Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

Crude oil is on the upswing while gold is under pressure in the wake an agreement on a bailout for Cyprus but the trends now on display may prove short-lived.

Talking Points

Crude Oil is on the Rise as Cyprus Bailout Deal Stokes Risk Appetite Gold and Silver Turn Lower on Diminished Market Dislocation Fears Crude oil is pushing higher along with Asian and European stock exchanges as risk appetite firms after Cyprus and the so-called “troika” (EU/ECB/IMF) agreed to measures paving the way for launch of the country’s bailout program. Gold and silver are trading lower as the apparent reduction in tail risk stemming from the agreement dents demand for alternative store-of-value assets. A lackluster response from the Euro hints not all is well however, warning that the optimism in the shares and commodities spaces may not prove lasting.

Forex traders’ lack of enthusiasm seems reasonable. The critical issue in for markets in following the Cyprus situation remains that of precedent for larger Eurozone countries, and the way in which the crisis has been managed does not seem to inspire a great deal of confidence. At best, depositors in Cypriot banking institutions now have to contend with capital controls locking up their money. At worst, they may lose as much as 40 percent of it.

This raises an important question: why should a depositor in any Eurozone country similarly vulnerable to a banking crisis expect to be unscathed if a Cyprus-like calamity were to occur there? If this expectation seems unreasonable in light of today’s events, said depositor (and many others) may well opt not to keep money in the Eurozone. This leaves markets waiting to see if a mass exodus of capital does indeed occur, for then the worst-case scenario will be upon the Eurozone whether or not Cyprus receives its aid.

WTI Crude Oil (NY Close): $93.71 // +1.26 // +1.36%

Prices are testing resistance at 94.07, the March 19 swing high, with a break higher on a daily closing basis targeting 95.51. A break above that targets trend line resistance at 96.33. Near-term support is at 91.97, the 23.6% Fibonacci expansion.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1608.58 // -6.30 // -0.39%

Prices are approaching support at 1597.76, the 14.6% Fibonacci expansion, with a break lower exposing the 23.6% level at 1586.30. Near-term resistance is at 1616.98, the March 21 high. A move above that aims for a longer-term falling trend line at 1642.66.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // -0.44 // -1.49%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.24. Alternatively, a reversal below support targets the 38.2% level at 27.86.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.466 // +0.030 // +0.87%

Prices are testing above resistance at 3.483, the 23.6% Fibonacci retracement. A break higher exposes the 38.2% level at 3.542. Near-term support is at 3.447, the 14.6% Fib, with move beneath that aiming for the March 19 swing low at 3.388.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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View the original article here

Crude Oil, Gold May Struggle to Further Post-Cyprus Deal Trends

Crude oil is on the upswing while gold is under pressure in the wake an agreement on a bailout for Cyprus but the trends now on display may prove short-lived.

Talking Points

Crude Oil is on the Rise as Cyprus Bailout Deal Stokes Risk Appetite Gold and Silver Turn Lower on Diminished Market Dislocation Fears Crude oil is pushing higher along with Asian and European stock exchanges as risk appetite firms after Cyprus and the so-called “troika” (EU/ECB/IMF) agreed to measures paving the way for launch of the country’s bailout program. Gold and silver are trading lower as the apparent reduction in tail risk stemming from the agreement dents demand for alternative store-of-value assets. A lackluster response from the Euro hints not all is well however, warning that the optimism in the shares and commodities spaces may not prove lasting.

Forex traders’ lack of enthusiasm seems reasonable. The critical issue in for markets in following the Cyprus situation remains that of precedent for larger Eurozone countries, and the way in which the crisis has been managed does not seem to inspire a great deal of confidence. At best, depositors in Cypriot banking institutions now have to contend with capital controls locking up their money. At worst, they may lose as much as 40 percent of it.

This raises an important question: why should a depositor in any Eurozone country similarly vulnerable to a banking crisis expect to be unscathed if a Cyprus-like calamity were to occur there? If this expectation seems unreasonable in light of today’s events, said depositor (and many others) may well opt not to keep money in the Eurozone. This leaves markets waiting to see if a mass exodus of capital does indeed occur, for then the worst-case scenario will be upon the Eurozone whether or not Cyprus receives its aid.

WTI Crude Oil (NY Close): $93.71 // +1.26 // +1.36%

Prices are testing resistance at 94.07, the March 19 swing high, with a break higher on a daily closing basis targeting 95.51. A break above that targets trend line resistance at 96.33. Near-term support is at 91.97, the 23.6% Fibonacci expansion.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1608.58 // -6.30 // -0.39%

Prices are approaching support at 1597.76, the 14.6% Fibonacci expansion, with a break lower exposing the 23.6% level at 1586.30. Near-term resistance is at 1616.98, the March 21 high. A move above that aims for a longer-term falling trend line at 1642.66.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.74 // -0.44 // -1.49%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.24. Alternatively, a reversal below support targets the 38.2% level at 27.86.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.466 // +0.030 // +0.87%

Prices are testing above resistance at 3.483, the 23.6% Fibonacci retracement. A break higher exposes the 38.2% level at 3.542. Near-term support is at 3.447, the 14.6% Fib, with move beneath that aiming for the March 19 swing low at 3.388.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

View the original article here

Euro Pessimism Gathers Pace- Further ECB Support Ahead

Talking Points

Euro: Cyprus Not a Template, Banks to Become Increasingly Reliant on ECB British Pound: 4Q GDP Contracts 0.3%, Disposable Incomes Fall 0.1% Euro: Cyprus Not a Template, Banks to Become Increasingly Reliant on ECB

The Euro tumbled to a fresh yearly low of 1.2760 as economic confidence in Europe weakened more-than-expected during the month of March, and the single currency may face additional headwinds over the near to medium-term as fears of a deepening recession along with the renewed threat for contagion drags on the exchange rate.

Although the EU argued that the Cyprus bailout ‘is not a template’ for the euro-area, former Bundesbank President Axel Weber warned the ‘impact on the Cypriot economy is going to be huge,’ and argued that ‘banks will become even more dependent on ECB liquidity because deposits will be largely drained.’

At the same time, it seems as though Slovenia could be next in line to request external assistance as Prime Minister Alenka Bratusek warns that public finances in the region remain in ‘bad shape,’ and the renewed threat for contagion may continue to dampen the appeal of the single currency as European policy makers maintain a reactionary approach in addressing the risks surrounding the region.

As the fundamental outlook for Europe turns increasingly bleak, the EURUSD should continue to work its way towards the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 to test for near-term support, but the bearish sentiment surrounding the single currency may threaten the rebound from 2012 (1.2041) as market participants see a growing case for the ECB to push the benchmark interest rate to a fresh record-low in the coming months.

British Pound: 4Q GDP Contracts 0.3%, Disposable Incomes Fall 0.1%

The British continued to give back the rebound from earlier this month as the Bank of England (BoE) warned commercial banks in the U.K. will need to come up with GBP 25B in fresh capital by the end of the year in order to insulate the economy from future shocks.

At the same time, the final 4Q GDP report confirmed the 0.3% decline in the growth rate, but showed a 0.1% contraction in disposable incomes, which puts the BoE in an even tougher position as above-target inflation continues to sap purchasing power for Britons.

As the British economy struggles to emerge from the double-dip recession, we should see the Monetary Policy Committee maintain an accommodative policy stance in 2013, but we may see a growing number of BoE officials adopt a more neutral to hawkish tone for monetary policy as the central bank sees a slow but sustainable recovery ahead.

As the GBPUSD appears to have carved out a near-term top around the 50.0% Fib from the 2009 low to high around 1.5260, the pair looks poised to revert back towards the 61.8% retracement (1.4840-50), and we may see the pair continue to consolidate ahead of the next BoE meeting on April 4 as market participants weigh the outlook for monetary policy.

FX Upcoming

Consumer Price Index (MoM) (FEB)

Consumer Price Index (YoY) (FEB)

Bank Canada Consumer Price Index Core (MoM) (FEB)

Bank Canada Consumer Price Index Core (YoY) (FEB)

Consumer Price Index s.a. (MoM) (FEB)

Consumer Price Index Core s.a. (MoM) (FEB)

Pending Home Sales (MoM) (FEB)

Pending Home Sales (YoY) (FEB)

DOE U.S. Crude Oil Inventories (MAR 22)

DOE U.S. Distillate Inventory (MAR 22)

DOE U.S. Gasoline Inventories (MAR 22)

Fed's Eric Rosengren Speaks on U.S. Economy

Fed's Narayana Kocherlakota Speaks on Monetary Policy

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

RelatedArticles: Weekly Currency Trading Forecast

New to FX? Watch this Video

View the original article here

Euro Pessimism Gathers Pace- Further ECB Support Ahead

Talking Points

Euro: Cyprus Not a Template, Banks to Become Increasingly Reliant on ECB British Pound: 4Q GDP Contracts 0.3%, Disposable Incomes Fall 0.1% Euro: Cyprus Not a Template, Banks to Become Increasingly Reliant on ECB

The Euro tumbled to a fresh yearly low of 1.2760 as economic confidence in Europe weakened more-than-expected during the month of March, and the single currency may face additional headwinds over the near to medium-term as fears of a deepening recession along with the renewed threat for contagion drags on the exchange rate.

Although the EU argued that the Cyprus bailout ‘is not a template’ for the euro-area, former Bundesbank President Axel Weber warned the ‘impact on the Cypriot economy is going to be huge,’ and argued that ‘banks will become even more dependent on ECB liquidity because deposits will be largely drained.’

At the same time, it seems as though Slovenia could be next in line to request external assistance as Prime Minister Alenka Bratusek warns that public finances in the region remain in ‘bad shape,’ and the renewed threat for contagion may continue to dampen the appeal of the single currency as European policy makers maintain a reactionary approach in addressing the risks surrounding the region.

As the fundamental outlook for Europe turns increasingly bleak, the EURUSD should continue to work its way towards the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 to test for near-term support, but the bearish sentiment surrounding the single currency may threaten the rebound from 2012 (1.2041) as market participants see a growing case for the ECB to push the benchmark interest rate to a fresh record-low in the coming months.

British Pound: 4Q GDP Contracts 0.3%, Disposable Incomes Fall 0.1%

The British continued to give back the rebound from earlier this month as the Bank of England (BoE) warned commercial banks in the U.K. will need to come up with GBP 25B in fresh capital by the end of the year in order to insulate the economy from future shocks.

At the same time, the final 4Q GDP report confirmed the 0.3% decline in the growth rate, but showed a 0.1% contraction in disposable incomes, which puts the BoE in an even tougher position as above-target inflation continues to sap purchasing power for Britons.

As the British economy struggles to emerge from the double-dip recession, we should see the Monetary Policy Committee maintain an accommodative policy stance in 2013, but we may see a growing number of BoE officials adopt a more neutral to hawkish tone for monetary policy as the central bank sees a slow but sustainable recovery ahead.

As the GBPUSD appears to have carved out a near-term top around the 50.0% Fib from the 2009 low to high around 1.5260, the pair looks poised to revert back towards the 61.8% retracement (1.4840-50), and we may see the pair continue to consolidate ahead of the next BoE meeting on April 4 as market participants weigh the outlook for monetary policy.

FX Upcoming

Consumer Price Index (MoM) (FEB)

Consumer Price Index (YoY) (FEB)

Bank Canada Consumer Price Index Core (MoM) (FEB)

Bank Canada Consumer Price Index Core (YoY) (FEB)

Consumer Price Index s.a. (MoM) (FEB)

Consumer Price Index Core s.a. (MoM) (FEB)

Pending Home Sales (MoM) (FEB)

Pending Home Sales (YoY) (FEB)

DOE U.S. Crude Oil Inventories (MAR 22)

DOE U.S. Distillate Inventory (MAR 22)

DOE U.S. Gasoline Inventories (MAR 22)

Fed's Eric Rosengren Speaks on U.S. Economy

Fed's Narayana Kocherlakota Speaks on Monetary Policy

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

RelatedArticles: Weekly Currency Trading Forecast

New to FX? Watch this Video

View the original article here

Japanese Yen Weakens Further as G-20 Refrained from Censure

ONG Focus | Insights | Written by Oil N' Gold | Mon Feb 18 13 01:01 ET

Japanese weakened further as G-20 finance leaders refrained from censoring the BOJ’s policies to depreciate its currency. The official statement released after the G-20, not much different from the G-7 one, said that “monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates”. Policymakers are committed to “monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes”. They pledged to “move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments and in this regard, work more closely with one another so we can grow together. The leaders cautioned that “excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability” and warned against “competitive devaluation”.

We have a light economic calendar today. The Eurozone current account probably widened to 15.3B euro in December from 14.8B euro a month ago. The BOJ minutes released today would explain the factors triggering policymakers to leave monetary policies unchanged in February 14. Japanese Prime Minister Shinzo Abe stated today that "it would be necessary to proceed with revising the BOJ law if the central bank cannot produce results under its own mandate”. Concerning weakness in Japanese, Abe said that the BOJ’s monetary policy is not directly aimed at depreciating the currency. Yet, it is one of the key factors driving recent decline in the yen.

Commitments of Traders:

With the exception of gasoline, speculators were bullish towards the energy complex in the week ended February 12. Net length for crude oil futures rose +6 071 contracts to 272 875. Net length for heating oil added +6 662 contracts to 38 394 while that for gasoline slipped -100 contracts to 94 413. Net short for natural gas slid -6 100 contracts to 138 655.

Speculators were mixed towards precious metals during the week. Net length for gold future was down -10 630 contracts to 126 835 while that for silver futures fell 3 789 contracts to 37 072. For PGMs, net length for platinum added +672 contracts to 50 138 while that for palladium climbed +1 079 contracts to 25 884.

 

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View the original article here

European Shares and Japanese Yen Weakened Further

ONG Focus | Insights | Written by Oil N' Gold | Tue Feb 19 13 00:15 ET

The US market was closed on the President Day while European stock weakened as the ECB President Draghi cautioned of risks to economic outlook in the Eurozone. Japanese yen continued its slump, now at the lowest level in 33 months, after the G-20 shrugged off the risks of currency war. Moreover, the market was moved by conflicting comments from Japanese official. In the commodity sector, the front-month contract plunged to a 4-day low of 95.21 before settling at 95.86 before settling at 95.86, down -1.49% while the Brent crude contract slipped -0.24%. Gold price remained fragile with the benchmark Comex contract losing for the third consecutive day to as low as 1596.7 before ending the day at 1609.5, down -1.59%.

In a speech at the European Parliament, the ECB President Draghi addressed the competitive depreciation of foreign exchange rates. He stated that "most of the exchange rate movements that we have seen were not explicitly targeted, they were the result of domestic macroeconomic policies meant to boost the economy. In this sense, I find really excessive any language referring to currency wars". He believed that both the nominal and real exchange of the euro has remained around its long-term average. Concerning the economic prospect, Draghi forecast that "economic weakness in the early part of 2013 is expected to be followed by a very gradual recovery later in the year" but he warned that "considerable further efforts are needed to ensure that Europe continues emerging from the crisis".

The BOJ's minutes for the January meeting indicated that a few members were reserved about the upgrades of Japanese economic outlook. Meanwhile, 2 BOJ members expressed that extending the maturity of BOJ bond buys was an option. Yet, the minutes were overshadowed by comments from policymakers. Japanese Finance Minister Taro Aso stated that the government has no plan to buy foreign bonds. His comments contradicted with Prime Minister Shinzo Abe who reiterated that buying foreign bonds "exists as one idea". The next focus is the upcoming BOJ governor. News headlines stated that Toshiro Muto, a less dovish candidate than Haruhiko Kuroda or Kazumasa Iwata, is the leading candidate for the post. Abe stressed that he expects the governor to reflect the government's determination to beat deflation. Abe stated that "it would be necessary to proceed with revising the BOJ law if the central banks cannot produce results under its own mandate".

The RBA minutes released in Asian session unveiled that recent rate cuts have shown effects in boosting the economy while benign inflation might trigger further rate easing. Regarding developments in China and Japan, the minutes stated that "a wide range of indicators showed that growth in the Chinese economy had stabilized, underpinned by public spending and somewhat stimulatory financial policies... There had also been indicators of stronger growth of domestic demand" in East Asia with the exception of Japan.

 

Latest Analysis from this Author

Gold Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Silver Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Crude Oil Weekly Technical Outlook (Saturday, 16 March 2013 10:05 ET)Natural Gas Weekly Technical Outlook (Saturday, 16 March 2013 10:04 ET)Weekly Fundamentals - WTI- Brent Spread Narrowed o... (Saturday, 16 March 2013 02:38 ET)Strong US Data Sent Shares to New Highs (Friday, 15 March 2013 01:03 ET)Economic Calendar 3/15/13 (Thursday, 14 March 2013 22:13 ET)IEA Lowered Global Oil Demand Growth Forecast for ... (Thursday, 14 March 2013 08:50 ET)Crude Weakened on Inventory Increase (Wednesday, 13 March 2013 23:14 ET)Economic Calendar 3/14/13 (Wednesday, 13 March 2013 23:12 ET)

View the original article here