325K/2560K

Market Update

BoJ completely ignored. JPY strongly lower across the board. EURJPY at key resistance at 159.00.

Though USD hardly moved on higher than expected CPI figs, inflationary fears were rekindled yesterday, thus pushing fixed income and (EU) stocks lower.

March ’07 WTI again probing $60.5/bbl. A weekly close above would clear up the technical picture and could see oil-prices rally in coming weeks.

Precious metals getting a boost shortly after CPI, though still range bound.

Precious Metals Update

Gold bounced back strongly off 656.40 Wednesday's low and is likely to extend the up-leg off 602.20 Jan 5 low beyond 682.49 Thursday high.

Expect a break there for further gains to 688.60 May 19, 2006 high and 692.27, projection target, preceding 694.60 high.

Immediate supports are located at 673.50 former high and 664.00 rising trend-line. Beneath 656.40, however, risks 645.

Silver recovers swiftly above the trend-line resistance off 15.240 May 2006 critical top and was followed by ascend to 14.340 Wednesday's high.

Former resistance at 14.195, Dec 2006 top turns support and look to underpin further gains to 14.525 May 15, 2006 high ahead of 15.080, May 12, 2006 high.

Under 13.710 Wednesday's low offsets current bullish structure.

Comex April Gold Update

Comex April gold peaked at $686.40 an ounce, its strongest level since July, before settling with a gain of $23 to $684.
It was buy stops all the way up, support came from stronger crude oil, plus tensions over Iran's nuclear program, there have been also fund and options-related buying, also noting that stops were hit.

FOMC Update- Jan30-31 Minutes confirm

Jan 30-31 FOMC minutes confirm the "somewhat more favorable outlook" for both growth and inflation;

but reiterate that upside risks to inflation remain the primary concern until a downtrend
in core infl gets established.

There were no signs at all of dissent or disagreement. Concern about housing contraction has diminished but this remains the main econ risk;

another risk is too strong consumption. The minutes are entirely 'according to Hoyle' per the Bernanke testimony

Gold Climbed to 682

Spiked to the $682.00 level after a slow steady climb to $673 accelerated, prompting a round of stop-driven buying through the $675/676 level that had capped the pair of late.

One trader suspecting hedge fund demand behind the move after those names were sellers of the metal yesterday as it slid to lows near $655.00, now perhaps caugth wrong-footed.

April NYMEX crude contract briefly vaults the $60.00 level before easing back slightly. Crude oil romping higher, along with other commodities

Oil Update

Libya says OPEC doesn't need to announce further output cut.

Upcoming BOJ rate decision might help gold prices

Upcoming BOJ rate decision to be key for direction of yen and likely to help gold if rates unchanged, market unsure about BOJ strategy after it left rates unchanged last month despite signs of greater economic strength, build up in yen carry trades.

Voting split will be scrutinized, with last vote 6:3 to stand pat suggesting move toward higher interest rates.

Should rate stay the same, inflation concerns for yen may see Japanese investors turn to gold.

Precious Metals Update

Gold may have exhausted its up-leg extended off 602.20 Jan 5 low and pullback from 672.15 Tuesday's high warn of relapse to former trend-line resistance near 639.25, Jan 24 low.

Depressed by falling momentum indicator, it needs a firm break of 672.15 to offset pressure for extended gains towards 680.00 ahead of 687.80, equality projection target.

Silver is likely to dip below former trend-line resistance off 15.240 May 2006 critical top on pullback from 14.040 Tuesday's high.

While key resistance at 14.195, Dec 2006 top stays intact, unwinding of overbought conditions suggest corrections to support zone near 13.510/13.250, Feb 12/Feb 2 lows.

Over 14.195, however, projects 14.335 and 14.525 levels.

Gold Update

Spot gold holds at $659.00/oz, after trading in a $656.15/$671.80 range.

This is the first day of long liquidation, and with open interest running near 400k, we would expect a drop of at least 5000 lots open interest on Wednesday.

Support is seen at $651-652 with minor resistance seen now at $660-662.

Gold Update

Spot gold holds at $657.00/oz, on the low side of a $656.15 to $671.80 range.

Monday, the precious metal vaulted recent highs just under $672 to post a 7 month high at $673.20 - just shy of the July 2006 peak at $676.00.

Gold's reluctance to press higher and take out the July high prompted a rethink of long positions and eventual paring back of these positions.

Initial support at $659/$661 - last week's lows, just gave way prompting additional unwinds.

NYMEX Crude Oil Technical Update

RES 4: $61.00 Failure high 9 Feb
RES 3: $60.40 Resistance line from 20 Dec
RES 2: $59.60 Daily high 13 Feb
RES 1: $59.00 Daily high 19 Feb

LAST PRICE: $58.18

SUP 1: $58.00 21-day moving average
SUP 2: $56.76/62 38.2% of $61.00-$49.90 & Daily low 15 Feb
SUP 3: $55.45 50.0% of $61.00 to $49.90
SUP 4: $53.75 Daily low 29 Jan

Risks are skewed lower ahead of the March contract expiry today, with break below the 21-day moving average at $58.00 seen triggering the downside move.
The daily studies are showing bear-divergence signals with 10-day momentum now making new lows for the move in negative territory.
Fibonacci support at $55.45 now eyed.

Market Update

Market is quiet due to holidays

Very rangebound markets yesterday with a lack of data. Today will be the same, except for the Canadian CPI figures.

JPY crosses tested the lows yesterday, but reversed strongly higher. Tomorrow’s BoJ Target Rate will be very important for these crosses. Nothing is certain yet.

Beware of unwinding in EM crosses and risky assets, if the JPY surges higher.

European stocks testing the upper band of bull channels. Upside is limited per unit of time. Time for a discretionary short-term trade.

Many bank stocks are reporting earnings this week in Europe, which could be a bearish catalyst.

FOREX ASIA UPDATE - USD

The Lunar New Year holidays in Asia and the President's Day in the US meant the market was quiet in thin trade throughout Monday.

But while carry trade remain popular, the lingering threat of weakening data out of the US may mean more position adjustments in the coming weeks.

Unexpectedly strong US data through December was probably boosted by unusually mild weather are beginning to ring true as the market absorbs the latest round of numbers, which showed weakness in consumer sentiment, the labour market and housing starts.

These prompted the market to adjust its Fed expectations from only giving a 56% chance of one 25bp cut by the end of 2007 early last week to now fully pricing in one rate cut this year.

Given the change in market sentiment, Presume Wednesday's core CPI reading could instigate more market action either way.

Apart from CPI, the only event of note is the release of the minutes from the Jan 31 FOMC meeting.
Consistent with Chairman's Bernanke's comments last week, we do not expect the minutes to reflect any imminent easing, but risks to economic growth will likely be highlighted, and the current message of policy staying on hold pending a clear break in data should remain. Of course, what the Fed's counterparts from across the Pacific do on Wednesday may yet pile on the pressure on the USD further if the BoJ announce a policy rate hike.

Market Update

Another round of disappointing US housing figures took the market by surprise.
At the same time, Japanese data has surprised strongly to the upside.

Rate spread changes are pointing lower for high-yielding currencies (especially USD and GBP) and higher for low-yielding ones (especially CHF and JPY).

Beware of unwinding in EM crosses and risky assets, if the JPY surges higher.

Stocks are not likely to change much today, as the US is closed (due to President’s Day).

Gold Update

Spot gold holds at $665.80/oz, after trading in a $663.13/$669.70 range.

Traders would like to see the precious metal break above $670 and retest Wed's highs at $671.50 and potentially revisit the July highsat $676.

Gold stalled at $670.60 Thursday and closed at $669.25. Furtherpairing back of long positions may be seen ahead of the long weekend ifthe greenback mounts any further gains.

With US markets shut Monday and Chinese players out next week for New Year celebrations we may see profit taking/book squaring drag gold lower across the day.

Chart lines support at $661 and below at $656, coupled with the picture of firm oil, dollar dissatisfaction, low mine output & geo-political tensions should keep gold underpinned.

Market Update

Further weakening of the USD on disappointing US figures. Bernanke expecting easing inflation.

TICS data showed a big decline in capital inflows for December, Capacity Utilization confirming downtrend since mid-2006. At the same time, E-Z figures have generally been rather strong.

JPY Trade Weigthed Index took a big leap higher after the surprisingly strong GDP figures. Especially GBPJPY looking weak. Japanese 6-month rates edging higher. Remember, what happened in May.

Emerging Markets, stocks and precious metals are in danger, if we see the JPY advancing too fast.

Stocks likely to edge lower today after a strong week.

Precious Metals Update

Gold retains bullish bias within the up-leg extended off 602.20 Jan 5 low on the major break of key trend-line resistance off 676.35.

While the momentum indicator continues to point higher, expect gains to 680.00 ahead of 687.80, equality projection target and only a sustained break there exposes key resistance at 694.60.

Meanwhile, 664.10/660.20 should hold and loss of 657.30 warns of deeper setback to 650.00 zone.

Silver clears key trend-line resistance off 15.240 May 2006 critical top which bodes well for an eventual test on 14.195, Dec 2006 top.

Amid overbought conditions, however, expect tough fight at 14.195 and only a sharp move over there projects 14.335 and 14.525 levels.

Trend-line support near 13.680 Tuesday's low should hold and only a loss of 13.510 Monday's corrective low risks deeper fall ahead.

Gold Update

Despite earlier dollar selling (mostly vs the yen), gold could not get back over Wed's highs near $671.85 and stalled even before the greenback slippage at $670.50.

Spot gold currently holds at $668.00/oz, up from an earlier low of $662.88.

The precious metal is also not help by lower oil prices, although the March contract, at $57.10 per barrel, is up from its earlier low of $56.62.

Failure to clear $670 again suggests gold has run out of steam short-term, and would benefit from a brief period on consolidation in order push higher and target $700.

Dips are still likely to be viewed as good buying opportunities by investors and speculators, with the metal still well placed for another year of strong gains.

Gold Update

Gold reacted the way as we studied, with 660 level to hold after the dip which took place.
Eventually, we are looking for strength to be built in the market for 676 to be cleared.
US Philly Fed came out with Dissappointing results, out at only 0.6% vs 4.1% expected.
We welcome the dip in Gold, And choose it as a buy in Dip opportunity.

Bernanke says:

Bernanke says the Fed will need to hike if inflation accelerates.

Precious Metals FUTURES Update : Buy at Dips

Precious metals continue to move upwards, with little sign slowing momentum.

The market found support yesterday on dollar weakness, expect this theme to continue.

There was some short liquidation in the Gold markets yesterday as there were some rumors of several mining firms lifting their hedges.

However, it was Bernanke's testimony weighing on the dollar that has provided most support to the Gold and Silver market, after losing some ground in early trading.

We expect the strength to continue in the Gold market, with the April contract setting up for a target at 693.90 in the short term. It appears that all eyes are looking at the "magical" 700.00 level, however, we do not see this as hugely significant in the grand scheme of things and would choose to close any longs lower at 693.90.

Any setbacks towards 667.20 is a good opportunity for fresh longs.

Energy Futures Update

Yesterdays weekly inventory data did failed to impress the Crude bulls, sending markets lower.

This supports our view that WTI should move lower in the short term. However, macro data is indicating that this will be short lived, and that we could be setting up for a longer term rally.
There is a some tightening in the markets according to longer term inventory data.

Yesterday, we indicated that the IEA has increased both its demand and growth forecasts for China, while non OPEC nations are still indicating a restrictive supply situation.

The demand in China rose at a faster pace than previously expected at 9.3% last year, according to sources at the Chinese Ministry of Commerce. Non OECD oil demand as a whole remains very robust, in stark contrast to the signs of growing weakness in non OPEC supply growth.

Long term to long, short term to short. The technicals paint a bearish picture, maybe even setting up for a sell off towards the 54.60 by the end of the week, as we, once again, point out that the lower highs in WTI indicate slowing momentum in the market.

The trading tactics today will be to trade from the short side, selling into rallies for a further extension of the downside.

FOREX EUROPE UPDATE - USD

The dollar fell to one-month lows against the yen overnight in Asia on the back of strong Japanese GDP and consumption numbers.

USDJPY traded in a range of 119.77-120.78 while EURUSD was a little stronger in a range of 1.3130-1.3149.

Yesterday's flat US retail sales reading (0.0% m/m, cons. 0.3% m/m) and Fed Chairman Bernanke's interpreted-as-dovish testimony hurt the dollar across the board. US yields are also down by 7 bp for both the 2 and 10-years, while the equity markets rallied on the reduced fears that the Fed could tighten policy later in the year.

Bernanke noted that core inflation has moderated, although it is still "elevated" and "the rate of resource utilization is high." On growth, he noted downside risks from housing but also that spillover effects have been limited and "some tentative signs of stabilization have recently appeared in the housing market." Bernanke certainly did not give any indication of near-term easing, and our economists note his comments are consistent with Fed policy staying on hold pending a clear break in the data.

The implied yield on the Dec 07 Euro$ contract fell by 8.5bp yesterday on the back of his testimony. We expect US economic weakness to continue to transpire in the coming weeks, and effects of a housing slump on consumption will become more pronounced. Meanwhile, the market will also be wary of the carry environment given the higher chances the BoJ will embark on a tightening path after this morning's firm Japanese GDP data.

Bernanke testifies again at 1500 GMT. Data releases due today include NY Fed Empire survey and weekly jobless claims at 1330 GMT, the TIC report for December at 1400 GMT, the Philly Fed at 1700 GMT and home builders' February housing market index at 1800 GMT.

Precious Metals Update

Gold is entrenched within the up-leg extended off 602.20 Jan 5 low on the major break of key trend-line resistance off 676.35.

With another upswing in the momentum indicator, expect further gains to 680.00 ahead of 687.80, equality projection target and only a sustained break there exposes key resistance at 694.60.

Meanwhile, 664.10/660.20 should hold and loss of 657.30 warns of deeper setback to 650.00 zone.

Silver clears resistance zone near 13.849, bear trend off 15.240 May 2006 critical top and 13.995, Dec 8 high, which bodes well for eventual up-leg to 14.195, Dec 2006 top.

However, expect some fight near 14.195 and only a sharp move over there projects 14.525 May 15, 2006 high.

Trend-line support near 13.680 Tuesday's low will contain dips and beneath 13.510 Monday's corrective low exposes 13.090 Jan 30 low.

Gold Update

The market is ready for a retest of the July 2006 high at $676.00.

Profit-taking ahead of that level stalled the current rally.

Overnight China's National Development and Reform Commission said in a statement that it had set the country's total gold output objective at 1,300 tones for the 2006-2010 period, XFN reports.

China's gold output in 2006 was 240.078 tons - up 7.15% from 2005. In 2007, China plans to produce 260 tons of gold - a historical high for the country.

According to the NDRC, China's exploration target for new gold reserves is 700 tons for 2007 vs 650 tons in 2006.

There was some confusion earlier as some players took the statement to mean a change in China's reserves. However it has nothing to do with FX reserves or diversification - just intentions on exploration and mining and China does import a little gold on a net basis, as it consumes slightly more gold than it produces.

US Data : 13:30 GMT out

Advance retail sales out at 0.0% vs 0.3% expected
Retail Sales less Autos out at 0.3% vs 0.4% expected

Precious Metals FUTURES Update

Precious metals continue upwards and on, with the market highs being broken this morning in Gold and Silver, with help from a strengthening euro.

Much of the upside from yesterday's trade came from speculative institutional buying and also bid up by the rally in Crude supporting much of the general commodity complex.
Although we are slightly bearish on Crude, we will remain bullish on precious metals, against dollar weakness.

A break of the highs in April 07 Gold sets up for a move towards the 696.00 level.
This morning we have already seen a short squeeze up through the highs, however we anticipate that we will re-test the highs in the US main session, hopefully providing for greater or more substantial volumes to drive the market forward.

Expect Silver to track Gold.

Crude Oil Futures Update

WTI Crude Oil failed to close above major resistance yesterday even after the International Energy Agency raised its forecast for global consumption in 2007.

Global demand is anticipated to rise by 1.8% to 86 mill barrels a day, according to the IEA.

This is an increase of 270k per day against what it predicted just over a month ago, based on predominantly of higher expected consumption in China. In addition tom this the IEA "revised down its 2007 estimate for oil production from non-OPEC countries by 1.8 million barrels.

The revised demand forecast and a lowering of expected non-OPEC supplies has certainly led to a tighter demand-supply balance.

The weekly inventory data is the main event for trading today. Crude & Gasoline Inventories are not expected to provide any surprises, although keep an eye on distillates, where a draw of 4000K is expected.
This is a "largish" number, so the market will be especially reading any deviations on this number from the consensus to be the main driver to todays trade.

Although there has been much bullish news to the market, it appeared quite apparent that that Crude prices have not been able to claw itself past daily resistance.
The past three days have the market showing lower highs, a sign of slowing momentum in what has been a range bound market.
The 50 day moving average has also provided a good resistance indicator and we very much favor technical trading against this.

We expect this weakness to continue, especially if the weekly inventory data is published in line with expectations.

Market Update

USD TWI not able to break 50-day MA after the disappointing trade balance yesterday.

Bernanke’s Humphrey-Hawkins Act Testimony today is important: What we see is a relatively strong labor market, housing market and a generally high level of economic activity. Rate cuts can be ruled out for now.

Emerging Market Currencies look strong, as do stocks.

Fixed Income again edging lower, todays new lows. Bunds look really weak.

Gold aim to clear 676 resistance levels.

Crude Oil Support 57.36 & Resistance 59.36.
Crude & Gasoline Inventories are not expected to provide any surprises, although keep an eye on distillates. A draw of 4000K is expected.
50 Day mvg combined with lower daily highs warn of a correction.

Crude Oil Futures Update

March Crude Oil trading above $59 as the IEA increased its Oil demand forecast for 2007 by 273K barrels/day to 86 millions barrels/day on higher demand from China.
Also pushing up price a storm cruising through the U.S. Midwest and headed for the Northeast, which consumers 80 percent of the nations heating oil.

US Tsy Sec Paulson says

US Tsy Sec Paulson says its too early to talk about deliverables re China - says needs benchmarks to show China progress.
Repeats China needs to move faster on FX appreciation but notes that the pace of yuan appreciation has stepped up since his Dec Beijing trip

Energy Futures Update

Oil markets were heavily sold off yesterday and finally closed lower as milder weather in the U.S was forecasted especially for the North Eastern high consuming region.

Geopolitical the negotiations between North Korea and US/Japan seems to be fruitful where North Korea will commit closing down nuclear facilities in exchange for oil.

If this will happen and the agreement honored by the Koreans, a major tension factor in the region will be gone, and added further pressure on the oil price.

Looking at March Crude Oil on NYMEX tested resent supports arr $57,35/40/bbl area and finally closed at $57,81 or $1,87 lower from the opening. Opening today didn't offer much as market will await tomorrows DOE inventory data which is expected to show a build and hence bearish for oil prices.

A break of the current support would bring March contracts back to the $56,60/bbl trend line established mid Jan when the contract lows at $51,03 was traded

Iran Ahmadinejad says:

IRAN AHMADINEJAD: Comments taken from Reuters

- Iran opposed to any proliferation of nuclear weapons

- Iran always ready to talk

Gold Update

Gold rebounded with yesterdays touch at 659 levels, emerging a new Buy in Dip Opportunity, with todays main focus at Trade Balance, could give huge impact on US$.
Gold still targets 676 levels to be crossed, where the path is cleared to easily touch 730 levels.
We expect slight retracement as technically it needs to push down at support 652 levels, to correct it self and then resume the upleg, However, gold has been trading in the same ranges, where the OverBought indication is lying.
Traders main focus is also on Bernakes Humphrey-Hawkins Act Testimony on Wed and Thu.

FOREX EUROPE UPDATE - USD

The dollar is lower amid a quiet session overnight, trading in a 1.2955-1.2970 range against the EUR and a 121.34-121.96 range against the JPY.

With the G7 out of the way and policymakers seemingly moving on to other topics, the market will retain its focus on key data releases scheduled this week. Carry trades enjoyed a brief surge yesterday but ended the session on the back foot. Despite passing a major risk hurdle and having calm restored to markets, investors have become more cautious as global monetary policy stances may yet surprise.

The Fed is still waiting for economic trends to become clear, and should Q4 GDP see sharp downward revisions as expected, coupled with weak CPI, Fed easing will firmly re-enter radar screens. Trade and inventory data this week will have a strong bearing on Q4 revised GDP and soft numbers would expose the USD to further weakness.

The ECB on the other hand has shrugged off blips in recent data, and in addition to usual warnings of price risks, new themes such as wage pressures have entered the central bank's purview. Higher yields have kept the dollar supported since the New Year, but we believe this will be hard to sustain once the effects of the US winter bounce begin to fade and the market begins to price in more Fed easing.

The major event in the US this week is Fed Chairman Bernanke's Congressional testimony on Wednesday and Thursday. With the market currently quite content with their assessment of Fed expectations, currency vols are quite low heading into the release, and it is more likely that economic data this week provides the impetus for fresh moves.

This week we would recommend watching retail sales for January in particular since the weather began to turn cold again in the latter half of the month (although temperatures were still higher than average for the month). The market's projecting a gain of just 0.3% m/m, down from 0.9% m/m in December.

Ahead today, the trade balance for December (13:30GMT) is expected to show an increase in the deficit to USD -60 bn (prev. -58.2 bn, cons. -59.6 bn) on the back of higher oil imports.

Market Update

Focus on Bernankes Humphrey-Hawkins Act Testimony (WED + THU) and the US Trade Balance and Retail Sales.

Dollar Trade Weighted Index about to break key resistance and its 200 day moving average. We still expect a big move higher.

JPY-crosses are struggling to move higher, but look for USDJPY to move towards 123.50-1.2400.

Stocks are weakening a tad ahead of the figures, which could move rates higher.

Oil is taking a beating after being rejected at new six-week highs.

Gold Update

As mentioned earlier regarding Gold chances are to dip today at 658 - 661 levels, Where Support lies.
And a good buy in Dip opportunity in earlier Update.
The next resistance to clear for gold is 676 levels. However gold still lies in Bullish triangle.

Crude Oil Update

Crude oil is lower after Saudi Arabia's oil minister said OPEC may keep its output levels unchanged at its next meeting scheduled on March 15.

Oil prices are also lower on speculation that heating oil supplies will be sufficient to meet the late winter demand in US, when the Department of Energy releases data on Wednesday.

However, prices are supported on tensions between US and Iran and risk of UN sanctions if Iran refuses to halt uranium enrichment by February 21.
Some traders say that this event risk is still a long way off, and prices could correct further before any buying is seen.

Precious Metals FUTURES Update

After last week behavior we expect precious Metals to consolidate towards $658/662/oz for Gold April and 13.60/80 and to keep the Bullish Trend from mid-January intact.

Funds piled into Gold last week as it was maintaining trade above $660/oz.

We still have to take out the next big hurdle with the peak from mid-July at $677 for Gold.

Copper helped by the end of Red Kite selling is also a positive note coupled with a move higher in Silver also supportive for the Gold market

We favor Buying April Gold around the 660 area and March Silver between 13.60/80. to target 677 and December high at 14.25 respectively.

Crude Oil Futures Update

March Crude Oil still has wild swings again on Friday, trading down to 59.30 before reaching a new high at 60.95 and trading back again Towards 59.40 level.

The market is driven by a Bull Market mood-colder weather, small Oil disruptions and OPEC cuts kicking in-but at the same time last US Stocks Inventories showing no sign of real tightness and fear of the same result next Wednesday.

Up to now the pattern has been the Market waits to have the US released behind to enter new Longs.

Resistance is at 61/62 and Market should struggle to break it as we are becoming overbought. 59.20/58.80 should hold to keep the focus higher.

Oil Update : Qatar Energy Minister Says:

Qatar Energy Min. Reported saying,

- Agrees with Saudi Arabia's Naimi on market conditions

- No need for OPEC cut if market conditions do not change.

IEA Head Mandil Reported Saying

IEA HEAD MANDIL Reported saying,
- Well supplied, stocks at an acceptable level, but no room for complacency
- Any talk of a further OPEC oil output cut is unwelcome
- Oil price still too high at around US$60.00.

We need to see how NY market reacts today in Oil Prices, which shall affect the Gold prices as well in co-relation, Nevertheless, we are still in good Bullish Channel, where 658 is where Support lies at.
However, Market looks for slight dip short term, to continue its bullish strength targeting 676 levels.

Iran Update : President Mahmoud Ahmadinejad says:

President Mahmoud Ahmadinejad has reportedly vowed Iran would never surrender to Western demands to suspend its nuclear drive and promised announcements on Tehran's atomic progress in the next two months.

Market Update

G7 meeting this weekend had little effect on currencies, but the "carry trade" remains well supported as Japan and US leaves the JPY direction to free market forces.
European officials remain concerned of JPY continuing to weaken and the EUR beeing elevated in general.

Wednesday's US retail sales along with Bernanke's testimonial should be the main focus this week.
We believe that the market could be in for a surprise to the upside on US retail sales supporting T-notes and the dollar.

G7 Update

G7 Finance ministers and central bankers urged investors to recognize that Japan's economic recovery is on track, but did not label the yens decline as a threat to global growth.
The officials bridged a divide between Europeans who want the yen to strengthen, and the US and Japenese who say the market should be free to set currency values

Gold Update

The outlook looks increasingly positive with the focus next on 676.35 following the recent break of 656.20.

Gold has confirmed an important break having cleared 656.20, the Aug 2, 2006 high.

The break of this level confirmed a resumption of the uptrend and paves the way for gains towards 676.35, the July 17, 2006 high.

Momentum conditions continue to provide a positive backdrop and remain in bull mode supporting the outlook for further gains in the metal.

Support has been defined at 641.10, the Jan 30 low where a break is required to undermine the current trend.

Precious Metals Update

Spot gold holds at $663.50/oz, down from the $665.70 high seen in the US session and up from an o/n low of $657.70.

The run-up in gold and silver was sparked by the earlier rally in oil over $60.

There also have been a bit of safe-haven demand in the wake of Iran's threat to target US assets if the country is attacked in response to its nuclear program.

The market now targets a retest of the $676 high from last July.

No real response to comments by US Tsy Sec Paulson, who said the US is open to studying Gold Sales by the IMF.

As a reminder, any agreement on future IMF gold sales would need to be approved by a majority of the fundshareholders as well as by the US Congress, which holds 17% of thevoting power.

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Gold Update

Gold is doing a steep rally, as mentioned earlier today, with Gold expected to clear 661.30 level to push higher, with target set for the moment at 676.35 July 2006 high, Gold is supported with Various Geo-Political tensions striking in the market.
An Added note, Gold is coming in a top over-bought section, where soon we shall see profit taking, which shall retrace the price around $15-20 downward, at support zone lying at around 643.50 and 647 level.
We expect a Bounce at such level, which shall continue the resumption of the Up-Leg.
However, it is important to watch the movements of $ index and Crude Oil, with any such news, Crude oil traders are very excited to push the prices upwards.

Precious Metals FUTURES Update

Yesterday Gold looking at the April contracts fell to 653 level and was bought back with volumes, aiming towards recent highs at $667,10/oz and printed a $666,10/oz high as Oil rallied and pressed through $60/bbl causing some short covering.

The upward movement continued initially overnight in Asia testing same levels once more. Current resistance levels above 667 seem to hold for now and there could be room for a correction to the supports at $660,50/oz in the short term.

In the medium Term we keep a bullish stance after yesterday’s move and we are aiming for the $676/oz, levels not seen since August last year.
Due to the volatility and current outlook with tight correlations to the energy markets we prefer to buy April contracts on dips towards 660- 661 support areas for a test and eventual break of resistance.

Silver broke resistance at 13,90 this morning and are currently fighting the levels backdating to early December just above $14/oz.
Silver has been holding up well despite the poor performance on Copper lately.

The March Copper contracts finally rejected an attempt to break recent lows at 238,50 cents/lb and recovered 10 cents towards 248,50 resistance but the long term down trend is still intact .
Intra day range 249/245.

Crude Oil Futures Update

Oil still very volatile mood and after falling nearly $3 on Wednesday after the US Inventories bounced back sharply to make new highs yesterday on news that the seventh Oil field in California was disrupted by a fire.

In terms of impact we think it is a disproportionate reaction and yesterday’s knee jerk reaction could be unfolded in the next days.

Nevertheless oil broke some strong resistance at 59./59.40 level which is holding well at the moment. Market general mood is bullish and the smallest news is going to trigger a rally.

Market Update

Focus on G7, Bernankes Humphrey-Hawkins Act Testimony (WED + THU), Trade Balance and Retail Sales next week.

G7 most likely to influence EURJPY. Probably a non-event (bullish).

Stocks consolidating before next week’s figures and events.

Fixed Income correcting higher. Buy EURUSD and EURJPY for the short term. EM Currencies also going lower.

Gold Pushing higher, clearing crossing earlier 661.30 this shall push it high upwards to 676.35 which is Jul 2006 high.

With Crude Oil also clearing the physcological resistance at $60 nicely, it is understood for it to push higher with target remaining at $62 in next few days.

Dollar weakness is on the boards, which is supportive for precious metals.

Iran issue rises again, causing much political tensions in the market, which is also another factor for rising in Precious Metals

Comex Gold Moves higher on Iran Issue

Comex gold pushed off lows to close higher as geopolitical tensions added to the metal's safe haven status.
Traders say buyers quickly moved in after a weak open and took the metal to a session high of $665.30 an ounce.
The contract closed $5.40 higher at $662.70.
A weak dollar and firm energy prices also played a role in the gains on the day.
The main news of the session was increasing tensions between the U.S. and Iran.
Comments that if the U.S. were to attack Iran, the country would respond by striking U.S. interests all over the world.
The comments by Iranian supreme leader Ayatollah Ali Khamenei came the same day that another top official, Iran's ambassador to the U.N., Javad Zarif, warned in a column in The New York Times that efforts to isolate Iran would simply backfire on the U.S., increasing sectarian tensions in the volatile Middle East, including Iraq.

Gold Update

Gold holds at $658.50/oz, after trading in a $648.40 to $660.55 range.
Last week, the precious metal topped out around $661.50 after having broken various peaks in the $654/$655 range.
The market is watching to see if there is any followthrough back over last week's highs or if a double top may be forming.
The metal now needs to conquer the $661 high from February 1st and may run into some scaled up selling as traders lock in profits however the metal is now nicely placed to challenge the $676 high from July.

ECB Trichet Says

Trichet was asked if strong vigilance signals a March rate hike, to which he responded the expression speaks for itself

ECB Trichet Says

ECB Will monitor wage talks very carefully, Capacity utilization approaching Peaks of 2000, Wage Settlements pose substantial price risks, renewed increases in oil prices cant be excluded, upside risks remain intact for inflation outlook, inflation expected to accelerate again in 2H, INflation may slow in spring or summer, German Vat Increase not fully reflected in CPI

ECB Trichet Says

ECB Trichet stresses Medium term focus on price developments, Oil Prices and Imbalances are risks to outlook, Risks to growth outlook in long term on downside, risks to economic outlook are balanced short-term, consumption should gradually strengthen,
Investement should remain Dynamic, Domestic demand expected to maintain momentum, Global growth remains robust

ECB Trichet Says

Trichet says economic expansion remains solid,
Says acting in timely manner remains warranted, says liquidity is ample.
Anchoring Inflation expectations key for growth.
ECB policy is still accommodative rates low

FX Update : EUR/USD

EUR/USD Pops back over $1.3000 on the "strong vigilance" remark that is read as indicating a March rate hike

ECB Trichet Says

ECB trichets says Strong Vigilance is Required

US Data out

Initial Jobless Claims out at 311K vs 312K expected
Continuing Claims out at 2490K vs 2495K expected

Silver Update

Sell Silver at 13.60/65 with a stop above 13.75.
Target 13.40/33. Yesterday rejection at 13.80 leaves us with a shooting star (reversal pattern) which could imply more retracement in the pipeline.
Furthermore, Copper broker support and could drag down Silver

Market Update

Swiss CPI coming out at -0.7% MoM, which leaves the expected rate hike from SNB in March very unlikely.

Today’s main event is the ECB’s accompanying statement, where it seems as if the market expects ’vigilance’ once again to be mentioned to secure a rate hike in March, but we tend to disagree.

Stocks still lacking momentum, but technology stocks in demand after Cisco forecasted sales that beat analysts’ estimates.

Oil testing bearish resistance line from August 2006, but unable to break it.

Europe Market Update

The key interest rate decisions from the ECB and Bank of England will obviously be the main focus today, but core-European data starts at 0700GMT for Thursday with German trade balance andcurrent account data for December.
We should get the UK HBoS house priceindex at 0800GMT this morning, as it is the last date in its scheduled range. The forecast is for a rise of 0.4% m/m, 9.6% y/y.

Neither the Bank of England or ECB are expected to move rates today, although traders will obviously be wary of the Bank of England decision at 1200GMT following the surprise interest rate hike last month.
As the Bank of England State of Play says, "The Bank ofEngland's Monetary Policy Committee is unlikely to drum up a majority for a rate hike in February, but the chance of another rate hike near term remains high."
Four members of the nine-strong MPC voted against the shock January hike so they should be counted on to oppose a further hike this week, which means the doves only need one more vote to keep rates on hold. The Inflation Report forecasts will be another key to the Feb rate decision and the MPC will have all the key details of the report from the start of this meeting.

The ECB decision is due at 1245GMT and is also expected to be unchanged, although the usual heavy focus will be on the press conference from 1330GMT.
ECB President Jean-Claude Trichet is currently seen re-deploying the 'vigilance' word in order to prepare the market for the expected 25bps rate hike in March.
However, if Trichet instead repeats that the ECB will be 'monitoring developments very closely', then this will likely shift expectations of a rate hike further out to April.

FX Technical Levels

EURUSD Key directional triggers are located at 1.3074, the Feb 2 high and 1.2865, the Jan 12 low.
Initial support however this morning lies at 1.2911 and with the Euro firmer, be on the lookout for a clear break of 1.3074.
This would signal scope for stronger intraday gains.

USDCHF recent sell-off from trend high resistance at 1.2575 was sharp, but so far it's holding above the 1.2376 reaction low from January 23.
Only a break there would damage the case for a continuance of a broader bull trend.
Monday's 1.2519 marks resistance for the short run.

GBPUSD formed resistance at 1.9749 Friday, and only a move above there would reinstate a bullish theme. Last week's 1.9482 marks key support.

USDJPY downward pressure from last week's 122.20 trend high is showing signs of subsiding, but it will take a rise above the 121.34 to 121.37 area to reasonably confirm a return of the broader bull trend.
The first level marks the 0.618 retracement of the 122.20-119.96 decline. The second level is the most prominent reaction high recorded (last Friday) so far since the 122.20 high. On the downside, support has been defined at 119.96, Tuesday's low.

AUDUSD maintains a corrective tone from support at last week's 0.7697 low, with potential toward 0.7847. This level marks the .618 retracement of the most recent leg down from 0.7940 to 0.7697.

USDCAD bull trend keeps its focus on 1.1888. There, the rise from the 1.1029 early-September low would equal 1.618 of the preceding advance from 1.0929 to 1.1460. Only a break of the 1.1737 to 1.1731 congestion zone would jeopardize the underlying bull trend.

Precious Metals Update

Gold remains overbought and cautious of a sudden fall in the momentum indicator.

Recent fall off 659.80 Friday's high to 643.50 low hints the rally off 602.20 Jan 5 low may have completed its 5-waves up-leg.

Break of 643.50 will confirm pullback to 639.25 Jan 24 low ahead of 633.70 Jan 23 low.

Meanwhile, 659.80/661.30 should cap and only a breach there triggers extension to 676.35, Jul 2006 high.

Silver faces tough barrier near 13.849, bear trend off 15.240 May 2006 critical top, ahead of 13.995, Dec 8 high.

Amid overbought conditions, expect 13.849/13.995 to cap for pullback to 13.425 Tuesday's low ahead of 13.250 last Friday's low, preceding deeper fall to 13.090.

Over 13.995 triggers bullish breakout over 14.195, Dec 5, 2006 top.

Gold Update

Comex gold lacked upside momentum heading into the close and ended the session lower after quietly trading in positive territory for most of the session.

A weaker dollar and early firmness in crude oil helped the metal maintain gains on the day but a reversal in oil below the $58 a barrel mark weakened gold's upside potential in a day that lacked market-moving news, traders say.

After the close, April gold is down $1.40 at $657.30 an ounce. The yellow metal faced technical resistance that caused it to stall. The combination of dollar weakness and energy-led inflation concerns, coupled with strong physical and fund buying paints a very positive picture, suggesting once the selling is satisfied gold will be quick to move higher, and could potential look to target $676 in a short space of time.

Treasury Update

Today market price direction could be volatile again and revolve around the $13.0B in 10yr notes to be auctioned.

Yesterday we saw aggressive bidding for the 3 yr auction and it could also be the case for the 10yr and lift treasury prices.

We expect a strong bid-to cover ratio.

We will watch closely the result as it could be a good indicator for the long term.

10yr note Support seen at 106-30 and Target at 107-16.

Precious Metals FUTURES Update

April Gold broke three times the 660 level since last Friday but each time to be rejected abruptly which is in general not a good sign.

Nevertheless we are still in a Bullish channel. If the 659.50/660 support hold during the US trading session focus should be on last Friday high at 667.

Gold could be pressurized up to the US Oil Inventories at 16:30 GMT as it failed also to break the 60.00 psychological level. Support will also be coming from a weakening USD lately.

March Silver also trading below the 13.80 resistance as long as we do not break this level we stay at risk of a nice double top and sideway trading with retracement towards 13.55

Energy Futures Update

Crude Oil Futures at key resistance below USD 60.00, supported by colder US weather and sentiment the OPEC cuts should finally kick in and pressurized stocks in Oil and Distillates.

It is at least what the Market is expecting as Price stay firm around the 59.20 level before the figures.

Sentiment is very Bullish and it seems the Market is waiting for the figures to be released to enter new long positions and trade up to 61.00. According to Reuters survey OPEC-10 production down 160K/day in January compared to the December output, and 840K below October level.

Today's inventory data expected to show the following: Crude Oil: +2000K; Gasoline: +1750K; Distillate: -3000K; Refinery Utilization 0.00%.

With the current weather outlook Market we will be watching closely at the Distillate number for crude oil direction.

US Data out

US Nonfarm Productivity (4Q P) out at 3.0% vs 2.0% expected.
US Unit Labor Costs (4Q P) out at 1.7% vs 2.1% expected.

FED update : Philly Fed's Plosser

Philly Fed's Plosser, in speech w/a hawkish tilt, issues a familiar infl concern: 'not yet clear' whether it 'will continue to recede in the coming year.'

'Additional monetary policy' tightening 'may be needed.' Pleasantly surprised by US 2006 econ performance.

But PCE infl 'came in higher than I would have liked.'

Not convinced infl on downward trend. Warns 2007 could have some surprises in store; he expects 3% real GDP, keeping unemp under 5%. Sees signs of improvement in housing mkt, but also uncertainty. Cont. strong cons. spending and progress on trade deficit also likely.

Notes dlr decline has cheapened U.S. exports.

No evidence of housing weakness spillover to econ. Other factors besides home prices affecting household wealth.

Market Update

A lot of noise about US budgets and the war efforts. That might be a reason for a change in theme. US10Y’s about to break bearish trend resistance.

Emerging Market Currencies also making a turnaround, especially EURTRY. EUR and AUD looking strongest.

Stocks totally lacking momentum for three trading days now. Could be in for a couple of weak days.

Oil is at a very important level (bearish trend resistance from July).

Gold trying to break out the 659 resistance zone, clearance of that we shall see a nice steep rally.

Forex Update

G7 meeting on Feb 9 and 10. Consensus for the coming meeting will be a non event although French Fin confirmed that weakness on yen is on the agenda.
This however is not supported by US Treasury Sec Paulson with his comment that yen is in line with fundamental.
Hedge Fund transparency will be the key agenda with carry trade being the focus.
A quick unwind of carry trade could led to global credit crunch and it will be the aim of G7 to reduce the risk of that.

FOREX ASIA UPDATE - USD

The dollar is weaker against most major currencies and in particular against the CHF and JPY as the market treads warily ahead of the G7 meeting.
Meanwhile, the high-yielding and carry-laden NZD was the worst performing currency.

Treasury Secretary Paulson said in his testimony to the Ways and Means Committee that the Treasury has no evidence that Japanese authorities have intervened in the markets since 2004 to manipulate the value of the yen.
He also said China agrees on the principles of FX reform, but disagrees with the US on the urgency of reform.

Meanwhile the Fed's Yellen made few comments of interest on the outlook for rates, but with regards to China, said that the country is "having trouble even now in conducting an independent monetary policy" given the rise in FX reserves and the trade surplus.

Overall, it looks like the US will not be taking an aggressive stance on FX matters at the upcoming G7 meeting. As such we think the pre-G7 effect of a decline in high-yielding currencies will reverse.
Moreover, we expect US economic data to deteriorate ahead of the March FOMC, with next Wednesday's retail sales for January being the next key data point.

Looking ahead, Treasury Secretary Paulson testifies on the FY 2008 Budget before the House Budget Committee at 1500 GMT.
Fed President Plosser speaks on the economic outlook at 1315 GMT.

Precious Metals Update

Gold's stays toppish and wary of unwinding of overbought indicators.

Recent fall off 659.80 Friday's high to 643.50 low hints the rally off 602.20 Jan 5 low may have completed its 5-waves up-leg.

Break of 643.50 will confirm pullback to 639.25 Jan 24 low ahead of 633.70 Jan 23 low.

Meanwhile, 659.80/661.30 should cap and only a breach there triggers extension to 676.35, Jul 2006 high.

Silver is facing stiff resistance near 13.849, bear trend off 15.240 May 2006 critical top, ahead of 13.995, Dec 8 high.

Amid overbought conditions, expect 13.849/13.995 to cap for dips below 13.425 Tuesday's low ahead of 13.250 last Friday's low, preceding deeper fall to 13.090.

Break of 13.995, however, triggers bullish breakout over 14.195, Dec 5, 2006 top.

Platinum remains cautious since losing its channel support on a sharp fall from near term top at 1192.0, Feb 1 high.

Weighed down by falling technicals, loss of 1165.5 Tuesday's low risks setback to 20 day MA near Jan 22 low at 1155.0 and 1145.0 Jan 18 low.

Failure to hold there exposes 1133.0 Jan 17 low, before resuming bull leg.

Upside, break of 1192.0 resumes bull leg to 1196.0, Nov 24 high and 1213.4, Fib.382 level.

Crude Oil Update

Crude oil hits resistance at 60.00 psychological level and after a nice run Traders are keen to cash in before tommorrows US Inventories.
Support close to 59.00/58.50 area

FOREX EUROPE UPDATE - USD

The US dollar remained firm overnight, trading in a 1.2932-1.2967 range against the EUR and a 120.70-121.19 range against the JPY.

The dollar barely moved against the euro and yen last week as data continued to send mixed signals on the direction of the economy.

GDP growth was stronger at 3.5% y/y while non-farm payrolls for January rose by 111k- less than market expectations of a rise of 150k. Revisions higher to payrolls of earlier months offset the weakness in January, and after a brief drop the USD swiftly rallied to end the week on a firm note.

Also on Friday, the University of Michigan consumer sentiment index for January (final) rose to 96.9 from 91.7, but less than market expectations of 98.0. The resilience of the US economy have surprised many market observers but we continue to expect the dollar to remain under pressure as recurring themes such as expected Fed easing, diversification concerns and the housing market slowdown begin to transpire towards Q2.

The Fed chose to keep rates on hold last week and issued a less-hawkish than expected statement and signalled risks to the economy remain to the downside. There are few data this week, with only the non-manufacturing ISM, Q4 unit labour costs, and weekly jobless claims of note. There are however plenty of Fed speakers, but only Philadelphia Fed President Plosser is speaking specifically on the economic outlook.

We may need to wait for Bernanke testimony next week to get more clarity from the data-dependent Federal Reserve.

Secretary Paulson also has several appearances in Congress relating to the fiscal 2008 budget, and markets will listen for any further comments on currencies ahead of this weekend's G7 meeting. With the Fed outlook likely to remain stable in the week ahead, and the carry trade environment likely to improve, the dollar should be able to trade well this week.

Ahead today, non-manufacturing ISM for January is due at 1500 GMT. The market expects 57.0 from 56.7 in December.

Market Update

USD moving slightly higher on Friday. The strong GDP figures could still be a supporting factor this week. Look for 1.2925 in EURUSD.

Emerging Market Currencies looking strong.

Stocks closing on new highs.

Fixed Income consolidating close to the lows.

Oil still looking strong.

Crude Oil Futures Update

Crude oil Futures traded higher to 59.36 during Asian session.
Market supported by cold weather forecast as well as renewed tension in Middle - East.
Short term support at 58.20 with resistance at 59.40

Crude Futures look to buy on dip at 58.50 target 59.30 with stop at 58.20 or look to buy if breaks 59.40 target 60.00 with stop at 59.10

Precious Metals Update

Gold's pullback off 659.80 Friday's high to 643.50 low hints that the overbought indicator may finally be exerting pressure, as the rally off 602.20 Jan 5 low completes its 5-waves up-leg.

Expect a likely break of 643.50 which will risk 639.25 Jan 24 low ahead of 633.70 Jan 23 low.

Meanwhile, 652.20/659.80 resistance zone should cap and only a breach there bodes well for extension over 661.30 ahead of 676.35, Jul 2006 high.

Silver is retreating from 13.780 last Thursday's high as overbought momentum look to unwind lower.

Ahead of tough barrier at 13.845, Dec 15, 2006 high and 14.195, Dec 5, 2006 key top, expect further dips below 13.250 last Friday's low, preceding deeper fall to 13.090, Tuesday's low and 12.775, Jan 22 low.

Gold Futures Trade

Buy Gold at 661/663

Target 670

Stop below 659

Dollar slips after NFP release

Dollar trades softer, was hit down ahead of the release, as NFP falls short of elevated expecations and benchmark revision was mild.

Stock futures hold slight gains, Tsys lift.

US Data : 13:30 GMT out

Non Farm Payrolls 111K Vs 150K expected. Previous revised up to 206K, was 167K.
US Avg Hourly Earning MoM (Jan) out at 0.2% vs 0.3% expected

US Data coming out in few minutes

US January Job report coming out in 10 minutes at 13:30 GMT, Consensus in the market point towards Nonfarm Payrolls at 150K and an Unemployment Rate at 4.5%

Trade Update

Trade orders placed ahead of US Non-Farm Payrolls
EUR/USD - To Sell at 1.3000 - target open
EUR/USD - To Buy at 1.3055 - target open

USD/JPY - To Buy at 121.25 - target open.

Gold - To Buy at 661.50 - target open.

Futures : Metals Update

Gold rallied yesterday to a six month high and looks increasingly strong.

Medium Term, key resistance for the Month is at 676.50 (last July high).

We need to close above this to confirm the uptrend has resumed and potential target at 850.

Short Term Gold looks overstretched and a retracement towards 648/645 level would not break the Bull Trend.

Today’s US Unemployment will be crucial.

Silver continues to outperform Gold and a break of 13.80 would trigger a larger move towards 14.80 and 2006 highs at 15.22.

Short Term we prefer to Sell close to 13.80/14.00 resistance and Target 13.25/40 support.

Futures : Energy Update

Oil still showing some resilience to the bearish news.

After last Wednesday built in US Oil Inventories, it was Natural Gas turn yesterday with a better draw immediately sanctioned with a Sell-off (-7.9% yesterday to compare with a +9.8% twos days ago).

This dragged down Oil towards the 57.00 support.

In this Bullish Market, Oil touched strong resistance at $58.90. An overbought short term picture should provide a good Selling zone 58.80.

We expect the Market to retrace towards 56/55.00 level in the days to come.

Crude Update

Crude futures are continuing to trade higher Friday, with the front-month March Nymex contract last higher by 30 cents at $57.60.

However, slightly tongue in cheek, some oil traders say the main upcoming focus is not the jobless data but the fact it is Groundhog Day.

Therefore, the appearance (or non-appearance) of legendary groundhog Punxsutawney Phil's shadow could be a main market mover. Fable has it that if Phil sees his shadow when he emerges from his hibernation bolthole at round 0730 local time, there will be six more weeks of
winter weather. If he doesn't see his shadow, an early spring is forecast.

So, look for a major weather indicator around 0730EST and a possible move in crude futures.

Market Update

Everything in line for USD move higher, especially in USDJPY: 1) Fixed Income strongly rejected at attempted rally. 2) Stocks are making new highs. 3) Oil is going higher. 4) Emerging Markets look strong.

13:30 GMT today will most likely offer some really big moves in the USD majors.

Stocks likely to edging higher before the figures, Bond traders are sniffing some good figures today…

Important US Figures today
13:30 GMT - Change in Nonfarm Payrolls
13:30 GMT - Change in Manuf. Payrolls
13:30 GMT - Unemployment rate

FX Update : Buy Eur/Usd

EURUSD is a pending buy at 1.3060, targeting 1.3250, with a stop at 1.2925. The recommendation will be removed if 1.2925 trades before 1.3060.

EURUSD has advanced strongly and closed with a bullish candle off Wednesday's low at 1.2925. Buoyed by a potential double bottom at the Jan. 12 low of 1.2865 and the Jan. 16 low of 1.2876, the single currency is set to ascend further on the back of rising lows.

Underpinned by bullish momentum indicators, expect a break of 1.3054 and 1.3057, the Jan. 9 high and the 38.2% retracement of 1.3368 to 1.2865, which is key in confirming a double bottom breakout towards 1.3181, the Jan. 4 high.

Beyond there bodes well for another upswing towards the 76.4% retracement level of 1.3249, preceding a possible extension to key resistance at 1.3298, the Jan. 2 high. Near-term support is located near the Jan. 30 former high at 1.2982.

Renewed loss of 1.2925, Wednesday's low, would however reinforce another low top, which would suggests a deeper setback below 1.2865-76.

Precious Metals Update

Gold advances strongly off 641.10, Tuesday's low and clears 654.60, Jan 25 high.
Amid risks of toppish indicator, clearance of Aug 2006 highs at 655.00/656.20 has delayed potential pullback.

Breach of 661.30 Thursday's high will accelerate gains to 676.35, Jul 2006 top.

652.20 and 642.50, Thursday/Wednesday lows, should hold and only a break there confirms unwinding of the indicator for losses to 633.70, Jan 23 low.

Silver continues to edge higher off 13.090, Tuesday's low and pierced through 13.692, Fib.764 level to 13.780 Thursday's high.

While the momentum stays overbought, break of tough barrier at 13.845, Dec 15, 2006 high will confirm strength to 14.195, Dec 5, 2006 key top.

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

Gold breaks the resistance

The outlook looks increasingly positive with the focus next on 676.35 following today's break of 656.20. As we mentioned earlier today of chances for it to break, and to initiate a buy order.

Gold has confirmed an important break today clearing resistance at 656.20, the Aug 2, 2006 high.

The break of this level confirms a resumption of the uptrend and paves the way for gains towards 676.35, the July 17, 2006 high.

Note too that a potential channel base currently lies at 661.30.

Momentum conditions continue to provide a positive backdrop and have also moved back into bull mode supporting the outlook for further upside.

Support has been defined at 641.10, the Jan 30 low where a break is required to undermine the current trend.

Futures : Metals Update

Precious Metals showed strength yesterday, much in line with the Crude Oil trade.

As while the FOMC was expected to remain on hold, any warnings on a bottom in the economy or higher inflation would lead to a higher dollar and therefore lower metals prices.

On the other hand, there is nothing to indicate the FOMC has changed their approach to monetary policy, suggesting that the current upside could continue, as no change is supportive of the current market direction.

Our strategy for today would be a buy of April Gold on a break of 660.00. Targeting 675.00. Stops below 656.00. However keep solid trading tactics, meaning keep good discipline, this is break-out strategy.

This is a very reactionary approach to today's trade which will favor the more active trader. Also, you will need to keep a watchful eye on the US dollar.

Energy Futures Update

Yesterday's move upwards in WTI Crude was a real show of strength in the energy markets.

Even faced with bearish inventory data, the market shrugged off any downward sentiment and moved into new highs.

Having extended gains in excess of $4.00 this week, we see Crude Oil market with some limited upside, as prices move into an overbought area.

Much of the focus was on the normal winter stock levels and temperatures from this week, however, there is a real threat of a record cold front moving into the US eastern seaboard for next week.

Most of the upward momentum was driven by looming weather conditions.

The inventory data still indicates that levels are remaining relatively high. The latest demand indications show an upward trend, whilst US gasoline demand leads the way and distillates and oil products' demand have both surged in the latest week.

Yesterday's low in WTI Crude was a perfect fit to technical support at 55.75. From there is was one way traffic, really. What with the surge in prices this week, we see only a limited upside to the current momentum, with 58.50 remaining the cap to the current positive momentum. With 58.50 being reached, we see profit taking moving into the weekend.

Market Update

FOMC statement remain with a hawkish tone, but we are disappointed that they decline to comment on core inflation and strong growth in Q4.

Just the right tonic for equities, the entire market getting a boost.
As we expected, January was a very strong month for both Europe and the US.

Futures Gold
Buy April Gold on a break of 660.00. Targeting 675.00. Stops below 656.00.
Trading tactics: Keep good discipline, this is break-out strategy. Keep a watchful eye on the US dollar.

Crude Oil Update
Inventories were expected to be inline with expectations, however, distillates showed a draw of 2100K came out at 2648k, i.e. greater than expected.
Crude & Gasoline showed significant builds in inventories.

Equities Update
S&P 500: dovish FOMC pushed the tape higher, with January turning out to be as strong as we expected. Only a break of the 1400 area would damage the technical picture.