Month: September 2012

By Central Bank News
    The European Central Bank (ECB) has made it easier for banks to access liquid funds from the ECB, suspending a minimum credit rating threshold on bonds that are issued by member states.
    The ECB is also allowing banks to use bonds they hold that are issued in U.S. dollars, pound sterling and yen as collateral to access funds from the ECB.
   
    The ECB issued following press release on the collateral measures:

6 September 2012 – Measures to preserve collateral availability

Change in eligibility for central government assets

Expansion of the list of assets eligible to be used as collateral

By Central Bank News
    The European Central Bank (ECB) has launched a new program to purchase sovereign bonds in the secondary markets that are issued by members of the 17-nation euro zone.
    The ECB issued the following press release on the technical features of the Outright Monetary Transactions (OMTs) program, which also terminates the previous bond purchase program, the Securities Markets Program (SMP):

6 September 2012 – Technical features of Outright Monetary Transactions

Conditionality

Coverage

Creditor treatment

Sterilisation

Transparency

Securities Markets Programme

Article by AlgosysFx Forex Trading Solutions

Expectations of the European Central Bank’s bond-buying plan were boosted by leaked versions of central bank President Mario Draghi’s plan that bond purchasing would be “unlimited.” As markets look forward to today’s ECB meeting, the single currency is expected to incline versus the Pound in today’s European trading session.

According to Bloomberg reports, two ECB officials said that the central bank’s bond purchases would be sterilized to alleviate concerns about printing money. This would likely mean that the ECB would take measures to control the money supply in the Euro Zone as not to increase even with purchase of unlimited quantities of Italian and Spanish government debts. But the precondition stands, and that is for troubled European banks to seek financial help first from the Euro Zone’s rescue fund. If Draghi would, in any way, give a signal as to the “unlimited” buying of government bonds by the ECB, it would strongly indicate its resolve to overcome the debt crisis.

Taken from Bloomberg News, Emma Lawson, Currency Strategist at National Australia Bank Ltd. in Sydney said that that market is overwhelmed by the details of the bond buying plan of the central bank, which tend to support its previous statements of preserving the single currency. The lack of significant details could mean that judgment of the German Constitutional Court as to the legality of the European Stability Mechanism, before disclosing much information on the issue of bond buying. In any case, the shared currency is projected to rise as the ECB is set to announce plans of its bond buying. Thus, a buy bias is recommended for the EUR/GBP in today’s trades.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx

By Chris Vermeulen, GoldAndOilGuy.com

For the first time in over 30 years, talk of a return to the gold standard has become part of mainstream politics in the United States. Part of the official Republican policy adopted it at the recent Republican Convention and called for the commission to look at reestablishing the link between gold and the U.S. dollar. No doubt that plank was added to soothe supporters of Texas Congressman Ron Paul.

However, gold bugs holding gold bullion or even those holding gold ETFs such as the SPDR Gold Shares (NYSE: GLD) shouldn’t hold their breath in anticipation of the gold standard returning. There was a similar commission – the Gold Commission – set up in 1981 by President Ronald Reagan. After a lot of ‘commissioning’, the decision was made to go with the status quo of using fiat Federal Reserve dollars.

Any commission set up under the current president would likely come to the same conclusion. There are simply too many practical obstacles to return to a full-fledged gold standard. Even pro-gold advocates including the World Gold Council and the Gold Anti-Trust Action Committee (GATA) don’t see a gold standard returning.

The key problem would be at what price of gold would the United States peg its currency. Great Britain returned to the gold standard in 1925, after going off it in 1914, at the 1914 peg price. This was a mistake made by Winston Churchill (he called it the biggest he ever made) since it basically ignored the vast inflation in the British pound in those intervening years. The result was a vast overvaluation of the pound and deflation and high unemployment soon followed.

What price would a new Gold Commission set as the “correct” price of the U.S. dollar versus gold? $1,000? $2,000? $5,000? The answer is that there is no “correct” price. Whatever price is set will eventually be tested by the financial markets and fail much as the pegged currencies system failed. So there will be no return to the gold standard.

But that does not mean there will not be a ‘back-door’ gold standard. The move to such as a system is already underway as central banks all over the world are rebuilding their stockpiles of gold. After two decades of heavy selling, central banks became net buyers of gold in 2010 and the momentum has built since. Gold will likely end up being used as ‘good’ collateral by global central banks, as opposed to the shaky collateral sovereign bonds are turning into.

Central bank purchases, led by the emerging markets, are on track this year to hit a record high according to the World Gold Council. China alone in 2011 bought around 490 tons of gold. Other countries including Russia, Turkey and South Korea have added gold to their official holdings in recent months. This buying showed up as central bank purchases in the second quarter of 2012 were more than double the level reported a year earlier at 157.5 metric tons. If the buying continues at current levels, central banks gold purchases would total around 500 tons this year, easily surpassing last year’s 458 tons.

The bottom line for investors from the global central banks’ buying of gold? The gold standard is working its way back into the international monetary system through the back door. This should, in the long-term, put a floor under gold and help maintain it on its steady upward path.

Just last week we started to see gold bullion, silver bullion and gold miner share prices start to breakout to the upside of a 12 month consolidation pattern. This could be the start of the next major rally in precious metals as future uncertainty fears continue to rise. The large bullish technical pattern we see on the gold chart points to much higher prices over the coming 24 months. But keep in mind this is a monthly chart and it could still take months to truly breakout to new highs and start another rally.

Gold Bullion Trading

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Chris Vermeulen

Source: ForexYard

The euro rallied against virtually all of its main currency rivals during European trading yesterday, as details regarding the ECB’s plan to lower borrowing costs in Italy and Spain began to surface. Today, in addition to the ECB Press Conference, where final plans to boost the euro-zone economy are expected to be unveiled, traders will also want to pay attention to a batch of US news. The ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI, set to be released at 12:15 and 14:00 GMT, could lead to losses for the dollar if they come in below their expected values.

Economic News

USD – ADP Data Set to Generate Volatility Today

The US dollar fell against several of its main currency rivals yesterday, as the release of details regarding the ECB’s plan to boost the euro-zone recovery led to risk taking in the marketplace. The USD/CHF fell more than 70 pips during the first part of the day to reach as low as 0.9529. A slight upward correction during the afternoon session took the greenback to the 0.9550 level. The EUR/USD managed to gain more than 100 pips during the European session to trade as high as 1.2611. A reversal later in the day brought the pair to the 1.2590 level.

Turning to today, while most analysts will be focusing on the ECB Press Conference, scheduled to take place at 12:30 GMT, dollar traders will not want to forget to pay attention to US news as well. The ADP Non-Farm Employment Change will be of particular importance. The ADP figure is considered a valid predictor of Friday’s all-important Non-Farm Employment Change figure and has been known to lead to market volatility. If today’s news comes in below the forecasted 141K, the dollar could see losses during mid-day trading.

EUR – ECB Press Conference May Help Euro Extend Gains

The euro saw gains across the board yesterday, as investors shifted their funds to riskier assets amid speculations regarding the ECB’s plans to lower borrowing costs in the euro-zone. The EUR/JPY advanced more than 80 pips over the course of the day to reach as high as 98.90. Against the British pound, the common-currency gained close to 40 pips before peaking at 0.7927. A slight downward correction later in the day brought the euro to the 0.7920 level.

Today, all eyes will be on the ECB Press Conference, scheduled to take place at 12:30 GMT, to see what the exact details are for plans to lower Spanish and Italian borrowing costs. Any indication from investors that the ECB did not go far enough with its plans to boost the euro-zone recovery, could result in the euro reversing yesterday’s gains. Tomorrow, euro traders should not forget to pay attention to the US Non-Farm Payrolls figure. If the figure comes in below expectations, the EUR/USD could see gains before markets close for the weekend.

Gold – Gold May Extend Gains Today

While concerns regarding an upcoming US jobs report led to minor losses for gold yesterday, the precious metal was able to quickly recover after details of the ECB’s plan to stimulate growth in the euro-zone were unveiled. By the end of the European session, gold was trading close to the $1693 level, very close to a recent six-month high of $1698.70.

Today, gold may be able to extend its recent gains if the ECB Press Conference results in risk taking among investors. That being said, gold traders will also want to pay attention to the US ADP Non-Farm Employment Change figure. A better than expected figure could lead to gains for the dollar, which may result in gold taking losses during afternoon trading.

Crude Oil – Fears Regarding Global Economic Health Send Oil Lower

The price of crude oil fell yesterday, as poor global economic indicators resulted in fears regarding future demand for the commodity. In addition to uncertainties regarding the euro-zone recovery, a slowing economy in China has caused investors to sell crude in recent days. After gaining close to $0.70 a barrel during the first part of the day, crude fell $1.40 during afternoon trading to reach as low as $94.24.

Today, oil traders will want to pay particular attention to US indicators. Specifically, the ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI could lead to volatility for the commodity. Should any of the news come in above their forecasted levels, speculations that demand will go up in the US could result in gains for oil during afternoon trading.

Technical News

EUR/USD

The Williams Percent Range on the weekly chart has crossed into overbought territory, indicating that downward movement could occur in the near future. Furthermore, a bearish cross has formed on the daily chart’s Slow Stochastic. Opening short positions may be the wise choice for this pair.

GBP/USD

While the weekly chart’s Williams Percent Range has crossed over into overbought territory, signaling a possible downward correction, most other technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture may present itself in the near future.

USD/JPY

The Bollinger Bands on the weekly chart are narrowing, signaling a possible price shift for this pair in the coming days. Additionally, the Slow Stochastic on the daily chart has formed a bullish cross, indicating that the shift could be upward. Opening long positions may be the wise choice for this pair.

USD/CHF

Long-term technical indicators are providing mixed signals for this pair. While the MACD/OsMA on the weekly chart has formed a bearish cross, the Williams Percent Range on the same chart has dropped into oversold territory. Taking a wait and see approach may be the best choice at this time.

The Wild Card

USD/DKK

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see an upward correction in the near future. Furthermore, the Williams Percent Range on the same chart has crossed into oversold territory. Opening long positions may be the best option for forex traders today.

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

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In focus today: Apple TV is coming, but no one knows what it is, timber’s time has come and the SITFA

How to “Play” the Apple TV

Apple is so hot the options exchange had to change the rules governing buying AAPL options. The buying has been huge and most of it bullish, according to Barron’s.

In fact, AAPL options are the most actively traded options on the whole exchange, and dealers are having trouble keeping up with all the activity.

All of this, according to the Barron’s article, is due to the anticipated announcement of the new iPhone this September.

But wait, Apple TV is right behind the new iPhone announcement, but nobody seems to have a handle on what it is exactly.

The best source I know of, Toni Sacconaghi of Sanford Bernstein, says it will be a set top box, not a whole new TV, a box that interfaces with the existing cable providers. Most analysts feel trying to break into a market as saturated as TV boxes would be foolish and over the top.

Sacconaghi says if it plays out this way, it will not be the big bang everyone has come to expect from AAPL, but rather a slower development process.

But knowing how AAPL does things, I wouldn’t expect too much of a muffled debut. This is the company that set the world on its ear with the iPad, iPhone, you name it. Expect more of the same.

Look for APPL to make a real dent in the TV/cable industry and for its share to grow steadily.

In the meantime, we’ll have to be content with the most active options and the largest market cap company in history.

Keep an ear to the ground for the Apple TV rumors. As always, buy AAPL on the rumor, sell on the news.

Next Up, Timber’s Day Has Arrived

The recovery in the homebuilders has sparked a big run-up in lumber prices, and the Journal says it’s just the beginning.

Take Weyerhaeuser, symbol WY. It’s at its 52-week high and its PE seems to indicate it’s overpriced at 29 times until you consider its estimates are based on trough numbers. It’s currently worth less than one third of its 2007 high.

Todd Lowenstein, of High Mark Capital Management, says that owning WY is a huge asset play that has been significantly undervalued at the bottom of the cycle.

Analysts are looking for a double-digit increase in earnings this year and, considering the fact that WY makes 84% of its revenue from homebuilders, they’re building significant momentum on the big turnaround there.

The CEO of WY was quoted in a Barron’s article as saying that the recovery in housing is real and although it’s not a V shaped recovery, it is a recovery.

The other names mentioned in the Barron’s article were Plum Creek, Rayonier and Potlatch.

Of course, if you’re a regular viewer of this spot, you would have been able to buy WY almost at its 52-week low when I talked about the opportunities in the lumber industry and homebuilders in a segment I did here last year.

Timber, this one has to be on your boogie board.

And, of course, the SITFA

This week it goes to a little understood industry that many count on to maintain their swimming pool.

That’s right, the pool cleaning business.

The former VP of Yahoo’s publisher network, Willan Johnson, saw an opportunity in the pool cleaning business and launched a high tech version of what they call the “one guy with a pole and a truck” business, which, according Johnson, is what makes up almost all of the business.

In a CNBC article, Johnson listed 10 truths about pool cleaners, and the number one was that they’re usually the first to know if you’re having an affair.

According to Johnson, unlike anyone else who has access to your home, the backyard has no key or doorbell, so they walk in on many compromising situations. No chance to say, just a minute when the doorbell rings.

Skinny-dipping is another really big one.

So, if you’re trying to hide an affair from your spouse, Johnson advises cleaning your own pool.

Article by Investment U

Article by Investment U

The other day I bumped into a friend who told me he has sat out this year’s stock market rally entirely.

“The worst part is I’m just sitting in cash,” he said. “That means I’m earning next to nothing. The little I am earning is taxable. And my return, after inflation, is negative.”

“So why don’t you put some of that money to work in the stock market?” I asked.

From the look on his face, you would have thought I suggested he play Russian roulette.

“Are you kidding?” he said. “The economy is weak. Unemployment is high. Consumer confidence is low. And the government is spending us into bankruptcy.”

So I’ve heard. But I’ve also heard something else: This too shall pass.

No Incentive to Be Positive

This is an election year, one in which neither side has any incentive to say anything positive. Here’s what I mean…

The goal of Mitt Romney is to make Obama look like a man who doesn’t deserve re-election. The best way to do that is to talk about the appalling economy. Millions are out of work. Millions more have given up looking for work. Most who are working aren’t really getting ahead. You’re hearing a lot of talk – and seeing a ton of political ads – about the miserable state of the nation.

Ordinarily, of course, the incumbent rebuts these charges by saying something positive about the economy. Not this time. Most of what Obama has accomplished – the two stimulus packages, the auto bailout, ObamaCare, etc. – isn’t terribly popular with the people he is trying to attract: independents and swing voters.

Plus, he doesn’t want to say anything good about the economy for fear of sounding “out of touch.” Remember President George H.W. Bush’s Rose Garden Strategy? He kept insisting recovery was just around the corner and the economy was probably already out of recession. History proved he was right. But it didn’t feel that way to the electorate and they voted him out of office.

So today we have a presidential election where no one has any incentive to say anything whatsoever that is positive about the economy.

No wonder investors are depressed.

Plenty to Be Excited About

That’s unfortunate, really, because there is actually plenty to be excited about. Short-term rates are near zero. (Not good for savers but great for corporations and consumers who need to borrow.) Inflation is low. The housing market is finally beginning an upturn. Huge new markets are opening up overseas, particularly in the developing world where more than three-quarters of the world’s population resides. Valuations in the stock market are historically low. Corporate profits are at an all-time record. And so are profit margins.

Of course, say all these things today and you sound insensitive, elitist or out of touch. (“Don’t you know people are hurting?”) Having a positive outlook on the economy, the stock market or the free-enterprise system just isn’t politically correct these days.

But if your goal is to make money and meet your financial goals, what difference does it make? Investors in the S&P 500 are up more than 15% this year. (And good stock pickers have done much better.) Investors in money markets, by comparison, are up less than one-tenth of one percent.

That’s a heck of a price to pay for being PC – or for listening to a lot of political blather in an election year.

Good Investing,

Alex

Article by Investment U

By Central Bank News
    The Bank of England (BoE) kept its official bank rate unchanged at 0.5 percent, as widely expected, and maintained its current target of purchasing assets worth a total of 375 billion pounds.
    The BoE said in a statement following a two-day meeting of its Monetary Policy Committee that it expected to complete its asset purchases, also known as quantitative easing (QE),  in two months.
    The British economy is currently in recession, with gross domestic product (GDP) shrinking 0.5 percent in the second quarter from the first quarter, following quarterly declines of 0.3 percent in the first quarter and 0.4 percent in the fourth quarter.
    The inflation rate in July rose to 2.6 percent from 2.4 percent but the BoE expects inflation to recede toward its target of close to 2 percent by the end of the year.
    The BoE has held its key lending rate at a record low 0.50 percent since March 2009, when it also started purchasing assets, such as bonds, by issuing central bank reserves to add further liquidity to the economy.
    In July the BoE expanded its QE target by 50 billion pounds to 375 billion. The bank said then that it expected to complete the asset purchases by November.

    The BoE launched its QE program because it was worried that inflation would undershoot its target without the extra money that is injected directly into the UK economy, bypassing the banking system. 
    Under QE, BoE electronically creates new money and uses this to purchase UK government bonds, known as gilts, directly from private investors, such as pension funds, insurance companies or other non-financial firms. 
    As interest rates are very low, the BoE expects these investors to use the cash they receive for their gilts to purchase other assets, such as corporate bonds or shares. This should lowering borrowing costs for companies and encourage the issuance of new shares and bonds.
    In addition to QE, the BoE and UK government started a Funding for Lending scheme in June, making 80 billion pounds worth of cheap loans available to households and businesses.
    www.CentralBankNews.info

  

By TraderVox.com

Tradervox.com (Dublin) – Merkit Economics and the Chartered Institute of Purchasing and Supply continued to boost the pound with more than expected data reports. On Tuesday, a report showed that Manufacturing sector shrunk less than the market was expecting and these positive results were compounded by another report yesterday showing that the services sector expanded more than expectation. These reports have dampened speculation of Bank of England expanding its monetary policy which is projected to increase to 425billion pounds by the end of the year. The pound has maintained yesterday’s gains as speculation about bond buying plan from the ECB increased. European Central Bank is set to meet tomorrow after its President Mario Draghi made a spirited appeal on the need of the program.

Paul Robson, a London-based Senior Foreign Exchange Strategist at the Royal Bank of Scotland, indicated that the UK data released this week is marginally positive for the pound and other European currencies. He pointed that this is as a result of the increased optimism the European Central Bank will move to stabilize nations experiencing high borrowing costs. He made these comments after a report showed that services sector in the UK expanded to 53.7 from 51 in July. This is the highest level it has been in the last five months. The market was expecting an increase to 51.2.

The pound increased against the euro and dollar as it emerged that Draghi’s bond purchasing program involves draining funds from other financial systems. The information was released as concerns about the source of money rose, with skeptics indicating that the ECB was planning on printing more money. Draghi admitted in a closed door session at European Parliament on September 3 that the central bank has lost control of the borrowing costs in the region.

The pound increased against the dollar by 0.3 percent to exchange at $1.5910 at the close of trading in London yesterday. The UK currency had reached a May 16 high of $1.5934 during the day.

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.
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By TraderVox.com

Tradervox.com (Dublin) – The Canadian dollar is trading low against most of its major peers after the Bank of Canada indicated that the interest rates may be raised to guard against inflation. Keeping the interest rates unchanged, the BOC Governor Mark Carney noted that modest withdrawal of the current monetary policy may be appropriate. Loonie’s drop against the US dollar was earlier precipitated by speculations that European Central Bank may not spur confidence in the euro zone. In its statement, the BOC projected that the economic growth in the country will pick through next year as consumer spending and business investment increases in the country. The statement also projected a decline in exports as global economic growth slows.

Blake Jespersen, the Managing Director of Foreign Exchange at Bank of Montreal in Toronto, said that the BOC story is consistent with its previous views, which is what everyone was expecting. The increased risk-off mood is pushing the loonie down against major peers. However, technical indicators are showing that the Canadian dollar my breach a four-month high level against the greenback if the Fed and the ECB act on measures to stimulate growth in respective countries. According to Greg Moore, a Currency Strategist at TD Securities, the resistance level at 98.43 is a vital level for the USD/CAD pair. The pair touched this level yesterday and it had previous reached this level on Aug. 21 and 28. Greg predicted that if any of the major central banks moves to make fundamental changes in monetary policy such as monetary easing, the pair could move further down.

The Canadian dollar has failed to drop beyond 99.50 cents per US dollar despite breaking a minor support level at 98.80 after the BOC decision. The currency dropped by 0.5 percent to trade at 99.05 cents per dollar at the close of trading in Toronto.

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