Month: August 2012

By MoneyMorning.com.au

On Thursday evening, it seemed all was lost for the eurozone.

Mario Draghi had sworn to do ‘whatever it takes’ to save the euro. Then on Thursday afternoon, he did nothing. He just talked.

With the “big bazooka” failing to materialise, markets plunged, as you’d expect. The European Central Bank (ECB) had failed.

But then on Friday, yields on Spanish and Italian debt fell, and markets rebounded sharply. Suddenly the end of the world didn’t seem quite as nigh.

So what’s changed everyone’s minds?

The Politics of the Eurozone Are Still Tilted Against Bailouts

A couple of things cheered investors up on Friday. Firstly, when the US payrolls data came in, it was a lot less awful than it could have been.

But more importantly, markets started to reconsider what ECB head Mario Draghi had said on Thursday.

Everyone had been hoping for some new big bond-buying package. Or maybe another bout of LTRO (Long-Term Refinancing Operation). Or maybe even some quantitative easing (QE).

What they got instead was a lot of talk. And that shouldn’t come as a huge surprise.

The politics of the eurozone are still tilted against ‘solutions’ involving money-printing. To recap, the easy way out of this crisis in the short-term is for the ECB to print euros and buy bonds. This is exactly what both the Bank of England and the US Federal Reserve have been doing.

The Fed and the BoE are doing it ostensibly to try to push inflation higher. But it also has the effect of keeping your bond yields low (because the central bank has unlimited buying power) and keeping your currency weak too.

With the eurozone, of course, it’s more complicated. Because the ECB would only be buying certain bonds – those of the troubled countries. But the inflationary impact of printing money would be strongest within the least-troubled countries – like Germany.

So the Germans are being asked to accept more inflation than they’d otherwise have in exchange for bailing out the periphery. They’re none too happy about that idea.

You can see why. Bond yields in ‘periphery’ countries are rising partly because the structure of their economies is fundamentally flawed. Greece is by far the worst offender on this score. But one way or another, they could all do with getting their houses in order.

So the Germans don’t want to give these countries a free ride. There’s no incentive for them to change otherwise.

That’s all very well, and it’s easy to sympathise with the German point of view. The problem is that no one in the eurozone – not even the Germans – wants the euro to break up. If you push austerity too far, chances are one or more countries will end up quitting. Not every nation is as stoical (or perhaps it’s more accurate to say ‘comfortable with mass emigration’) as Ireland is.

Greece came very close to dropping out at the last election. And I suspect that the eurozone is now ready and willing to countenance a Greek exit. The euro could conceivably survive without Greece, if it was prepared.

But a Spanish exit? An Italian one? Forget about it. An exit by either of those two would demolish the euro in its current form.

So while the austerity brinksmanship makes sense with a country like Greece, it’s pretty hard to pull off with the bigger players.

The European Central Bank is Planning to Buy More Bonds

That’s why it’s interesting to look more closely at what Draghi said on Thursday.

As Ambrose Evans-Pritchard reports in The Telegraph, Draghi noted that the ECB may ‘undertake outright open market operations’ of ‘adequate size’ to cap bond yields for troubled countries that are pushing through reforms.

‘ECB experts [will] draw up plans… for potentially “unlimited” and “unsterilized” intervention in the bond markets,’ writes Evans-Pritchard. In other words, Draghi ‘basically said that he was considering QE,’ as Gary Jenkins of Swordfish Research told the FT.

Julian Callow of Barclays Capital agreed: ‘Draghi has made it clear that the ECB is preparing to buy Spanish and Italian bonds on a much bigger scale. This is the thin end of the wedge for QE and marks a turning point in the crisis’.

There’s a catch. Troubled countries have to sign up to the EFSF (the big bail-out fund). So they have to ask for a formal rescue package, which will mean signing up to reforms, and no doubt stricter supervision.

In other words, what Draghi is saying is this: if you show that you’re capable of being a good European, the ECB will print money to buy your bonds. That’ll cap your borrowing costs, and tide you over while you restructure your economy.

That’s pretty radical. And you just need to look at the reaction of the Germans to realise that. Jens Wiedmann, who represents the German Bundesbank on the ECB board, voted against the idea of buying periphery bonds. But he was outvoted.

As Olaf Storbeck in Handelsblatt put it: ‘Between the lines the message was perfectly clear. The Bundesbank might not like it, but the ECB will intervene in the bond markets in the foreseeable future. And big time.’

Europe Looks Cheap if Utter Disaster is Avoided

In short, the real significance of Draghi’s speech is that it was another step down the road towards full-blown QE for the eurozone. That’s very significant for investors.

Don’t get me wrong. QE is not a cure-all for Europe’s woes, just as it’s not a magic cure for Britain’s or America’s. It’ll bring its own set of problems.

But the point is that for now, most of Europe is priced for a much nastier outcome than that. The main thing keeping European stock markets much cheaper than the rest is the threat of a messy break-up for the eurozone. QE would make that scenario far less likely.

As Ben Inker of highly-respected US value investor GMO noted last month, eurozone equities (excluding financials) are ‘about 15% cheaper than fair value.’ This ‘broadly [discounts] an ugly endgame for the region. If something less bad than that occurs, the stocks are at least mildly cheap.’

If you haven’t done so already – it’d be a good idea to start allocating a bit of your portfolio towards Europe.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek (UK)

From the Archives…

Revealed: Government to Get Hands on More Retirement Savings
03-08-2012 – Kris Sayce

Olympic Badminton Farce Shows How Capitalism Beats Socialism
02-08-2012 – Kris Sayce

How Low Natural Gas Prices Are Causing Energy Havoc
01-08-2012 – Dr. Alex Cowie

Silver Bounces Off Key Level, Where’s it Going Next?
31-07-2012 – Dr. Alex Cowie

How No ‘Plan B’ For The Australian Economy Could Boost Aussie Stocks
30-07-2012 – Kris Sayce

Eurozone Money Printing is on the Horizon

Article by AlgosysFx

Disagreements within the 17-nation Euro area had undermined the future of the European Union, as the stand-off on European Central Bank support for Italian and Spanish debt hardened. A psychological dissolution of Europe was said to stem out from the tensions that have accompanied the Euro Zone in the past years. The signs of a severe
malfunctioning in the market for government bonds in the Euro region along with the continuance of extraordinarily high costs of its members in financing their debts had resulted the European currency to plunge by 46 pips versus its American counterpart in last Friday’s exchanges.

However, as investors and politicians conitnue to grapple with the significance of comments on sovereign debt purchases by European Central Bank President Mario Draghi last week, the EURUSD pair is once again expected to volatility. The Sentix Investor Confidence is also deemed to deepen to a negative reading at -30.8 points in August from -29.6 points in July.

Though  Spain and Italy are likely to have to formally request a resumption of the bank’s bond buying, as they rallied the following day as investors concluded that ECB action would occur, albeit on an unknown future date. The ECB did not restart its bond purchases this week, as widely expected, but pointed to a more important and constructive shift in its approach to managing the crisis. If the arrangement sketched out is fully implemented, the ECB will provide an effective liquidity backstop, enabling sovereigns to retain access to markets for a large portion of their funding needs.

Economists furtehr stated that not only did the ECB not take any steps backward, but it took decisive steps forward to correct the functioning of monetary policy transmission, and therefore of the stability of the single currency. In effect, Draghi’s plans to reactivate the ECB’s bond purchase program is expected to persist to generat some critical comment in Germany. The ability to address the issues of price stability that is massively threatened hence sees the immense of the EURUSD pair.

Get more news and analysis at AlgosysFx Forex Trading Solutions

By The Sizemore Letter

Now and then it is nice to take a peek over the shoulder of a successful investor to see what their high-conviction buys are.  When you read a headline that “Warren Buffett is buying Company X,” you’re naturally inclined to do a little digging into Company X’s financials.  After all, if it’s good enough for Buffett, it might be good enough for you.

You have to be careful with this line of thinking, of course.   The SEC filings that disclose the holdings of large investors are generally pretty dated by the time we have access to them.  For all we know, the conditions that made a guru buy a given stock may no longer be valid by the time we read about it, and there are no guarantees that they haven’t already sold it.  For these reasons, I tend to focus on larger holdings, the conviction buys that they are likely to hold onto for a while.

Today, I’m going to look at one high-conviction dividend stocks each from five well-known superinvestors.  My criteria is simple enough: the stock must be a significant holding in the guru’s portfolio and it must pay a respectable dividend.

We’ll start with Mr. Buffett.  Warren Buffett’s Berkshire Hathaway ($BRK-A) has been accumulating shares of retail behemoth Wal-Mart ($WMT), and it’s not hard to understand why.  Wal-Mart is exactly the kind of company that Buffett is famous for buying.     It has a dominant position as the leading discount retailer in the world.  It has competitive “moats” in its size and logistical efficiency that competitors have a hard time scaling.  And naturally, it’s attractively priced. Wal-Mart trades for 14 times 2013 expected earnings and at 0.55 times sales.  Its 2.10% dividend, while not exceptionally high, is growing at a nice clip.  Wal-Mart raised its dividend 9% last year and 20% the year before.

Our next guru is David Einhorn.  Einhorn is better known for some of his high-profile short positions—he even wrote a book about his short of business development company Allied Capital, Fooling Some of the People All of the Time—but he is certainly not afraid to make large, concentrated long bets as well.

As of his most recent filings, former high-flyer Apple ($AAPL) was his largest holding by a wide margin at fully 15% of Greenlight Capital’s publicly-traded long portfolio.

It is debatable whether Apple should be considered a “dividend stock” given that the company only recently started paying a dividend and yields less than the broader S&P 500.  Still, given Apple’s gargantuan $100 billion cash hoard and continued shareholder agitation, it is safe to assume the dividend will be rising in the years ahead.

Joel Greenblatt of Gotham Capital is one of my favorite gurus. His “Magic Formula” is one of the best stock screeners I have ever come across, and he gives away access to it for free.  I’ve stumbled across more great investment ideas than I can count from browsing his site, and I recommend that you give it a look.

Greenblatt is heavily invested in defense firms these days, and one that caught my eye was Northrop Grumman Corporation ($NOC).

Northrop Grumman is not a “high conviction” pick of Greenblatt, per se, as its weighting is not materially higher than any of his other holdings.  It is, however, a highly-profitable company selling at a very attractive price.  Northrop Grumman trades for just 9 times expected 2013 earnings and yields an impressive 3.3% in dividends.

Next on the list is Bill Ackman, Greenblatt’s former partner at Gotham Capital and the principal of Pershing Square Capital Management.  Ackman is an activist investor with a history of taking large positions in companies and then agitating for radical change.

One such company in need of radical change is the iconic American retailer JC Penney Company ($JCP).  Penney is Ackman’s largest position, comprising fully 17% of his portfolio.

The company recently cut its dividend and is in the midst of an existential crisis, so we’ll move down the list to his first dividend stock of any size, diversified REIT General Growth Properties ($GGP).

A retail REIT may raise eyebrows when consumer spending appears to be slowing, but investors don’t appear to be worried. General Growth is up 20% year to date, roughly double the return of the S&P 500.

With a yield of 2.20%, General Growth is certainly not a big income generator, particularly by REIT standards. Still, a reliable 2.2% is attractive in a low-yield world.

As a side note, Ackman has a large position in Sizemore Investment Letter recommendation Beam Inc ($BEAM), the maker of Jim Beam bourbon whiskey.  Though not much of a dividend stock, it is attractive as a recent spin-off and as a money-minting sin stock.

Finally, we come to Mohnish Pabrai, author of the Dhandho Investor and one of my favorite investors. Pabrai is known for running a highly-concentrated portfolio and for good reason.  As of his most recent filings, two thirds of his portfolio was invested in the financial sector.

Pabrai’s largest holding that pays a dividend of any size is Wall Street superbank Goldman Sachs (GS), which yields a modest 1.8%.

Pabrai is betting big on the financial sector, and Goldman alone accounts for over 19% of his portfolio.  To say that this was a “high-conviction” investment for Mr. Pabrai would be an understatement.

Of all the guru stocks profiled in this article, the one I find most compelling is Mr. Buffett’s Wal-Mart, which I own both personally and in client accounts.  Though considering the track records of each of the gurus, a case could be made for considering any of these dividend-paying stocks.

Disclosures: Sizemore Capital is long BEAM and WMT.

Related posts:

• Is There a Bubble In Dividend Stocks?
• Charles Sizemore Quoted in Smart Money
• European Dividend Stocks: What You Need to Know

By TraderVox.com

Tradervox.com (Dublin) – The pair closed the week almost one cent weaker at 1.5632 from 1.5726. The situation in Europe is still affecting the UK economy and investors are projected to remain on safety mood this week. There are eight releases from UK that are projected to affect the cross this week. The Halifax HPI will be the first release this week, where the market is expecting a decline of 0.4 percent for the August reading. The housing Index had climbed by one percent in July. At 2301hrs on Monday, the BRC Retail Sales Monitor report will be released. This indicator has advanced by 1.5 percent in the previous two readings, and the market expects this trend to continue for August.

On Tuesday there will be two major reports; the Manufacturing Production and the NIESR GDP Estimate which will be released at 0830hrs and 1400hrs GMT respectively. The Manufacturing Production is expected to be at 3.9 percent while the GDP Estimate is expected to be better than the previous one of negative 0.2 percent.

The BOE Inflation Report will be released on Wednesday at 0930hrs GMT. This report focuses on the forecasts given by the BOE for economic growth and inflation. Investors will be looking at this for any clues of major action by the Bank of England in the next two years. On Thursday there will be the UK Trade Balance and the CB Leading Index releases which will be at 0830hrs and 0900hrs GMT. A reading of -8.4 billion pounds is expected on Trade Balance while the Leading Index is expected to be positive. On Friday, the PPI Input data will be released at 0830hrs GMT. This manufacturing inflation index has remained below zero since April, but the market is expecting the index to advance to 1.3 percent in August.

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

London Gold Market Report
from Ben Traynor
BullionVault
Monday 6 August 2012, 08:30 EDT

BOTH THE spot gold and spot silver price posted gains in Monday morning’s London trading, with the gold price hitting $1610 an ounce– a few Dollars up on where it ended last week – as stocks and the Euro also rallied, with analysts speculating on whether central banks will conduct further stimulus measures.

“There is still room for [Federal Reserve] easing if it is required,” says David Jollie, analyst at Mitsui Precious Metals in London.

“There is still a perception that it may be required…the question of when that is, with the US elections approaching, makes it difficult to be super bullish on gold.”

“We think the likelihood of further central bank moves remains high, particularly in Europe” agree analysts at Barclays.

The silver price meantime climbed as high as $27.93 an ounce this morning – a few cents above Friday’s close – while other commodities were broadly flat.

Precious metals prices held on to most of their gains from Friday’s rally, which coincided with a stock market rally following better-than expected US nonfarm jobs data, as well as news that Spain may seek a bailout.

Spain’s prime minister Mariano Rajoy told reporters Friday he would do whatever is “in the best interest of the Spanish people” – remarks widely reported as a hint that Spain could at some point seek a bailout on top of the €100 billion of aid agreed in June.

A day earlier on Thursday, European Central Bank president Mario Draghi said that the use of bailout funds was a “necessary condition” ahead of any “non-standard” measures by the ECB.

“What I want to know is what these measures are,” Rajoy told a press conference Friday, “what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision [on whether to ask for a bailout].”

Draghi spoke last week of “severe malfunctioning” in the market for government bonds, leading to speculation that the ECN might be considering intervening in an effort to keep borrowing costs down.

“The tensions that have accompanied the Eurozone in the past years are already showing signs of a psychological dissolution of Europe,” Italian prime minister Mario Monti said in an interview with German newspaper Der Spiegel published over the weekend.

“Italy has, to all intents and purposes, been hung out to dry” by Draghi’s insistence that governments seek bailout assistance before the ECB will act, according to Nicholas Spiro at consultancy Spiro Sovereign Strategy, which specializes in sovereign credit risk.

“As far as Rome is concerned any external assistance would be the kiss of death. This puts Mr Monti in an untenable situation.”

“We’re a lot less optimistic that policy makers will be able to get their act together quickly,” adds John Shin, foreign exchange strategist at Bank of America in New York, suggesting that any rallies for the Euro would be an “opportunity to sell”.

“The ultimate goal of monetary and fiscal policy in [Europe] is to re-engage the private sector,” writes Bill Gross, head of world’s largest bond fund Pimco, in the Financial Times.

“They want your money…but private investors are balking – and for what it seems are good reasons – because policy makers’ efforts have been, until now, a day late and a Euro short, or more accurately, years late and a trillion Euros short.”

Over in New York meantime, the difference between bullish and bearish contracts held by Comex gold futures and options traders – the so-called speculative net long – rose by 25% in the week to last Tuesday, figures published by the Commodity Futures Trading Commission show.

The CFTC meantime is set to drop a four-year investigation into allegations of silver price manipulation, the FT reports.

Ben Traynor
BullionVault

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.

By TraderVox.com

Tradervox.com (Dublin) –  EUR/USD: the opened the week just below the resistance line at 1.2330 and advanced to 1.24. However, this pair plunged to support level at 1.2144 after speculation Draghi will disappoint came into play. The pair was able to reverse this as it advanced to 1.24 again before dropping to close the week at 1.2384. The pair made a breakout from the short term downtrend channel as it broke above the downtrend resistance. The pair is expected to continue with its upward trend at a slow pace as things in Europe continue to take shape.

GBP/USD: the pair started off the week at 1.5726 and fell sharply through the support line at 1.5515 as it touched 1.5490. While it was down most of the week, the pair retraced to close the week almost a cent lower at 1.5632. With the UK economy in deep hardships and the situation in Europe, the pound is expected to lose grounds against the US dollar as investors seek the safety of the dollar. However, this will be moderate as the JPY is attracting more safety seekers.

USD/JPY: the pair opened the week dropping temporary below the support line 78. However, the cross retraced to close the week unchanged at 78.46 after a week that saw regular risk on-risk off movements and classical range trading. This week, the cross is expected to improve with improvements of the dollar as risk appetite slows in the market following Europe’s efforts to curb the debt crisis; positive job data will also push the dollar higher. The market also expects the BOJ to intervene on the strengthening yen.

USD/CHF: opening the week at 0.9761, the cross advanced to a high of 0.9898 as the dollar gained momentum; however, this was to be short lived as the Franc made a comeback pushing the cross to lows of 0.9697 and eventually pushing it further down to close the week at 0.9691. The market expects safety demand to be moderate during the week hence the cross will be bullish.

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

Swinging Scalpers

Scalper traders and Swing traders are often classed separately when it comes to their investment practices, but in fact the only major difference in their strategy is the length of time in which they hold their position in a particular market.  Scalper traders technically seek out short term investments where they expect a return on investment in as little as a few hours of trading. Scalper traders are usually day traders as they take positions in different markets at the start of the day’s trading with the hope of profitably squaring off these positions by the end of the day’s trading, as these positions are never held overnight. The idea is to take many positions daily in the hope that the markets move in the predicted direction, gaining the trader a small profit on each position they held. Swing traders, mostly being in fact fundamental, on the other hand may take fewer positions in the markets but they aim to do it over a longer period of time and for a substantial increase in the potential profit returned in comparison to that of a scalper/day trader. A swing trader’s position can be held for days or weeks and as a rule of thumb they generally don’t take a position with the intention of squaring off at the end of trading on that day.

Putting their differences aside you will see that there are many similarities between scalper and swing traders, in fact most successful traders from each classification share the same methods and investment techniques.  The main key for being successful in both types of trading lies in a trader’s research ability. Both types of trading call for continued research in the markets so one can start seeing and predicting trends. This research is based on fundamental analysis which provides an overview of the markets by looking at historical and present data. A trader was looking to invest in the markets, will look at the factors which will affect the supply and demand of a particular financial instrument. For example if a trader was looking to invest in the forex markets he/she will have to factor in the political and economic climates  of countries that can affect his/her investment, if there is a change in their position. Thorough analysis is essential as without it traders will be relying on luck to execute successful trades.
Historically Scalper trading and Swing trading are the two types of investing that appeal mostly to new investors looking to make investments in financial spread betting and this is with good reason, as it allows people outside the finance industry a better opportunity to make profits within the financial markets by doing thorough research and keeping up to date with relevant trends/factors.

Below are a few tips to help you on the way to becoming a successful trader, whether you are intending to become a scalper or a swing trader.

• For short-term trading profits always look at the history of the particular stock/market you are interested in. History can give you an idea of how the stock/market performed through similar events that already occurred.

• Timing is everything. Knowing when to take up a position as well as when to exit a position is very important as collectively they will determine whether a trader makes a profit or loss.

• Be on the lookout for shorting opportunities. Most people are aware that they can make a profit if a stock rises in price but you may not know that you can also make profits from stocks decreasing in value. For example a trader thinks that stock ‘a’ which is currently valued at $100 per share is going to fall, he/she will take this position with their broker and let’s say the stock falls to $80 per share; the trader can then square off their position making themselves a profit of $20 per share. This practice is referred to as ‘shorting’

• Research and more research. Keeping up to date with all factors that can possibly affect the markets you are trading in is essential if you are to be successful as a trader. The most successful traders are the ones that do the most research and technical analysis.

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

A better than forecasted US Non-Farms Payroll figure on Friday led to risk taking in the marketplace, which turned currencies like the euro and AUD bullish. Furthermore, commodities and precious metals received a significant boost following the release of the US news. Today, the main piece of news is likely to be a speech from Fed Chairman Bernanke, set to take place at 13:00 GMT. Later in the week, traders will want to pay attention to Tuesday’s Australian Cash Rate, Thursday’s US Trade Balance report and Friday’s British PPI Input figure. All three are considered important for their respective economies and have the potential to generate volatility in the marketplace.

Economic News

USD – Non-Farms Data Results in Dollar Losses

The safe-haven US dollar took significant losses against its main currency rivals on Friday, as a better than expected US Non-Farm Payrolls figure resulted in risk taking in the marketplace. The AUD/USD shot up close to 100 pips during the European session to peak at 1.0569. The pair eventually finished out the week at 1.0561. Against the Swiss franc, the dollar fell more than 170 pips to trade as low as 0.9694 before staging a slight recovery to close the day at 0.9703.

Turning to today, traders will want to pay close attention to a speech from Fed Chairman Bernanke, set to take place at 13:00 GMT. While Friday’s Non-Farm Payrolls came in above expectations, the unemployment rate in the US increased slightly from 8.2% to 8.3%. As a result, some analysts are predicting that the Fed Chairman may hint at a new round of quantitative easing today to boost the US economy. If he does, the greenback could extend its recent losses during afternoon trading.

EUR – Euro Sees Major Gains amid Risk Taking

The euro saw significant gains against several of its main currency rivals on Friday, after better than expected US jobs data boosted confidence in the global economic recovery, which in turn led to risk taking in the marketplace. The EUR/USD finished out the week at 1.2383, up over 200 pips during the European session, and only a few pips below its high for the day at 1.2390. Against the JPY, the euro gained just over 200 pips during European trading to reach as high as 97.38. The pair staged a minor downward correction and ended up closing out the week at 97.19.

This week, euro traders will want to pay attention to announcements out of the euro-zone, particularly with regards to plans to lower borrowing costs in Spain and Italy. If euro-zone leaders decide to divulge any information about how they plan to stabilize troubled economies in the region, the common currency may extend its recent bullish trend. That being said, analysts are also warning that Spain may be getting ready to make a formal bailout request to assist its ailing banking sector, in which case investors could shift their funds away from the euro.

Gold – Weakened Dollar Leads to Gains for Gold

The price of gold got a significant boost on Friday, after better than expected US jobs data caused the safe-haven greenback to slide against its main currency rivals. As a result, gold became more affordable for international buyers which led to an increase in demand. The precious metal finished out the week at $1603.21 an ounce, up more than $20 during the second half of the day, and slightly below its high for the day at $1606.53.

This week, gold traders will want to continue monitoring US and euro-zone data and how it affects the dollar. Any negative news could result in risk aversion in the marketplace, which may lead gains for the safe-haven greenback and gold giving up some of its recent gains. That being said, should investor confidence in the global economic recovery increase further, gold may be able to extend its recent bullish trend.

Crude Oil – Crude Boosted By Increase in US Demand

The price of crude oil received a significant boost during European trading on Friday, after a better than expected US Non-Farm Payrolls figure led investors to speculate that demand for oil in the US could go up. Last week’s lower than expected US Crude Oil Inventories figure supported that theory. As a result, the price of oil reached as high as $91.66 a barrel before finishing out the week at $91.37.

This week, any better than expected data out of the US could help the price of crude oil increase further. Traders will want to pay attention to speeches from Fed Chairman Bernanke today and tomorrow, as well as Thursday’s Trade Balance figure for clues as to what direction the US economic recovery is taking.

Technical News

EUR/USD

While the daily chart’s Williams Percent Range is in overbought territory, indicating that downward movement could occur, most other technical indicators signal this pair is in neutral territory. Taking a wait and see approach may be the best option, as a clearer picture is likely to present itself in the near future.

GBP/USD

The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. The MACD/OsMA on the same chart has formed a bearish cross, signaling that the price shift could be downward. Traders may want to open short positions for this pair.

USD/JPY

The Williams Percent Range on the weekly chart is approaching the oversold zone, indicating that this pair could see an upward correction in the coming days. Furthermore, the Slow Stochastic on the same chart is close to forming a bullish cross. Traders will want to keep an eye on these two indicators, as they may signal an impending bullish correction in the coming days.

USD/CHF

The daily chart’s Williams Percent Range has dropped into oversold territory, signaling possible upward movement 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.

The Wild Card

CAD/JPY

A bearish cross has formed on the daily chart’s Slow Stochastic, indicating that this pair could see downward movement in the near future. Additionally, the Williams Percent Range on the same chart has crossed into overbought territory. 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.

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