Oil N'Gold: Crude Modestly Higher ahead of FOMC Meeting

Crude oil price climbed higher in Asian session on Monday as USD's decline ahead of the FOMC meeting raised appeal for commodities. Data showing strong manufacturing activities in China also boosted oil prices. Gold kept hovering around 1360. We believe either upside or downside surprise from Fed's QE should benefit positive for gold in the long term. However, a milder than expected dose of QE may trigger selloff in the metal in the near-term.

Economic data released last Friday were mixed. US GPD grew by an annualized pace of +2% (consensus: +2.2%) in 3Q10, from +1.7% a quarter ago. University of Michigan consumer confidence was revised down -0.2 points to 67.7 in October. While the ‘economic conditions' index rose +3.6 points to 76.6, the ‘expectations index' fell -2.7 points to 61.9.Chicago PMI, however, beat market expectations and improved to 60.6 in October. We believe the set of data should not alter the Fed's decision to announce new QE measure at the meeting this week.

The dollar fell against major currencies with the exception of Japanese yen. The market forecast the size of Fed's new bond buying program would be $1-2 trillion but it may begin by announcing $500B over several months or $100B per month. Apart from purchasing Treasury securities, the Fed may modify its language used in the accompanying statement. At the Boston Fed conference, Chairman Ben Bernanke said that 'clear communication about the longer run objectives of monetary policy is beneficial at all times but is particularly important in a time of low inflation and uncertain economic prospects such as the present' and the FOMC will continue to 'actively review its communications strategy with the goal of providing as much clarity as possible about its outlook, policy objectives, and policy strategies'.

China's PMI expanded to 54.7 in October from 53.8 a month ago. This is the fastest growth pace in 6 months and signaled the country's economy can sustain through the government's tightening measures. This is also positive news for the oil market as, according to IEA, China has overtaken the US as the world's largest oil user.

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Oil N'Gold: Crude Oil Weekly Technical Outlook For Saturday Oct. 30th

Crude oil continued to be bounded in choppy sideway trading between 79.25 and 84.45 last week. Outlook remains unchanged. With 78.04 support intact, there is no confirmation of reversal yet. The consolidative price actions from 84.43 also suggests that recent rally is not over. An upside break out will be in favor. Though, in case of another rise, we'll continue to focus on reversal signal inside resistance zone of 82.97/87.15. On the downside, break of 78.04 support will indicate that rise from 70.76 is over and deeper decline should be seen to retest this support level first.

In the bigger picture, after all, we're still favoring the case that medium term rally from 33.2 is already completed at 87.15. Recovery from 64.23 is treated as a correction and should be near to completion, if not finished. Even in case of another rise, strong resistance should be seen as crude oil enters into resistance zone of 82.97/87.15 and bring reversal. We're still expecting another fall to 60 psychological level (50% retracement of 33.2 to 87.15 at 60.18). However, decisive break of 87.15 will put focus on long term fibo level at 50% retracement of 147.27 to 33.2 at 90.24.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Price actions from 147.27 are treated as consolidation in the larger up trend and with 90.24 fibo resistance intact, a test of 33.2 eventually is in favor. Though, decisive break of 90.24 will bring stronger rally to above 100 psychological level as a relatively powerful second wave of the consolidation continues.

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Oil N'Gold: Crude Oil Weekly Technical Outlook For Saturday Oct. 23rd

Crude oil continued to engage in choppy sideway trading last week and spiraled lower. But after all, downside is still contained above 78.04 resistance and there is no confirmation of reversal yet. Recent rally might still extend one more time. But after all, even in case of another rise, we'll continue to focus on reversal signal inside resistance zone of 82.97/87.15. On the downside, break of 78.04 support will indicate that rise from 70.76 is over and deeper decline should be seen to retest this support level first.

In the bigger picture, after all, we're still favoring the case that medium term rally from 33.2 is already completed at 87.15. Recovery from 64.23 is treated as a correction and should be near to completion, if not finished. Even in case of another rise, strong resistance should be seen as crude oil enters into resistance zone of 82.97/87.15 and bring reversal. We're still expecting another fall to 60 psychological level (50% retracement of 33.2 to 87.15 at 60.18). However, decisive break of 87.15 will put focus on long term fibo level at 50% retracement of 147.27 to 33.2 at 90.24.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Price actions from 147.27 are treated as consolidation in the larger up trend and with 90.24 fibo resistance intact, a test of 33.2 eventually is in favor. Though, decisive break of 90.24 will argue that crude oil will bring stronger rally to above 100 psychological level as a relatively powerful second wave of the consolidation continues.

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Crude Oil Weekly Technical Outlook For Saturday Oct. 2nd

Crude oil's rise from 72.75 accelerated to as high as 81.75 last week and the development suggests that whole rise from 70.76 is not corrective in nature. In other words, rise from 70.76 is resuming whole rebound from 64.23 and should extend beyond 82.97 resistance. Initial bias is on the upside this week and further rise should be seen to 161.8% projection of 70.76 to 78.04 from 72.75 at 84.53. On the downside, below 79.70 will turn intraday bias neutral and bring consolidations. But downside should be contained by 4 hours 55 EMA (now at 77.32) and bring another rise.

In the bigger picture, the stronger than expected rally from 70.76 dampened the immediate bearish view and suggests that rise from 64.23 is still in progress. Nevertheless, we're still favoring the case that medium term rally from 33.2 is already completed at 87.15. Hence, strong resistance should be seen as crude oil enters into resistance zone of 82.97/87.15 and bring reversal. We're still expecting another fall to 60 psychological level (50% retracement of 33.2 to 87.15 at 60.18).

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.

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Crude to Remain Range Bound Under OPEC's Manipulation

The dovish September FOMC statement heightened speculations that the Fed will announce additional monetary easing measures later this year. Provision of extra liquidity to the market is negative for USD. The dollar index dropped below 80 for the first time since March 2010. Weakness in USD drove commodities higher. WTI crude oil rallied, after a week of selloff in the prior week due to earlier than expected resumption of operation in the 6A pipeline, as a lower dollar increased it appeal despite unexpected rise in crude inventory. Precious metals strengthened with gold reaching rising above 1300 for the first time on record while silver outperforming its counterparts. Base metals were generally higher as robust demand from China boosted confidence in the complex's outlook.

Crude oil rallied on Friday as driven by strength in Wall Street. WTI crude oil for November delivery jumped to 76.68, the highest level in more than a week, before settling at 76.49, up +3.84% during the week. Meanwhile, corresponding contract for Brent crude gained +0.84% during the week. WTI-Brent spread widened to 4.9, a level not seen since mid-May, on Wednesday, as crude inventory surprisingly increased despite shutdown of the Enbridge pipeline, before narrowing to 2.4 on Friday.

When sovereign crisis in the Eurozone reached its peak in May/June, rally in the dollar and selloff in growth assets had sent crude oil price to as low as 64.24. As the concerns gradually abated and risk appetite increased slowly, oil buyers became active again and sent prices above 80 in August. Nevertheless, crude oil price has remained within a range of 70 and 80 for most of the time. In fact, we expect the 'range-bound' situation will continue for the rest of the year as we see price below 70 would attract buying, e.g. from the Chinese government as strategic reserves, and trigger 'intervention' by the OPEC while price above 80 is unsustainable giving growing non-OPEC production and ample OPEC spare capacity.

China's strategic petroleum reserve (SPR) plan aims at completing the 3 phases of oil reserve base construction in 15 year (around 2020). While the sky-high oil price in 2008 had discouraged stockpiling, China's oil imports rebounded sharply in March 2009 when oil price stabilized after a sharp selloff. In 2010, China has been importing a large amount of oil and a record high being set in June 2010 (at 22.27M metric tons). We believe part of the oil imports went to the country's national oil reserves and the commercial oil reserves of China National Petroleum Corporation (CNPC) and the Sinopec Group. Now that the country's is in the middle of the 15-year plan and, given the opportunistic nature of the SPR buying, it's likely for the country to accelerate the pace of stockpiling when global oil price fall below 70,  the lower boundary of the trading range.

OPEC is in control of the world's 40% oil supply and has proven capability of 'adjusting' oil prices using its output. The cartel appears satisfied with recent price levels and some oil ministers expressed they preferred oil to trade at around 70-80. Saudi Arabia's King Abdullah said that 75 is a level he wants. Therefore, it's reasonable to believe the cartel will do something, i.e. cut production, to defend the floor.

Yet OPEC's supply is a 2-edged sword. While it may cut production so that oil price will not fall to a level that hurts oil investment and national revenues, its abundant spare capacity is limiting the upside of oil price.

According to the September Short-Term Energy Report by the US Energy Department, OPEC's crude oil production will increase +0.3M bpd and 0.5M bpd 2010 and 2011, respectively, with non-crude petroleum liquids expected to increase by 0.6M bpd 2010 and 0.7M bpd in 2011. Spare capacity in the cartel should remain near 5M bpd compared with 4.3M bpd in 2009 and 1.5M bpd in 2008.

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BOE may Ease Further, Conforming to Our View on Low Rate Environment

Crude oil recovered modestly but remained hovering around 75 level as the market awaits the oil inventory report. Stock markets were mixed in Asian and European session so crude failed to benefit much despite its strong correlation with equities. Gold resumed the uptrend after profit taking sent price to 1274 yesterday. Currently trading at 1294, the benchmark contract for gold has gained in 5 out of the past 7 days due to macroeconomic uncertainty and the Fed’s move closer to additional easing.

Stocks gained in Asian session as driven by Australia and Hong Kong shares. Just 2 days after RBA governor Glenn Stevens saying that Australia’s economy will growth above trend in 2011, Westpac Leading Index unexpectedly rose +0.4% m/m in July, following a contraction of -0.1% in the prior month. Australia’s S&P/ASX Index added +0.21%. In Hong Kong, the Monetary Authority said the city will grow at a moderate rate through the end of the year. This lifted the Hang Send Index by +0.21%.

In Europe, equities were generally lower with benchmark indices losing 0.5-0.9%. Eurozone’s industrial new orders surprisingly fell -2.4% m/m in July from a downwardly revised +2.4% growth in June. The market had anticipated a milder drop of -1.4%. As stated in the minutes for BOE’s September meeting, economic data released in the past month has showed a ‘reduction in growth prospects’. The minutes also revealed.....Read the entire article.

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Crude Oil Weekly Technical Outlook From Oil n Gold

Crude oil edged high to 78.04 last week but was limited below mentioned 61.8% retracement of 82.97 to 70.76 at 78.31 and reversed. The break of 73.88 minor support indicates that whole recovery from 70.76 is likely completed. Initial bias is mildly on the downside this week for a retest on 70.76 support first. Sustained trading below 70.76/71.09 support zone will confirm our bearish view that whole rebound from 64.23 is finished at 82.97 already and target another low below 64.23. On the upside, above 75.25 minor resistance will turn intraday bias neutral and bring recovery. But we'll stay bearish as long as 78.31 fibo resistance holds.

In the bigger picture, choppy rebound from 64.23 is treated as a correction to fall from 87.15 only and has possibly finished at 82.97 already. Decisive break of 71.09 will confirm this bearish case and also indicate that whole fall from 87.15 is resuming for 60 psychological level, (50% retracement of 33.2 to 87.15 at 60.18, 100% projection of 87.15 to 64.23 from 82.97 at 60.05). Decisive break there will indicate that fall from 87.15 is developing into a powerful impulsive wave and would target 33.2 low. On the upside, break of 82.97 resistance is needed to invalidate this view. Otherwise, we'll stay bearish in crude oil.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.

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Crude Oil Retreats Along With Equities as Economic Data Disappoints

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Crude oil pulled back in concert with stock markets. Political environment in Japan and economic releases in the UK and the Eurozone took center stage in driving market sentiment. Currently trading at 76.7, the front month WTI contract retreated for the first time in 3 days after soaring to a 1 month high of 78.04 yesterday. Weakness in USD sent precious metals higher. Gold climbed to as high as 1256.9 while silver continued trading above 20. For PGMs, both platinum and palladium strengthened for a second day to 5 week high of 1570 and 4 month high of 541 respectively.

In Japan, Prime Minister Naoto Kan's victory as the head of the ruling Democratic Party of Japan (DPJ) pushed the yen to a 15 year high against the dollar. Kan has been viewed as more tolerant to yen's appreciation than another PM candidate Ichiro Ozawa.

In the Eurozone, ZEW's index signaled investors lost confidence on Eurozone's economy. The 'economic sentiment' index for the 16-nation region plummeted to 4.4 in September from 15.8 in August. The market had anticipated a milder drop to 14.5. The reading specifically for Germany slumped to -4.3 in August from 14 a month ago. In the UK, headline CPI surprisingly rose to +3.1% y/y in August. Inflation has been overshooting BOE's target of +3% for 6 straight months, increasing the difficulties for the central bank to implement measures to stimulate growth.

Gold/silver ratio has dropped to 62.2 yesterday from 64.4 earlier in the month and above 70 earlier this year, indicating silver's outperformance. However, we have become more cautious of a correction in silver price from current price level. In fact, silver is the only precious metal under our coverage that is oversupplied due to rising mine production.

PGM prices rallied as a labor strike at the South African PGM producer Northam Platinum entered a second week. According to the company, about 80% of the mine's 6 800 workers were on the strike.

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China's Outlook Dominates the Market

While market sentiment was dominated by renewed concerns over the stability of the European banking system earlier in the week, better than expected bond auctions in Portugal and Poland eased the worries. Confidence was further boosted by the weekly drop in US jobless claims and China's trade data which suggested the country's demand for foreign goods remained strong.

Oil started the week moving within a narrow range with a soft tone but strength in stock markets drove price higher. Prices were further lifted after reports of shutdowns of production facilities. Gold jumped earlier in the week as sovereign risks in the Eurozone spurred demand for safe havens. However, failure to breach the record high triggered selloff.

Crude Oil
Oil price jumped on Friday as better-than-expected data from the US and China boosted optimism of the demand outlook. The front-month WTI contract jumped to a 4-week high of 76.73 before settling at 76.45, up +2.48% on weekly basis. Fuel prices also soared with heating oil and gasoline futures gaining more than +2%. Brent crude also rose but the increase was milder than WTI crude.

Movement of WTI-Brent spread was dramatic last week. The front-month WTI contract had widened to a $3.65 discount to ICE Brent on Tuesday (Sep 7) before narrowing to $1.71 on Friday. The change was mainly driven by shutdown of the largest pipeline operated by Enbridge Energy Partners due to a leak. According to the company, the pipeline can carry 670K bpd of oil from Canada to refineries in the US Midwest. The direction of the WTI-Brent spread in the near-term depends on when the pipeline can resume operations. Indeed, Enbridge closed another line, which transports oil from Indiana to Ontario, 6 weeks ago after a spill in Michigan. Repair of the line has been finished but US regulators has not yet permitted it to resume operations.

We do not expect WTI crude oil to return parity or even at premium to Brent crude in the short term as total crude oil inventory remains at record high and Cushing stock is abundant......Read the entire Oil N' Gold Focus Report



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Crude Oil Weekly Technical Outlook For Saturday August 21st

Crude oil's decline from 82.97 extended further as expected last week and continued to sustain below the short term rising trend line. Initial bias remains on the downside this week for 71.09 support next. As discussed before, whole rebound from 64.23 should be finished at 82.97 already. Break of 71.09 will confirm this case and target another low below 64.23. On the upside, above 76.63 resistance will suggest that a short term bottom is in place, possibly with bullish convergence condition in 4 hours MACD. Stronger recovery would be seen in this case. But after all, risk will now remain on the downside as long as 82.97 resistance holds.

In the bigger picture, choppy rebound from 64.23 is treated as a correction to fall from 87.15 only and has possibly finished at 82.97 already. Break of 71.09 will confirm this case and also indicate that whole fall from 87.15 is resuming for 60 psychological level, (50% retracement of 33.2 to 87.15 at 60.18, 100% projection of 87.15 to 64.23 from 82.97 at 60.05). Decisive break there will indicate that fall from 87.15 is developing into a powerful impulsive wave and would target 33.2 low. On the upside, even in case of another rise, focus will remain on reversal signal as crude oil enters into resistance zone of 82.97/87.15.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.


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Crude Oil Weekly Technical Outlook For Saturday Aug. 7th

Crude oil edged further higher to 82.97 last week but retreat sharply since then. A temporary top is at least formed and initial bias is neutral this week. We'd continue to seem more retreat below 82.97 first. Nevertheless, note that another rise remains in favor as long as 75.90 support holds. Above 82.97 will target 100% projection of 64.23 to 79.38 from 71.09 at 86.24 next. However, break of 75.9 will be the first signal that whole rebound from 64.23 is finished and will turn focus to 71.09 support for confirmation.

In the bigger picture, there is no change in the view that rise from 64.23 is a correction to fall from 87.15 only. Hence, even in case of further rally, we'd expect strong resistance below 87.15 high and bring reversal. On the downside, break of 71.09 will be the first signal that whole fall from 87.15 is resuming for another low below 64.23 towards 50% retracement of 33.2 to 87.15 at 60.18

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.

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Crude Oil Weekly Technical Outlook For Saturday July 31st

Crude oil edged higher to 79.69 initially last week but retreated sharply. Nevertheless, the retreat was contained at 75.90 and rebounded. Near term outlook is mixed and we'll stay neutral first. on the upside, break of 79.69 will indicate that whole rebound from 64.23 is still in progress for 61.8% projection of 64.23 to 79.38 from 71.09 at 80.45 next. On the downside, break of 75.90 will revive the case that crude oil has topped out at 79.69 already and will flip bias back to the downside for 71.09 support for confirmation.

In the bigger picture, there is no change in the view that rise from 64.23 is a correction to fall from 87.15 only. Hence, even in case of further rally, we'd expect strong resistance below 87.15 high and bring reversal. On the downside, break of 71.09 will be the first signal that whole fall from 87.15 is resuming for another low below 64.23 towards 50% retracement of 33.2 to 87.15 at 60.18

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.....Nymex Crude Oil Continuous Contract 4 Hours, Daily, Weekly and Monthly Charts.

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Commodities Firm While Equities Fall

Commodities were generally firm after strong European confidence data and bigger than expected decline in initial jobless claims in the US. WTI crude oil price rebounded strongly and pared most of the losses made over the past 2 days amid USD's weakness. The front month contract surged to as high as 78.89 before closing at 78.36, up +1.78%. Natural gas rallied as gas storage rose less than expected in the US while gold price also climbed higher and settled at 1168.4, up +0.69%.

The US Energy Department reported gas inventory added +28 bcf to 2919 bcf in the week ended July 23. Stocks dropped -94 bcf from the same period last year but remained +239 bcf (+8.9%) above the 5 year average of 2680 bcf. Gas price extended the rally for a 4th day and settled at 4.827, up +2.31%.

The dollar plunged to a 12 week low against the euro as economic data in the US has been mixed but biased to the downside while that in the Eurozone has shown improvement after enduring a tough period. At the same time, concerns over sovereign crisis in peripheral European countries continue to diminish as debt-ridden economies have been actively implementing fiscal consolidations measures and economic indicators have been better-than-expected.

Initial jobless claims slipped -11K to 457K (consensus: 460K) in the week ended July 24. The drop also brought the 4 week moving average down to 452.5K, the lowest since the beginning of May, from 457K. While the reading was better than expected, the sluggish decline signals that the job market is improving very slowly.

Stock markets failed to be stimulated by the jobless claims report as corporate earnings in the consumer sector were uninspiring. Kellogg reported a -15% decline in net income to $302M in the quarter ended July 3. The management also revised down its profit forecast for the year due to cereal recall last month. Black & Decker, a diversified worldwide supplier of tools and solutions with sales mainly in the US, revised down its sale guidance for 2010. DJIA and S&P 500 fell -0.3% and -0.4% respectively.

Focus of the day is US' GDP report. The economy probably grew by an annualized +2.5% q/q in 2Q10, an ease from +2.7% in 1Q10 and +5.6% in 4Q09.

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Crude Rebounded Together with Equities Despite Mixed Housing Data

Crude oil rebounded in NY session Tuesday as driven by reversal in Wall Street. Corporate earnings results were disappointing while new home sales plunged to an 8 month low. However, investors looked forward for Fed Chairman Ben Bernanke's Congressional testimony in Capitol Hill today. The market anticipated Bernanke would downplay recent weak data that might lead to a double dip recession. He would probably say economic slowdown is temporary and the Fed is ready for new stimulus measures if the economy worsens. The front month WTI contract settled at 77.58, up +0.88%, yesterday.

Wall Street opened lower in the morning session as corporate earnings were weaker than expected. Earnings of IBM and Texas Instruments, large tech stocks, disappointed as revenues missed market expectations. Goldman Sachs reported it net income tumbled -82% y/y to $613M, the lowest level since end 2008, in 2H10 as trading revenue declined more than anticipated. At the same time, Johnson & Johnson revised down its guidance. The company said earnings excluding specia items will be $4.65-4.75/share this year, compared with consensus of $4.80-4.9. The cut is due to a series of drug recalls. These were then upstaged by a powerful report from Apple Inc. Net income jumped +78% y/y to $3.25B in the third quarter as driven by strong iphone sales which generated $5.33B revenue on 8.4M units.

Economic data released yesterday was mixed. While housing starts slid -5.02% to 549K in June from a downwardly revised 578K in the prior month, building permits surprisingly soared +2.09% to 586K during the month. The market, however, chose to focus on the positive side and sent stocks higher. DJIA and S&P 500 ended the day +0.47% and +1.1% higher respectively. Crude oil also rose after the National Hurricane Centre said that a weather system over Puerto Rico and the Dominican Republic has a 60% chance of becoming a tropical cyclone.

Concerning oil inventory, the industry sponsored API said crude and gasoline inventories fell, 0.241 mmb and -0.412 mmb respectively in the week ended July 16. Distillate stockpile, however, rose +0.979 mmb during the week. The market currently forecasts the US Energy Department will report another week of draw for crude inventory but builds in gasoline and distillate stockpiles.

Gold gained +0.83% to settle at 1191.7 as driven by modest safe haven demand. The Hungarian government raised 35B forint from issuance of the 3-month bills, compared with the 45B forint originally planned. The average yield surged to 5.47%, the highest level in 19 weeks, as the talk with the IMF/EU suspended.

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Commodities Tumbled as US Data Signaled Slowdown

Poor economic data in the US echoed the theme of slowdown demonstrated in Asian countries and this exacerbated risk aversion and accelerated the selloff in risky assets. Decline in commodity prices was broadly based. WTI crude oil price tumbled to a 3 week low at 72.05 before recovering to 72.95, down -3.54%, at close while Brent crude lost -3.56% to settle at 72.34 (intra-day low at 71.5). Base metals were generally lower with losses ranging from 0.8-3.8%. Gold slumped and broke below 1200 as a time as triggered by panic asset sales and ease in funding pressure in the Eurozone. The benchmark gold futures fell -2.67% to settle at 1206.7.

US ISM manufacturing index declined 3.5 points to 56.2 in June while the market had anticipated a milder drop to 59. Initial jobless claims surprisingly increased to 472K in the week ended June 26. This also gave rise to the highest 4 week average, at 466K, since the first week of March. This reading, together with weaker than expected ADP employment addition released Wednesday, suggests the US job market remains vulnerable. Pending home sales contracted -30% m/m in May after rising +6% in the previous month. The decline almost doubled consensus reading.

Signs of slowdown in economic recovery in the US and China (June PMI dropped to 52.1) raised worries over a double-dip recession.

Funding concerns in European banking system eased. The ECB lent a further 111.2B euro in its 6 day operation after a much lower than expected 131.9B euro 3 month operation conducted in the prior day. Banks needed to repay 442B euro in the 12 month LTRO. Meanwhile, a Reuters source said that Germany banks had fared well under the stress tests. The news boosted the euro which surged +2.3% to 1.2522 against the dollar at close.

Today in Asia, most commodities rebounded as yesterday's selloff was probably overextended. In Australia, the government and mining companies reached an agreement on mining tax. Australian Prime Minister Julia Gillard announced to cut the tax to 30% on coal and iron ore earnings, compared with a previous plan to collect 40% of all resource profits. At the same time, the current Petroleum Resource Rent Tax to all onshore and offshore petroleum and gas projects is extended.

Focus of the day is US employment report. Consensus forecast non-farm payrolls dropped -110K in June after rising 431K in the prior month. Unemployment rate probably increased to 9.8% from 9.7% in May.

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Crude Oil Weekly Technical Outlook For Saturday June 26th

Crude oil's retreat was shallow and was contained 75.17. Subsequent rally indicates that rise from 64.23 is not over yet and has resumed. Initial bias remains on the upside and further rise should be seen to 80.53 next. Break will target a retest on 87.15 high. On the downside, though, break of 75.17 will argue that rebound from 64.23 is completed and will turn bias back to the downside for 69.51 support first.

In the bigger picture, the stronger than expected rebound from 64.24 dampened our bearish view and we'll stay neutral first. But still, rise from 64.24 looks corrective in nature and favors another fall after completion. A break of 69.51 support will indicate that rebound from 64.24 is finished and revive the bearish case. That is, whole medium term rise from 33.2 is finished at 87.15, just ahead of 50% retracement of 147.27 to 33.2 at 90.24. In such case, we'd see another fall to 50% retracement of 33.2 to 87.15 at 60.18 at least.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall fro 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Daily Technical Outlook Wednesday Morning

Crude oil is still staying in tight range above 74.51 as consolidation continues. Intraday bias neutral and more sideway trading could still be seen. But after all, even in case of another rise, upside should be limited by double top neck line (80.53) and 4 hours 55 EMA (now at 79.35) and bring fall resumption. On the downside, break of 74.51 will target 69.50 key support next.

In the bigger picture, as noted before, 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Such rise might have completed at 87.15 already, ahead of 50% retracement of 147.27 to 33.2 at 90.24. Break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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Crude Oil Weekly Technical Outlook

Crude oil's rebound from 80.53 resumed towards the end after initial setback and closed strongly at 85.12. Further rise would be in favor to retest 87.09 high but after all, sustained break there is needed to confirm rally resumption. Otherwise, another fall would still be seen before consolidation from 87.09 concludes. On the downside, below 81.73 minor support will flip intraday bias back to the downside for 38.2% retracement of 69.50 to 87.09 at 80.37 or possibly further to 61.8% retracement at 76.22.

In the bigger picture, medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal. Hence, even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.

In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While the rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that, strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.....Nymex Crude Oil Continuous Contract 4 Hours Chart.



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Crude Oil Reverses Losses as Equities Closed Higher

Crude oil initially slumped as global stock market tumbled amid revision of Greece's debt deficits. Together with disappointing inventory report released Wednesday, the front month WTI contract plummeted to as low as 81.73. However, buying interests emerged at that level as price reversed and ended the day flat at 83.7. Strong rebound in equities and attack of Iraqi oil pipeline also supported oil.

After the EU released a report revising up 2009's Greek fiscal deficit to 13.6% of GDP from the 12.7% of GDP estimated previously, the Greek Financial Ministry reassured the market that will endeavor to shrink the deficit by 4%. With the upward revision and potential further revision, the country is unlikely to reduce the deficit to 8.7% of GDP as previously estimated.

Worse still, Moody's announced to cut its rating on Greek debt to A3 from A2. Moreover, Greek officials said that the country has prepared to ask the EU for a bridge loan. In US trading session, the market was further pressured by President Barrack Obama's call for new financial reform as well as the Senate's approval of derivative legislation requiring US lenders to spin off their swaps trading desks.

Despite the negative news, stocks managed to crawled back and DJIA and S&P 500 ended the day gaining +0.1% and +0.2%, respectively. Encouraging corporate earnings, mildly bigger than expected decline in initial jobless claims and stronger existing home sales data restored sentiment.

Specifically to the oil market, damage of an oil pipeline from Iraq to Turkey disrupted supply which will take around 3 days to resume.

Gold fell, halting a 2 day rally, as the euro tumbled to a new 11 month low against the dollar. However, the recovery after sliding to as low as 1132 signaled yellow metal's underlying strength. In fact, while the market has only focused on Greece's deficit issue, such problem has also rooted in other countries including the US, Japan and the UK. If worries intensify and spread to these countries, we believe gold should benefit.

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Crude Oil Daily Technical Outlook For Tuesday

With 4 hours MACD crossed above signal line, a temporary low is in place at 80.53, just ahead of 38.2% retracement of 69.50 to 87.09 at 80.37. Intraday bias in crude oil is turned neutral and stronger recovery might be seen, to 4 hours 55 EMA (now at 83.82). Break there will bring retest of 87.09 high. On the downside, note that decisive break of 80.37 fibo support will confirm that rise from 69.50 has completed after hitting 61.8% projection of 69.50 to 83.16 from 78.56 at 87.00. In such case, deeper fall should be seen towards 61.8% retracement at 76.22 and below.

In the bigger picture, note again that medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal. Hence, even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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