Month: July 2012

Article by Investment U

Until Facebook (Nasdaq: FB) manages to stabilize itself a bit and show actual signs of growth, investors may want to consider placing their money elsewhere.

It’s been over a month now since Facebook (Nasdaq: FB) debuted on the Nasdaq to much excitement… and then much frustration.

Though the social media site’s fair value estimates rose from $25.54 in March 2011 to $29.73 in December, its IPO was finally priced at $38 on May 17, the day before it hit the markets. While Facebook steadfastly stands by that valuation, shareholders seem to think it wholly insupportable.

And their opinion reigns supreme for now, as the stock tanked to a low of $25 in early June, and barely saw $33 since.

Diehard Facebook groupies (if they exist) might blame the shares’ slow start on the disastrous way Nasdaq handled the IPO. Somehow unprepared for the ensuing volume, it had to delay the opening by nearly half an hour, sending chaotic shockwaves throughout the rest of the offering.

Admittedly, that kind of widely publicized start is unnerving enough to keep many investors out of the company for a while, even if Facebook isn’t to blame. But recent reports, statements and admissions – some from before the IPO and some after – have cast more negative light on the company.

Recognizing the market’s unrest, CEO Mark Zuckerberg and his team are trying to implement significant changes to the way they do business, especially when it comes to advertising.

But the question remains whether their efforts will be worthwhile or not.

Hope and Change Facebook Style

For all of its faults, Facebook does understand investors’ main gripe against it: Its advertising problem.

As a social media site, it relies heavily on advertising revenue to advance its bottom line. That’s why it features a sidebar filled with one-by-two-inch teasers from wireless services, credit card companies, insurance offers, shoe sites and the like.

But that format might be flawed considering how General Motors pulled its sales campaign right before the IPO. Since then, Debra Williamson of eMarketer notes that other large companies have begun to second guess the association: “… last year they spent a lot of money acquiring ‘likes’ and now they want to know what to do with them.”

And an ExactTarget study done a few months ago postulated that Facebook ads worked less efficiently than their mail and direct-mail counterparts.

Part of that seems to be the changing times, specifically the shift from PCs to smartphones. In February, the Financial Times reported that nearly half of Facebook’s 845 million active users logged on through handheld devices, a number that’s likely to only increase from here.

That’s problematic for a few reasons, including the tiny size of the ads themselves and the overwhelmingly negative response other sites have received for trying to generate revenue from their smartphone-using customers. (Just ask Twitter.)

In the past – possibly for that very reason – Facebook controlled exactly where its members saw ads, and smartphones seemed to be off limits. But after weeks of uninspiring stock growth, Zuckerberg now seems willing to push those boundaries.

Reuters reported in June that the company “is making it easier for advertisers” by “letting marketers craft ads destined specifically for mobile… or users’ news feeds.”

Follow the Earnings, Not the Hype

To be fair, Facebook might actually succeed in its struggle for advertising relevance and revenue. It might manage to somehow appeal to both the companies demanding more screen time and the users who don’t want their social interactions cluttered by sales pitches.

It might pull it off… But then again, it may not.

Leading web analytics service, comScore, just found that Facebook’s audience isn’t doing as well as it could be… The site brought in 158.93 million unique U.S. visitors in March, but only 158.69 million in April and just barely 158 million in May.

CBS, meanwhile, noted a 4.8% drop in unique U.S. visitors over a six-month time frame. That might be due to the unauthorized and/or unannounced changes it frequently makes, such as switching everybody’s listed email addresses to @Facebook.com this week.

Between its often-annoyed member base and its often-frustrated client base, there are just too many signs that Facebook has an uphill battle to fight. And its current valuation leaves little room for error…

With a PEG ratio of more than two and a P/E of nearly 80, substantial growth is already priced into the stock – meaning the price could be very sensitive to any hiccups in growth over the next few years.

For a good example of what I’m talking about, look at what happened to the stock of Netflix (Nasdaq: NFLX) last year with its price-hike dilemma. In mid-July 2011, it was trading at insane valuations based on rapid growth. By September, the market had shaved off half of its stock price and now it trades at less than two-thirds its 52-week high. And all this arguably stemming from one poor decision by management.

So until Facebook manages to stabilize itself a bit and show actual signs of growth, investors may want to consider placing their money elsewhere.

Good Investing,

Jeannette Di Louie

Article by Investment U

Article by Investment U

There’s a huge opportunity coming in bonds. It won’t look like an opportunity to most; the press will actually call it a bust.

But, with the right planning in place, it’ll produce huge returns with virtually no risk.

In fact, as this “bust” develops, you’ll actually be able to increase your returns.

The tricky part will be fighting the urge to sell when everyone – and I mean everyone – will be cutting and running.

For the informed investor, this will be the biggest bonanza of the new millennium, and all you have to do is not sell.

Here’s how it will develop…

The Interest Rate Explosion

While the whole market is fixated on the Eurozone, the slowdown in China, India’s issues and “Obamacare,” interest rates are slowly simmering and looking for an excuse to explode.

The good news is that this explosion (and it will be a big bang when it hits) is very predictable. So you can prepare for it and actually set up yourself for a rich retirement while the rest of the market goes down the drain.

These increasing interest rates will affect every investment – stocks and bonds. It’ll be devastating for the unprepared.

For a big dose of reality about how bad this can get, take a look at rates in the early 80s and what they did to the stock and bond markets.

The DOW was in the 600s. Bonds were paying double-digit rates and selling for next to nothing.

But, if you’re in the right place, this unavoidable sell-off will be a huge payday!

How It Will Begin…

Interest rates can, and will, go back up when any of the following conditions fall into place. Obviously, this isn’t a complete list, but it includes the most obvious factors:

• The world business community loses faith in our ability to pay our bills. That will cause the cost of our government borrowing to sky rocket and, with it, interest rates.
• Our economy finally gets going again and the normal growth/interest patterns re-emerge. Under normal conditions, when growth gets into high gear, the Fed raises rates to control inflation.
• Our money printing finally results in inflation. Rates have to go up to try to control inflation. This is the one we don’t want to see. But that’s for another article…

There’s no magic here. Any, or all of these three forces, can and will fall into place, and it will look like 2008, 2000 and 1987 all over again.

One of the Few Safety Valves…

In the stock market, one of the few safety valves that’ll protect your assets will be tight trailing stops. Properly used, they get you out as stocks start to drop – and they will drop.

Lock in your gains and limit your losses… that’s the best strategy for stocks as the market absorbs the higher rates.

Bonds will drop, too – a lot. Virtually no investment will be spared.

But, if you hold the right type of bonds, the way to make money will be to not sell. It’s counter intuitive, I know, but this may be the only way to actually make money in the coming rising interest rate environment.

What to Do About Bonds

As rates go up, the existing bonds on the market will drop in value.

But, and this is a huge but, bonds will pay their interest and mature at $1,000 no matter what happens to their market value. The bondholder just needs to sit tight, let it happen and collect the interest and principal.

That’s asking a lot of most small investors. Most want to get out and guarantee a loss.

One way of preparing yourself mentally to “not fix what isn’t broken.” Know, before you buy a bond, how much you can expect to make from it, and what your worst-case scenario is before you invest.

This is where all the money will be lost or made.

Here’s a bond that’ll pay enough to keep most people in place and allow you to cash in on the panic selling in bonds of all types that has to come.

The Edgen Murray Corporation has a B-rated bond (cusip: 280148AC1) that’s paying a coupon of 12.25% (that means you get $122.50 in interest per bond every year). It matures in January of 2015. It also has a call date of January 2013 when the company has the option to buy back the bond before maturity at 106, or $1,060. If called we would earn a return of about 20% annually.

Besides the very high coupon of 12.5% and a 20% return to the call, here’s what I really like about this bond…

It has a maturity of about two and a half years. Short maturities are an absolute necessity to survive the coming panic selling that will accompany increasing rates.

When rates move up, a bond with this maturity will drop in value about one-third of what a 10-year maturity will. That will decrease the possibility of selling in a panic when you get your account statement and thus keep you in the black.

Staying put is absolutely essential! Cut and run and you become one of the losers.

The silver lining of very short maturities is that you’ll have fresh money coming out of maturing bonds to buy into a rising interest rate market. This is how you turn a bad situation into a big payday.

Waiting 10 years for money to come due when your market value is dropping is a Herculean task for anyone. Two years is a whole different story. It’s being able to see the end that makes it more manageable, and two years is manageable for anyone.

As this unfolds you’ll be buying bonds at pennies on the dollar, earning incredible annual returns, yes, higher than 13% and 20%, from bonds being sold at huge losses by uninformed investors.

So just like that, dropping bond prices just became a very big positive for your portfolio. The key though is you must be disciplined enough to ride out what will be a horrible storm for most. Ugly doesn’t begin to describe what will happen to long-term bondholders and panic sellers.

One of the most beneficial aspects of the Edgen Murray bond – and all bonds – is that before you put one cent into this bond you will know exactly how much you will be paid annually and at maturity. No guessing!

This is the one part of bonds that will make riding out the coming storm easier. And it’s one more psychological edge we have helping us stay put during the coming sell-off.

MEAR: Minimum Expected Annual Return

So how do you figure out your return beforehand?

I use an equation I call MEAR, or minimum expected annual return.

Here’s the MEAR for this bond:

Edgen Murray Corporation Bond:          

• Rate = 12.25
• Maturity = 01/15/2015
• Price = 101.500 (Think of this as a percentage of $1,000)

This bond will pay us six interest payments of $61.25 per bond on January and July 1 until maturity in January 2015.

6 x 61.25 = $367.50

There’s a slight premium for this bond of $15 – it’s selling for about $1015 – so we must deduct that from our total interest payments.

$367.50 – $15 per bond = $352.50

We’ll hold this bond for about 30 months so we divide our total, $352.50, by 30, and divide by our cost of $1,015 per bond.

$352.50 / 30 / 1015

Times 12 for a one-year average.

$352.50 / 30 / 1015 x 12 = 13.89%

Yes, 13.89%! Whether the bond’s market value goes up or down.

Right now, defaults in all corporate bonds, investment grade and high yield, or junk bonds, are about 1% to 3%. That means 97% to 99% of corporate bonds are paying exactly as promised. That’s a huge advantage over stocks and a bet that makes this a possible play for almost everyone.

So, the most probable worst-case scenario for corporate bonds (97% to 99% of the time anyways) is you hold them to maturity, collect your interest and get your $1,000 in principal back no matter what the market does.

I can do that, especially when I’m earning 13% -plus per year for waiting it out.

The keys to this strategy are disciplined buying, understanding what’s really happening, knowing before you buy a bond what you’ll make, and that you may have to hold it to maturity. If you’re making enough from your bonds and prepared for the volatility, that should be easy.

Remember, when interest rates hit the fan:

• Own short maturities in companies with good fundamentals.
• Sit tight when bond market values drop.
• Collect your interest and principal.
• As your bonds mature buy back into the market’s rising rates and lower prices.
• Finally, laugh all the way to the bank.

Good Investing,

Steve McDonald

P.S. In today’s Investment U Plus, I’m sharing one of four new bond recommendations for my trading service, Oxford Bond Advantage. It’s a much safer bond (but with less return) than the Edgen Murray one mentioned in today’s article.

Registration is currently closed for the service, but you can get this recommendation along with daily recommendations from all of our experts by becoming an Investment U Plus subscriber here.

Article by Investment U

Four and a half years of studies and five failed votes in the House later, exactly where are we with the Keystone XL pipeline? Stuck on the US-Canadian border where it is likely to remain until mid-2013 despite the headline-grabbing issuance of one of three permits to begin construction in Texas for the smaller and much less controversial portion of the pipeline.

On 26 June, the US Army Corps of Engineers granted TransCanada Corp one of three permits required in order to begin construction on the $2.3 billion southern section of the Keystone XL pipeline, which would run from Cushing, Oklahoma to the Gulf of Mexico in Texas. This first in the permit series covers construction across the wetlands and waterways of Texas’ Galveston district. TransCanada still needs to more permits from Tulsa, Oklahoma and Forth Worth, Texas, to complete this southern Gulf portion of the pipeline extension. Tulsa is set to rule on the second permit in a month and a half.

This southern section of the extended pipeline will carry 700,000 barrels a day of crude, to start with, to Texas refineries from Cushing. Construction will begin this summer. The southern line, permits pending, could be functional by mid-to-late next year. Indeed, Obama pledged to speed up the approval process to make this a reality.

But these permits are only for the southern extension of the Keystone pipeline, which seeks to extend the existing Keystone pipeline from Cushing, Oklahoma to the Gulf of Mexico. This is a much less controversial piece of the pipeline project, which by dint of not crossing the US-Canadian border and which is being pursued by TransCanada independently from the rest of the Keystone XL pipeline extension, does not require complicated approval.

The “greater” Keystone XL pipeline project would extend the existing Keystone pipeline, which runs from Hardisty in Alberta, Canada, then eastwards in Canada, dropping southwards into the US, through North Dakota, South Dakota, Nebraska, Kansas and ending in Cushing, Oklahoma, with an eastern branch spiking off at Steele City, Nebraska and running to Patoka, Illinois.

The proposed extension would run from Hardisty across the border through Phillips Country, Montana, and meet up with the existing pipeline at Steele City. This would represent 1,179 miles of new pipeline that would carry Canadian tar sands crude eventually to the Gulf of Mexico, with an initial capacity of 830,000 barrels per day.

In order to speed things up after President Barack Obama initially rejected the project in January this year, TransCanada has split the pipeline extension project into the northern and southern sections, pursuing the southern branch independently.

As such, issuing permits to begin construction on the southern extension through Texas and Oklahoma does not signify that the Keystone XL project is progressing just yet. Because the much larger northern extension crosses an international border, it must first obtain presidential approval, in accordance with an executive order implemented under George W. Bush in 2004.

A comment period on the proposal began Jun. 15, 2012, and will continue until 30 July 2012, but the State Department has said it would not be able to complete its review of the process until the first quarter of 2013. Approval is contingent upon whether the project is demonstratively in the country’s national interest.

So, the trillion-dollar question is whether Keystone XL is in fact in the country’s national interest. The more urgent question of course is whether Keystone XL is in the Obama administration’s interests, specifically in the run-up to presidential elections.

On 27 June, House and Senate negotiators reached a tentative agreement over two-year bill to overhaul federal highway and transit programs-a bill Obama had vowed to veto if there were any attempts to slip approval of Keystone XL in the legislation. Republicans backed down over their insistence of language that would approve the pipeline in the bill.

The former question is complicated enough; the latter even more so. From an environment and jobs perspective, Keystone XL is not in the Obama administration’s interests. Organized labor is not as interested as it might be in the jobs this would create at a time when the administration has been fairly successful at creating energy jobs elsewhere. On the environmental front, the Obama administration’s hesitancy over the project is the stuff of heroism.

The Republicans had hoped to deal Obama a lethal campaign blow by setting a two-month deadline for the administration to approve Keystone XL in January. The Republicans knew that two months was not nearly enough to evaluate the project from an environmental and economic aspect, and that the administration would have to reject the project. The idea was to force the administration into publicly denouncing massive job creation and working against US energy independence ahead of the elections.

This hasn’t been as successful as the Republicans had hoped. They had not counted on the relatively sober response from organized labor. The Obama administration has also racked up some very significant points in energy development that it can cash in to replace the loss of Keystone XL, and that includes (clean) job creation that is keeping organized labor at bay.

In terms of the oil and gas industry, here, too, the Obama administration doesn’t have much to gain by approving Keystone XL ahead of the elections. It would not be the end-all for the oil lobby’s harassment of the administration.

Back to our first question: Is Keystone XL in the country’s national interest? It is almost a mute point in an election year, but we will entertain the notion simply to avoid being labeled cynical. The answer is, “no”. It will create plenty of jobs, which is hardly a contested point, but there are plenty of other energy-related jobs already being created rather successfully. Environmentally, the project flies in the face of the administration’s clean energy ambitions with the associated risk of oil spills and the increase in greenhouse gas emissions as a result of increased tar sands (dirty oil) extraction.

In terms of economics, there is some solid research showing that Keystone XL is more likely to result in higher prices at the pump. Canadian tar sands crude pumped into the Midwest and intended for domestic gas consumption would be diverted to the Gulf Coast where it would be used in diesel production and for global exports. It could very well mean reduced gas supplies and higher gas prices in the end.

Much like the Republican attempt to force Keystone XL to fail early on and force a vote loss on the Obama, the issuance of the first Texas permit for the southern extension is but a Democratic bone to big oil and a job-hungry public. It has little marrow. The Republicans lost this battle when TransCanada split the project in half, allowing the Obama administration to score points by supporting the smaller version while avoiding a decision on the larger project. Nothing will happen on the “greater” Keystone XL this year.

Source: http://oilprice.com/Energy/Crude-Oil/Whatever-Happened-to-the-Keystone-XL-Pipeline.html

By. Jen Alic of Oilprice.com

By TraderVox.com

Tradervox.com (Dublin) – Economists are predicting that Italy will become the sixth country in the euro region to seek international bailout. Italy is the third largest economy in the euro area and it is a member of the G7 nations. However, the country has the third largest debt market with its debt-to-GDP ratio standing at 120 percent which is the goal set for Greece for 2020. Most of the economists are saying that Italy has escaped the spotlight only because investors are looking at Spain; but warned that with the ECB rate decision pending, Italy can easily slip into the limelight.

Italy’s efforts at the EU Summit indicate that the Prime Minister Mario Monti is worried about the state of the economy in his own country. Monti inherited a government in huge economic turmoil from Silvio Berlusconi in 2011 and embarked on a series of reforms that created some market confidence.

However, the country’s economy has since contracted by 0.8 percent in the first quarter as compared to stagnation of the euro zero. In addition, purchasing manager’s indicators in the country have shown a contraction in all sectors in the second quarter. In the past two months, the retail sales for the country have been below the expectation coming in at negative 0.8 and negative 1.6 respectively.
The country’s economy is slowing down as global economy worsens and the austerity measures in the region take effect. It is evident that the public is not supportive of Mario Monti’s actions and neither is the market. This is coming amidst great pressure as 10-year bonds shoot past 6 percent which is unsustainable given the growing contraction and the high debt-to-GPD ratio.

With these conditions, it is clear that Italy cannot meet its debt repayment obligations hence may request for bailout making it the sixth country in the region to do so. While Monti has some political support from parties in parliament, it will be hard for lawmakers to support further reforms which are needed to give Italy some relief from the market. Some of the reforms that are needed involve pension and labor reforms.

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
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News and analysis are produced throughout the day by our in-house staff.
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Daily Market Analysis by Real-Forex

Tracking the EUR/USD pair

Date: 04.07.2012   Time: 16:04  Rate: 1.2516

Daily chart

Last Review

The price has descend to check the Bollinger moving average which is suppose to use as a dynamic support, in case it will actually become a support- the price should breach the 1.2750 price level since this level is the neckline level of the “Double bottom” pattern and its target is around the 1.3090 price level. On the other hand, if the price will not break the 1.2750 price level and go back under the 1.2436 level, it is possible to assume that in first stage the price will check the last low on the 1.2290 price level.

Current review for today

The price has descended under the Bollinger’s moving average and it looks like making its way towards the 1.2436 support level. In case the price will go down under the 1.2436 price level, it will be possible to assume that it will check the 1.2290 last low at first stage. On the other hand, breaching the 1.2750 price level which is the neckline of the “Double bottom” pattern will lead the price towards the 1.3090 price level, the pattern target.

You can see the chart below:

4 Hour chart

Date: 04.07.2012   Time: 18:11 Rate: 1.2519

Last Review

It looks like the price has stopped at the 38.2% Fibonacci correction level of the last uptrend (blue broken line) and it is possible to assume that its first target from this point is the 1.2690, while breaking this level will lead the price towards the last peak on the 1.2750 price level. On the other hand, proven breaking of the 1.2580 price level will probably continue the correction towards the 1.2550 and the 1.2516 price levels.

Current review for today

The price has corrected the mentioned move upwards (blue broken line) by two thirds (61.8%) by Fibonacci retracement. Breaking of this level will indicate that the price will reach at first stage the closest support at the 1.2440 price level, while its breaking will probably lead the price towards the last low at the 1.2290 price level. On the other hand, stoppage of the price at the current level and breaching the 1.2690 price level will indicate that the price is headed towards the last peak on the 1.2750 price level.

You can see the chart below:

GBP/USD

Date: 04.07.2012   Time: 18:24  Rate: 1.5590

4 Hour chart

Last Review

The price is clearly supported by the dynamic support in the shape of the Bollinger’s moving average which sharply goes upwards and brings power to the ascending move. Breaching the 1.5716 price level will probably lead the price to check again the last peak on the 1.5777 price level. on the other hand, breaking the 1.5660 price level will probably lead the price towards the closest support level at first stage.

Current review for today

The price has breached the 1.5650 support level and reached the 1.5576 price level, this is a 61.8% Fibonacci correction level of the last ascending move (blue broken line). Breaking of this level will probably lead the price towards the “Wolfe waves” pattern target on the crossing of the price with the line connecting between points 1 and 4, around the 1.5400 price level, while this will be used as a support level. On the other hand, stoppage of the price at the current area and breaching the 1.5716 price level will confirm that the current correction is over and its target will be the last peak on the 1.5777 price level.

You can see the chart below:

AUD/USD

Date: 04.07.2012   Time: 16:45  Rate: 1.0282

4 Hour chart

Last Review

The price breached the 1.0278 price level and currently going back to check whether this level can switch its role from a resistance to a support. In case it will, the first target will be the 1.0326 price level. On the other hand, breaking of the 1.0224 price level will probably lead the price to a correction towards the 1.0170 price level at first stage, this is a 38.2% Fibonacci correction level of the last move upwards (blue broken line)

Current review for today

The price has reached the 1.0326 target (minus 6 pips) and went back to the 1.0278 support level. its descend under this level and under the Bollinger’s moving average will indicate that it will perform a correction in size of between a third and two thirds of the last ascending move (blue broken line), meaning between the 1.0195 and the 1.0119 price levels. On the other hand, breaking of the 1.0326 price level will lead the price towards the next resistance on the 1.0474 price level.

USD/CHF

Date: 04.07.2012   Time: 16:52  Rate: 0.9593

4 Hour chart

The price has breached the 0.9564 price level and reached the 0.9594 resistance level. Breaking of this level will probably lead the price north towards the next resistance on the 0.9653 price level. On the other hand, stoppage in the current area and its descend under the 0.9513 price level will indicate that the price is headed towards the next support on the 0.9463 price level.

You can see the chart below:

USD/JPY

Date: 04.07.2012   Time: 16:57  Rate: 79.80

4 Hour chart

The price is trying to get support above the 79.80 price level, while breaching of the 80.15 price level will lead the price at first stage towards the last peak on the 80.60 price level. On the other hand, descend of the price under the 78.80 price level will indicate that the price will probably descend to check the last low on the 77.66 price level.

You can see the chart below:

Daily Market Analysis by Real-Forex

By Central Bank News
    The European Central Bank (ECB) cut its benchmark repurchasing rate (repo rate) by 25 basis points to a record low 0.75 percent to aid a weak economy in the euro area that is keeping inflation in check.
    ECB President Mario Draghi said the economy in the 17-nation euro area continued to remain weak with heightened uncertainty weighing on confidence and sentiment.
    “The risks surrounding the economic outlook for the euro area continue to be on the downside, Draghi told a news conference in Frankfurt.
    “The main downside risks relate to the impact of weaker than expected growth in the euro area. Upside risks pertain to further increases in indirect taxes, owing to the need for fiscal consolidation, and higher than expected energy prices over the medium term,” he added.
    
     Draghi said it was essential for banks in the euro area to strengthen their balance sheets so they can provide loans to businesses and consumers.
     Looking beyond the short-term, he expects the recovery to be weighed down by tensions in government bond markets, high unemployment and the need to pay down debt by both the financial and the non-financial parts of the economy.

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

The euro fell against most of its main currency rivals yesterday, as expectations that the European Central Bank will cut euro-zone interest rates today weighed down on the currency. The price of crude oil also fell yesterday, as tensions between Iran and Western countries decreased. Turning to today, in addition to the euro-zone Minimum Bid Rate, traders will also want to pay attention to the US ADP Non-Farm Employment Change figure, scheduled to be released at 12:15 GMT. The ADP figure is considered an accurate predictor for Friday’s all important Non-Farm Payrolls figure, and consistently leads to market volatility.

Economic News

USD – ADP Non-Farm Employment Change Could Generate Dollar Volatility

The US dollar saw gains against several of its main currency rivals yesterday, as risk aversion due to poor euro-zone and British news boosted safe-haven assets. The GBP/USD fell close to 100 pips during the European session, following the release of a worse than forecasted British Services PMI. The pair eventually reached as low as 1.5580. The EUR/USD also dropped some 90 pips yesterday, eventually reaching the 1.2507 level.

Today, dollar traders can anticipate heavy market volatility, as a batch of significant euro-zone and US news is set to be released. Analysts are forecasting that the European Central Bank is getting ready to cut euro-zone interest rates when they meet today at 11:45 GMT. If true, the dollar could extend its recent gains against the euro. At 12:15 GMT, the ADP Non-Farm Employment Change figure is set to be released. With analysts forecasting the figure to come in below last month’s result, the greenback could see some losses against its safe-haven rival, the Japanese yen, during afternoon trading.

EUR – EUR Could Extend Bearish Trend Today

The euro fell against several of its rivals yesterday, including the Australian dollar and Japanese yen, as expectations that the ECB will cut euro-zone interest rates weighed down on the common-currency. The EUR/AUD fell some 85 pips during the European session, eventually hitting the 1.2165 level by the afternoon session. Against the JPY, the euro dropped some 70 pips over the course of the day, eventually reaching 99.78 before staging a very slight upward correction.

Today, the euro-zone Minimum Bid Rate at 11:45 GMT, followed by the ECB Press Conference at 12:30, is likely to be the most significant news events. Given the impact the euro-zone debt crisis has had throughout the region, analysts are forecasting that the ECB will cut interest rates today from 1.00% to 0.75%. If true, the euro may extend its bearish trend going into the rest of the week. That being said, depending on the outcome of Friday’s all important US Non-Farm Payrolls figure, the euro could recoup some of its recent losses before markets close for the weekend.

Gold – Gold Resumes Bearish Trend as USD Strengthens

A strengthening US dollar caused the price of gold to fall during trading yesterday. A bullish USD means that gold becomes more expensive for international buyers, and typically causes prices to drop. Gold fell close to $8 an ounce over the course of the day, eventually reaching as low as $1611.29 before staging a moderate upward correction and stabilizing around the $1615 level.

Today, gold traders will want to pay attention to the US ADP Non-Farm Employment Change figure. The figure is considered an accurate predictor of Friday’s Non-Farm Payrolls indicator. Should today’s news come in below analyst expectations, the USD could turn bearish which may help gold recoup yesterday’s losses.

Crude Oil – Oil Takes Moderate Losses as Iran Tensions Calm

The price of oil fell just over $1 a barrel yesterday, as tensions between Iran and the West calmed down and supply side fears among investors eased. Crude fell as low as $86.46 before staging a slight upward correction during the afternoon session, to reach as high as $87.37.

Turning to today, crude oil could resume its downward trend if the European Central Bank decides to cut euro-zone rates and investors shift their funds to safe-haven assets. That being said, any escalation in the conflict over Iran’s disputed nuclear program could lead to significant gains for crude.

Technical News

EUR/USD

The Williams Percent Range on the weekly chart is approaching oversold zone. If it continues moving down, it may signal a possible upward correction in the coming days. This theory is supported by the MACD/OsMA on the same chart, which has formed a bullish cross. Going long may be the wise choice for this pair.

GBP/USD

Most long-term technical indicators place this pair in neutral territory, meaning that no defined trend can be predicted at this time. Taking a wait and see approach may be a wise choice, is a clearer picture is likely to present itself in the near future.

USD/JPY

The MACD/OsMA on the daily chart appears close to forming a bearish cross, signaling a possible downward correction in the near future. That being said, most other technical indicators show this pair range trading. Taking a wait and see approach may be the best option at this time.

USD/CHF

The Williams Percent Range on the weekly chart has almost crossed into overbought territory. Furthermore, a bearish cross has formed on the daily chart’s MACD/OsMA. Traders may want to go short in their positions ahead of a possible downward correction.

The Wild Card

AUD/JPY

The Slow Stochastic on the daily chart appears close to forming a bearish cross, indicating that downward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Forex traders may want to open short positions ahead of a possible downward breach.

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.

Article by Investment U

In focus this week: a very cheap oil play that is already rebounding, timber and farmland, and the SITFA.

One of the largest independent oil producers in the world is really cheap! CNOOC Limited (NYSE: CEO).

The U.S. ADR is off 25% since the start of the big sell-off in oil, but despite the continued slide in oil prices, CNOOC has actually been rebounding.

David Hurd of Deutsche Bank said the early recovery in price is due to bargain hunters going after returns and operating margins that are, as he described them, head and shoulders above their international peers.

A Macquarie analysis shows CNOOC with enough cash to easily cover their costs and still pay their 3% dividend. And, the current stock price has already been discounted enough to allow Brent crude to drop to $70 from its current price near $100.

According to Barron’s, this story gets better with the fact that their P/E is a skimpy eight down from its historic level of 11.5 and well below the rest of the industry at 12.

CNOOC production is 78% oil, which is higher than its competitors, and two thirds of its reserves are oil, not natural gas, which will be a huge boon when oil recovers, which it will.

Goldman upgraded the stock to a conviction “Buy” and also sees oil prices rebounding on Asia and Chinese demand. They have Brent running back to around $120 per barrel this year.

Almost everything is pointing to a good recovery in oil and CNOOC.

Watch this one!

Timber and Farmland Up Next

According to the Journal, there’s a race on worldwide to convert paper money into hard assets, and timber and farmland are where a lot of it is heading.

Dennis Moon, of U.S. Trust’s Specialty Asset Management division, says there has been a big uptick in the rush to farm and timberland as investors, who do not need liquid assets, look for places to avoid everything from inflation to a depression.

Moon said, “We are buying dirt with a long history of stability despite everything that has happened in the world economy.”

Returns on timber and farmland come from two sources: the gross cash generated by the production on the land and the long term appreciation of the land itself. The total long-term return is in the low double digits.

That beats a 10-year Treasury at 1.6%, and without the guaranteed sell-off in treasuries that has to come soon.

And, according to Moon, despite the worldwide housing crunch driven sell-off in timber, the long-term returns on timber are about the same as farmland.

Timber however doesn’t produce any annual income as farmland does. Timber is more of a big payday down the road investment, so you have to be able to live without the income during what Moon described as a 10- to 15-year investment.

As the dollar and the euro continue their money printing driven race to what appears to be a collapse, hard assets like land will become even more valuable as a real safe haven. Land that can produce an annual income, farmland, will be in very high demand.

It isn’t for everyone, but it’s definitely something we should be looking at as a defensive play.

Now, the SITFA

This week it goes to those people who thought there was a real estate crisis in California.

The Journal had a recent article about a three-bedroom, two-bath, 1,700 square-foot home, just down the street from FB headquarters, that’s selling for, I hope you’re sitting down, $1.295 million. You heard me right, million!

Are you kidding me? What happened to being under water in the golden state, and evictions, these folks just bought the house in 2007 for $985,000 and it already has a contract for more than the asking price.

This is a nice house, what we would call a starter, nothing special, just nice, but $1.295 million!?!

I’m sorry, my starter home was $37,500 and was almost identical to this one; a rancher with a two-car garage. Even with inflation since 1983, when I bought my first house, it can’t be that much for a rancher.

I hope the folks buying this house have received big bonuses, they’ll need it.

I wonder what the taxes are in this neighborhood for a $1.295 million house? I wonder if they have even thought about it.

See you all next week.

Article by Investment U

Source: ForexYard

The early afternoon release of Canada’s GDP data revealed an economy in modest stability. The release of a nation’s gross domestic product report is a strong indicator of that nation’s economic health and well-being. Today’s release revealed to investors that Canada’s economy is stronger than previously assumed.

The forecasts for today’s numbers were for a mildly sluggish publication of 0.2%, below last quarter’s 0.3% growth. The actual reading of 0.3% has given traders cause to look over their numbers once again and revalue their Canadian dollar (CAD) positions. Look to the CAD making decently bullish moves throughout the week as one result of today’s numbers.

Read more forex trading 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.