Month: April 2012

Source: ForexYard

Following a relatively mild session last week, traders can anticipate significant market activity in the coming days, as a batch of significant US news is set to be released. While the most attention will be given to Friday’s Non-Farm Employment Change figure, investors will be also looking at today’s ISM Manufacturing PMI and tomorrow’s FOMC Meeting Minutes for clues as to the current state of the US economy. Positive news may help the dollar move up vs. its main currency rivals, including the euro and Japanese yen.

Economic News

USD – Manufacturing Data May Give USD a Boost Today

The US dollar saw a mixed day on Friday to close out last week’s trading session, as positive euro-zone news generated some risk taking in the marketplace. The passage of Spain’s budget gave investor confidence in the euro-zone economic recovery a slight boost. As a result, the dollar extended its recent bearish trend vs. the euro. The EUR/USD traded as high as 1.3375 on Friday before experiencing a slight downward correction to finish the week at 1.3340. The greenback fared significantly better against the yen. The USD/JPY was bullish for most of the day, and gained close to 100 pips to close out the week at 82.79.

Turning to today, the main piece of US news is likely going to be the ISM Manufacturing PMI, scheduled to be released at 14:00 GMT. Analysts are predicting that today’s news will come in slightly better than last month’s. If true, it would be a sign of further expansion in the US manufacturing sector, and could help the greenback reverse its current bearish trend against the euro.

Taking a quick look at the rest of the week, traders will want to remember that the all-important US Non-Farm Payrolls figure is scheduled to be released this Friday. The figure is widely considered the most important indicator on the economic calendar, and major volatility is to be expected. Ahead of Friday’s news, attention should also be given to Tuesday’s FOMC Meeting Minutes and Wednesday’s ADP Non-Farm Employment Change figure. Positive news from either indicator could help the dollar going into the rest of the week.

EUR – Spanish Budget Helps Turn EUR Bullish

The passage of Spain’s budget that included tough austerity measures helped renew investor confidence in the euro-zone economic recovery on Friday. As a result, the euro saw gains against both the Japanese yen and Australian dollar to close out the week. The EUR/JPY shot up well over 100 pips on Friday to close out the week at 110.45. Meanwhile, against the AUD, the common-currency advance over 60 pips to finish the week at 1.2881.

While euro-zone news was positive overall last week, analysts are quick to warn that the region’s debt troubles are far from over. This week, traders will want to watch out for any news, especially out of Portugal, Italy or Spain, that may indicate the current state of the euro-zone overall. Particular attention should be given to Wednesday’s ECB Press Conference, as it will likely give investors a good idea of where the economic recovery stands.

Silver – Silver Sees Gains amid Weak US Dollar

The price of silver shot up on Friday, reaching as high as $32.60 before staging a mild downward correction to close out the week at $32.22. Analysts attributed silver’s bullish run to the weak US dollar. Precious metals, like silver, typically see gains in value when the dollar is weak because they become more affordable for international buyers.

Taking a look at the next few days, silver traders will want to pay close attention to a batch of significant US news. With both today’s ISM Manufacturing PMI and Wednesday’s ISM Non-Manufacturing PMI expected to show growth in the US economy, the dollar may see some gains to start off the week. If true, silver may reverse its current bullish momentum.

Crude Oil – Crude Oil May Extend Bearish Trend This Week

A sharp increase in US crude oil stockpiles last week was seen as a sign of reduced demand in the world’s largest energy consumer, and resulted in a bearish trend that lasted until markets closed for the week. Crude oil finished out last week’s trading session at $102.95 a barrel, down almost $5 since the US inventories figure was announced on Wednesday.

Turning to this week, a number of factors are set to impct the price of oil. The ongoing conflict with Iran may drive prices up in the coming days, as stronger sanctions by the West may result in supply side fears among investors. That being said, a batch of US indicators scheduled to be released throughout the week are forecasted to show continued growth in the American economy. Should the dollar turn bullish as a result of the news, the price of oil may go down as a result.

Technical News

EUR/USD

The weekly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bearish cross forming on the daily chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.

GBP/USD

The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. . Going short with tight stops might be a wise choice.

USD/JPY

The price of this pair appears to be floating in the over-bought territory on the weekly chart’s RSI indicating a downward correction may be imminent. The downward direction on the Slow Stochastic also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

USD/CHF

The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the RSI. Going long with tight stops may turn out to pay off today.

The Wild Card

Crude Oil

Crude oil prices have dropped significantly last week and peaked at $103 a barrel. However, on the 8-hour chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

AUDUSD’s rise from 1.0304 extends to as high as 1.0451. Further rise to test the resistance of the downward trend line would likely be seen later today. As long as the trend line resistance holds, the rise is treated as consolidation of the downtrend from 1.0855, and another fall to 1.0200 is still possible. On the other side, a clear break above the trend line will suggest that lengthier consolidation of the downtrend is underway, then range trading between 1.0304 and 1.0556 could be seen.

Daily Forex Signals

By TraderVox.com

Tradervox (Dublin) – The euro registered its first quarterly gain against the yen since the first quarter of 2011. The euro strengthened after the endorsement of the second bailout financial package for Greece was approved and as the Investors concerns were calmed by the European Central Banks loans to financial institutions in the region.  In the approval of this bailout package for Greece, the Region’s finance ministers approved 130 billion Euros as aid to Greece, and the ECB provided financial institutions in the region with 529.5 billion Euros of three-year loans in its efforts to avert a possible credit crunch.

The latest stimulus to the euro came after the March 30 meeting of Finance Ministers in Copenhagen. This meeting aimed at creating a bigger firewall to boost the regions ability to fight credit crisis which is bound to spread into other countries like Italy and Spain. The European finance minister agreed to expand the firewall kitty which increased confidence among investors leading to the increase of the euro against major world currencies.

On the other hand, the dollar and the yen were falling against major currencies as appetite for safe haven currencies dampened on the news of agreement. A Currency Strategist at Wells Fargo & Co in New York indicated that the rise of the euro was due to the increase in the firewall kitty, adding that the euro might move higher this week.

On Friday, the euro increased by 0.3 percent to exchange at $1.3343 in New York securing a quarterly gain of 3 percent. The 17 nation currency rose 0.8 percent against the yen to sell at 110.56 yen. This secured a quarterly gain of 11 percent against the yen which is the most it had climbed against the yen since the closing three month of 2000. The yen fell against the dollar by 0.5 percent exchanging at 82.87. The Japan currency had earlier on Friday increased against the dollar to 81.83 yen.

Analysts are claiming that the euro might hold its gains against the dollar at between $1.3275 and 1.34. This is supported by the recent agreement to boost the firewall power. Europe is now waiting the pledges that have been made so far and the one trillion-euro boost expected to be done by the ECB.

Disclaimer
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By MoneyMorning.com.au

My wife and I recently had our second baby.

Little bubs is thriving.

But six weeks in, the sleep deprivation is really catching up with us!

It’s a big step going from one child to two – definitely more than twice the work! (How my parents raised five of us is beyond me.)

This lack of sleep means double-checking my mental checklist twice to avoid stuff ups. I use checklists religiously for everything. Particularly for keeping my finger on the pulse of the market, analysing stocks, and watching the myriad of data that is released each day. It’s a big market and following it all needs some organisation.

But I use checklists for everything else as well. As a sleep-deprived parent they are more essential than ever at home.

Just yesterday in the supermarket car park, in the chaos of getting our travelling circus into the car, this half-asleep dad failed to notice our two year old had the car keys.

As he hit the remote lock button – thus locking himself in the car – I could feel the blood drain from my face.

And with my face pressed to the window, I pleaded with him to press it again so it would unlock the car.

Negotiating with a two year old is tricky at the best of times. I tried miming pressing the button. He thought this was a great game, started laughing and waved back. As he waved, the keys left his hand, and flew into the foot well.

Standing in the car park with bags of shopping, all our kids’ stuff – and thankfully our six-week-old baby – my wife and I ran through our options. The spares were over a two-hour drive away. So … what to do?

Option 1 – Panic

Option 2 – Smash the window

Option 3 -Take a deep breath, use my head, and phone RACV.

After doing option 1, thinking about option 2, logic stepped in and we went for option 3.

Lucky for us, RACV has a policy of getting their nearest mechanic to drop his job and come straight to you. So just 15 minutes later, a very helpful RACV mechanic arrived. The car was quickly opened, our boy was fine, and the travelling circus was on its way home again.

On the ride home, my wife asked how come I can always be up-to-the-minute with the markets, and keep picking the next commodity moves; yet could somehow manage to let my own son lock himself in the car?!

It’s all down to the checklists! I’m constantly working through lists to make sure I haven’t missed anything important in the market.

Even when I’m exhausted, I’m normally trawling through online newspapers, newsletters, data releases and bulletins.

I’ve got research coming at me from financial contacts all over the world, and it’s one of the things I love most about the job.

And the fact is those late-night feeds are also a great time for sifting through it all, and watching the European and US markets in real time!

An important part of last week’s checklist was China’s Purchasing Managers Index (PMI).

The PMI gives us a good idea of which direction China’s economic growth is heading. It’s been all eyes on China recently as the markets worry about it slowing down.

And right about the time I was trying in vain to get my son to unlock the car, China announced its best PMI in a year. After creeping up for the last few months from contraction territory (sub-50), slightly into expansion territory (above-50), it has now just bounced from 51 to 53.

I was expecting it to rise, as China’s electricity demand has increased, and this is a good sign that industry is picking up again.

This is good news for resource investors, as this jump in PMI is a fair sign that China is not slowing down. Not for now at least. This should see commodity prices have a good bounce, taking resource stock prices with it. The whole market is up 0.6% this morning, and Diggers and Drillers stocks are up 1.2% as I write.

The other set of data that caught my eye yesterday – after we all arrived back at home safely – was a chart showing Saudi oil production for 40 years.

The Saudis are the biggest oil exporters in the world.

They are forever saying that they can step into the market and provide an extra few million barrels a day to make up a shortfall from Iran or anywhere else. But take a look at this chart…

Saudi oil production has never been above 10 million barrels a day in the last 40 years. And now the Saudis are promising 12.5 million barrels a day (red line). They’re dreaming.

Click here to enlarge

Oil prices are soaring right now, and Saudi Arabia is trying to talk the prices DOWN because they don’t want the world to look for alternatives because oil has risen too much. The Saudi Oil Mininster, Ali-Naimi, was actually telling the Financial Times that oil prices were too high.

The Saudis can talk all they want, but the facts are the facts. The supply is not keeping up with demand, and the world will continue to face higher oil prices.

I’ve been tipping oil stocks recently for Diggers and Drillers readers. The first is up 60% in two months, and the second has just got going and is up 25% in six weeks. This is a very hot area of the market right now and we’re just starting to scratch the service with these recommendations.

I have a checklist of things to watch in the market, and oil is right near the top of the list. This list is evolving all the time, and I like the look of other commodities for later in the year. Particularly copper, especially since China’s data last weekend.

The checklists I use for the rest of my life obviously need to be updated too.

And keeping the car keys away from our two year old will go right to the top of the list!

Dr. Alex Cowie
Editor, Diggers & Drillers

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By MoneyMorning.com.au

Reports of a coup have startled many long-time China watchers.

Of course, we’ve seen next to nothing in the Western media about it despite the fact that what is going on behind the scenes now may be the biggest political play we’ve seen in decades.

Call it a Chinese “coup” or a “power play” if you like. Either way, recent events in China suggest the Chinese Communist Party is badly fractured at the very top.

Former Ambassador Jon Huntsman notes that the split may be the most significant since the tumultuous Tiananmen Square era – a sentiment I share based on more than 20 years of involvement with Chinese markets.

Why talk about Chinese politics here? For three good reasons…

The power play we’ve just witnessed – albeit from the fringes – is likely to result in a stronger “order” in China, along with increased spending and a big global expansion from China in the months ahead.

Let me explain.

Behind the Scenes in the Chinese Coup

Western media widely reported that Premier Wen Jiabao, China’s No.2, unceremoniously and very publicly sacked rising star Bo Xilai on March 14.

But nobody went any further, nor did they bother to understand that what’s happening behind the scenes is the real news.

Not only is the way in which this was handled uncharacteristically public, but the sacking itself is unusual. Bo is the son of a revolutionary hero and wildly popular for his anti-corruption initiatives in Chongqing, one of China’s largest megalopolises.

Bo was known to be angling for a seat on China’s standing nine-person politburo working committee, which would make him one of the most powerful men in China. That’s not a problem in and of itself, as many people ultimately want to be on that committee and spend their entire lives working toward that goal.

However, Bo is the only politician to move his agenda independently of Beijing’s ruling elite in nearly 40 years. That makes him – or made him — dangerous because he single-handedly threatened the political status quo.

To call his rise to prominence divisive is an understatement.

Premier Wen Jiabao voted against Bo’s promotion to vice premier. President Hu Jintao is rumoured to dislike his money-grubbing ways.

Yet, none other than Jiang Zemin, the former leader of the Communist Party and the real No.2 in the CCP’s Standing Committee, has helped further Bo Xilai’s career as has Zhou Yongkang, who is also a Standing Committee member and hardliner.

That’s when reports of gunfire, military vehicles and plainclothes police swarming the central government leadership compound of Zhongnanhai in Beijing surfaced.

There were also reports of iron fences on Changan Street nearby and a heavy police presence. Both were verified by business contacts of mine who visited the area in an attempt to get to the bottom of the rumours that were spreading around Beijing like wildfire via chat boards, text messaging and the Internet.

Within hours, all three were shut down or squashed by China’s Internet police.

The Chinese media claimed the extra security involved the protection of a high-level North Korean official who was meeting with Chinese diplomats.

Bo Xilai’s political mentor, political guardian and standing politburo member, Zhou Yongkang, is apparently missing or under house arrest. He was seen briefly meeting with Indonesia’s minister of foreign affairs, Marty Natalegawa, on March 23 but that’s likely scripted by Hu Jintao and Wen Jiabao.

Zhou is China’s spy chief and head of internal security. He would definitely have the means to engineer an overthrow.

Meanwhile, 85-year-old Jiang Zemin is reported to be in a vegetative state. Presumably, he did not participate in recent events. Or, as is probably the case, he did and this story is planted to allow him to save face.

That would normally be the work of the state’s English language mouthpiece, the Global Times. However, that was not to be.

In fact, the Global Times published an unusually blunt editorial asking Beijing’s central leadership for direction on how to deal with rumours of the attempted coup. It also suggests more than a little confusion over who is running China…a fact I find interesting considering that the coup didn’t “officially” happen.

The Aftermath of the Chinese Coup

So now what?

Leadership purges in China happen all the time, but usually at much lower levels in the party. They are usually non-events. But this is much bigger, and there will definitely be follow-on manoeuvring.

Above all else in China, stability is what the government wants. The Chinese military in particular doesn’t want to rock the boat, because any change in the political structure potentially undermines its stranglehold on business and economic development.

You’d think the Chinese military would be more concerned with bombs and bullets, but in actuality, the People’s Liberation Army is highly entrepreneurial and has its hands in everything from airlines to pharmaceuticals. Their operations may encompass as many as 15,000 companies generating revenues of more than $10 billion according to Tai Ming Cheung of Kim Eng Securities.

My read on what’s happening is that this is very different from students rioting in the street. This is the top guys manoeuvring for power in a high-stakes game of chess.

Bo Xilai’s summary dismissal is nothing more than the hammering down of a “nail” – Bo Xilai – who stood up, albeit in a highly and uncharacteristically public fashion.

Using history as our guide, we can expect a few things:

1. The top officials, including Hu Jintao and Wen Jiabao, will make public appearances in the weeks ahead implying that the situation is normal and it’s business as usual. All senior Communist Party officials around China will take similar actions followed by highly scripted loyalty pledges from military and local officials in that order.

2. Behind the scenes, the Communist Party’s Central Commission for Discipline Inspection will be on a witch hunt designed to ferret out anybody who could be a threat and remove them.

3. China’s businesses will go on a renewed growth spurt at Beijing’s explicit direction; this is intended to create an internal distraction for the people and defray international criticism while paving the way for China’s once-in-a-decade power transition later this year.

Keith Fitz-Gerald
Chief Investment Strategist, Money Morning (USA)

Publisher’s Note: This article originally appeared in Money Morning USA.

Secret “Coup” Could Send Chinese Growth Higher

By MoneyMorning.com.au

As I have discussed over the last two years, liquefied natural gas (LNG) is going to be a complete game-changer.

And along the way, a small group of LNG stocks will become the main focus for investors.

Remember, the LNG process cools natural gas to a liquid form, allowing it to be shipped over long distances. Upon arrival, the liquefied gas is returned its original state before being injected into pipeline for delivery to foreign consumers.

Already, the construction of LNG receiving terminals in Asia and Europe is accelerating.

Here’s why.

The European and Asian markets have the biggest need for imports. These markets have a need to meet rising demand and restrain the prices commanded by long-term pipeline-delivered gas.

Luckily, LNG can do both.

Traditionally, natural gas has only been able to develop regional “spot” markets. These are locations where the availability of volume provides an opportunity for traders to execute a price for a quick sale (usually within 72 hours).

This is because the availability of product depends upon the development of import pipelines, which are multi-year, capital-intensive projects.

LNG, on the other hand, can be delivered to a terminal, so it can provide an immediate increase in available local supply.

To the extent that the LNG trade can be sustained, new spot markets are immediately formed around the hubs that develop at the intersection of terminal and delivery pipelines.

And now Qatar – one of the world’s largest producers of conventional gas (that is, from freestanding gas fields) – has banked on LNG being the wave of the future.

Qatar has become the first country to commit all of its production to the LNG trade.

And that is a huge vote of confidence for this market.

Considering the number of new tankers involved, this single decision jolted the global shipbuilding industry into one of the most significant increases in business ever recorded.

The Qatari decision was just the first step…

That’s especially good news for oil and energy investors. LNG stocks are set to take off.

Dr. Kent Moors
Global Energy Strategist, Money Morning (USA)

Publisher’s Note: This is an edited extract of an article that first appeared in Money Morning (USA).

From the Archives…

Why Spain’s Economy is the Next Big Problem for the Eurozone
2012-03-30 – John Stepek

Water: A Long Term Trend to Follow
2012-03-29 – Patrick Vail

How to Avoid the Welfare State Hunger Games
2012-03-28 – Kris Sayce

What Happens When You Put Someone With No Market Experience in the Top Job?
2012-03-27 – Dr. Alex Cowie

The Star Stocks of the Resource Sector
2012-03-26 – Dr. Alex Cowie

LNG Stocks Are Set to Take Off

By Central Bank News
Here's today's Central Bank News link list, click through if you missed the previous central bank news link list.  Remember, if you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.