Month: March 2012

By TraderVox.com

Tradervox (Dublin) – The Euro has been on a bearish run against major currencies this week due to the eurozone finance ministers meeting today which is expected to endorse a plan to combine the European Stability Mechanism kitty with that of European Financial Stability Facility. This will be done in a bid to strengthen the region’s financial firewall safeguarding the region’s economy against any crisis like the one for Greece. The idea of combining these two facilities had been vehemently contested by Germany and Ireland; however, these two countries have softened their stand and now they are willing to comprise in order to secure the currency bloc.

Currently the EFSF has 248 billion Euros out of its total capacity of 440 billion Euros. The ESM is set to have 500 billion Euros lending capacity and it is expected to take over from the EFSF completely. Therefore, it is expected that the Final ESM would have 500 billion-Euro capacity which include the amount that has already been utilized by the EFSF leaving only 308 billion Euros at the disposal of the newly created entity. Analysts are warning that this would lead to a less favored outcome that is likely to exert downward pressure on the euro.

Since this option is less favorable for the region, another version, which is a bit optimistic and opposed by Germany is letting EFSF and ESM to run concurrently, meaning that the kitty would amount to 748 billion Euros now, as 192 billion Euros have already be used from the EFSF kitty. The third scenario which might be acceptable is to let the EFSF and ESM to run concurrently up to then end of June when the EFSF expires and thereafter to continue with the ESM which has a capacity of 500 billion Euros.

Since the third option has been agree upon across the market, this might be the likely scenario outcome which will be against the traders’ expectation precipitating a scenario of “buy the rumor, sell facts.” It should also be noted that the high inflation rate, which despite lowering to 2.6 percent still remains above the ECB target, will affect the demand for the euro after the meeting.

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After touching 1.5991 previous high resistance, GBPUSD pulled back from 1.6000, suggesting that a cycle top is being formed on 4-hour chart. Initial support is at the lower line of the price channel, and the key support is at 1.5770, as long as this level holds, uptrend from 1.5602 could be expected to resume, and another rise towards 1.6300 is still possible. On the other side, a breakdown below 1.5770 will indicate that the uptrend has completed at 1.6000, then deeper decline to test 1.5602 support could be seen.

Daily Forex Forecast

By Paul Tracy, dividendopportunities.com

It’s a country that rarely gets any mention by the mainstream investing press.

Sure, you hear about India, China, Russia, and Brazil. And for good reason — those countries are growing at incredible rates, which has made many investors rich already… and will make even more people wealthy in the years ahead.

But for my money, I don’t know if there is a better place to invest than Chile.

It’s small — total GDP is roughly $215 billion. That’s about 70 times smaller than the United States’ economy. Meanwhile, only 17 million people call Chile home… giving it a smaller population than Florida.

Right now, Chile’s economy is growing at a 5% annual rate. That growth is accompanied by perhaps the most fiscally conservative government on the planet. National debt in the United States sits at 100% of GDP. But Chile’s public debt totals just 9% of GDP, according the CIA World Factbook.

In fact, it is required by law to run a budget surplus unless there are extreme circumstances. In 2011, it ran a surplus of 0.6%. For comparison, the United States ran a deficit of nearly 9% — or $1.3 trillion — last year. And we haven’t seen a budget surplus since 2000.

This good governance has allowed the country to flourish. Poverty has fallen from 45% in the ’80s to 27% today — still high, but a dramatic move in a little more than two decades. Meanwhile, unemployment sits at just 6.6% today.

One more thing… Chilean companies are required by law to pay dividends.

That sounds almost too good to be true for U.S. investors. It’s one thing that income investors have always had to remember — dividends are optional.

Dividends can be cut at any time, for any reason. While bonds are required to pay interest, there is usually nothing requiring a company to pay a dividend to its investors.

But in Chile, public companies are required to pay at least 30% of their net income out to shareholders. In that regard, the mandate is basically a tax… but instead of the government grabbing their share, it goes to investors.

There’s more good news. You don’t need a specialized brokerage account to own Chilean stocks, and you don’t have to buy the stocks directly from the Santiago Stock Exchange.

For example, the Aberdeen Chile Fund (AMEX: CH) holds a stake in about 20 Chilean companies. By simply buying shares of the fund here in the U.S., you’re buying a stake in these companies. Right now the fund is yielding well into the double-digits.

But more important than Chile’s prosperity, or the fact that its companies are required to pay dividends, is what Chile represents.

The country is a perfect example of the opportunities for income coming from foreign markets. As I’ve told you before, the vast majority of the world’s highest yields aren’t being paid out by U.S. companies.

When I ran the numbers a few weeks ago, just 17 profitable U.S. companies had stocks with yields of 12% or more… compared to 210 abroad.

I want to make something clear — I don’t think you should drop everything and put every dollar you have into international high yielders. Truth is, the size and scope of the U.S. market makes it a great place to search for income investments.

But limiting yourself to only the U.S. is like going to a restaurant and limiting your options to just one side of the menu. Sure you can find something you like… but wouldn’t you rather see all the options?

I have more details — including the full list of 17 U.S. stocks yielding 12% — in a presentation I recently put together. You can visit this link to watch it now.

All the best,

Paul Tracy
StreetAuthority Co-founder, Chief Investment Strategist — High-Yield International

Disclosure:  StreetAuthority owns CH as part of the company’s various real-money portfolios. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any “real money” model portfolio. Members of our staff are restricted from buying or selling any securities for two weeks after being featured in our advisories or on our website, as monitored by our compliance officer.

USDCAD stays in a trading range between 0.9841 and 1.0050. As long as 1.0050 key resistance holds, the price action in the range is treated as consolidation of the downtrend from 1.0422 (Dec 14, 2011 high). Another fall to test 0.9841 would likely be seen, a breakdown below this level could signal resumption of the downtrend. However, a break above 1.0050 will indicate that the fall from 1.0422 had completed at 0.9841 already, then the following upward movement could bring price back to 1.0400 zone.

Forex Signals

AUDUSD is facing the resistance of the downward trend line on 4-hour chart, a clear break above the trend line will suggest that lengthier consolidation of the downtrend from 1.0855 is underway, then range trading between 1.0336 and 1.0550 could be seen. On the other side, downtrend could be expected to resume after touching the trend line resistance, support is now at 1.0425, a breakdown below this level could signal resumption of the downtrend.

Daily Forex Forecast

GBPUSD’s upward movement had completed at 1.5922. Another fall would likely be seen later today. Support is at 1.5770, a breakdown below this level could signal resumption of the longer term downtrend from 1.5991, then further decline to test 1.5602 could be expected. On the other side, a break above 1.5922 will indicate that the pair remains in uptrend from 1.5602, then further rise towards 1.5991 previous high could be seen.

Forex Signals

Being contained by 1.3290 resistance, EURUSD pulled back from 1.3284, suggesting that a cycle top is being formed on 4-hour chart. Further decline would likely be seen later today, and next target would be at 1.3050 area. Key resistance is at 1.3290, only break above this level will indicate that the fall from 1.3486 had completed at 1.3003, then the following upward movement could bring price to test 1.3486 previous high resistance.

Daily Forex Forecast

USDJPY moves sideways below 84.17. The sideways movement is likely consolidation of the uptrend from 76.02. Support is at the lower line of the price channel on 4-hour chart, as long as the channel support holds, we’d expect uptrend to resume, and another rise towards 85.00 is still possible. On the downside, a clear break below the channel support will indicate that lengthier consolidation of the uptrend is underway, then the pair will find support around 82.50.

Forex Signals

GBPUSD remains in short term uptrend from 1.5602, the pullback from 1.5913 is likely consolidation of the uptrend. Support level is at 1.5800, as long as this level holds, uptrend could be expected to resume, and another rise to test 1.5991 previous high resistance is possible. On the downside, a breakdown below 1.5800 will suggest that a cycle top has been formed at 1.5913 on 4-hour chart, then further fall towards 1.5602 could be seen.

Daily Forex Forecast