Month: October 2012

By OilPrice.com

We were fortunate enough to speak with the well known economist Ed Dolan on various energy and economic issues.

In the interview Ed talks about the following:

• Why cheap energy is not vital to economic growth
• Why high oil prices aren’t necessarily a bad thing
• Why the U.S. Oil and gas boom is hurting Russia’s global influence
• Why Obama’s desire to cut oil industry tax breaks could be a great idea
• Why energy policy needs to be completely reformed
• Why Russia’s Arctic Exploration could cause the worst environmental disaster to date
• Why renewable energy investors should be very worried about the Natural gas boom
• Why the EU was flawed from the start
• Why subsidies for renewables are just plain wrong.
• Why we should give QE3 a chance
• Why abundant natural resources can bring a curse of riches

Ed writes the popular economics blog Ed Dolan’s Econ Blog and has just recently released a book:TANSTAAFL (There Ain’t No Such Thing As A Free Lunch) – A Libertarian Perspective on Environmental Policy, which you can find out more about here

Interview by. James Stafford of Oilprice.com

James Stafford: Access to cheap energy is vital to economic growth. What do you see happening with the economy over the coming years as the time of cheap oil comes to an end?

Ed Dolan: In my view it is a myth that cheap energy – “affordable energy” as many people like to say is vital to growth. The idea that there is a lockstep relationship between growth of GDP and use of energy is widespread, but the data simply does not bear it out. Instead, what they show is that the world’s best-performing economies have become dramatically more energy efficient over time.

The World Bank uses constant-dollar GDP per kg of oil equivalent as an energy efficiency metric. From 1980 to 2010, the high-income countries in the OECD have increased their average energy efficiency by 55 percent. The United States has done a little better than that, increasing its energy efficiency by 81 percent over that period. That’s pretty remarkable, considering that we haven’t really had a policy environment that is supportive of efficiency.

Think what we could do if we did.

Even after the efficiency gains in efficiency we have made, we still have a long way to go. The US economy is still 15 percent less energy efficient than the average for high-income OECD countries, giving it plenty of room to improve. Switzerland is almost twice as energy-efficient as the US, and the UK is 68 percent more efficient.

Some people say that the only reason the United States has been able to grow while using less energy is the deindustrialization of its economy, outsourcing heavy industry to China. However, compare the US with Germany. Germany is an export powerhouse and Europe’s best-performing economy, yet its energy efficiency has increased at almost the same rate over the last 30 years as the United States, an 80 percent gain in efficiency compared to 81 percent. Furthermore, despite being proportionately more industrialized than the US and a major exporter, Germany squeezes out 41 percent more GDP from each kg of oil equivalent.

In short, we don’t have to hypothesize about the possibility of someday breaking the lockstep relationship of growth and energy use—we and most of the rest of the advanced world are already doing it.

James Stafford: What effect can you see America’s Oil & Gas boom having on foreign policy?

Ed Dolan: On the whole, I see it as beneficial. Energy dependence has led us to buy a lot of oil from countries that are unstable and/or unfriendly to us. Anything we can do to reduce that dependence gives our foreign policy more room to maneuver. The beneficial effects reach beyond our actual imports and exports. The US gas revolution is having repercussions all the way to Russia, where Gazprom is seeing its market power undermined, and Russia, as a result, is losing some of the geopolitical leverage its pipeline network has given it.

James Stafford: From Siberia and Poland to China and Qatar – the shale revolution has politicians salivating at the thought of a cheap and abundant source of energy. But can the results seen in the U.S. be easily replicated in other parts of the world?

Ed Dolan: I think you’re going to have to ask someone with more engineering background for the technical details, but from what I read, the answer is that it won’t always be easy. It is my understanding that some countries where shale seemed just recently to have great promise have already encountered disappointments in practical exploratory work. Poland I think is an example. Furthermore, the environmentalist opposition to fracking seems even stronger in many European countries than in the United States.

Still, I am hoping that the shale revolution will pan out in at least some countries. Think how much difference it would make, say, to Ukraine’s foreign policy if they were able to break their dependence on Russian gas.

James Stafford: Gail Tverberg has written a recent article suggesting the world is suffering from high-priced fuel syndrome, which has the following symptoms:

• Slow economic growth, or contraction
• People in discretionary industries laid off from work
• High unemployment rates
• Debt defaults (or huge government intervention to prevent debt defaults)
• Governments in increasingly poor financial condition
• Declining home and business property values
• Rising food prices
• Lower tolerance for immigrants
• Huge difficulty in funding retirement programs, programs for disabled, and regular pension plans
• Rising international tensions related to energy supply

Do you think this is too convenient and an oversimplification of the problems facing world economies at the moment? What would you blame for the plethora of economic woes being experienced at the moment?

James Stafford: I don’t buy the argument at all. Yes, when countries are hit by unexpected upward shocks in fuel prices, we do see short-run results like slower growth and layoffs, but those are short-term problems. When the proper structural adjustments are made, countries with high fuel prices manage to achieve strong growth and full employment.

Where are fuel prices lowest? If you look up the data and rank countries by retail fuel prices, you find the low-price end of the rankings crowded with countries like Egypt, Cambodia, Iran, Pakistan—not exactly economies we would like to emulate.

We’ve got big economic problems, but a lot of them don’t have much to do with energy.

What about a healthcare system that delivers mediocre results at the world’s highest cost?

Health care isn’t all that much energy driven. What about our steady move down the international rankings in education—are you going to blame that on the high cost of heating classrooms? Hardly.

James Stafford: Oil prices have been near to the $100 a barrel mark for some time now, and don’t look likely to drop back to previous low levels. What effect could this increased price have on oil importing economies compared to oil exporting economies?

Ed Dolan: Clearly, any oil price increase has the short-term effect of transferring wealth from using countries to producing countries. However, the long-run effects are what matter.

In the long run, high prices just accelerate the trend for using countries to become more efficient and less dependent. Meanwhile, the producing countries often don’t manage their oil riches well. They fall victim to the “curse of riches.” The curse takes the form partly of a loss of competitiveness in their non-energy sectors (the so-called “Dutch disease”). Partly it takes the form of corruption of their political systems. Russia is a poster child for both aspects of the curse of riches.

James Stafford: Renewable energy is more expensive than fossil fuels, so how can people be persuaded to choose the less economical option of renewables over the likes of coal and natural gas?

Ed Dolan: There is only one right way to promote renewables, and that is to introduce full-cost pricing of all forms of energy. Full-cost pricing is a two-part program.

First, it means pricing that covers the full production costs for every form of fuel. No subsidies for anyone—not for oil, not for ethanol, not for wind or solar.

The second half of full-cost pricing is to include all of the nonmarket costs, what economists call the “external costs” or “externalities.” The most publicized of these are pollution costs, whether those take the form of local smog, oil spills, climate change, or bird kills. Some people, I am one of them, would like to count in something for the national security costs of dependence on unfriendly and unstable foreign sources of energy supply.

Full-cost pricing accomplishes two things. First, it levels the playing field so that each form of energy competes on its economic merits, not whether corn-growing states have early primaries or oil companies have big SuperPacs. Second, by raising prices to consumers to a realistic level, it accelerates the trend toward energy efficiency that is already underway.

Subsidies for renewables are just plain wrong, even if you look at them from a hard-core environmentalist point of view. With a subsidy, on the one hand, you say, “produce more green energy” and other the other hand, you turn around and tell the consumer, “waste more green energy.” We don’t want to waste energy from wind or solar any more than we want to waste oil and gas. We shouldn’t forget that even the greenest renewables can have significant environmental impacts.

The whole “affordable energy” idea is based on the myth that if we don’t include those external costs in the price—the pollution costs, the national security costs—they just go away. They don’t. Keeping prices artificially low just transfers those costs to someone else, someone unlucky enough to live downwind, someone who owns beachfront property that gets eroded away as the sea level rises, someone who has to go off to fight a war to keep the shipping routes open. There are two things wrong that. First, it’s immoral. If we believe in the market economy, the rule of law, and all that, we have to respect people’s property rights and their human rights. Second, it’s inefficient. It doesn’t strengthen our economy, it weakens it. If there’s one thing we can’t afford, it’s “affordable energy.”

James Stafford: Obama has made clear his desires to cut the $4 billion a year tax breaks given to oil companies. What affect do you believe this would this have on the US economy and the US oil industry?

Ed Dolan: If it is done as part of a comprehensive move toward full-cost pricing, it could only strengthen the US economy. The oil industry would whine, but if we cut subsidies and tax breaks for competing energy sources at the same time, oil will remain a competitive part of the energy mix for many years to come.

James Stafford: The oil industry has enjoyed decades of subsidies and grants, so do you think it is unreasonable to already start cutting the subsidies to renewable energies and expect them to survive on their own?

Ed Dolan: As I explained above, the answer is yes, provided it is done as part of a package that reforms our energy policy as a whole in the direction of full-cost pricing.

James Stafford: Economic growth is generally dependent on the access to energy. As the supply of energy grows, so too does the economy (more or less). Global oil supplies are pretty much stagnant, so do you predict that only nations that successfully convert to a renewable energy mix with an abundant supply of cheap energy will be able to experience continued economic growth at a similar level experienced by the developed countries of recent years?

Ed Dolan: Again, I just don’t buy the doctrine that growth is dependent on ever-increasing energy use. For sure, those countries that pursue sound policies, like full-cost pricing to rationalize their energy mix and promote efficiency, are the ones that are going to keep growing.

James Stafford: As the arctic ice melts at a rapid pace the world’s superpowers are jockeying for position to exploit the region’s vast oil & gas & mineral deposits. Environmental groups are rightly concerned, but is this a resource that we cannot afford to ignore?

Ed Dolan: Arctic oil, like any other source of energy, should pay full freight for any environmental impacts it has. If it can bear those costs and still be competitive, I think it should be in the mix. I am worried about Russia, though. It has a dangerous combination of an environment-be-damned attitude and low technical competence that could lead to headline-grabbing disaster worse than the Gulf blowout or Exxon Valdez.

James Stafford: What effect do you see the shale revolution having on investments in renewable energy?

Ed Dolan: If I were trying to make money by generating electricity with wind or solar, I’d be worried about gas. I don’t have all the relevant numbers at my disposal, but my gut feeling is that even if you price in full environmental costs for wind, solar, and gas—including environmental costs associated with fracking—gas is still going to be pretty competitive.

James Stafford: What are your views on Ben Bernanke’s QE3?

Ed Dolan: I’ve written repeatedly about QE over at Economonitor, so I am on record as saying we should try it. The trouble is, QE is not a magic bullet. Properly executed and properly communicated, it can help support the recovery, but it can’t do it alone.

That is one point where I agree 110 percent with Ben Bernanke Here is what he said in a speech at the Fed’s Jackson Hole conference at the end of the summer:

“It is critical that fiscal policymakers put in place a credible plan that sets the federal budget on a sustainable trajectory in the medium and longer runs. . . Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve.” http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm

James Stafford: How do you see the EU solving its debt crisis?

Ed Dolan: I’m afraid I’m a euro pessimist. The US debt situation is hard enough to resolve, but Europe’s is worse. At the same time, whatever you say about gridlock in Washington, our political decision making is a model of streamlined efficiency compared with the EU.

James Stafford: Do you think the EU was doomed to fail from the start with the format that it has? Could more success be seen in a split EU, with the northern/richer nations using one currency, and the southern/poorer nations using a different currency?

Ed Dolan: Doomed, I don’t know, but flawed, certainly. Just recently, I was looking back at what economists were writing about the prospects for the euro back in the early 1990s, when it was still just a project. They were telling us, for one thing, that Europe is too diverse to be ideal for a currency union—and that was when there were only 15 EU countries. Second, they said that you can’t run a monetary union without a central government, a fiscal union, and a banking union. You still don’t have any of those.

I am not sold on the idea of a northern euro and a southern euro. If the currency union doesn’t work, it doesn’t work. Break it up. Sure, some countries will find it works for their special circumstances to tie their currencies to a large, stable neighbour. I could see the Danes or the Latvians keeping a link to the German currency, for example, and I’m sure the Vatican will continue to use whatever currency Italy uses. But a formal, north-south divide doesn’t make much sense to me.

James Stafford: In terms of tackling the current economic situation in the US, of the two main presidential candidates, who do you suggest is the best man, and why?

Ed Dolan: I do not think we can tackle the current economic situation without a thorough-going fiscal policy reform that includes three key elements: Spending cuts, revenue increases, and a rewrite of the whole tax system to eliminate loopholes and cut marginal rates. Furthermore, the package can’t be heavily front-loaded like George Osborne’s austerity program in the UK, which has sent their economy back into recession. Ours should be back-loaded, with an element of stimulus now and an ironclad commitment to move the budget toward surplus as the economy improves. It’s a lot to ask for.

We are not going to get good budget policy out of the GOP unless members of that party make a clean break with mantra that they will not accept a dime of new revenue, not even if it comes from eliminating the most loathsome tax loopholes. Personally, I am never going to vote for a candidate for President, the Senate, the House, or any office who has signed that nonsensical Grover Norquist tax pledge.

At the same time, I have been very disappointed at the lukewarm support Obama has given to the kind of program I would like to see. During the first debate, Romney said that when Obama didn’t “grab” Simpson-Bowles—that was his word, and a good one—it was a failure of leadership. That was one point where I agreed with Mitt.

Then, you also have to take into account the vote for Congress. I’m afraid there is going to be continued gridlock as long as the GOP controls the House. In the Senate, there are at least a few people in both parties who are willing to meet behind the scenes and talk compromise, but not in the House, not right now, anyway. Maybe what we need in the White House is someone who is a real politician, a negotiator and dealmaker in the mould of a Clinton or an LBJ. Instead, we have the choice between a manager and a law professor. I’m not optimistic that either of them will be able to do what needs to be done.

Source: http://oilprice.com/Interviews/The-Myth-of-Affordable-Energy-Interview-with-Ed-Dolan.html

By. James Stafford of Oilprice.com

Despite today’s less-than-stellar global economic environment, as recently as April, crude was trading well over $100 a barrel.
October, 2012

By Elliott Wave International

After a 4-day losing streak, on October 23 crude oil futures fell as low as $85.69 a barrel — the lowest price since July.

Predictably, the mainstream energy market observers have blamed the drop on “global economic worries.” Of course, we have pointed out before how, on one recent occasion, oil fell in the face of positive economic expectations. And on another recent occasion, oil fell despite the absence of any real news, period.

So, the mainstream analysts have to do better than “global economic worries” to explain the latest oil selloff…except that they can’t.

See, in the world of “fundamental” analysis, markets always react to something. If it’s not A, then it’s B; and if not B, then it’s C. “Action” outside the markets produces a “reaction” inside them. So it’s simply inconceivable for a conventional analyst to suggest anything other than an outside factor — the handy “global economic worries,” in this case — to pin the October 23 selloff on.

Fine…except, doesn’t every day now bring some “concern about global economic growth”?

Europe has been dealing with the debt crisis for several years now; China’s economy has been cooling off; and right here in the U.S. — well, every month it’s been hit and miss with various economic indicators, from unemployment to manufacturing to consumer confidence.

One could argue that in this environment, oil prices should be half of what they are today. But they aren’t. In fact, as recently as April, crude was trading well over $100 a barrel.

When it’s all said and done, you have to accept the fact: To get serious about forecasting the future trend in crude, you have to consider something other than the proverbial “fundamentals.” Elliott wave analysis offers a real alternative.

By studying price charts, wave analysis tracks and measures the changes in the market’s collective psychology. After all, what moves market prices but the market participants? If you can forecast their bias, bullish or bearish, you can reasonably forecast the market. And right now can you see how EWI Founder and President Robert Prechter views the common argument over “peak oil” — free. See below for details.

Free Oil Report from Robert PrechterIn July 2008, when crude oil prices were at $148 a barrel and “peak oil” bulls were forecasting a rise to $200, even $300 a barrel, contrarian technical analyst Robert Prechter took the opposite stance: “One of the greatest commodity tops of all time is due very soon.” Six months later, a barrel of oil cost just $32. Now, you can read Prechter’s big-picture outlook on the oil markets in a newly released report.Follow this link to download Prechter’s 26-page oil report now — it’s free >>

By Central Bank News
    Hungary’s central bank cut its base rate for the third month in a row by 25 basis points to 6.25 percent, a move that was expected by some economists.
    The Magyar Nemzeti Bank said in brief statement that the new two-week deposit rate would take effect on Oct. 31. The overnight central bank deposit rate will be 5.25 percent and the rate on overnight collateralised loans will be 7.25 percent.
    The central bank will issue a statement later, explaining its policy decision.
    The central bank has been cutting rates this year, so far by 75 basis points, despite a rise in inflation to fight of recession.
    The inflation rate rose to 6.6 percent in September, the highest since mid-2008, from 6.0 percent in August. The central bank targets inflation of 3 percent.
    But Hungary’s economy contracted by 0.2 percent in the second quarter from the first, following a quarterly contraction of 1.04 percent in the first quarter, leaving the year-on-year contraction of 1.3 percent in the second quarter.
    Last month the central bank said it expected inflation to remain above 3 percent for some time and only decline to its target in the second half of 2014.
  www.CentralBankNews.info
 

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 30 October 2012, 06:45 EDT

THE SPOT MARKET gold price traded just below $1715 an ounce during Tuesday morning’s London session, little changed from last week’s close, while European stock markets recovered their losses from a day earlier and UK and German government bond prices fell.

“Downside targets will be in focus while the gold price stays below the 17 October high at $1753.86,” says Commerzbank senior technical analyst Axel Rudolph.

The silver price climbed above $32 an ounce shortly after London opened, holding above that level for most of the morning, while other commodities were broadly flat.

Markets in the US are due to remain closed for the second day running as a result of Hurricane Sandy. Monday’s trading saw gold futures volumes “far below normal”, one analyst said, with another adding the market remained “pretty quiet” on Tuesday morning.

Press reports suggest that this Friday’s US nonfarm payroll report could be delayed as a result of the storm.

The Bank of Japan meantime increased the size of its quantitative easing program Tuesday for the second time in as many months, from ¥80 trillion to ¥91 trillion. Of the additional ¥11 trillion, ¥10 trillion will be used to buy government debt while the remaining ¥1 trillion will be put into riskier assets, with half being earmarked for exchange traded funds.

The Yen rallied nearly 1% against the Dollar immediately after the decision, while the Yen gold price fell by 1%.

“Most people had forecast and priced in further easing this time,” said Soichiro Monji, chief strategist at Daiwa SB Investments in Tokyo, shortly after the decision was announced.

“Investors are selling to lock in profit after the announcement, learning lessons from September, when a rally lasted for only a few hours.”

The BoJ “aims to achieve its goal of 1% [inflation]” said a statement issued jointly by the central bank’s governor and Japan’s finance and economy ministers.

“The government strongly expects the Bank to continue powerful easing,” it added.

“The question that inevitably arises,” says Neil Mellor, senior currency strategist at BNY Mellon, “is to what extent government pressure, and the presence of economy minister Maehara, influenced the decision?”

Here in Europe, Spain’s economy shrank by 1.6% year-on-year in the third quarter, the fifth successive quarter of contraction, according to official GDP figures published Tuesday.

Spain’s parliament is to invite European Central Bank president Mario Draghi to discuss the Outright Monetary Transactions program he announced last month, Reuters reports.

Under OMT, the ECB could buy sovereign debt on the open market conditional on the beneficiary country being in a bailout program.

A victory for Mitt Romney in next week’s US presidential election would be bad for the gold price, according to an article published by the Financial Times today.

“[Romney] would replace Ben Bernanke with a more hawkish chairman of the Federal Reserve when the latter’s term expires in January 2014,” the FT’s Jack Farchy writes.

“If that means a change in direction from the Fed’s current experimental and super-accommodative monetary policy, gold could suffer.”

“The Dollar might strengthen regardless of the election result,” says Matthew Turner, precious metals strategist at Mitsubishi.

“Political uncertainty would be reduced if there is a clear election victory.”

“Should Mitt Romney win, the attitude towards monetary measures is…likely to change ” says a note from gold bullion refiner Heraeus.

“In the short term [though] we still expect that [gold] falling below $1700 an ounce would fuel fresh purchases.”

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. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

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 Forex Trading Solutions

The US dollar is presumed to gain opposite the Swiss franc today on increasing signs that the US economy is gaining steam to conclude the year. Yesterday, the Commerce Department reported that consumer spending is apt to boost growth in the third and fourth quarters. Although the US stock markets remain closed as Superstorm Sandy bears on the East Coast, a gauge of housing prices on deck for release is believed to underscore the ameliorating state of the real estate sector.

US household purchases inclined by 0.8 percent in September, its fastest pace since February, after increasing by 0.5 percent in the previous month. Larger income gains, improved job prospects, and an improving housing market are seen to have bolstered consumer spending, which has shown encouraging rises in the past three months. When adjusted for inflation, spending increased 0.4 percent after edging up 0.1 percent in the prior month. Analysts say that the acceleration in spending will likely help the world’s largest economy overcome a slowdown in exports and business investment as global growth softens and concerns escalate over the fiscal cliff. Such trends corroborate last Friday’s third-quarter Gross Domestic Product report, which revealed that spending rose at an annual pace of 2 percent. That helped lift economic growth to 2.0 percent in the September quarter, better than the 1.3 percent pace in Q2. The spurt in purchases as the quarter ended, which was concentrated in long-lasting goods such as automobiles and the iPhone 5, signifies that some of the momentum could carry through the remainder of the year.

Meanwhile, in a sign that increased demand is boosting the US housing market, the S&P/CS Composite-20 House Price Index is estimated to post its largest increase in August since July 2010. The selling price of single-family homes in 20 metropolitan areas is foreseen to have mounted by 1.9 percent in August, larger than the 1.2 percent rise in the previous month. This potentially marks the third consecutive increase in housing prices as ultra low mortgage rates helped boost home refinancing and purchasing. Meanwhile, the Federal Reserve’s new bond purchase plan is believed to continue supporting the housing sector by bringing down mortgage rates further. On positive signs that the world’s largest economy is gaining steam in the final quarter of the year, the Greenback is seen to outclass its Swiss counterpart. Hence, a long position is recommended today.

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

By Central Bank News
    The Bank of Japan (BOJ) expanded its asset purchase program by another 11 trillion yen to 91 trillion, slightly more than expected by many economists, and set up a new framework, with unlimited funds, in an attempt to stimulate bank lending.
    The BOJ also kept its overnight call rate unchanged at zero to 0.1 percent, the level it has been at since December 2008,
    Under the increased asset purchase program, the BOJ will purchase some 10 trillion yen in Japanese government bonds and Treasury bills, 0.1 trillion in commercial paper, 0.3 trillion in corporate bonds, 0.5 trillion in exchange traded funds and 0.01 trillion in Japanese real estate investment trusts.
    The BOJ intends to complete the increased purchases by around the end of 2013.
    Last month the BOJ expanded the asset purchase program by 10 trillion yen to 80 trillion.
    Under the new framework to stimulate bank lending – the Stimulating Bank Lending Facility – the BOJ said in a statement that it would provide long-term funds of up to the banks’ net increase in lending at a low interest rate, currently at 0.1 percent, to promote an “aggressive action and helping increase proactive credit demand of firms and households.”
    “There shall be no upper limit – unlimited – to the total amount of funds provided by the Bank under this facility,” the BOJ added.

    The BOJ’s new lending facility is in addition to the bank’s existing 5.5 trillion yen Growth-Supporting Funding Facility of which 3.4 trillion are outstanding.
    In a joint statement with Japan’s government, the BOJ and government stressed the need to overcome deflation and said that the BOJ “judges the price stability goal in the medium to long term to be within a positive range of 2 percent or lower in terms of the year-on-year rate of change in the CPI.”
    However, the bank still aims to achieve its goal of 1 percent inflation through monetary easing until it judges that goal to be in sight.
    Once again, deflation has taken hold of Japan and in September consumer prices fell in at an annual rate of 0.3 percent, the fourth month in a row with falling prices.
    The BOJ also said that “overseas economies have moved deeper into a deceleration phase” and Japan’s economy has been weakening somewhat.
     In the second quarter, Japan’s Gross Domestic Product expanded by 0.20 percent from the first, for an annual growth rate of 3.2 percent, up from 2.9 percent in the first quarter.
    “Going forward, there remains a high degree of uncertainty concerning Japan’s economy, including the prospects for the European debt problem, the momentum toward recovery for the U.S. economy, the possibility of emerging and commodity-exporting economies making a smooth transition to the sustainable growth path, and the spreading effects of the recent bilateral relationship between Japan and China,” the BOJ said, adding:
    “Based on these economic and price developments, the Bank of Japan judged it appropriate to undertake further aggressive monetary easing policies in order to prevent Japan’s economy from deviating from the path of returning to a sustainable growth path with price stability.”
    According to its October forecast from all its policy board members, the BOJ expects consumer prices to remain at -0.1 to 0.0 percent in fiscal 2012, down from July’s forecast of +0.1-+0.4 percent, then rise slightly to a range of -0.1 to +0.6 percent in fiscal 2013 and then to increase between 2.2 and 3.0 percent in fiscal 2014.
    Japan’s real GDP is forecast by all policy board members to rise by 1.2 to 1.7 percent in fiscal 2012, down from July’s forecast of 2.1 to 2.4 percent, then remain largely stable in fiscal 2013 at 1.0 to 1.8 percent growth and rise by only 0.1 to 0.8 percent in fiscal 2014.
    www.CentralBankNews.info

Source: ForexYard

A lack of significant international news yesterday, combined with concerns regarding a hurricane set to hit the United States resulted in low volatility in the marketplace. Crude oil reversed earlier gains during the second half of the day, as the threat posed by Hurricane Sandy to US refining capabilities led to supply side fears among investors. Today, traders can anticipate market volatility following an Italian bond auction and US CB Consumer Confidence figure at 14:00 GMT. Any positive data could boost risk taking, which may help the euro recoup some of yesterday’s losses.

Economic News

USD – Consumer Confidence Data Set to Impact USD

The US dollar saw a slow trading day to start off the week yesterday, as a lack of significant news combined with the closure of US markets due to Hurricane Sandy created a low volatility situation in the marketplace. After advancing around 25 pips during early morning trading, the USD/CHF staged a downward correction, eventually erasing all of its earlier gains. By the end of European trading, the pair was at 0.9355. Against the Japanese yen, the dollar fell some 20 pips to trade as low as 79.51 during the morning session, before bouncing back to the 79.75 level by the end of the day.

Today, dollar traders can anticipate heavier volatility in the marketplace, following the release of the US CB Consumer Confidence report at 14:00 GMT. Analysts are forecasting that consumer confidence in the US increased to 72.4 from 70.3 last month. If true, it would be yet another sign that the American economic recovery is progressing, albeit at a slow rate. Any better than expected data could result in the USD advancing against its main currency rivals, including the CHF and JPY during afternoon trading.

EUR – Euro May See Volatility Following Italian Bond Auction

The euro was able to make minor gains against several of its main currency rivals yesterday, although ongoing concerns regarding Spanish and Greek debt limited the currency’s bullish trend. Against the British pound, the common-currency advanced just under 30 pips for the day, eventually trading as high as 0.8049. After falling some 40 pips during the first half of the day, the EUR/USD was able to bounce back during mid-day trading and spent most of the afternoon session around the 1.2915 level.

Today, euro traders will want to pay attention to several key news events. First up is a speech from ECB President Draghi, scheduled to take place at 8:00 GMT. Any positive statements from the ECB President with regards to the ongoing debt crisis in the EU could boost the euro during morning trading. Next, an Italian 10-year bond auction could also benefit the common-currency if demand for Italian debt comes in higher than expected. Later in the day, a US consumer confidence figure could also impact the euro, with any better than expected news likely to result in risk taking among investors.

Gold – Gold Takes Minor Losses to Begin Week

A drop in global stock prices resulted in gold taking relatively minor losses to start off the week yesterday. Still, the precious metal was able to remain well above the psychologically significant $1700 level throughout the day. Gold fell just over $7 an ounce during European trading before stabilizing at the $1708 level.

Today, gold traders will want to pay attention to a batch of euro-zone and US news. Any better than expected data could lead to an increase in risk taking among investors, which may boost the price of gold over the course of the day.

Crude Oil – Oil Remains Low amid Fears of Hurricanes Impact

After seeing slight gains during the first part of the day yesterday, the price of oil once again turned bearish amid fears about Hurricane Sandy’s potential impact on US refining capabilities. Crude advanced as high as $86.31, up close to $1 a barrel, before falling once again during the afternoon session and stabilizing at the $85.30 level.

Today, crude traders will want to pay close attention to the impact the hurricane has on oil demand in the US, the world’s leading oil consuming country. Furthermore, news out of the US and euro-zone may have an impact on risk sentiment among investors. Worse than expected data could result in the price of oil falling further throughout the day.

Technical News

EUR/USD

The Williams Percent Range on the weekly chart has crossed into overbought territory, indicating that a downward correction could take place in the coming days. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Traders may want to open short positions for this pair.

GBP/USD

Most long-term technical indicators place this pair in neutral territory, making a definitive trend difficult to predict at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.

USD/JPY

The Relative Strength Index on the daily chart is approaching the overbought zone, meaning that this pair could see a downward correction in the near future. Furthermore, the MACD/OsMA on the same chart appears close to forming a bearish cross. Traders will want to keep an eye on these indicators, as they may signal an impending downward correction.

USD/CHF

The Slow Stochastic on the weekly chart has formed a bullish cross, signaling that this pair could see an upward correction in the coming days. Additionally, the Williams Percent Range on the same chart is currently in oversold territory. Opening long positions may be the smart choice for this pair.

The Wild Card

Crude Oil

The daily chart’s Relative Strength Index has fallen into oversold territory, indicating that an upward correction could occur in the near future. Furthermore, the same chart’s Slow Stochastic has formed a bullish cross. Forex traders may want to open long positions ahead of possible upward movement 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.

By TraderVox.com

Tradervox.com (Dublin) – The euro-dollar pair slid last week as there was no progress made in the solving the debt crisis. Signs of weaknesses from Germany have also played a major role in weakening the euro. With the German Inflation data already out, the market will now be waiting for the Mario Draghi, the European Central Bank president’s speech, which will be held on Tuesday at 0800hrs GMT. The speech will be scrutinized for indications of any rate cut that might be coming this week. The ECB President is also expected to defend the bond-buying program that he started.

The other major report expected to shape the trading pattern of the euro-dollar is the Spanish Flash GDP report which will be released at 0800hrs GMT. The previous data showed that the Spanish economy deteriorated in the second quarter, contracting by 0.4 percent. The market is expecting another drop of 0.4 percent. German Unemployment change report will be released at five minutes to nine where an increase of job seekers is expected, reaching 10000 from 9,000 registered last time. The euro zone retail PMI will be released at 0910hrs GMT on the same day, where a contraction is expected.

The market is also waiting for the Eurogroup Conference Call where the region’s ministers are expected to discuss Greece. The Troika is also expected to discuss the debt struck country and the recent proposal to adjust the pre-bailout agreement. The German Retail Sales and the French Consumer Spending reports will be released on Wednesday morning. Together with the euro zone CPI Flash Estimates and the Unemployment rate. The market is expecting a rise in CPI to 2.5 percent which there is no change expected in the unemployment rate.

On Friday, the Italian, Spanish, and the overall euro-zone Manufacturing PMI reports will all be published starting from 0815hrs. The market is expecting weak numbers from the reports, compounding the debt crisis issues plaguing the region. With these events mostly expected to be negative for the euro. The market has a bearish outlook for the euro-dollar pair.

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

Source: ForexYard

The Japanese yen rallied against its main currency rivals last night, after a significantly smaller than expected new round of asset purchases was initiated by the Bank of Japan. The USD/JPY fell more than 40 pips after the announcement was made, eventually trading as low as 79.26.

The euro saw gains against several of its main rivals during morning trading, as expectations that Spain will soon request a bailout package led to some risk taking in the marketplace. The EUR/USD, currently trading around the 1.2940 level, has spiked more than 50 pips since 6:00 GMT.

Today, traders will want to note that US markets will remain closed due to Hurricane Sandy.

Main News for Today

Italian 10-year Bond Auction
• Should the bond auction signal that Italian borrowing costs have fallen, the euro may be able to extend this morning’s bullish run

US CB Consumer Confidence-Postponed
• The announcement of this indicator has been postponed due to the hurricane which is currently hitting the eastern United States

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By TraderVox.com

Tradervox.com (Dublin) – The US dollar advanced last week, making gains against both commodity-related currencies and safe haven currencies. The lack of promising solution to the eurozone crisis and the strong economic data from the US made the dollar more appealing to investors. As the month closes this week, here is a brief analysis of major currencies performances last week and the expected trend this week.

EUR/USD: the pair slid in range last week, losing the 1.30 line in the process. The lack of progress in Euro zone and Germany’s opposition to Greece restructuring proposal has exacerbated the situation in Europe. The euro-dollar pair started the week with a move up, but failed to break the resistance line at 1.3075. The pair then dropped to below 1.30 line and went further below the 1.29 line. With Draghi expected to speak this week and the German Retail sales expected at the start of November, there is a high chance the that euro will appreciate marginally against the dollar. However, the weekly outlook remains neutral and slightly bullish for the pair.

GBP/USD: the pair enjoyed a good week last week, climbing by almost one cent at the close of the week. The pair started the week at 1.5997 and dropped to touch a low of 1.5913 as the support line at 1.5930 weakened. The pair then made a strong break above the 1.61 level to touch a high of 1.6141 before retreating to close the week at 1.6091. The manufacturing and Construction PMIs are the major reports this week and the pair is expected to trade within range this week.

USD/JPY: improvements in the US resulted to the pair moving upwards during the week. The pair started the week with a slow climb to the resistance line at 80. With critical support at 79.70, the pair moved up above the 80 line to touch a high of 80.37 before sliding to close the week at 79.64. The outlook for the pair this week remains bullish and we might see the pair move above the 80 line again.

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