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Action Insight | Written by ActionForex.com | Jan 31 07 07:40 GMT |
Forex Daily Technical Report Markets Look Forward to US GDP and FOMC Statement

Dollar remains bounded in tight range ahead of FOMC announcement and a handful of economic data today. Markets will likely remain quiet before US Q4 GDP data where volatility should jump up. A solid 2.9% growth is expected in the Q4 GDP and if that’s confirmed, dollar will likely be boosted as expectation will then be built up for a more upbeat FOMC statement that reflect recent improvements of growth outlook.

Fed is widely expected to keep its target rate unchanged at 5.25% today. Once again the focus will be on the accompanying statement. There were three major developments since last meeting in Dec. Economic indicators has be resilient and showed that the US economy grew near potential in the fourth quarter. Inflation eased moderately but the pace certainly slow. More importantly, Fed members has shifted to a more hawkish stance in their speeches, saying that growth outside housing sector remains firm and inflation pressure may moderate slower than they would like to see. Hence, the statement’s wordings on inflation is not expected to change but the wordings about “recent indicators have been mixed” could be modified to reflect the current growth outlook, leaving the statement a slightly more hawkish statement than the prior one.

A series of better than expected key economic data, in particular the retails sales and trade balance, pointed to a stronger growth in the US economy in the last quarter of 2006. Consensus expects that US GDP has grown at a quicker pace of 2.9% in Q4, comparing to prior quarter’s 2.0%. GDP price index growth is expected to drop from 1.9% to 1.7% while core PCE rise is expected to stay at 2.2%, suggesting that price pressure continues to moderate slowly. Chicago PMI is expected to rise slightly from 51.6 to 52.0 in Jan while construction spending is expected to rebound from Nov’s -0.2% to 0.1% rise in Dec. ADP employment data, which is used as preview to Non-farm payroll, is expected to 122k job growths in Jan.

Euro was steady after yesterday’s Germany CPI data which saw a surprised drop of -0.1% mom in Jan. Just released, Germany retail sales rose much more than expected by 2.4% in Dec, comparing to prior -0.7% and expectation of 1.3%. More data from the Eurozone will be featured today including Germany and Eurozone unemployment, Eurozone consumer confidence. HICP inflation is expected to accelerate from Dec’s 1.9% to Jan’s 2.1%.

Swiss franc remains pressured on carry trade and is pressing record low against euro with EUR/CHF at 1.6253. KOF Leading indicator, which serves as a predictor of further economic activities, is expected to continues it’s downtrend that started last Jul and fell further from 1.6 to 1.56 in Jan. UK Gfk consumer confidence is expected to drop further from -8 to -9 in Jan. EUR/USD

Daily Pivots: (S1) 1.2948; (P) 1.2964; (R1) 1.2986; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Outlook remains unchanged as EUR/USD stays in tight range today. With a short term low in place at 1.2876, with 4 hours MACD staying above signal line, further recovery cannot be ruled out. Break above 1.3000 resistance will indicate that the consolidation from 1.2865 is indeed still in progress. In such case, focus will be back to 1.3042 high and 1.3052 cluster resistance (38.2% retracement of 1.3364 to 1.2867 at 1.3057). However, below 1.2905 support will indicate the recovery has completed and bring retest of 1.2865 low and then trend line support at 1.2845. Break will confirm that whole fall from 1.3364 has resumed for next downside target of 1.2760 support.

In the bigger picture, an important medium term top could be in place at 1.3364 already, with bearish divergence condition in weekly MACD and RSI. Sustained break of 1.2760 support, which will also have medium term rising channel line (now at 1.2748) taken out too, will add much weight to the case that whole medium term up trend from 1.1639 has completed. Focus will then be on 1.2483 cluster support (50% retracement of 1.1639 to 1.3364 at 1.2502). Decisive break of 1.2483 cluster support will confirm this case and have medium term outlook turned bearish.

However, decisive break of 1.3052 cluster resistance will indicate the fall from 1.3364 has possibly completed after drawing support from resistance line (1.2978 to 1.2937, now at 1.2845). This will also save the case that medium term up trend from 1.1639 is still in progress with EUR/USD kept inside the rising channel. Break of 1.3296 resistance will suggest the rise from 1.2483 has possibly resumed and EUR/USD could make a new high above 1.3364 before finally making a top on above mentioned bearish divergence condition in weekly chart.

GBP/USD

Daily Pivots: (S1) 1.9583; (P) 1.9638; (R1) 1.9682; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable is also bounded in tight range today. Rebound from 1.9547 lacked decisive momentum and was limited at 1.9695. Nevertheless, with 4 hours MACD pushed back above signal line, a short term top could be formed at 1.9547 low and hence, further rebound is still in favor to come as long as cable stays above this low. On the upside, Break of 1.9735 resistance will encourage a retest of 1.9913 high. Meanwhile, break of 1.9547 low will indicate fall from 1.9913 has resumed for rising trend line support (1.8517 to 1.8834, now at 1.9480).

In the bigger picture, a strong break above 1.9679 resistance will save the case that rally from 1.9261 is still in progress. In such case, further rise could be seen to retest 1.9913 high and break will confirm whole rally from 1.8517 has resumed. But still, close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches key 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067) as the whole medium term up trend from 1.7047 could complete at or below this level.

Right now, we already have bearish divergence conditions in weekly RSI, daily MACD and RSI. Sustained break of 1.9588 cluster support will be the a warning that whole rise from 1.8517 has completed earlier than we thought. Break of mentioned rising trend line support will confirm such case and bring much deeper decline towards 1.9237/61 cluster support (23.6% retracement of 1.7047 to 1.9913 at 1.9237). Decisive break of this 1.9237/61 cluster support will add much weight to the case that whole medium term up trend from 1.7047 has already completed and much deeper decline should be seen towards next cluster support at 1.8834 (38.2% retracement of 1.7047 to 1.9913 at 1.8818).

USD/CHF

Daily Pivots: (S1) 1.2491; (P) 1.2517; (R1) 1.2538; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF’s retreat from 1.2545 was contained above mentioned 1.2486 support and strengthens mildly today. Though, it’s still bounded in recently established range as USD/CHF hasn’t taken out medium term falling trend line resistance (1.3238 to 1.2768, now at 1.2546) yet. At this point, further rally is still in favor as long as USD/CHF stays above 1.2486 minor support. Sustained break of the trend line resistance should bring further rise towards 1.2768 cluster resistance (61.8% retracement of 1.3283 to 1.1878 at 1.2746). On the downside, below 1.2486 will turn intraday outlook consolidative first but pullback should be contained above 1.2422 support and bring rally resumption.

In the bigger picture, decisive break of medium term trend line resistance will also indicate that whole medium term down trend from 1.3283 has already completed at 1.1878. Further rally should be seen towards 1.2768 cluster resistance first. Decisive break of 1.2768 cluster resistance will add much weight to the case that whole corrective rise from 1.1288 (04 low) has resumed and further rally should be seen towards 1.3283 (06 high) or above.

On the downside, break of 1.2422 support will also have short term rising channel (now at 1.2448) taken out too. With bearish divergence conditions in 4 hours MACD and RSI as background, this could indicate that the whole rise from 1.1878 has completed, after failing to break mentioned medium term falling trend line. Deeper correction should then be seen towards 1.2268 resistance turned support in such case.

USD/JPY

Daily Pivots: (S1) 121.38; (P) 121.68; (R1) 121.88; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY’s retreat from 122.17 continues today and is now pressing 121.22 support as expected . At this point, further consolidation cannot be ruled out but, rise from 114.41 is still in force as long as USD/JPY stays within short term rising channel (lower channel line at 120.98 now) and any interim consolidation should be brief. Above 121.72 will indicate the retreat has completed and should bring retest of 122.17 high. Break of 122.17 high will indicate recent rise has resumed for 123.23/29 cluster projection level

In the bigger picture, as medium term rally from 108.99 is still in force, such rally is treated as resumption of whole up trend from 101.65 for the moment. With price actions from 117.87 to 114.41 treated as interim consolidation, next upside target will be 123.23/29 cluster projection level (100% projection of 114.41 to 119.68 from 117.96 at 123.23. 100% projection of 108.99 to 117.87 from 114.41 at 123.29).

On the downside, sustained break of the short term rising channel will indicate a short term top is formed. With bearish divergence condition in 4 hours MACD and RSI as background, that would indicate that the whole rally from 114.41 has already completed. Hence, deeper decline is expected to be seen towards 117.96 support in such case.

Forex News Digest

http://c.moreover.com/click/here.pl?r789412395
Wed, 31 Jan 2007 00:15:00 GMT from American Economic Alert

http://c.moreover.com/click/here.pl?r789406061
Wed, 31 Jan 2007 00:04:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789404971
Wed, 31 Jan 2007 00:03:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r789389886
Tue, 30 Jan 2007 23:44:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789386457
Tue, 30 Jan 2007 23:40:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789385606
Tue, 30 Jan 2007 23:39:00 GMT from The Australian

http://c.moreover.com/click/here.pl?r789371860
Tue, 30 Jan 2007 23:09:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r789353752
Tue, 30 Jan 2007 22:38:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r789349111
Tue, 30 Jan 2007 22:32:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:30 JPY Japan Manufacturing PMI Jan 53.4 N/A 53.1
5:00 JPY Japan Construction orders Dec -5.6% N/A 9.20%
5:00 JPY Japan Housing starts Y/Y Dec 10.2% 9.80% 4.00%
7:00 EUR Germany Retail sales M/M Dec 2.4% 1.30% -0.70%
9:00 EUR Germany Unemployment rate Jan 9.70% 9.80%
10:00 EUR Eurozone Consumer confidence Jan -6 -6
10:00 EUR Eurozone HICP Y/Y Jan 2.10% 1.90%
10:00 EUR Eurozone Unemployment rate Dec 7.60% 7.60%
10:30 CHF Swiss KOF index Jan 1.56 1.6
10:30 GBP U.K. Gfk index Jan -9 -8
13:15 USD U.S. ADP employment change Jan 122 K -40 K
13:30 USD U.S. GDP annualised Q4 2.90% 2.00%
13:30 USD U.S. GDP price index Q4 1.70% 1.90%
13:30 USD U.S. Core PCE Q4 2.20% 2.20%
13:30 CAD Canada GDP M/M Nov 0.40% -0.40%
15:00 USD U.S. Chicago PMI Jan 52 51.6
15:00 USD U.S. Construction spending Dec 0.10% -0.20%
19:15 USD FOMC rate decision Feb 5.25% 5.25%

http://www.actionforex.com/general_information/forex_newsletters/forex_newsletter_200507301487/

Steve McCallion taps a few keys on his laptop to open a presentation on the Sirius Stiletto, a new portable satellite radio. He calls up a page that displays photos of pocket transistor radios from the 1950s, knobby dials and all. “At the end of the day, it’s just a radio,” says McCallion, a creative director at the company that designed the Stiletto, twirling the device in his fingers.

His point is that Sirius (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=SIRI) wants its own brand of radio, transmitted via satellite, to be the way people listen to radio nowadays, in much the same way they listened to transistors half a century ago. But the company is relying on a device that has come a long way since those crackly gizmos of a bygone era. BRISK SALES.

Today, some 12 million people pay $12.95 or more a month to Sirius and its larger rival, XM (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=XMSR), to listen to satellite radio channels, most of which run no commercials. Those rising subscriber numbers are likely to grow, drawing audiences from traditional, free AM/FM radio, in part because of the proliferation of satellite radio devices for the car, the home, and for listening on the go.

From September, 2005, to this August, Sirius and XM sold more than 325,000 portable satellite radios in the U.S., an increase of 88% from the year before. The units generated $80 million in sales, an increase of 49%, according to consultancy NPD Group. That figure doesn’t include sales from big retailers like Wal-Mart (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=WMT). And chances are, sales are going to keep climbing.

/>Sirius is hoping the Stiletto will play a big part in that growth. “Stiletto can make a major contribution,” says Tom Watts, an analyst at Cowen & Co. Analysts at Standard & Poor’s, which like BusinessWeek.com is owned by The McGraw-Hill Companies, also expect brisk sales. YAHOO! CONNECTION.

What’s so special about Stiletto? Part of the reason for the excitement is that the device appears to be comparable to other consumer electronics such as cell phones and music players like Apple’s (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=AAPL) iPod and the upcoming Zune from Microsoft (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=MSFT) in appearance and features. Indeed, the new Stiletto’s interface and capabilities look eerily like those of the iPod.

Stiletto’s predecessor, the Sirius S50, was also designed by McCallion’s company, Ziba. It was released last year and features a radio-like knob to pause, rewind, or stop programs. By contrast, the Stiletto offers an iPod-like round media dial. With its polished black face, the Stiletto evokes the black iPod nano. But the new gadget also features more chrome accents and a pearlized back, giving it what McCallion calls a “gem-like quality.”

But the Stiletto has some features the iPod lacks. Unlike the S50, which could only download radio streams when docked (in effect, it was a low-capacity MP3 player), the Stiletto can catch live satellite radio feed. The Stiletto can reach Sirius’ programming via wireless fidelity, or Wi-Fi, connections. It can also download songs from Yahoo’s (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=YHOO) music service, according to documents filed with the Federal Communications Commission, into 2 GB of storage. SHADOW RADIO.

While final details of the Yahoo arrangement are being worked out, the feature is likely to let users tag songs they like on Sirius broadcasts and buy them later by connecting the device to the PC.

BY REUTERS

Posted 1/24/2007

Treasury debt prices were little changed in thin trading on Wednesday after a $20 billion auction of two-year notes left benchmark yields steady near three-month highs.

The Treasury’s monthly sale of two-year notes proceeded as expected, drawing good demand, analysts said.

The Treasury sold $20 billion of the two-year securities at a high yield of 4.930%, with a 3.03 ratio of bids offered to those accepted.

“The two-year note auction drew strong interest from primary dealers, but this was more of a help to the short end (of the maturity range) than to the whole curve,” said Josh Stiles, senior bond strategist at IDEAglobal.

The two-year notes were offered at “the cheapest levels since August,” Stiles said. “So much of the hope for a Federal Reserve rate cut have been priced out that two-years have started to look like a more attractive, safer place to be.”

Two-year Treasuries are more sensitive to perceptions of Federal Reserve policy than longer-dated issues, which fluctuate with changes in inflation expectations.

Still, with the market expecting Fed policy to stay steady for the next few months, two-year yields did not wander far.

The two-year note was up 2/32 in late trade, its yield easing to 4.92% from 4.96% on Tuesday.

The new two-year note auctioned on Wednesday yielded 4.9275% in when-issued trade.

The Federal Open Market Committee, the Fed’s policy-setting group, will meet next Tuesday and Wednesday. Economists expect the FOMC will leave the key federal funds rate at 5.25%.

In afternoon trade, the benchmark 10-year Treasury note was at 98 18/32, yielding 4.81%.

In Wednesday’s only piece of major economic data, the Mortgage Bankers Association said its mortgage market index fell 8.4% to 611.3 for the week ending Jan. 19, its lowest level in four weeks. However, the index’s four-week moving average rose 2.2% from the prior week.

The latest four-week reading on mortgage application activity supports recent assessments by Fed officials that the worst of the housing correction may have be over.

WASHINGTON, Jan. 17 (UPI) — Despite a short-term spike in the cost of wind power, data from a recent Emerging Energy Research study shows wind energy is nearly cost-competitive.

The Comparative Costs of Energy report focuses on the European market but can be applied to the U.S. market as well, said William Ambrose, president of EER. Much of the study was based on global trends in the industry, he said.

“A great increase in demand has outstripped supply and growth in demand in the U.S. market has largely led to rise in costs; straining existing suppliers and component manufacturers,” Ambrose said.

One reason the United States is slightly behind Europe is the lack of consistent, long-term legislation, including the erratic production tax credit system. More recently, a lull in investment due to the demand surge and supply deficit slowed the U.S. wind industry.

“I think having a consistent regulatory framework is more important than a production tax credit per say, but I think that while wind power has become more competitive, it still doesn’t compete with, for example, power from traditional coal generation plants that already exist,” Ambrose said. “If there’s no cost associated with restricting emissions from those coal plants then that’s hard to compete with for any technology.”

EER used a scenario for the European market that encompassed the risks associated with energy security, high fuel costs and climate change as well as a $40 carbon penalty for carbon dioxide emissions. Under those conditions in Europe, EER found that wind power would lead the renewable generation technologies as one that is competitive with coal combustion, natural gas, nuclear and integrated gasification combined cycle coal technology.

Wind would not be able to carry the demand alone, but the cost of building a new wind facility would be more cost efficient than building a new traditional fossil fuel generation plant. New nuclear plants would also be competitive as a source of alternative energy as part of a mixed portfolio of supply.

“Wind is looking pretty good in the long term because there is no fuel variability, there’s no fuel cost to worry about. That’s why a lot these utilities say even though the cost may be a little bit more than some of the alternatives right now, its still worth having in our portfolio because it’s steady,” Ambrose said. “I like to think of it as a fixed mortgage versus a variably mortgage rate.”

Some say having subsidies and incentives such as production tax credits are detrimental to consumers and businesses in the long run. Tom Tanton, vice president of Institute for Energy Research and former policy adviser for the California Energy Commission, said unequal subsidies distort the market.

“If we implement a plan to phase out subsidies, the technology can mature,” Tanton said.

New legislation in the pipelines would possibly put a cap on emissions and issue a mandated timeline for reducing emissions. Other proposed regulations include increased and extended subsidies and higher taxes for oil and natural gas companies.

Other countries that have implemented stricter emissions regulations, Tanton said, like those that signed the Kyoto Protocol, have had increased emissions while the U.S. greenhouse gas intensity has been lowered over the last several years without a federal mandate.

Based on efficiency, Tanton said, wind and ethanol facilities receive 10 times more subsidies than oil and gas facilities because they are not as productive. Getting rid of subsidies will lower prices and weed out the inefficient producers.

Stephen Pociask, chief economist for the American Consumer Institute, suggested the proposed legislation would increase costs to consumers, making sources of wind energy, less cost effective.

“Energy proposals are out of sync with other proposals that increase consumer welfare,” Pociask said.

Tanton said that solutions to problems like storing nuclear waste and more stable, reliable peak wind energy will come along as the technology develops further. In the meantime, development of domestic resources, like offshore drilling and clean coal, will reduce dependence on imports and be positive for the overall economy and new technology investments.

Mandates for percentages of renewable generation would further drive up demand, which in turn could drive the price of components and manufacturing higher, creating a larger supply shortage, especially in the wind sector.

–

(Comments to energy@upi.com)

NEW YORK: The new heads of Exxon Mobil, Lockheed Martin and PepsiCo do not have one, and some corporate governance experts say shareholders are better off as a result.

It is an employment contract, and it has been in the spotlight since a number of prominent chief executives have been ousted with golden goodbyes Robert Nardelli’s $210 million exit package from Home Depot being the most recent. Employment contracts have been blamed for virtually guaranteeing such huge payouts even when an executive fails.

“Time and time again, the smoking gun of any major compensation problem is in the form of a contract that was executed at a earlier date,” said Patrick McGurn of Institutional Shareholder Services, a proxy advisory firm. “It was at the heart of Home Depot. People never imagine when they ink these contracts that it could go wrong.”

Yet while they may be tarred by controversy, employment agreements are still common at many large corporations.

“Rumors of the employment contract’s demise are greatly exaggerated,” said Jannice Koors, a managing director at Pearl Meyer & Partners. “As long as you need to do things to lure top executives from positions they are already in, you are going to have to offer them some kind of protection to get them to say yes.”

Today, 56 chief executives at the biggest 100 companies in the United States signed a contract before starting their jobs, according to an analysis by Equilar, a compensation research firm based in San Mateo, California.

Executives who are being recruited by outside companies argue that they need contracts because of the risks involved.

And indeed, among the 15 executives who were recruited from outside in the past three years, about 80 percent had an employment or severance contract; among the 10 executives who were promoted, 60 percent had a contract.

While every agreement is different, they generally set out the terms of a new executive’s salary, bonus, perks and stock awards. They also describe what happens to the executive’s pay package in the event that he or she is fired or the company is acquired.

In theory, the agreements work to ensure employment conditions while providing some protection for the company if things do not work out. A company might agree to certain amount of severance pay, for example, to contractually prevent a chief executive from immediately working for a competitor or poaching top staff.

In practice, however, many of the agreements appear to be negotiated in the executive’s favor. Among the poor practices, compensation experts say: Guaranteeing bonuses two or three years after the executive has been at the helm; offering so-called evergreen clauses that automatically renew the contract every few years, narrowly defining the conditions for which an executive can be fired, and providing lucrative severance payouts.

“It’s not that employment agreements are bad,” said Paul Hodgson, senior analyst at the Corporate Library, a governance watchdog group. “It’s what’s in them.”

Consider a recent analysis by James Reda, an independent compensation consultant in New York, that examined a poorly negotiated severance agreement’s impact. The average American worker might receive about two weeks worth of salary for every year they worked at a company, Reda said. The average chief executive without an agreement received the equivalent of about 18 weeks of salary for each year of service.

At Home Depot, Nardelli’s contract entitled him to 567 weeks of salary for each of the six years he was chief executive. Of course, that pales in comparison to Michael Ovitz, the former chief operating officer at Walt Disney. He took home the equivalent of 5,000 weeks of salary after he was ousted just over a year on the job.

Not every employment contract, however, calls for lavish severance payouts or income guarantees.

At Intuit, for example, Stephen Bennett, its chief executive, is entitled to severance pay equal to six months of his current salary, which was $1.1 million in 2005, and limited vesting of stock options and restricted stock awards he is not yet able to exercise. Likewise, Walgreen and Whole Foods hold the line on change-in-control payouts.

William Perez, Wrigley’s new chief executive who has been at three different companies in the past three years, said that “trust and fit” mattered when he has contemplated an employment contract.

At S.C. Johnson, where he rose through the ranks to become chief executive, Perez said he never had an employment agreement.

Nike, which has had a history of rejecting executives recruited from outside, was a different story. Perez said he was leaving behind a 34-year career to enter the “unpredictable world of Nike.”