Month: August 2012

The market’s main trend stays the same.

By Elliott Wave International

Elliott Wave International has long observed that external events do not alter the dominant trend of financial markets — not even major events like wars, natural disasters, terrorist attacks, political assassinations or any other news that makes headlines.

Now, it is true that news can sometimes have a near-term effect on market prices.

The July 26 opening bell is an example.

Dow Surges 200 Points on Draghi Comments, Jobless Claims

That’s from The Wall Street Journal. The text reads:

Europe’s top central banker sparked a global rally in stocks after reassuring investors the Continent’s central bank would be vigilant about holding together the euro zone…. European Central Bank President Mario Draghi…said the ECB is ready to do whatever it takes to preserve the common-currency union.

The article adds that “the number of U.S. workers filing for unemployment benefits fell for the fourth time in five weeks, to a level that was far lower than expected.”

EWI expected a near-term bounce in stock prices — just one day ago.

On July 25, EWI’s Financial Forecast Short Term Update said this to subscribers:

Near term, there may be a few more days of bounce. The stock market is setting the stage…

The Update went on to describe what the stock market is setting the stage for. It is not what most investors expect.

The pattern in the major U.S. stock indexes has been 80 years in the making — which is to say, the pattern is unfolding at a large degree of trend.

You Can Be Ready for the Market Changes Ahead. Let Elliott Wave International change the way you see the markets forever. Right now, our 50-page Independent Investor eBook is available to download FREE. You’ll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International’s 30-year history; you’ll also get analysis, forecasts and commentary to help you think independently in today’s tumultuous market. Learn to think differently about the markets. Download the 50-page Independent Investor eBook now >>

By Central Bank News

     The past week in monetary policy saw interest rate decisions by nine central banks around the world, with three central banks cutting rates and six keeping rates unchanged.
     The markets were overwhelmingly focused on the European Central Bank (ECB), following recent statements by its president, Mario Draghi, and the U.S. Federal Reserve.  Although both central banks failed to present new stimulus measures, they began the critical task of preparing markets for measures that are likely to be launched if economic conditions deteriorate. 
    There was initial disappointment that the ECB didn’t kick off any new bond purchasing programs but what many observers fail to recognize is that central banks have to be very cautious rolling out new measures as they are in unchartered terrain. Raising or lowering interest rates in response to business cycles is one thing, restoring investors’ faith in governments is a different matter.

   LAST WEEK’S MONETARY POLICY DECISIONS:

By MoneyMorning.com.au

The new global hotspot in the oil and gas business isn’t US shale gas, or Queensland’s coal seam gas industry. It’s the vast untapped resources of offshore oil and gas in East Africa.

It’s been tagged ‘elephant country’ and not because of the local mammals with ivory tusks and big ears. It’s all to do with the discovery of huge energy reserves off the coasts of Tanzania, Mozambique and, potentially, Kenya. Opportunities are hot for small exploration companies to identify more assets that can be tapped and developed.

What’s remarkable is how little action this part of the world has seen until now. For a long time a combo of low commodity prices and high risk shut out the East Africa region from any exploration or investment at all.

Kris Sayce pointed out in Australian Small Cap Investigator that until recently, for every seventy wells drilled over the rest of Africa, only one was drilled in the east. That makes it one of the last regions of relatively unexplored territory left in the world.

But that’s changing faster than the time Michael Phelps takes to swim to the other end of the pool. The race is on to find new energy reserves to replace current production and increase output to meet the huge rising demand in Asia.

Remember, all the cheap and easy oil fields have been in production for a long, long time. Oil companies have to find new supplies, often in more remote, riskier and more expensive places.

The risks are high — but fortunately, so are the rewards…

Low-Cost African Oil and Gas
Threatens Aussie Energy Dominance

The reason for the excitement in East Africa is down to the success of early drilling.

Diggers and Drillers editor, Dr. Alex Cowie told his subscribers this week:

‘The success rate in this region is outstanding. To provide some context, oil and gas exploration typically has a success rate just 10-20%. That’s terrible when you think about. It can cost $50 million to sink an offshore well, and the chance of making a financial return could be as low as one in ten.

‘But East Coast African energy exploration stands out from the crowd because in all but a few cases they hit oil or gas. To be exact — the success rate has been 87%. A strike rate of close to 9 out of 10 is almost unheard of.’

This is attracting the interest of the big energy majors. And shareholders in the London-listed Cove Energy (LON: COV) don’t need to be told about the success in the region. The Cove share price has gained over 1000% in three years mainly thanks to its assets in Mozambique.

Global energy giant Royal Dutch Shell this year made a bid for the explorer, only to be trumped by Thai firm PTT Exploration & Production. After withdrawing its offer for Cove, Shell is now rumoured to be in talks with American company Anadarko Petroleum (NYSE:APC), which has an even larger stake in the same gas reserve and plans to develop an export facility to supply Asia.

This has got Australia’s natural gas industry worried, despite East Africa’s current lack of production and infrastructure. On Thursday, the Australian Financial Review ran the headline: ‘Woodside warns of East Africa rivalry’. The story notes:

‘Woodside Petroleum chief executive Peter Coleman has sounded another warning about the competitive threat from rapidly emerging gas hubs overseas that is increasing pressure to rein in costs in Australia’s liquefied natural gas sector.

‘He pointed in particular to East Africa, where discoveries in Tanzania and Mozambique by companies including BG Group, ENI and Anadarko Petroleum have spawned proposals for LNG export ventures that will target customers in Asia.’

Asian countries could source their energy from Africa and cut out the volatile Middle East and higher cost producers like Australia.

Huge Opportunity for Oil Explorers

The subdued oil price in recent times has seen major oil companies rein in their frontier exploration and consolidate their existing projects and revenue. This has created opportunities for smaller, aggressive companies to find new reserves. Cath Norman, managing director of small oil and gas explorer, FAR Ltd (ASX: FAR), said in a recent interview:

‘The larger companies are doing very little frontier exploration at the moment; they’re relying on the smaller companies, with a view to buying back in later. The larger companies will always have a need to replace their reserves and increase their inventories, and they’re really dependent on companies like us to do that for them.’

It’s a huge opportunity for exploration companies to get in early and capitalise on the growth. One benefit is they’re not especially sensitive to short term movements in the oil price because they don’t have any revenue. An oil producer does — and any downward shift in the oil price effects their profit. But shares don’t come much riskier than oil explorers.

The good news for investors is that the energy business can rise without depending on a rising economy. That might sound strange because oil often falls on slack demand. But the other question is always supply.

During the 1970′s, a troubled decade frequently cited as similar to today, the oil price rose over fifteen times in price per barrel despite ‘stagflation’ and a bear market in bonds and stocks.

The long-term trends for the energy business are bullish, as Asian demand continues to rise and existing producers struggle to maintain supply. That’s good news for some oil and gas stocks, especially for frontier energy explorers.

Callum Newman
Editor, Money Weekend

The Most Important Story This Week…

Since peaking last year at just under fifty dollars an ounce, silver has declined almost 50%. That’s a big correction. But it is not unusual for commodities to suffer drops in a long term bull market. Even big markets such as oil and gold have seen declines of 30% or more in the last decade before going higher.

Silver has been range bound between $27 and $37 since October last year. Money Morning editor Dr. Alex Cowie says the floor may have been hit for the precious metal. This is especially true if the central bankers turn to printing money in the next quarter. See what he says in Silver Bounces Off Key Level, Where’s it Going Next?

Other Recent Highlights…

Kris Sayce on How No ‘Plan B’ For The Australian Economy Could Boost Aussie Stocks: “But where’s the Australian economy’s Plan B? Plan A is to sell lots of stuff to China…lots of resources. What if that plan doesn’t last as long as the mainstream hopes? Already Ken Henry’s claim that the resources boom would last until 2050 is looking a bit shaky. So what happens next?”

Matthew Partridge on Central Banks Are Buying Gold – Is This a Sign to Sell?: “Gold’s suffered something of a lull in recent months. Combined with the fact that central banks – never great market timers – became net buyers last year for the first time in decades, it’s worth asking if their interest in the yellow metal is a sign to the rest of us to get out.”

John Stepek on The Biggest Threat to the US Economy: “Unless a deal on spending and taxes can be reached by the end of the year, massive spending cuts will take place. This is the so-called ‘fiscal cliff’ that everyone seems terrified of plunging over. Yet US shares have been surprisingly resilient so far. Can this continue? Or should you be looking to invest elsewhere?”

Dr. Alex Cowie on How Low Natural Gas Prices Are Causing Energy Havoc: “Australia is sitting on almost 4 times as much shale gas as conventional natural gas. Argentina’s and China’s shale gas reserves dwarf those in the US. The US isn’t exporting its gas yet, but the falling gas price is still having a huge effect on us in other ways.”

Oil in East Africa: Is this the Last Frontier for Energy?

By MoneyMorning.com.au

There are plenty of well-known investors with long and successful track records. John Templeton, Warren Buffet and Ray Dalio are three obvious examples.

There are also plenty of stock traders, those who move in and out of positions on a weekly, daily or even hourly basis, who have made fortunes. Indeed, Jack Schwinger has profiled many of them in his ‘Market Wizards’ books. However, far fewer of these individuals have careers spanning two or more decades. In part, this is because most stock traders either burn out, or make enough to retire and escape with their wealth.

Those who stay in the game for any length of time invariably ‘blow up’, giving back most of their gains, and are forced to quit. As the saying goes, ‘there are old traders and there are bold traders but there are no old, bold traders.’

However, there was one stock market trader who made billions in today’s money and lasted in the market for more than 30 years. Even though he had some large setbacks – losing all he had and more – he managed to rebuild his fortune twice. His market timing skills were so impressive that he even made money during the Wall Street Crash.

Sadly, he eventually proved the truth of the old adage – ending his own life at the age of 63. Yet many modern stock traders still swear by lessons they’ve learned from observing his career – even although he was born more than 100 years ago.

His name was Jesse Livermore.

How Did Jesse Livermore Start Out?

Livermore is best known as the subject of Reminiscences of a Stockbroker, a thinly-disguised biography first published in 1923. It was written by financial journalist Edwin Lefevre, who interviewed Livermore extensively for the book.

Born in 1877, Jesse Livermore, started his trading career in his teens, after working as a brokerage clerk. Initially, he traded in what were known as ‘bucket shops’. These were firms that offered investors the chance to trade in shares without owning them. In effect, they were the 19th century version of spread betting firms.

Because they didn’t rely on brokers, they were much better for small investors who wished to trade frequently, offering credit and prices based on the ticker, not execution. In other words, transaction costs could be lower because no one ever owned the underlying stocks.

Like spread betting firms, bucket shops relied on customers either cancelling each other out or consistently making the wrong decisions. Sadly for them, Livermore kept getting his bets right.

As a result he was quickly banned from all the shops in town, though not before making $10,000 by the age of 20 (equivalent to $280,000 today). This enabled him to start trading through proper brokers (although he would briefly return to the bucket shops after taking a massive loss during his early attempts to use a broker).

From 1897 to his second (and final) bankruptcy in 1934, Livermore played both the commodity and the stock markets. He made millions from trading. But he also lost millions, and ended up having to declare bankruptcy for the first time in 1912, a step he claimed to have taken partly to get his creditors off his back and let him focus on making a comeback.

And, unlike most other bust traders, that’s exactly what he did. He managed to repay his creditors. At his peak in the early 1930s he was worth over $100m ($2.4bn in 2011 money). But there were many troughs and further comebacks along the way.

So How Did Jesse Livermore Make His Money?

Livermore’s main strategy was ‘tape reading’: monitoring the price movements of stocks, looking to see if there was a sudden change in direction. If this change continued with enough force he would then follow it until, in his view, it had ended.

This approach is sometimes called ‘trend following’. It is important to note that this expressly did not involve attempting to buy stocks at the bottom. Indeed, he was quite clear that the stock market trader should be happy to wait until stocks had already advanced before piling in.

Of course, this approach of waiting for the trend to confirm itself gave up some of the upside. However, he argued that when he did move in he was rarely wrong. As he put it: ‘Do you wish to gamble blindly in the hope of getting a great big profit or do you wish to speculate intelligently and get a smaller but much more probable profit?’

What About the Fundamentals?

Jesse Livermore thought that many investors who tried to use valuation techniques to determine whether a stock or commodity was properly priced tended to act too early. They therefore risked losing out, or even being forced out of a position while they waited for the market to catch up with them.

However, unlike many charting purists, he didn’t ignore fundamentals when making a decision. Indeed, when he traded commodities he frequently used them to guide his overall view – although he still used tape reading to time his buying and selling.

His two biggest coups came from shorting the market before crashes in 1907 and 1929. Indeed, at one point during the panic of 1907, JP Morgan actually implored Livermore not to go short the market for fear of making things even worse – which shows just how much clout he had.

In each case, Jesse Livermore was struck by the fact that so much of the share buying that had pushed prices up was done on credit. He realised that at some point this would have to be unwound, causing mayhem.

As was shown by the stock market crash in 2008 and subsequent rally in early 2009, and the sensitivity of the market these days to money printing, the amount of liquidity in the system plays an important part in pushing prices higher or lower.

Lessons From Jesse Livermore’s Failures?

Livermore’s failures were as instructive as his successes. He always stressed the importance of not listening to “hot tips”. As with Bridgewater’s Ray Dalio, he felt that a speculator should do his own homework and question everything.

He also stressed the importance of money management, which is especially important if you are going to do a lot of high-risk trading. One strategy that he endorsed was to take part of the profits from every trade and put it in a savings account. He was honest enough to admit that he didn’t always follow his own advice.

On November 28 1940, aged 63, he shot himself in a Manhattan hotel. Despite leaving a suicide note in which he described himself as a “failure”, he still managed to leave $5m behind for his heirs after his death.

Jesse Livermore’s sad end should be a reminder about the need to retain perspective. Although trading can be a way to enhance your wealth, it should not become an obsession. There are other ways to secure your future that are less stressful. As Livermore himself once pointed out, if your investments are keeping you awake, you need to sell to your sleeping point.

If you’re at all interested in investing, you must read Reminiscences of a Stock Operator. It’s got everything from financial history to insights into investor psychology that years of research by ‘behavioural economists’ have frankly done very little to improve upon. If you’ve never read it, get a copy and put it at the top of your reading pile now – you won’t regret it.

Matthew Partridge
Contributing Editor, Money Morning

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

From the Archives…

Get Ready to Pin Back Your Ears With Gold Stocks
27-07-2012 – Dr. Alex Cowie

The Upcoming Interest Rates Shock You Should Prepare For
26-07-2012 – Kris Sayce

Don’t Believe ‘the Bull’ on Australian House Prices
25-07-2012 – Kris Sayce

Why the Melbourne Property Market Could Be Set For Two Years of Pain
24-07-2012 – Dr. Alex Cowie

The End of Growth Through Currency Wars
23-07-2012 – Dan Denning

Jesse Livermore: One of the Greatest Stock Traders of All Time

By TraderVox.com

Tradervox.com (Dublin) – The US dollar has weakened against most major currencies despite a report showing US employers added more workers in July than it has been forecasted. This has boosted risk appetite in the market making the US dollar unfavorable. The greenback weakened as report from Labor Department in Washington showed that unemployment rate increased to 8.3 percent in the same period. The Federal Reserve failed to give a clear signal on when it would embark on a third round of asset purchases, but indicated that it would act out of necessity. The growing unemployment might force the FOMC to act sooner rather than later. Further, the dollar declined against the euro after German Chancellor Angela Merkel’s coalition members said that they will not oppose European Central Bank’s plans to buy government bonds.

According to Greg Anderson of Citigroup Inc in New York, the headline is enticing but the resulting details are not so supportive in regard to Fed’s decision. He said that the market is now looking at what Europe will do in relation to Spain, Greece and Italy. The Labor Department data showed that US employers added 163,000 jobs in the market after a revised rise of 64,000 in June. This is greater than market expectation of 100,000 jobs. However, the unemployment rose to three months high of 8.3 percent from the previous reading of 8.2 percent.

With these mixed results in the labor market, investors seem to stick to their speculation of Fed making a third round of quantitative easing soon. According to Eric Viloria who is a Senior Currency Strategist in New York at Gain Capital Group LLC, the Labor Department data is not strong enough to change market sentiments on quantitative easing. The US dollar fell by 1.2 percent against the euro to trade at $1.2324 at the start of trading in New York but appreciated against the Yen by 0.5 percent to trade at 78.63 yen per dollar.

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

By The Sizemore Letter

If you are the adventurous sort and happen to find yourself strolling the streets of Tripoli, Libya, you may smell the familiar aroma of cinnamon buns baking. U.S. bakery chain Cinnabon opened a new café in downtown Tripoli, making it the first American franchise to set up shop in the country. You can bet that more will be following.

With many of the traditional East Asian and Latin American emerging markets now comfortably developed into middle-income nations, investors and entrepreneurs are shifting their attention to the next big growth market—Africa.

In a year in which growth forecasts have been slashed across the globe, Africa has been surprisingly resilient. Meanwhile, the IMF forecasts that Africa’s growth rate will be 5.4% this year and 5.3% in 2013. For a continent best known for its chronic civil wars and HIV epidemic, that’s not half bad at all.

The African continent has a population of over a billion people, making the continent bigger than the United States and European Union combined. But before we get too excited, we should remember that the entire lot of them are not exactly queuing up to buy iPads and frappucinos. The World Bank estimates that 47% of Sub-Saharan Africans live on less than $1.25 per day.  Living standards are higher in North Africa, though North Africa is certainly no stranger to poverty either.

Before you write Africa off as being too poor to be worthy of consideration, consider that India—which has been a favorite emerging market destination for investors for years—has nearly comparable levels of poverty. The World Bank estimates that 36% of South Asians live on less than $1.25 per day. And we should also remember that China had similar levels of poverty just a few decades ago.

Investors looking to invest in the rise of the African consumer can go about a couple different ways. The iShares MSCI South Africa ETF ($EZA) is one popular option, though this ETF is concentrated in one country—South Africa—and in the mining industry, which is notorious volatile and a poor proxy for rising African incomes.

The Market Vectors Africa Index ETF ($AFK) is a more diversified option in that its mandate covers the entire continent, though it is a little too heavily allocated to the banking sector for my liking. AFK has more than 40% of its assets in financials. I would prefer to see larger allocations to consumer-focused companies such as Nigerian Breweries or Maroc Telecom.

Perhaps the best way to get access to Africa is via the shares of high-quality Western firms actively engaged there. A fine example would be British high-end spirits group Diageo ($DEO). I highlighted Diageo’s booming whisky sales in Africa last year (see “Into the Wilds of Africa”), and the company continues to be one of my very favorite ways to get “back door” exposure to emerging markets.

Another option would be SABMiller ($SBMRY), which is the second largest beer brewer in the world. SABMiller gets roughly a third of its profits from Africa, and that number should only grow with time

As a note of caution, the U.S. ADR shares are thinly traded, so make sure you use a limit order. Investors with access to foreign markets may prefer to buy the London-traded shares.

Disclosures: Sizemore Capital is long DEO.

SUBSCRIBE to Sizemore Insights via e-mail today.

No related posts.

By Central Bank News

London Gold Market Report
from Ben Traynor
BullionVault
Friday 3 August 2012, 07:00 EDT

U.S. DOLLAR prices quoted for gold bullion on the wholesale market rose to $1596 an ounce during Friday morning’s London trading, recovering some ground following three days of losses, as stock markets also rebounded ahead of the release of US nonfarm payrolls data later today.

Silver bullion climbed back above $27.30 per ounce, in line with where it closed two weeks ago, while other industrial commodities also edged higher.

Heading into the weekend, gold bullion looked set for a 1.7% weekly loss by Friday lunchtime in London. Gold prices fell sharply on Wednesday following a better-than-expected ADP Employment report, a privately-produced precursor to today’s official nonfarms figure.

Gold then fell again Thursday along with the Euro, after the European Central Bank opted to leave interest rates on hold and, like the Federal Reserve a day earlier, announced no new stimulus measures.

“While this week’s price behavior highlights that investors are rather quick to get out, it’s important to remember that gold is back to levels it was trading at just last week,” says a note from UBS.

“Our more positive outlook…still stands, especially with the potential for central banks to act remaining elevated.”

The European Central Bank voted to leave interest rates on hold at a record low of 0.75% Thursday. ECB president Mario Draghi said last week that his institution would do “whatever it takes to preserve the Euro” – comments widely-taken to mean the ECB could intervene in sovereign bond markets with the aim of reducing borrowing costs.

At Thursday’s press conference however few specifics were given as to what actions the ECB might take.

“Various committees will now review the various non-standard policy options,” Draghi told reporters.

“Policymakers in the Euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination.”

Draghi acknowledged that “implementation [of such measures] takes time and financial markets often only adjust once success becomes clearly visible”, adding that governments need to “stand ready to activate [Eurozone bailout funds] the EFSF/ESM in the bond market”.

The ECB chief expressed surprise when asked whether the European Stability Mechanism, the permanent bailout fund being phased in to replace the European Financial Stability Facility, should be granted a banking license to enable it to borrow from the ECB and this leverage the planned €500 billion lending capacity the ESM will eventually have.

“I have said at least twice,” replied Draghi, “that the current design of the ESM does not allow it to be recognized as a suitable counterparty [for the ECB].”

Responding to a question about ECB Governing Council member Jens Weidmann, president of Germany’s Bundesbank, Draghi agreed that Weidmann and the Bundesbank “have their reservations about programs that envisage buying bonds”.

“Although [Governing Council members] are here in a personal capacity and we should never forget that,” he added.

“The ECB can’t just take random measures against the Bundesbank’s will,” says Alexander Krueger, chief economist at Bankhaus Lampe in Dusseldorf.

“That’s why investors are disappointed…the country with the largest economy needs to be part of any package.”

“[The Bundesbank] can talk, scream and yell, but there is not much they can do,” counters Charles Wyplosz, professor of international economics at the University of Geneva.

“Germany’s hegemony is not what it seems,” agrees Ambrose Evans-Pritchard in the Telegraph.

“The Germans are holding a gun to the head of the Latins, but the Latins are also holding a gun to German heads…they can call Germany’s strategic bluff by mobilizing their majority power on the ECB council to force reflation over a German veto.”

Benchmark 10-Year yields on Spanish bonds rose back above 7% yesterday, while 10-Year Italian yields rose back above 6% and stock markets fell.

“Draghi’s comments yesterday didn’t help investors to gauge the market’s direction,” says Zurich-based hedge fund manager Trung-Tin Nguyen.

“Hence US data are in focus today, with investors hoping to weigh whether or not further action by the Fed can be expected soon in case of worse-than-expected numbers, or, as a silver lining, to see if the US economy is recovering.”

The US Bureau of Labor Statistics is due to publish the latest Employment Situation report later today, which includes July’s nonfarm payrolls number showing how many private sector nonagricultural jobs the economy added last month.

Elsewhere in the US, “the federal government has been quietly completing an audit of US gold stored at the New York Fed,” the LA Times reports.

The Treasury Department says the results will be announced by the end of the year.

Derivatives exchange operator CME Group meantime has said it will cut its margins for silver futures contracts for the third time since February, newswire Reuters 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.

Article by AlgosysFx

Recent rate cuts by the Reserve Bank of Australia (RBA) have boosted retail sales in June, matching the biggest advance since April of 2011. With exports falling for the first time in four months, the nation’s economic growth is increasingly becoming more reliant on domestic demand. In June, Australian retail sales climbed by 1 percent, when it rose by a revised reading of 0.8 percent in the month before, data from the Australian Bureau of Statistics showed. This surpassed economic forecasts of a gain of 0.3 percent.

RBA Governor Glenn Stevens kept the benchmark interest rate at 3.5 percent in May and June, saying that it would shore up the strongest developed economy as a slowdown in economic growth already hit countries from India to Germany. Economists say that the report provides vindication for the central bank as it suggests that strong sales are being generated without stoking inflation. Aside from the rate cuts, cash handouts and sharply lower petrol prices boosted consumer spending during the month.

Shoppers were said to have splurged on cosmetics and pharmaceutical goods, after receiving carbon tax compensation and SchoolKids Bonuses, along with said interest rate cuts. The first half of this year has been deemed to be stronger than what was expected for retail sales. Ben Jarman, JPMorgan Economist said that retail sales, making up a big part of GDP, could trigger the RBA to revise its growth forecast for the Australian economy. “Australia’s stellar 4.3 per cent growth rate over the year to March shocked everyone and the bank had been to inclined to see it as an aberration. The pattern of retail spending is similar to what occurred following the large Rudd government stimulus payments back in 2008 and 2009, although the magnitudes were larger then,” he said.

Get more news and analysis at AlgosysFx Forex Trading Solutions

Source: ForexYard

The euro tumbled against virtually all of its main currency rivals yesterday afternoon, after the ECB refrained from announcing any new significant new measures to boost euro-zone growth. The news led to risk aversion in the marketplace, which in turn benefitted safe-haven currencies including the USD and JPY. Today, all eyes are likely to be on the US Non-Farm Employment Change, set to be released at 12:30 GMT. Analysts are predicting that the US added around 100K jobs last month, slightly higher than the 80K added in June. If true, the dollar could see additional gains before markets close for the weekend.

Economic News

USD – Dollar Benefits From Risk-Aversion

The dollar saw significant gains against virtually all of its higher yielding currency rivals yesterday, after the ECB failed to unveil any new plans to boost growth in the euro-zone, as some had been predicting. The USD/CHF advanced close to 130 pips following the news, reaching as high as 0.9867 before moving slightly downward and finding support at the 0.9840 level. The AUD/USD fell close to 90 pips during the afternoon session, to reach as low as 1.0452. The pair was able to stage a slight reversal, and was trading at the 1.0480 level by the evening session.

Today, all eyes are likely going to be on the US Non-Farm Payrolls figure, set to be released at 12:30 GMT. The indicator is widely considered the most important event on the forex calendar, and consistently leads to market volatility. After a better than expected ADP Non-Farm Employment Change figure earlier this week, investors are cautiously optimistic that today’s news will come in above the forecasted 100K. Any positive news could help the greenback extend yesterday’s bullish trend before markets close for the weekend.

EUR – Euro Resumes Bearish Trend

The euro turned overwhelmingly bearish yesterday, after the ECB Press Conference failed to reassure anxious investors that the euro-zone will be able to recover from its debt crisis. Against the US dollar, the euro tumbled over 175 pips during the afternoon session, eventually reaching as low as 1.2171. The pair was able to recover slightly and eventually stabilized around the 1.2200 level. The EUR/JPY fell close to 150 pips to trade as low as 95.14. By the afternoon session, the pair had recovered slightly and was trading at the 95.50 level.

Today, analysts are warning that the euro could extend its recent losses if euro-zone officials fail to reassure investors regarding the prospects for an economic recovery in the region. Furthermore, if the US Non-Farm Payrolls figure comes in above analyst predictions, investor confidence in the US economic recovery could go up, which could benefit the US dollar against the euro. That being said, any disappointing US news could help limit the euro’s losses against the greenback.

Gold – Gold Reverses Recent Gains

After advancing more than $11 an ounce during mid-day trading yesterday, gold took heavy losses during the afternoon session amid an increase in risk aversion in the marketplace. The precious metal fell as low as $1587.65 after euro-zone officials failed to announce any new plans to lower Spanish and Italian borrowing costs. By the close of European trading, gold was trading just below the $1600 level.

As markets prepare to close for the weekend, gold traders will want to pay attention to US employment news, set to be released at 12:30 GMT. If the data comes in positive, the dollar could extend yesterday’s bullish trend against the euro, which may lead to gold taking additional losses during the second half of the day.

Crude Oil – Crude Oil Falls More Than $2 after Euro-Zone News

The price of crude oil fell as low as $86.91 a barrel during afternoon trading yesterday, following disappointing euro-zone news which caused investors to revert their funds to safe-haven assets. Overall, the commodity fell close to $2.50 after the news was released.

Today, analysts are warning that if risk aversion continues to dominate market sentiment, the price of oil has the potential to fall further. Additionally, should the US dollar benefit from US employment news, set to be released at 12:30 GMT, the price of oil would become more expensive for international buyers, which may lead to more bearish movement during the second half of the European session.

Technical News

EUR/USD

The weekly chart’s Slow Stochastic has formed a bullish cross, signaling that this pair could see upward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed over into oversold territory. Going long may be a wise choice.

GBP/USD

While it appears that the MACD/OsMA on the daily chart is close to forming a bearish cross, most other long-term technical indicators place this pair in neutral territory, meaning that no defined trend can be predicted at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself in the near future.

USD/JPY

The Williams Percent Range on the weekly chart has crossed into oversold territory, indicating that this pair could see upward movement in the near future. Furthermore, the MACD/OsMA on the daily chart has formed a bullish cross. Going long may be the wise strategy for this pair.

USD/CHF

The Bollinger Bands on the weekly chart have begun to narrow, indicating that this pair could see a price shift in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Opening short positions may be the smart move at this time.

The Wild Card

EUR/AUD

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement before markets close for the weekend. Additionally, the Relative Strength Index on the same chart has crossed into oversold territory. Forex traders may want to open long positions ahead of a possible bullish 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.