AUDUSD breaks below 1.0240 support, suggesting that a cycle top has been formed at 1.0328 on 4-hour chart. Further decline would likely be seen over the next several days, and the target would be at the lower line of the price channel. As long as the channel support holds, the price action from 1.0223 is treated as consolidation of the longer term uptrend from 0.9581, and one more rise towards 1.0600 is still possible.
Central Bank News Link List – July 9, 2012
By Central Bank News
Most Accurate Stock Market Predictions Using the US Dollar Index– Next Major Move
By Chris Vermeulen, GoldAndOilGuy.com
The term Stock market predictions is a very controversial topic and does seem to give off a negative/non-credible overtone to most traders, investors and the general public. We all know you cannot predict the market with 100% certainty, but knowing that you can still predict the market more times than not if done correctly. Keep in mind that the term “market prediction” is also known as a market forecast or technical analysis outlook and is nothing more than a estimated guess of where the price for a specific investment is likely to move in the coming minutes, hours, days, weeks and even months.
Getting back on topic, this report clearly shows how the US dollar plays a dominant role in the price of other investments. Understanding how to read the Dollar Index will make you a better trader all around when trading stocks, ETF’s, options or futures.
SP500 Stock Market predictions – 10 Minute Chart:
These charts clearly show the inverse relationship between the stock market and the dollar index. Knowing how to read charts (candle sticks, chart patterns, volume etc…) is not enough to give you a winning edge. You must also understand inter-market analysis as all markets are linked together in some way and the dollar plays a major role in where stock prices will move next. Review the charts and comments below on how I came up with my stock market prediction and trade idea.
Most Accurate Stock Market Predictions
Gold Market Prediction – 10 Minute Charts
Gold is another investment which is directly affected by the price of the dollar. Review charts for more details.
Gold Market Forecast Procetions
Long Term Stock Market Forecast:
The weekly dollar chart is VERY IMPORTANT to watch as a short term trader and long term investor because trend changes in the dollar means you open positions will also likely change direction.
So, if we apply technical analysis to the dollar chart as seen below. You will notice we are able to create a market forecast and predict roughly where price is likely to move and how long it should take to get there. If the dollar can break above the red resistance level then we can expect a rally for 4 – 8 weeks and a price target around the 87-88 level.
If this is the case then stocks and commodities would likely do the inverse price action and move lower, sharply lower…
Dollar Long Term Market Forecast
Stock Market Predictions & Gold Market Forecast Conclusion:
In short, the next weekly candle stick on the dollar chart could be a game changer for those who are long the overall stock market.
I will admit that the current market conditions are not easy to trade because of all the headline news rolling out of Europe each week along with economic data. And I feel as though we have been tip toeing through a mine field for the past 12+ months waiting for extremely negative news are extremely positive news to trigging a wave of buying or selling that will make our jaw drop, but it has yet to happen. Remember always use stops and don’t get over committed in a headline driven market.
If you would like to receive my free weekly analysis like this, be sure to opt-in to my list: www.GoldAndOilGuy.com
Chris Vermeulen
Monetary Policy Week in Review – July 7, 2012
By Central Bank News
POLAND 4.75% 4.75% 4.50%
NEXT WEEK:
Jul-11 | BRL | Brazil | Banco Central do Brasil |
Jul-12 | JPY | Japan | Bank of Japan |
Jul-12 | IDR | Indonesia | Bank Indonesia |
Jul-12 | PEN | Peru | Central Reserve Bank of Peru |
Bank supervisors propose how to gauge intraday liquidity
By Central Bank News
The Data On The Chinese Economy You Really Should Read
China is Australia’s biggest trading partner. They buy more of our commodities than any other country. Our economy has relied heavily on the Chinese economy doing well.
So next Friday, when China releases their second quarter gross domestic product (GDP) figures, you can expect wide media coverage.
The Australian already noted this week that the previous numbers were just a little too ‘rosy’.
‘A growing number of economists are stating that the 8.1 per cent year-on-year growth China’s National Bureau of Statistics announced for the first quarter of this year was suspiciously rosy, even by the generally unreliable standards often ascribed to those statistics.’
It’s worth questioning the GDP results. After all, this is a country which produces a quarterly GDP result within two weeks of the quarter ending. Other countries, like Australia, can take up to three months to report our economic growth.
You have to wonder how a country of more than one billion people can announce a GDP result so quickly…
In fact, Chinese Vice Premier, Li Keqiang has been quoted as calling China’s GDP result ‘man-made’ and ‘for reference only’ in a Wikileaks cable. So if the Middle Kingdom’s own insider doesn’t trust the official numbers, what does he follow?
The three he feels best represent the Chinese economy are electrical consumption, freight volume and disbursement of loans.
And two out of three of these indicators are pointing toward Chinese economic growth slowing…
Chinese Electrical Consumption Expanded by 5.8% for May 2012
Overall Chinese electrical consumption was up 5.8% in May. Which should be good news, right? After all, growth is growth?
But it’s only when you start to break down the numbers that you see how much the Chinese economy is sputtering.
The overall consumption figure is comprised of the following: primary, secondary, tertiary and urban and residential consumption.
Primary industry is the agricultural side of the Chinese economy, accounting for 3% of total electrical consumption. And tertiary industry, which is the services sector of China’s economy, makes up 12% of all electrical needs. Then there’s 12% for urban and residential.
And secondary industry?
Well that comes from China’s mining and manufacturing industry…and accounts for a massive 73% of all electrical consumption.
Let’s have a look at how all of these separate categories are consuming electricity…
Both tertiary and urban and rural consumption achieved over 10% growth for May.
But the sector of China’s economy that consumes the largest amount of power, mining and manufacturing, barely eked out 3.8% for May.
And ‘growth’ was well below the previous two years.
Freight Volumes Drop in the Chinese Economy
But the bad news for the Chinese economy doesn’t end there.
Another one of the Vice Premier’s economic indicators, cargo freight, is trending down. Most economists tend to look at the purchasing managers index (PMI) to determine how healthy the manufacturing sector is. It’s an indicator of new orders, inventory, levels of production, supplier delivers and employment.
So why does VP Keqiang look at cargo, or freight volume, instead? Simply because it tells him how much stuff is actually being transported for export.
And all isn’t well for the freight sector. Volume is heading south…
Freight Volume increased by 3.6% for May
Freight volume was 3.6% higher from January to May this year. Yet it’s still less than half of the 2011 average. This is a huge drop.
Follow the Yuan
Overall lending was 16% higher in May, but that comes mostly as a result of the bank’s three reserve ratio requirement cuts.
Also, most of the new loans written went to government and state owned infrastructure projects. But that doesn’t mean the loans are going to anything the country actually needs.
This is why the Vice Premier uses loan disbursement as a more accurate gauge of lending activity. Called ‘total social financing’, other ‘senior’ Chinese officials feel this measurement better correlates with the Chinese economy’s growth.
Social financing includes bank deposits, bank loans, off balance sheet lending, and money raised through bond and equity markets. While there was 18% growth in total social financing to 1.14 trillion yuan for the month of May, overall deposit growth slowed to 11%. That is the lowest figure in 12 years.
For now, there is still growth in lending and deposits. But should growth in deposits stop, the central bank of China will have to cut the reserve ratio requirement even further to encourage banks to lend more. But that’s a cycle that can only go on for so long.
One person prepared for a slowing Chinese economy is Greg Canavan, editor of Sound Money. Sound Investments. He is convinced China is actually the next stage of the financial crisis.
This weekend, he releases a special note to readers about how to prepare for and survive the coming China crash. Keep an eye on your in-box for the report.
Shae Smith
Money Weekend
The Most Important Story This Week…
When you ‘short’ a stock, you are betting on the price going down. You sell a stock at a certain price and hope to buy it back at a lower price. The aim is to sell high, buy low. That way you can pocket the difference. The risk you run is the price of the stock rising instead of falling. Eventually you have to buy it back. If it’s more than you sold it for, you’ve lost money.
Traders and hedge funds short stocks all the time, but most retail investors don’t. But short selling is an important concept to understand because it can drive trends in the market. When short sellers want to get out of their positions, they have to buy the stocks they’ve ‘sold short’ back. The market can rise. A naïve investor can think stocks are rising because things are improving when they’re not.
Slipstream Trader Murray Dawes thinks it might be happening right now. Don’t be fooled – a big drop in the share market might be coming. See what Murray says in Did the European Summit Change the Market Trend?
Other Recent Highlights…
Nick Hubble on The Interest Rate Banana Your Stocks Will Slip On: “At least the price jump should offset the recent news in The Age that the, ‘Housing shortage [is] all smoke and mirrors’, and the number of vacant homes is just under a million. Before you get too optimistic about lower interest rates saving the Australian economy, consider this: The Australian yield curve looks like a banana. That’s a very bad thing.”
Satyajit Das on ‘Super Brussels’ Saves The World Again: Maybe!: “The Pavlovian response of financial markets to the European leaders’ summit of 28th and 29th June 2012 was remarkable. The frugal communiqu?of 322 words fired the ‘animal spirits’ of financial markets, which now believe that the European debt crisis has been ‘solved’. As comedian Robin Williams joked, ‘reality is just a crutch for people who can’t handle drugs.’ “
Dr. Alex Cowie on the LIBOR – The Banking Scandal That Could Cause A Riot: “This is the biggest banking scandal in years – and that’s saying something. Some of the biggest names in banking are being torn down, and heads are rolling. The latest scalp is the Chairman of the world’s 4th biggest bank – Barclays Plc. Barclays faces an industry record fine to boot: $451 million. That’s close to half a billion dollars. It won’t stop with Barclays.”
John Stepek on Investing in the Indian Economy: Your Best Bet of the BRICs Right Now: “The grouping together of the BRICs countries (Brazil, Russia, India and China) was always more of a crafty marketing slogan than anything else. But while everything was rising together, it was easy enough to just lump all the emerging markets into one big group. Today, you need to be more discriminating.”
Why the West Should Learn From the Indonesian Economy
Fourteen years ago during the Asian financial crisis, Indonesian economy endured a currency collapse, a severe 2-year recession, and an embarrassing IMF bailout.
Western bureaucrats wagged their fingers incessantly at Indonesia, lecturing the country about the dangers of excess and fiscal irresponsibility.
How sweet the irony is. In a stunning rags-to-riches story, Indonesia contributed US$1 billion to the IMF last week in order to help bail out bankrupt Western nations.
As I’ve written before, unlike Japan, the US, and Europe – which all seem to think the answer to an economic bust brought on by a debt-binge is to borrow and spend even more money – the Indonesian economy took its medicine when it collapsed back in 1998.
The government cut spending. The economy was de-regulated and thrown open to more foreign investment.
The banking system was restructured, and after a difficult and admittedly very painful two years, the foundation was laid for new economic expansion, which continues to this day.
To be sure, the 1998 collapse of the Indonesian economy cost the incumbent political elite their cushy positions. President Suharto’s three-decade long iron-grip came to an ignominious end. There were riots in the streets, and he was literally turfed out of office.
But so what? That’s EXACTLY what was needed. Part of the renewal process should always be to ship out the dead wood.
Wandering the streets of Menteng this week, Jakarta’s most up-market residential suburb, it’s as though the Suharto era never existed. The street where he used to live is just another non-descript, quiet, residential street in this leafy inner-city suburb.
Ironically, US President Barack Obama spent some of his childhood in this same suburb of Jakarta.
Unfortunately, as he pulls out all stops to cling to power for a second term, the kind of tough decisions that could help the US emerge from its economic malaise have no chance of being made.
What Free Markets?
Lest anyone accuse me of being “anti-Obama” or, shock-horror, FOR the Republicans, let me state emphatically that the PROBLEM is not one side of the aisle or the other. In fact, whoever coined the terms “Demopublicans” and “Repulicrats,” is right on the money in my book.
It’s the ENTIRE system that’s the problem. And that goes for nearly every Western, “free market,” democracy out there.
I use the term “free market” reluctantly, because these economies are anything but. There has not been a true free market economy anywhere in the Western world for many decades.
The most important price of all – that of MONEY – is completely rigged by a small band of dark-suited men who sit around an impressive boardroom table and DECREE what interest rates should be. It is a farce.
Moreover, politicians from opposing sides of the political spectrum may disagree in public and harangue each other in the press.
But, at the end of the day, they’re generally all members of the same club – a cabal of privileged, self-righteous individuals who think they know how to spend your money better than you do.
This system has a vice grip on society, and nothing short of a revolution – such as what Indonesia experienced in 1998 – will force any change.
Tim Staermose
Contributing Writer, Money Morning
Publisher’s Note: This is an edited version of an article that originally appeared in Sovereign Man: Notes From the Field
From the Archives…
The Hard Lesson of a Stock Trader: No Pain, No Gain
2012-06-29 – Kris Sayce
How Gold Prices Look Set to Climb As Banks Crumble
2012-06-28 – Peter Krauth
‘Big Wednesday’ For the Aussie Dollar
2012-06-27 – Dr. Alex Cowie
Three Reasons Why Silver Could Take Off in 2012
2012-06-26 – Dr. Alex Cowie
Who is Winning the Battle Between the Bulls and Bears?
2012-06-25 – Kris Sayce
This is NOT the End of America
Article by Investment U
My iMac was smoking.
After writing a few weeks ago on why the U.S. dollar will remain the world’s leading reserve currency, the comments from readers came fast and furious.
“Are you stupid?” and, “How naïve you are?” were some of the more polite comments. Some suggested that before long the Chinese currency would eclipse the dollar as the world’s reserve currency.
Nonetheless, I noticed that as the euro crisis escalated, where have governments parked their precious cash? In the U.S. dollar – now trading at a three-year high. For example, the U.K. and France increased U.S. Treasury holdings 26% and 30%, respectively, in recent months.
Why are American Treasury bonds more attractive than gold, the Swiss franc, or the China yuan despite all of America’s budget and debt challenges?
It’s certainly not income with 10-year bond yields at 1.57%.
My view is that America’s strengths greatly outweigh its weaknesses, but it appears that I have more confidence in America’s future than most. A recent poll by the Chicago Council on Global Affairs indicated that 55% of those polled believe that the United States will be equaled or surpassed as a global power over the next 50 years. A group of Chinese polled believes their country will catch up to America in terms of global influence within 10 years.
And don’t think I sugarcoat the challenges America faces. More than half of my most recent book, Red, White and Bold: The New American Century, outlines these challenges and how to turn things around.
But when a country decides what currency to safeguard its billions, it’s looking beyond the headline news of GDP growth, budget deficits, or the latest job report.
They’re looking at a bigger and deeper picture, and especially institutions that promote stability, openness, flexibility, mobility and transparency.
Here are the 10 benchmarks I have come up with to measure America’s relative strengths compared to other countries, such as China:
- Protects citizen’s political, religious and economic freedoms.
- Provides educational opportunity for all.
- Ensures a strong defense and conducts a foreign policy based on the broad national interest.
- Nurtures a culture of risk taking and second chances while accepting inequality of results.
- Protects an independent judicial system and enforces the law in a fair, transparent and consistent manner.
- Prizes a tradition of service and philanthropy.
- Conserves and uses natural resources wisely.
- Demonstrates fiscal discipline and puts in place a low, fair and simple tax system.
- Maintains a quality healthcare system open to all.
Taking America for Granted
In my view, China, as a semi-market, state capitalist country would rank rather poorly on many of these benchmarks. We take for granted what is sorely missing in much of the world; due process, property rights, a free press and especially the transparent and smooth transfer of political power.
While America could use improvement across the board – its glaring weakness is fiscal discipline and tax complexity. It needs to move aggressively on both of these fronts immediately.
But on balance, America is an open, confident, flexible and transparent society with the deepest and most sophisticated financial markets in the world.
And despite its faults, the U.S. political system is the most transparent and stable in the world and much preferable to multi-party parliamentary systems such as in India, where a small Communist party coalition member can stall market reforms.
Then there’s the demographic angle. The United States, in large part due to immigration, is still growing, while most of Europe, Japan and especially Russia are rapidly declining. Most of Asia has a relatively youthful population, China being the exception, which will put tremendous strain on its budget.
America sure looks like a winner to me.
But don’t just take my word for it. The chief of Singapore’s $100-billion sovereign wealth fund, Tony Tan Keng Yam, in a recent Wall Street Journal interview, stated that:
“(Americans)… don’t see the potential in their own economy, which is one of the most innovative, open economies in the world. Foreigners seem more optimistic.”
About one-third of the fund he oversees is invested in the United States.
Finally, what markets are showing the best momentum in a turbulent world? Looking at composite (one-, three-, six-, 12-month) list of country returns, the United States leads the list followed by Malaysia, Mexico, Thailand and Singapore while India, Brazil, Russia and China are laggards.
Maybe the forward-looking markets are telling us something?
Good Investing,
Carl Delfeld
Editor’s Note: Today’s Investment U Plus pick is a strong play on the resurgence of U.S. retail sales. Sales topped $23 billion over the last 12 months. Earnings per share grew 17% and management earns a whopping 47% return on equity.
The company enjoys double-digit operating margins, with more than $1.6 billion in cash in the bank. For more information on how to receive this pick and our experts’ recommendations with each Investment U issue for less than $5 a month, click here.
Article by Investment U
The Story of How Entitlements Reached 200% of GDP
The Story of How Entitlements Reached 200% of GDP
By Robert Folsom
Seventy-five years of positive mood trend has entrenched the idea that the state can afford to support an ever-expanding percentage of its citizens, including even the more affluent.
–Alan Hall, May 2012 Socionomist
Please take a moment and think about that sentence with me. It offers a wealth of information already, yet it’s even more instructive to consider what happens if you delete the first major premise. Here’s what I mean:
The state can afford to support an ever-expanding percentage of its citizens, including even the more affluent.
That is a straightforward claim. And the truth is, at least two generations of Americans agreed with the claim enough to vote in legislators who acted on it.
Now, what I removed from the sentence was the reason for the claim. Because the point I wish to make is, some reasons make more sense than others. For example, the original sentence could have said this:
America is a rich country, so the state can afford to support an ever-expanding percentage of its citizens, including even the more affluent.
But that’s not satisfying or even credible. America has always been a rich country. But it has not always had Federal entitlement programs, much less so many of them that they amount to 200% of GDP.
So, if the question is:
How and why could Americans ever think that straightforward claim was true?…
…Then socionomics offers a uniquely credible AND satisfying answer. It’s worth your time to understand that answer in full — and to get your head around the forecast that comes with it. The entitlement state as we know it may well be about to enter a very different future.
Gold “May Be Preparing for Further Falls”, But Central Banks Easing Implies “Upward Trend” for Bullion
London Gold Market Report
from Ben Traynor
BullionVault
Friday 6 July 2012, 07:00 EDT
U.S. DOLLAR gold bullion prices continued falling during Friday morning’s London trading, extending losses from the previous day to hit $1592 an ounce by lunchtime, while stocks and commodities also traded lower and US Treasury bonds gained ahead of the release of June nonfarm payrolls data.
Silver bullion fell to $27.42 an ounce – a few cents below where it started the week.
“[Gold] has been in a three month consolidation range of $1528 to $1640,” says the latest technical analysis note from bullion bank Scotia Mocatta.
“We are either building a base, or preparing for another leg lower through $1500.”
Gold bullion fell 1.6% in less than two hours on Thursday, as monetary policy easing in Europe and China was shortly followed by a better-than-expected US jobs report. The Euro meantime fell more than 1% against the Dollar, dropping back towards two-year lows at less than $1.24.
The US economy added an estimated 176,000 jobs in June, according to Thursday’s privately-produced ADP Employment Report, which is published each month a day or two ahead of the official nonfarm payrolls number.
In advance of yesterday’s ADP release, which was delayed from Wednesday owing to the Fourth of July holiday, consensus forecast among analysts was for an additional 105,000 new jobs to be reported.
“People are concerned that today’s non-farm payrolls figures might [also] be better than expected, which will decrease the chances of quantitative easing by the Fed – bad news for gold,” says Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.
Ahead of Friday’s nonfarm payrolls release, analysts’ consensus forecast was for an additional 90,000 private sector jobs.
By Friday lunchtime in London, gold in Dollars was down around $5 an ounce on the week, while the gold price in Euros was still showing a 1.9% weekly gain following the weakening of the Euro.
The European Central Bank yesterday cut its main policy rate to a new record low of 0.75%. The rate paid to banks who deposit funds with the ECB was cut to zero – prompting Denmark’s central bank to push its deposit rate into negative territory at -0.2%.
“Cutting the deposit rate to zero has practically brought [the ECB] to the door of QE,” says Julian Callow, chief European economist at Barclays here in London.
“They have practically exhausted their conventional armory.”
“There is no such feeling that we are running low on policy options,” countered ECB president Mario Draghi yesterday, when asked by a reporter if the ECB would now turn to unconventional measures.
“We still have all our artillery ready to contain inflationary risk in order to pursue the objective of price stability…on both sides [and] in both directions…I do not think I want to elaborate on further non-standard measures at this point in time.”
Draghi added that asking the ECB “to act outside the limits of its mandate [risks] destroying its credibility”.
Here in London by contrast, the Bank of England’s Monetary Policy Committee, as widely expected, voted for a further £50 billion addition to its QE program yesterday, taking the total commitment to asset purchases to £375 billion since the policy began in March 2009.
“By merely matching market expectations the MPC has failed to deliver the ‘shock and awe’ it normally aims for when easing policy,” says Nomura economist Philip Rush.
“The ultra-loose monetary policy of the central banks speaks for an upward trend in the gold price,” says today’s commodities note from Commerzbank.
China’s central bank also eased policy yesterday, cutting interest rates for the second time in as many months.
“The rate cut is necessary but not enough,” reckons Gao Shanwen, chief economist at China Essence Securities in Beijing.
China’s vice premier Wang Qishan said Friday that the country will have difficulty hitting its official 10% trade growth target for 2012.
Chinese gold bullion imports from Hong Kong meantime – widely viewed as proxy for overall imports – fell in May for the first time in five months, according to official Hong Kong government data published Friday. Imports of gold into Hong Kong from China by contrast hit their second-highest level on record.
Over in India, the late monsoon has seen some farmers resorting to selling gold bullion in order to fund their expenses, India’s Economic Times reports.
“Last year, scrap gold sales in the market was to the tune of 130 tonnes,” says Prithviraj Kothari, president of the Bombay Bullion Association.
“But this year, scrap sales may go up to 300 tonnes.”
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
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.