AUDUSD is in consolidation of the downtrend from 1.0474. Range trading between 0.9689 and 0.9934 would likely be seen over the next several days. As long as 0.9934 resistance holds, one more fall towards 0.9500 is still possible after consolidation. However, a break above 0.9934 key resistance will indicate that the whole decline from 1.0855 (Feb 29 high) has completed at 0.9689 already, then the following upward move could bring price back to 1.0600 zone.
Listen to Big Joe Clark discuss dividend investing with Charles Sizemore and more on Market Carver. To see the video, follow this link: http://www.screencast.com/t/V67Q9ENycih
By the time you read this article, Greece may or may not still be in the Eurozone. But whether Greece is in or out, the European sovereign debt crisis will almost certainly still be raging on. The focus of investor worry has, in any event, moved westward to Spain. The Spanish 10-year bond yield hit 6.5% on Monday, and the spread between Spanish and German yields hit a euro-era record.
While there are no quick fixes, one of the options on the table is the issuance of Eurobonds. The precise mechanics of how an issuance would work remain unresolved, but the basics are simple: the 17 member states of the Eurozone would issue bonds collectively and accept joint liability for the outstanding debt.
Before you draw the wrong conclusions, this is not at all similar to the United States federal government issuing Treasury securities. In that case, the U.S. federal government raises funds for its own operations, not the operations of the 50 U.S. states. Imagine instead the 50 U.S. states borrowing collectively and distributing the funds amongst themselves, and you can quickly see why the proposal is controversial. Texas, a low-tax, small-government state would not be particularly fond of effectively guaranteeing the debts of, say, big-spending, high-safety-net California. Likewise, German or Dutch citizens would resent lending their own country’s credit rating to less-disciplined problem countries like Spain or Italy. And in the case of Germany specifically, such a move would likely be unconstitutional.
Suffice it to say, the issuance of Eurobonds would be one of the more difficult solutions to implement, but the idea is not without its merits.
For smaller, non-crisis countries, such as Austria or Luxembourg, the increased liquidity of a Eurobond relative to their current, relatively illiquid domestic markets would mean lower yields and borrowing costs.
And for crisis-wrecked countries like Spain or Italy, their bonds would effectively enjoy Germany’s rating, and yields would be more than halved overnight. Such a move would make their debts payable and take away the immediate threat of meltdown.
Unfortunately, there is that pesky little critter known as “moral hazard” that presents a challenge. Germany wants to keep the pressure on the Eurozone’s problem children in the hopes that the fear of meltdown will force them to implement needed economic reforms. And they rightly fear that bailing out the periphery countries too soon will breed complacency and that the reforms will simply never happen. Essentially, they want to avoid creating another Greece.
For these reasons, a Eurobond scheme would have to have some kind of enforcement mechanism to ensure that the problem states kept their budgets under control. But this would also mean some kind of new treaty, because nothing in the European Union’s assorted arrangements or institutions allows for anything strict enough to make the plan workable.
Whatever Europe’s leaders decide to do, they had better do it quickly. Their indecision has consequences.
Virtually everyone practicing the investment management profession today was taught in business school that markets efficiently process information and reflect that information in market prices. Prices reflect the underlying reality. Therefore, rising bond yields reflect investor fears about the creditworthiness of the borrowers in question.
The problem, as George Soros explained in his Theory of Reflexivity, is that the tail also wags the dog. Prices not only reflect the underlying reality; they affect it as well. Rising yields have a way of creating a self-fulfilling prophecy; investors, by pushing yields to unsustainable levels, effectively create the event that they feared most by pushing the borrower into default.
At time of writing, I do not believe that Spain or Italy is at risk of default, and in fact I have several open positions in Spanish stocks (see “Bargain Hunting in Spain“). But part of my bullishness is predicated on my belief that the European Central Bank will act aggressively to force down yields to more sustainable levels. I also expect Germany to take a more relaxed stance when presented with the truly awful alternative of a Eurozone meltdown.
We shall see. But until something close to an agreement is made, expect the volatility of recent months to continue.
London Gold Market Report
from Adrian Ash
Tues 29 May, 08:15 EST
PROFESSIONAL WHOLESALE prices in the gold investment market reversed an early lift for the second day running in London Tuesday morning, easing back to last week’s finish at $1573 per ounce as the Euro currency also reversed its early rise to $1.26.
European stock markets cut their gains but held 0.7% better by lunchtime, while commodity prices were broadly higher but the silver price fell to new 3-session lows beneath $28.30 per ounce.
US, UK, German and French government bonds rose yet again, pushing the annual yield on 10-year Bunds down to 1.35%.
The official statistics agency today pegged Germany’s consumer price inflation at 1.9% year-on-year by, down from 2.1% in April.
Spanish retail sales fell last month by almost 10% from April 2011 according to new data. Spain’s cost of living, however, rose 2.1% on the official CPI measure.
“We still believe that gold has become increasingly undervalued,” says a note from South Africa’s Standard Bank, pointing again to $1640 per ounce as “fair value” in the gold investment market.
“Gold looks the healthiest metal currently,” says David Jollie at Japanese trading conglomerate Mitsui, “but new drivers may be needed to encourage the price back above $1,600 and reinvigorate the rest of the precious metals.”
With Indian consumer demand still poor thanks to the weak Rupee, “We have seen other Asian physical buyers such as China pick up some of the slack, as well as central banks,” says Swiss refiner MKS’s trading desk in Sydney, Australia.
Shanghai shares rose 1.2% on Tuesday amid rumors of a new consumer stimulus package from Beijing.
An official told Reuters on Monday that rural workers and owners of small-engine cars will receive unspecified subsidies to encourage them to trade in their old vehicles for new.
Credit Suisse analysts forecast a stimulus package ranging from CNY1-2 trillion (up to $315bn) – around half the size of China’s 2008 program.
UK chancellor George Osborne will meantime not tax pies and other baked goods, the Treasury said overnight, losing £75 million per year ($110m) in extra revenue from the so-called “pasty tax” and other levies now reversed.
“[It] is true that a change [of policy] would weaken the government’s credibility,” writes Financial Times columnist Martin Wolf. “But this is because the government made an unwise commitment [to austerity].
“Cameron/Osborne are sharply tightening fiscal policy in the face of a depressed economy,” says New York Times columnist Paul Krugman – who is lecturing at the London School of Economics on Tuesday, and whose new book End This Depression Now! is apparently in its fourth printing in Spain.
“Britain is choosing to emulate both the United States and the troubled nations of Europe when it doesn’t have to – all in the name of an economic theory that was foolish two years ago, and completely discredited now.”
Irish Taoiseach Enda Kenny today warned that Dublin’s credit rating – already cut to “junk” status by Moody’s despite the €85 billion rescue in 2010 by the IMF, European Central Bank and European partner states – would be downgraded further if voters don’t back the new European fiscal treaty in Thursday’s referendum.
Peaking above 14% per year last summer, Ireland’s 10-year government bond yields today ticked above 6.0% in early trade.
Back in the gold investment market, “Support at 1532/22 has held once more and continues to underpin” the Dollar price, says the latest weekly chart analysis from Commerzbank in Luxembourg.
However, “We believe that this significant area will be retested in the months to come and that it will give way when this occurs.”
Spanish government bonds fell further Tuesday morning, pushing 10-year costs for Madrid above 6.5% after a spokesman was quoted saying that choosing between cash or newly-issued government debt to fund the latest €19 billion rescue of the Bankia lender was now only a “marginal” issue.
“The phrase ‘house of cards’ comes to mind,” says Georg Grodzki at London’s £391 billion Legal & General insurance and investment group.
“We do not believe that Bankia is unique [in Spain] in the extent of new losses identified,” the Financial Times quotes analysts at Rabobank, noting Friday’s restatement of 2011’s profits from a €309m profit into a €2.97bn loss.
Madrid is also “considering” allowing Spain’s regional governments – now some €140bn in debt – to issue joint bonds, guaranteeing them by setting aside tax revenues so that creditors are paid first, according to Bloomberg.
“It would provide some comfort to investors at a time when a guarantee from the Spanish sovereign is not exactly gold plated,” says Credit Agricole strategist Harpreet Parhar in London.
Adrian Ash
Gold price chart, no delay | Buy gold online at live prices
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
By TraderVox.com
Tradervox (Dublin) – The Canadian dollar retreated against the greenback last week but the buck/loonie pair never crossed critical resistances. Some of the events that were major last week included the Core Retail sales for March, which came in weaker than expected. The minimal increment of 0.1 percent on Core Retail sales indicates an improvement in the economy which is good for the loonie. Here are some of the events this week that will affect the cross.
On Wednesday at 12:30, the Raw Materials Price Index report will be released. The previous reading showed a decline of 1.6 percent in March after 0.6 decline in February. Analysts indicated that the decrease was as a result of mineral fuels and crude oil petroleum decreasing but there was some gain in the grain prices. Further, the Industrial Product Price Index (IPPI) increased by 0.2 percent in march due to price increase of petroleum. This time, the RMPI is predicted to come in at 2.1 percent while the IPPI is projected to gain to 0.1 percent.
On Thursday at 12:30 a report on Canadian current account will be released. The last report showed that the current account deficit contracted to $10.3 billion in the fourth quarter last year as a result of a $3.1 billion merchandise surplus, which indicated market improvement. The report is expected to show an increase in the current account deficit to $11.1 billion.
Another report on Friday is expected to change the USD/CAD pair and might determine whether the cross will close on a high or low is the Canada’s GDP report. The economy was reported to contract in February by 0.2 percent against the market expectation of a 0.2 percent growth. The decline will have a negative report for the first quarter growth rate and it may delay an interest rate hike that has been highly predicted. The GDP report is expected to show an expansion of 0.3 percent.
Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management.
Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox
The european debt crisis is still the dominating theme but this week also brings important economic data from the US – jobrapport and ISM.
Senior Strategist Ib Fredslund Madsen outlines the most important economic themes and events for the week ahead.
Video courtesy of en.jyskebank.tv
Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.
Source: ForexYard
After a Greek poll over the weekend indicated that pro-austerity political parties are gaining popularity ahead of next month’s elections, the euro turned bullish against several of its main currency rivals to start off the week. That being said, the common-currency was not able to hold on to its gains, and by mid-day trading was once again falling against the USD, JPY and GBP. Today, in addition to any announcements out of the euro-zone, traders will also want to pay attention to the US CB Consumer Confidence figure. Analysts are predicting a slight increase over last month’s figure, which if true, could help the dollar in afternoon trading.
The US dollar took losses against several of its main currency rivals during trading yesterday, following mildly positive Greek news which led to risk taking in the marketplace. The EUR/USD started off the week on a bullish note by gaining over 100 pips during overnight trading, reaching as high as 1.2623. That being said, the pair was not able to maintain its upward trend, and by the mid-day session was trading around the 1.2530 level. Against the British pound, the dollar was down almost 60 pips during overnight trading. The GBP/USD was able to reach as high as 1.5715 before staging a slight downward correction to stabilize at 1.5693.
Turning to today, traders will want to pay attention to the CB Consumer Confidence figure, scheduled to be released at 14:00 GMT. With analysts predicting the figure to come in slightly above last month’s, the dollar may be able to recoup some of yesterday’s losses during afternoon trading. In addition, traders should remember that this week is packed with significant US news, culminating in Friday’s all- important Non-Farm Payrolls figure. Any positive developments out of the US economy could lead to prolonged dollar gains.
Following a brief upward correction during overnight trading yesterday, the euro once again turned bearish as concerns regarding Spanish debt weighed down on the common currency. The EUR/GBP, which had reached as high as 0.8035 during early morning trading, turned bearish over the course of the day and eventually dropped as low as 0.7987. Against the Canadian dollar, the euro opened the week by gaining close to 50 pips during the Asian session. The common currency was not able to hold onto its gains, and proceeded to tumble some 70 pips during European trading.
Turning to today, euro traders will want to pay attention to any developments out of both Greece and Spain regarding their respective political and economic crises. Any additional negative developments are likely to weigh down on the euro and could even bring it within reach of its recent two-year low against the dollar. Later in the week, traders should monitor the results of the Italian 10-y Bound Auction. Any indications that the euro-zone debt crisis is spreading to countries like Italy may result in further losses for the euro.
The Australian dollar staged a significant upward correction against its US counterpart throughout yesterday’s trading session, as some positive euro-zone developments led to risk taking in the marketplace. The AUD/USD shot up over 140 pips, reaching as high as 0.9887 before staging a slight downward correction in the afternoon session. The pair eventually stabilized at 0.9841.
As we move into the rest of the week, aussie traders will want to monitor any developments out of the euro-zone for clues as to the level of risk-taking in the marketplace. Any indications that Spain’s current debt crisis is spreading to other countries in the region could lead traders to shift their funds to safe-haven assets, which may result in the AUD giving up yesterday’s gains.
Crude oil started off the week on a bullish note as risk taking in the marketplace led to gains for commodities and higher-yielding currencies. In addition, inconclusive talks between Iran and the West last week led to some supply side fears among investors which further boosted prices. The price of oil increased by over $1 a barrel, reaching as high as $91.95 before staging a downward correction and stabilizing at $91.45.
Today, whether or not oil will be able to extend its recent gains will largely be determined by any news out of the euro-zone. Any indications that more pro-austerity political parties will win in Greek elections next month could ease fears that Greece will have to leave the euro-zone, in which case crude oil may extend its bullish run.
A bullish cross on the weekly chart’s Slow Stochastic indicates that this pair could see upward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into oversold territory. Going long may be the preferred strategy for this pair.
Technical indicators on the daily chart, including the Relative Strength Index and the Slow Stochastic, indicate that this pair could see an upward correction in the near future. In addition, the weekly chart’s Williams Percent Range has crossed into oversold territory. Opening long positions may be the wise choice for this pair.
While the Williams Percent Range on the weekly chart is in oversold territory, most other long term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart’s MACD/OsMA has formed a bearish cross, indicating that downward movement could occur in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Going short may be the wise choice for this pair.
The Relative Strength Index on the daily chart has crossed into overbought territory, indicating that downward movement could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of a possible downward correction.
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.
By TraderVox.com
Tradervox (Dublin) – The debt crisis in Europe has had a tremendous effect on world currencies as governments and traders try to go through this without making losses. The crisis has led to the strengthening of the Swiss Franc against euro and SNB President Thomas Jordan is cautious on the effect it might have on the cap introduced to curb such strengthening. The week started with Swiss National Bank President indicating that the government is considering the capital controls as a possible measure to stop the country’s currency from advancing against the euro due to the debt crisis in the euro area.
The government and the central bank have constituted a panel that is focusing on instruments that can combat the franc strength and they are also looking at how secure the country’s economy will be in case the currency union collapses. Such remarks from the SNB officials show some possibilities of the crisis in Europe worsening and the central is keeping all its options on the table. The current risk aversion in the market has forced investors to pile into the franc hence the current efforts to curb franc gains. These measures are meant to protect the Swiss economy as a strong franc is not conducive to the country’s economy.
According to some analysts, SNB and government officials are preparing for the possibility of the euro currency union collapsing, however unlikely. Capital controls will be a good measure for the country especially if there is capital flight in Europe. In her statement in December, the Swiss Finance Minister Eveline Widmer-Schlumpf indicated that the task force would be tasked with the responsibility of investigating capital controls and negative interest rates. The franc has strengthened against the euro due to the current debt crisis that seems to be spreading in Europe. Further, election results in France and Greece triggered another wave of concerns in Europe which has led the euro to weaken considerably.
Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management.
Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox
Source: ForexYard
The euro reversed virtually all of its gains yesterday, as investors are now shifting their focus from Greece’s political problems to Spain’s debt issues. The EUR/USD dropped as low as 1.2509 last night, not far from its recent two-year low of 1.2495.
Today, investors will be watching for any announcements out of Spain which could shed some light on how serious the debt situation actually is.
Main News for Today
US CB Consumer Confidence-14:00 GMT
• Forecasted to come in at 69.8, above last month’s 69.2
• Any better than expected news could help the dollar against the JPY
Read more forex news on our forex blog
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.
