Month: October 2012

Tropical storm Sandy is about to hit New York and the american eastcoast. As a safety precaution NYSE wil be closed Monday and maybe also Tuesday.

Senior Strategist Ib Fredslund Madsen explains how this effects the financial week ahead.

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Video courtesy of en.jyskebank.tv

By Central Bank News
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Source: ForexYard

Despite a better than expected US GDP report on Friday, the US dollar took somewhat significant losses against the Japanese yen before markets closed for the week. Meanwhile, after turning bearish during mid-day trading, the EUR/USD was able to stage an upward correction to close out the week relatively unchanged from where it began the day. This week, traders will want to pay attention to several highly important international news events. The Japanese Monetary Policy Statement, a speech from ECB President Draghi, US manufacturing data and finally the all-important US Non-Farm Payrolls report, all have the potential to create heavy volatility in the coming days.

Economic News

USD – Batch of Significant US Data Set to be Released This Week

The US dollar had a relatively slow trading day on Friday, despite a slightly better than expected US GDP figure which highlighted the slow, but steady pace of the American economic recovery. Against the Canadian dollar, the USD was able to advance more than 40 pips during the first half of the day to trade as high as 0.9993. A downward correction resulted in the greenback finishing out the week at 0.9973. The USD/CHF saw also saw gains of 43 pips during morning trading before a bearish reversal caused the pair to close the week at 0.9349, virtually unchanged for the day.

This week, dollar traders can anticipate significant activity in the marketplace, as several highly impacting US economic indicators are set to be released. Tuesday’s CB Consumer Confidence figure, followed by the ADP Non-Farm Employment Change and ISM Manufacturing PMI on Thursday, and finally the all-important Non-Farm Payrolls figure on Friday, all have the potential to create market volatility. Any better than expected data could lead to risk taking among investors, which may result in dollar losses against higher yielding assets like the euro and AUD.

EUR – Concerns Regarding Spain and Greece Limit Euro Gains

Uncertainties among investors regarding economic instability in Greece and Spain continued to weigh down on the euro before markets closed for the weekend on Friday. While some risk taking helped the common currency recoup losses during afternoon trading, virtually no gains were made for the day.

The EUR/USD fell more than 60 pips during the morning session to trade as low as 1.2881, before an upward correction brought the pair to 1.2938 by the end of the day. Similarly, the EUR/GBP fell more than 30 pips before staging a recovery during the afternoon session to trade as high as 0.8034, roughly the same level as the beginning of the day.

This week, in addition to a batch of significant US news, euro traders will want to pay close attention to a speech from ECB President Draghi and an Italian bond auction, both scheduled to take place on Tuesday. Investors will be watching Draghi’s speech for clues as to the current state of the debt crisis in Spain and Greece. Any optimistic statements from the ECB President could help the euro turn bullish before Friday’s crucial US Non-Farm Payrolls report.

JPY – Yen Closes Week Out on Bullish Note

After speculations that the Bank of Japan (BOJ) will soon initiate a new round of monetary easing turned the yen bearish against most of its main rivals early last week, the currency was able to recover some of its losses before markets closed on Friday. The EUR/JPY tumbled close to 90 pips to trade as low as 102.67 during mid-day trading. An upward correction brought the pair to 103.03 by the end of the day. Against the US dollar, the yen gained close to 40 pips for the day. The USD/JPY closed out the week at 79.63.

This week, yen traders will want to pay close attention to Tuesday’s Japanese Monetary Policy Statement and Bank of Japan press conference. If the BOJ does choose to initiate a new round of monetary easing to boost Japan’s export industry, the yen could see significant losses against both the US dollar and euro.

Crude Oil – Oil Gains from US Supply Side Fears

Concerns among investors that a hurricane could disrupt US oil refining capabilities this week boosted the price of crude during the European session on Friday. Past disruptions to the US’s ability to refine oil have often resulted in an increase in price. Oil closed out the week at $86.13, up approximately $1.20 a barrel.

This week, oil traders will want to closely monitor the impact Hurricane Sandy has on US oil production. Any prolonged disruptions could drive prices higher. Additionally, Wednesday’s US Crude Oil Inventories report has the potential to create volatility in the price of crude.

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

GBP/SGD

The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. Furthermore, a bullish cross has recently formed on the same chart’s MACD/OsMA, signaling that the price shift could be upward. This may be a good time for forex traders to open long positions ahead of a possible upward 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.

Source: ForexYard

The Japanese yen reversed some of its recent losses against the US dollar during Asian trading last night, as investors eagerly await tomorrow’s Bank of Japan meeting, in which it is widely expected that a new round of monetary easing will be announced.

Ongoing concerns regarding the Spanish and Greek economies caused the euro to drop more than 40 pips against the USD last night. In addition, the EUR/JPY fell more than 50 pips during early morning trading.

The price of crude oil reversed some of last Friday’s gains during the overnight session to trade as low as $85.39 during early morning trading. That being said, investor concerns regarding Hurricane Sandy’s potential impact on US refining capabilities continue to threaten to drive prices higher today.

Main News for Today

Today, a lack of significant international news means that any market volatility will likely come as a result of announcements out of the euro-zone with regards to the debt situations in Greece and Spain. Furthermore, traders will want to note that the US stock and options markets will be closed today due to the threat posed by Hurricane Sandy. Any damage the hurricane does to US oil refining capabilities has the potential to drive the price of crude higher.

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 MoneyMorning.com.au

It’s been just six weeks since the geniuses at the US Federal Reserve decided that they could fix the world — with a third round of free dollars, ‘QE3‘.

And already…there is talk of DOUBLING the pace of this program.

Question: Do you have a high unemployment rate, a slow economy, or are you drowning in debt?

No problem! Just print your way out of it!

What do you mean it didn’t work last time? Well this time we’ll keep going – and keep increasing it — until it does work…To infinity and beyond!

But what this could do to the price of real assets, like gold, is mind-boggling.

Those institutional gold price forecasts of $2400 an ounce in two years suddenly look a bit weedy!

On the 13^th September 2012 the Fed started a third round of quantitative easing, or QE3. It will create $40 billion out of thin air each month, to buy bonds. This will carry on until either the US unemployment rate falls, or someone blows up the Fed.

And we know people are already considering the latter.

Forecasting the Gold Price in Two Years

From experience, we know that when the Fed increases its balance sheet during these programs, the US gold price increases very closely with it. If the balance sheet increases 20%, the gold price also increases around 20% too.

In fact if you statistically calculate the relationship between them, the correlation is around 95%, which is about as certain as anything gets in finance.

If this relationship holds true, you can plug in the projected numbers for the Fed’s balance sheet over the next few years — to make a pretty fair forecast of where gold will go next.

Assuming the Fed keeps adding $40 billion a month for two years, Bank of America has already projected a gold price target of US$2400 per ounce in two years time. That’s a 40% gain from today’s price.

The Golden Road to $2400 Per Ounce Gold

After getting a bit ahead of itself in September on the initial excitement, gold has cooled from nearly $1800 to closer to $1700 during October.

Looking at the chart today, I suspect that we’re now looking at a good entry to the start of a long steady rally. This could make the coming weeks one of the best opportunities to buy gold — and also gold stocks.

It’s a good proposition as it stands, but already it looks as though the Fed could be about to turn the heat up.

It looks like the Fed will now INCREASE its asset purchases from December.

Goldman Sach’s chief economist, Jan Hatzius, reckons the Fed will step up its purchases from $40 billion a month — to $85 billion a month.

Seeing as ‘Government Sachs’ has time and again somehow magically ‘predicted’ the Fed’s next move — it pays to listen to them.

This would be to make up for the end of that fizzer Operation Twist, which expires in the coming months.

But winding up Operation Twist (which didn’t increase the balance sheet, it just switched the Fed’s focus from short dated bonds to longer dated bonds), to replace it with QE (which WILL increase the balance sheet), would see a measurable effect on the balance sheet…and therefore the gold price.

So if Goldman Sachs is right, and it normally is when it is talking about the Fed, the result could be a more than doubling of the already rapid pace of gold price appreciation.

IF this happens, then I calculate we could see $US gold in the region of $3150 / ounce in just over two years. That would be an 85% increase from today’s price!

This is a tantalising possibility, though frankly we wouldn’t need this to happen for gold to be a good investment today. On its current path, decent gains are already highly likely.

Why You Should Consider Gold Stocks

Of course, for Aussie investors, we have the headwind of the Aussie dollar to think about.

As it rises, it erodes our gains — like a swimmer (gold) fighting a current (the Aussie). The ever-rising Aussie (and ever-falling US dollar) is the reason that the annual gain for Aussie dollar gold in the last decade was 11.3%, while for US dollar gold it was 17.6%.

The question is: if gold were to soar to $3150 by the end of 2014 on the back of massive QE3…then where would the Aussie dollar be?

QE tends to nudge commodity prices up, which in turn tends to drag the Aussie up. So there is a real risk of a big rise in the Aussie in the next few years.

So unless the Aussie dollar falls, Aussie bullion holders won’t make the same gains on gold that the Americans will. However there is a gold-ETF called QAU which neatly gets around this, and is well worth a look.

Otherwise, quality ASX gold stocks are one way for you to increase gold gains. This can be riskier, as you take on a multitude of company-level risks. And a gold mine has many moving parts, any number of which can go wrong.

But get it right, and these risks are rewarded in spades.

And for the first time in 18 months, gold stocks are finally rising faster than gold.

They have been savage underperformers for a long time. But slowly and surely, quality gold stocks are now on their way back up again.

This has been on the prospect of profit margins swinging from ‘under pressure’ to ‘pay day’.

It is also on the promise of more stocks paying dividends.

Gold stocks are once again ready to give that long elusive reason to buy them — LEVERAGE.

Of the three gold stocks I’ve recently tipped to Diggers & Drillers readers, the first is already up 30%, while the two more recent ones are still on the launch pad. They just need gold to turn back up again, to power some gold-leveraged gains.

But I think gold is now marking its next turn up already, with a bounce from $1700 shaping up.

It just needs a catalyst to support this.

And that 800-mile-wide mega-storm moving up the Eastern seaboard, ‘Hurricane Sandy’, which is about to smash into New York…could be exactly that.

Dr Alex Cowie
Editor, Diggers & Drillers

From the Port Phillip Publishing Library

Special Report:
After the Bust

Daily Reckoning:
Australian Banks at Risk to the Core

Money Morning:
The Australian Media: Big Losses, Big Potential Gain

Pursuit of Happiness: Even Children Aren’t Safe from Government Groping

QE3 Program Could Double, Will it Take Gold With it?

By MoneyMorning.com.au

Could Ireland finally be about to see some good news?

After crashing into a deep recession, the Irish are now hoping that one industry could pull the economy out of trouble. That industry is oil and gas.

Last month, Tony O’Reilly Junior announced Ireland’s first commercial oil find, and he believes that it could trigger interest from the international oil industry and set off a new round of oil exploration.

I say ‘new’ because those with good memories will recall a wave of exploration that culminated in a wholesale plunge on a share called Atlantic Resources.

Founded and financially backed by Tony O’Reilly Senior (now Sir Anthony), Atlantic Resources reported an oil find off the coast of Waterford. Half of Ireland piled in behind their favourite son, rushing Atlantic’s share price up.

But it all ended in tears.

The rumoured reservoir of black gold turned out to be no more than a puddle, and the Irish oil business went into hibernation for the next 25 years.

Now, though, there is a revival of interest, and it is not only due to this first commercial oil find, made by Providence Resources.

Keen to stimulate activity, the Irish government has set attractive fiscal terms. It allows a complete write-off of exploration costs and then levies corporation tax at a rate of just 25%, compared to the 62% tax rate of North Sea oil production.

The oil price is also much higher than it was back in the 1970s and 80s, and oil exploration techniques have improved.

Potentially 1.6 Billion Barrels of Oil

The Providence oil find could be the catalyst for renewed exploration. It has found oil in the north Celtic Sea, to the south of the country. This Barryroe licence has been estimated to contain over 1.6 billion barrels of oil, with a high recovery factor of 27% estimated for the stratigraphic levels assessed so far.

Providence is now looking for development partners to bring Barryroe into production, but it also has its sights set on another massive target: the Dunquin prospect which lies out to the west of Ireland.

Partner ExxonMobil expects to begin drilling next year, and with an estimated 14 trillion cubic feet of gas and 500 million barrels of condensate, this is another whopper. This really does have the potential to kick off a flurry of activity on the Atlantic margin.

The seas around Ireland are thought to be promising for hydrocarbons. In a 2008 report, the influential Irish stockbroker Davy described the geological conditions. It said:

‘Ireland is surrounded by basins (depressions in the earth full of sediment) that have the potential to host oil and gas. These occur in the Irish Sea, in the Celtic Sea and off the west coast. Some of these are very large and have up to ten kilometres of sediment piled up.’

Four Concerns for Oil in Ireland

This is promising for the presence of hydrocarbons, but there are complications. Firstly, while the seas to the south and east of Ireland are relatively calm and shallow, the Atlantic margin to the west is a hostile deep-water environment. And that means high cost exploration.

Secondly, as well as the existence of oil-bearing sedimentary rocks, an oil zone needs geological fault lines that enable the oil and gas to migrate to a point where it can become trapped and accessible.

However, in the Celtic Sea Davy refers to multiple and micro-faulting, which makes oil reservoirs small and hard to intercept.

Another problem that presents itself is that where oil has been found in the Celtic Sea it has been waxy, meaning that it does not flow easily. This is the quality of the Providence oil discovery. But new techniques developed can ensure that oil is kept warm and thus viscous, which can overcome this problem.

Finally, the story of the Corrib gas discovery 52 miles off Ireland’s north-west coast has not endeared the country to the industry. Capable of meeting 60% of Ireland’s gas requirements, the project, run by Royal Dutch Shell, has been endlessly postponed by protestors concerned by the proximity of pipes to their homes and the impact on the environment.

Oil exploration off the shores of Ireland is not unprecedented. ‘A review of the 162 wells that have been drilled,’ said Davy in 2008, ‘shows that over half are officially recorded as having encountered oil or gas shows.’

Indeed, Providence’s Barryroe find was drilled by Esso back in the 1970s, and there have been some quite large finds, such as Statoil’s 220-million barrel Connemara field. ‘The challenge for the Irish offshore industry,’ says Davy, ‘is to convert such discoveries to value.’

Perhaps now this turning point has been reached. Watch this space.

Tom Bulford
Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in MoneyWeek

From the Archives…

Does Excessive Government Spending Make You the World’s Best Treasurer?
26-10-2012 – Kris Sayce

Why a Return to the Gold Standard Could Actually Be Bad
25-10-2012 – Kris Sayce

A Safer Than Super Investment?
24-10-2012 – Nick Hubble

Agricultural Commodities – The Best Way to Play Rising Food Prices
23-10-2012 – Merryn Somerset Webb

Stock Market ‘Barometer’ Speaks: The Bulls Won’t Like it…
22-10-2012 – Kris Sayce

Ireland’s 1.6 Billion Barrel Oil Awakening

USDJPY breaks below 80.00 support, suggesting that a cycle top has been formed at 80.37 on 4-hour chart. Range trading between 79.25 and 80.37 would likely be seen in a couple o f days. Key support is at the lower line of the price channel, as long as the channel support holds, the fall from 80.37 could be treated as consolidation of the uptrend from 77.43, another rise could be expected after consolidation. On the downside, a clear break below the channel support will indicate that the uptrend has completed at 80.37 already, then the following downward movement could bring price back to 76.00 area.

Daily Forex Analysis

By Central Bank News

www.CentralBankNews.info