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Key commodities ended U.S. trade Friday with significant gains to the week’s run, with copper closing almost 4% up after four sessions and oil nearing last year’s record price.

Corn, arguably the most-watched agricultural commodity now, jumped 3% in Friday’s session alone as weather forecasters reversed last week’s rain predictions, saying they expected a hot and dry weekend in the U.S. Midwest corn belt.

Gold was the only laggard, closing just above a half percent up for the week.

Copper for September delivery at the New York Mercantile Exchange’s Comex division ended up 0.10 cent at $3.5945 a pound as the market overcame early profit-taking to ride a bullish wave that analysts said could extend into next

Copper prices have rallied most of the week with the exception of Wednesday’s U.S. holiday for Independence Day on concerns that strike threats at copper mines around the world will depress physical stocks of the metal at exchanges such as Comex, the LME and Shanghai in China.

Among the mine strikes, the one attracting the most attention is at Chile’s Collahuasi, where workers and their managers are struggling to reach a wage deal and abort a strike by Monday.

Union leaders and managers at the mine, which is located in northern Chile and produces 440,000 metric tons of copper per year, talked into the early hours of Friday but were unable to agree on a new contract.

Labor disputes aside, copper prices were also aided by better U.S. economic data.

A better-than-expected U.S. jobs number for June, issued Friday, helped Comex copper rebound from early profit-taking. The nonfarm payrolls report showed 132,000 jobs were created in June, beating a 120,000 consensus in a poll conducted by Reuters.

Oil surged to an 11-month high above $76 a barrel, closing in on its all-time record in 2006, due to disruptions in eighth-biggest exporter Nigeria, cuts by producer group OPEC and rising demand from U.S. refiners.

London Brent crude, currently seen as a better indicator of the global market, settled up 87 cents at $75.62 a barrel, after touching a session high of $76.01, its highest level since August 2006.

The rise put Brent within striking distance of the record $78.65 struck last August.

U.S. crude gained $1.00 to $72.81, the highest settlement since Aug. 22, 2006. It had touched a record $78.40 in July last year.

Action Insight | Written by ActionForex.com | Jan 11 07 06:37 GMT |
Forex Daily Technical Report Focus on ‘Vigilance’ from ECB

Focus today will be on ECB’s press conference after rate decision. ECB is widely expected to keep rates unchanged at 3.50%. After unexpectedly strong German IFO business climate and M3 money supply growth that accelerated to a 16 year high in November, markets generally expect that ECB’s tightening will continue this year will another hike in first quarter. However, opinion is divided on whether ECB will raise rates in Feb or Mar. Hence, as usually, focus will be on whether ECB President Trichet will use the word ‘vigilance’ to signal a rate hike in the coming month in the press conference after the meeting.

BoE will also be making rate decision today. Markets expect BoE to keep rate unchanged at 5.00% today. No statement will be released in such circumstances in tradition and hence the BoE meeting will likely be a non-event. Focus from US will actually be on November industrial and production data which are both expected to rebound to have 0.3% mom growth.

Earlier today, Australian dollar was lifted by better than expected employment report which showed in December, total employment rose 44.6kon a seasonally adjusted basis, beating expectation of 15.0k. Prior month’s job growth was also revised up from 36.2k to 43.0k. Unemployment rate stayed at 4.6%. Tight labor market condition has added to speculation of a near term rate hike from RBA to 6.50%, probably in Feb. Focus will now be on Q4 CPI to be released later this month.

Overnight, Chicago Fed President Moskow, a new voting member on the FOMC, delivered another hawkish speech from Fed this week. Moskow suggested that economy is performing well outside of the housing market and labor market is still quite strong. Also, because of sturdy growth, Moskow stated that Fed needs to be ‘vigilant’ against the possibility of an increase in inflation pressures. Generally speaking, it’s inline with earlier speech by Kohn and suggest that Fed won’t cut rate in first half this year. EUR/USD

Daily Pivots: (S1) 1.2909; (P) 1.2957; (R1) 1.2983; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

EUR/USD’s fall from 1.3052 extended further to 1.2930 but downside momentum is still unconvincing as EUR/USD approaches 1.2922 cluster support. Nevertheless, further decline cannot be ruled out as long as EUR/USD stays below 1.3000 resistance. On the upside, above 1.3000 will indicate a short term bottom is possibly formed and should bring rebound to 1.3052 resistance or higher.

Also, as 1.2922 cluster support (50% retracement of 1.2483 to 1.3362 at 1.2923) remains intact, we’re still holding on to the preferred case that price actions from 1.3362 is merely consolidation to rally from 1.2483. Firm break of 1.3104 resistance will add much credence to the case that fall from 1.3296, and likely the whole consolidation from 1.3362, has completed and should bring further rally to 1.3296 and then 1.3362 high. However, sustained break of 1.2922 cluster support will seriously dampen the preferred case and at least, suggests deeper decline will be seen to challenge 1.2760 support.

In the bigger picture, EUR/USD’s medium term up trend from 1.1639 (06 low) is still in force and is expected to continue towards 1.3668 (04 high) and probably further to 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. However, as it’s unclear whether this rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668, close attention will be paid to loss of upside momentum and reversal pattern formation as EUR/USD approaches 1.3668/1.3822 zone. On the downside, break of 1.2760 support will turn medium term outlook neutral and argue that whole medium term rally from 1.1639 has completed.

GBP/USD

Daily Pivots: (S1) 1.9284; (P) 1.9353; (R1) 1.9389; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

Cable’s fall from 1.9454 extends further to 1.9316 and is now pressing trend line support (now at 1.9318) again. Intraday bias is still on the downside and further decline towards 1.9261 low is in favor as long as cable stays below 1.9423 resistance. On the downside, break of 1.9261 low will indicate decline from 1.9750 has resumed for 1.9177 cluster support. Meanwhile, on the upside, above 1.9454 will suggest that rebound from 1.9261 has resumed for 1.9564 cluster resistance.

Also, with 1.9177 cluster support (50% retracement of 1.8517 to 1.9846 at 1.9182, 23.6% retracement of 1.7047 to 1.9846 at 1.9185) remains intact, we’re still holding on to the preferred case that price actions from 1.9846 is merely correction to rise from 1.8834 only. Break of 1.9564 cluster resistance will add much credence to the case that fall from 1.9750, and probably the whole correction from 1.9846 too, has completed and should bring further rally to1.9750 and then 1.9846 high. However, sustained break of 1.9177 will dampen this case seriously and should bring further decline to 1.8834 support.

In the bigger picture, cable’s medium term up trend from 1.7047 is still in progress and further rise is expected to follow towards 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067). But close attention will be paid to sign of loss of upside momentum and reversal pattern formation as cable approaches 2.0106 cluster resistance. On the downside, sustained break of 1.9177 cluster support will turn medium term outlook neutral and argue that the whole rise from 1.7047 has possibly completed. Break of 1.8834 will add further weight to this case and turn focus back to 1.8517 support.

USD/CHF

Daily Pivots: (S1) 1.2415; (P) 1.2446; (R1) 1.2493; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/.

USD/CHF’s rise from 1.2111 extends further to 1.2478 but upside momentum is seen diminishing as USD/CHF approaches 100% projection of 1.1878 to 1.2268 from 1.2111 at 1.2501. A this point, further rise is still expected to follow as long as 1.2399 support holds. On the upside, break of 1.2501 projection level will likely bring further strong rally towards 1.2768 resistance.

However, With bearish divergence conditions remaining in hourly MACD and RSI as background, steep sell off from 1.2501 could at least market the completion of rise from 1.2111. Break of 1.2399 support will indicate a short term top is formed and should bring further pullback to 1.2770 support or lower.

In the bigger picture, break of 1.2343 resistance has opened up a few possibilities. Sustained break of 1.2501 projection level will argue that the rise from 1.1878 could be of impulsive nature. In other words, the whole down trend from 1.3283 could have completed and the current rise from 1.1878 could be resumption of the medium term rebound from 1.1288 to 1.3283. But still, a strong break of 1.2768 cluster resistance is needed to confirm such case. Otherwise, USD/CHF will just be bounded in choppy range trading between 1.1878 and 1.2768. On the downside, a break below 1.2110 support is needed to shift focus back to the downside. Otherwise, further rally is still in favor.

USD/JPY

Daily Pivots: (S1) 119.25; (P) 119.51; (R1) 119.87; http://www.actionforex.com/forex_analysis_and_forecasts/pivot_points/pivot_points_summary_200603205734/

USD/JPY’s rally extends further to 119.82 today and is now pressing 119.86 support. At this point, intraday bias remains on the upside as long as USD/JPY stays above 119.49 support. Sustained break of 119.86 resistance will confirm that recent rally from 114.41 has resumed and should encourage further rise towards 121.38 resistance (04 high).

On the downside, below 119.49 support will indicate an intraday top is formed and should bring pull back towards 119.13 support. But further rise is still in favor as long as consolidation is contained by 119.13 support. However, break of 119.13 will argue that USD/JPY is still bounded in consolidation that started from 119.68 and should bring further fall to retest 117.96 low and then 38.2% retracement of 114.41 to 119.68 at 117.67

In the bigger picture, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38.

Favor is still in the former case as long as USD/JPY stays above 113.14/39 cluster support (61.87% retracement of 108.99 to 119.86 at 113.14). And above 119.86 will bring further rise to 121.38 (04 high) again. Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20, now at 117.65) again. Sustained break of 121.38 resistance will confirm that whole up trend from 101.65 has resumed.

Forex News Digest

http://c.moreover.com/click/here.pl?r764850582
Thu, 11 Jan 2007 02:59:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r764834628
Thu, 11 Jan 2007 02:31:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r764820105
Thu, 11 Jan 2007 02:15:00 GMT from CHINAdaily

http://c.moreover.com/click/here.pl?r764814878
Thu, 11 Jan 2007 02:10:00 GMT from Bloomberg

http://c.moreover.com/click/here.pl?r764787580
Thu, 11 Jan 2007 01:43:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r764766200
Thu, 11 Jan 2007 01:20:00 GMT from Reuters

http://c.moreover.com/click/here.pl?r764746258
Thu, 11 Jan 2007 01:00:00 GMT from Bloomberg

http://www.actionforex.com/latest_news/latest_news/forex_news_20060323537/ Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
00:30 AUD Australia Employment change Dec 44.6K 15.0 K 36.2 K 43.0K
00:30 AUD Australia Unemployment rate Dec 4.60% 4.70% 4.60%
05:00 JPY Japan Leading indicator Nov 20 20 54.5
06:00 JPY Japan Machine tool orders Y/Y Dec -2.4% N/A 4.90%
08:00 EUR Germany GDP (annual growth) 1 Jan 2.50% 0.90%
09:30 GBP U.K. Industrial prod’n M/M Nov 0.30% -0.80%
09:30 GBP U.K. Industrial prod’n Y/Y Nov 2.30% 2.50%
09:30 GBP U.K. Manufacturing prod’n M/M Nov 0.30% -0.40%
09:30 GBP U.K. Manufacturing prod’n Y/Y Nov 2.30% 2.50%
10:00 EUR Eurozone GDP rev. Q/Q Q3 0.50% 0.50%
10:00 EUR Eurozone GDP rev. Y/Y Q3 2.70% 2.70%
12:00 GBP BOE rate decision Jan 5.00% 5.00%
12:45 EUR ECB rate decision Jan 3.50% 3.50%
13:30 USD U.S. Jobless claims 324 K 329 K
15:30 GBP U.K. Leading indicator M/M Nov N/A -0.10%
19:00 USD Fed budget Dec 20.0 B 10.97 B

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

This column was originally published on RealMoney on Jan. 11 at 2:00 p.m. EST. It’s being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Even as private-equity buyouts and corporate takeovers are occurring with increasing frequency and at record numbers, the ability to identify and profit from the next big deal remains as elusive as ever.

One of the most popular strategies is to use options, buying out-of-the-money calls on a slew of possible takeover candidates and hoping one gets a big premium bid and delivers jackpot returns. The problem is, just like the lottery itself, buying another fistful of tickets does not measurably improve your odds, but increases the likelihood of loss.

A better bet is to focus your attention, and dollars, on companies already in play, such as Harrah’s (HET) , or those that are courting suitors, such as Foot Locker (FL) .

It might mean lower returns, but it offers a much higher probability of turning a profit. And the last time I checked, consistent hitters Cal Ripken and Tony Gwynn are heading to the Baseball Hall of Fame, while slugger Mark McGwire will be riding the pine of shame into retirement. The obvious lesson is don’t swing for the fences. Be patient and wait for a situation that offers not only a reasonable risk/reward, but also a quantifiable edge.

Collapsing Time Premiums

In options-trading (or any investing, for that matter), eliminating or accurately gauging the behavior of the price variables under a particular circumstance provides an enormous edge to controlling risk and increasing the probability of a profit.

It’s crucial, and advantageous, to understand what happens to the option prices on a company once it agrees to a merger/takeover/buyout: Once a deal is agreed to, the implied volatility or time premium collapses. That is, options that are out of the money will be essentially worthless, and in-the-money options will be priced at their intrinsic value.

Remember, the bulk of an option’s value stems from the right to buy or sell a stock at a set price — the strike price — during a given time period defined by the expiration date. Once terms of a deal are agreed upon, those variables are eliminated and so, too, is the price premium awarded to the options. Sell Calendar Spreads

As I discussed in a Jan. 9 video, one of the best ways to play the possibility of a takeover is to sell a calendar spread. The video used Gap (GPS) , which recently hired Goldman Sachs to explore a sale, as an example.

In this case, I suggested buying the March $22.50 call for 40 cents and simultaneously selling $22.50 calls with a January 2008 expiration for $1.50 per contract. This gives the position a $1.10 net credit for the calendar spread. Because talks are still in very initial stages, the longer term, or LEAP, options still retain a significant amount of time premium. But if Gap does agree, or even home in on the terms of sale before the March 16 expiration day, then expect the implied volatility or time premiums to collapse across the board.

The result will be that the value of the March and the January 2008 calls will trade at nearly equal values, meaning the value of the calendar spread will contract or flatten out. This will be true regardless of the price of the deal; if price is only $20, then both options will be worthless; if there is a 30% premium to $26 per share, then both call options will be worth $6 per contract. In each case, the value of the spread will be close to equal, allowing you to collect that $1.10 premium, which represents the position’s maximum profit.

The risk, especially in a case like Gap, which is still in the early exploration stages, is that the timing, terms and pricing are far from set. In fact, the company might consider spinning off certain units. That means if no deal, parameters or even intentions are clarified by the March expiration date, the position will be exposed to incurring a loss. The 2008 LEAP (long-term equity anticipation) options that you’ve sold short will maintain their time premium and potentially increase in value while the near-term March options you own will expire, possibly worthless.

To avoid winding up with a naked short position, it is imperative to close the position before the March expiration or roll those long calls into a later month. My advice in Gap would be to wait and see if some more details emerge regarding any potential deal. Even after a proposal is put on the table, it is not too late to benefit from this sale of a calendar spread strategy. The key to the trade is establishing the position in the window between when a deal is still just a proposal, and its consummation. Hoping the EGL Deal Flies

EGL (EAGL) offers a recent — and, because I established a position in the Options Alerts Model Portfolio, better, I hope — example of using this strategy. On Jan. 3, the freight company received a buyout bid from a group led by its chairman and CEO James Crane. The bid was worth $36 a share, a 25% premium to the stock’s previous closing price.

The company’s board will review the offer, which investors interpreted as EGL looking for a higher price, so shares jumped to $38 TJan. 4 and have been trading above $37 for the past four days. Given that Crane is also EGL’s largest shareholder, with about an 18% stake, it is likely the deal will go through and at a higher price. After all, he is basically paying a large portion of the purchase price to himself.

The position I established consisted of buying the February $35 calls and selling the August $35 calls for a net credit of $1 for the calendar spread. If a deal is agreed to prior to the Feb. 16 expiration, the time premiums should collapse, the spread will contract and the position will earn the $1 profit of the net credit collected.

If no headway is made by the second week of March, I’ll close the position to avoid ending up naked short the August calls and at the mercy of a rising IV or stock price. But at the moment, with the firm proposal on the table, I like my odds of squeezing out a profit during the time period of very limited risk. Keep Your Eye on the Balls in Play

Right now, there is hardly a name on the board that isn’t being floated as a takeover target, and if you tried to swing at all of those by purchasing calls on every rumor, both your arms and wallet would be exhausted before you connected with a winner.

By focusing on companies that already are in play, that is, ones that are contemplating “strategic alternatives,” officially up for sale or have received unsolicited buyout bids, you have essentially performed a very efficient screen that allows you to pass on the tough-to-read curveballs, and you can now groove on those entering the strike zone.

LONDON (Thomson Financial) - The upcoming UK smoking ban will dent spending on alcohol and tobacco, weighing heavily on the hospitality sector, according to think-tank, Centre for Economics and Business Research (CEBR).

CEBR said in a report it sees the July ban resulting in a 3 pct drop in spending in the third quarter of the year compared with the same period a year ago before worsening to a near 3.5 decline pct in the fourth quarter.

It argued that the decline will come on top of what has already been a difficult period for the sector.

Jaspreet Sehmi, one of the report’s authors said he expect belts to tighten across the board over the next 18 months as high interest rates, low house price inflation and a weak global economy take effect.

“However, while tobacco and alcohol sales have traditionally been relatively immune to these cyclical effects, we expect the smoking ban to change that on this occasion, and sales to drop,” he added.

Jonathan Said, senior economist at CEBR said some companies in the sector are still not fully prepared.

“Virtually all parts of the hospitality sector are going to be affected to a greater or lesser extent by the forthcoming smoking ban. However, while some companies have made concerted efforts to understand the likely impact and plan around it, others are likely to face a shock come July 1st,” he said.

sivakumar.sithraputhran@thomson.com

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BEIJING (XFN-ASIA) - Premier Wen Jiabao said that credit growth is too fast and the nation needs tighter controls on investment.

The premier made the remarks at a meeting of the State Council, or cabinet, called today to review the economy’s first quarter performance.

Wen also said that China needs to maintain price stability in the months ahead as well as curtail the expansion of the nation’s trade surplus, according to a statement on the government’s main web site.

“So far this year, economic development has been good. The growth of the economy has maintained fast and stable momentum,” the statement said.

He noted that among the problems in the economy’s current performance is fast-growing monetary credit, pressure from a rebound in fixed-asset investment and continuing growth in the trade surplus.

The meeting called for maintaining coherent and stable macro-economy policies. The central government should take “timely” economic and administrative measures and enhance economic controls to prevent overheating, it said.

The State Council pledged to strengthen liquidity management and “window guidance” to curb the fast growth of money and credit. “Window guidance” refers to direct government interventions into commercial bank lending activities.

It reiterated that the government will continue to enhance fixed-asset investment controls and apply tighter requirements in energy-saving and environmental protection.

To curb the fast trade surplus growth, Wen said that the nation should “eliminate unreasonable preferential policies for exports, improve supervision over processing trade and actively expand imports of high-tech equipment and key parts.”

China also should strengthen supervision of the property sector to curb the fast growth in housing prices, as one of the measures taken to maintain overall stability of prices.

The National Bureau of Statistics said earlier today that the country’s GDP growth accelerated to 11.1 pct year-on-year in the first quarter, stoking concerns that the government will take new steps — possibly including an interest rate hike — to tame the economy’s rapid expansion.

derek.jiang@xfn.com