Month: November 2012

Source: ForexYard

Higher-yielding assets, including the euro and Australian dollar, saw modest gains to start off the week yesterday, as hopes that Greece will be able to secure a new round of bailout funds in the near future led to risk taking in the marketplace. Today, traders will want to pay close attention to a meeting of euro-zone finance ministers, scheduled to take place throughout the day. Any positive developments out of the meeting with regards to Greece receiving a new bailout package could result in additional gains for the euro.

Economic News

USD – Bernanke Speech Set To Impact Dollar Today

The US dollar turned bearish against several of its main currency rivals yesterday, as hopes that a deal can be reached to avert the upcoming US “fiscal cliff” led to some risk taking in the marketplace. In addition, signs that Greece is closer to receiving a new round of bailout funds helped boost higher-yielding assets. Against the Canadian dollar, the greenback fell more than 40 pips during European trading, eventually reaching as low as 0.9960. The AUD/USD advanced close to 50 pips to trade as high as 1.0410.

Today, dollar traders will want to pay attention to several US news events. At 13:30 GMT, the Building Permits figure is forecasted to come in at 0.85M, slightly below last month’s 0.87M. If the indicator comes in worse than expected, the dollar could extend yesterday’s bearish trend. At 17:15, Fed Chairman Bernanke is scheduled to deliver a speech regarding the pace of the US economic recovery. Any indication that the US economy is slowing down could lead to further dollar losses.

EUR – Euro-Zone Meetings May Result in Euro Volatility

Speculations that Greece may be closer to receiving a new round of bailout funds led to risk taking among investors, which helped the euro advance against several of its main currency rivals yesterday. The EUR/USD advanced more than 30 pips to trade as high as 1.2786 toward the end of European trading. Against the British pound, the common-currency gained more than 25 pips during the mid-day session to trade as high as 0.8038.

Today, traders can anticipate significant euro volatility, as a meeting of euro-zone finance ministers is set to take place. The meeting is expected to largely revolve around whether Greece is eligible to receive a new round of bailout funds. The euro could see bullish movement against both the US dollar and yen if there is an announcement that Greece will receive the funds. Conversely, if the finance ministers fail to reach an agreement regarding Greece, risk aversion may cause the euro to reverse yesterday’s gains.

Gold – Bearish Dollar Leads to Gains for Gold

Gold saw moderate gains during European trading yesterday, as a bearish US dollar resulted in the precious metal becoming cheaper for international buyers. The price of gold advanced close to $10 an ounce, eventually reaching as high as $1732, before dropping back to the $1728 level.

Today, gold traders will want to pay attention to the Eurogroup meetings, scheduled to take place throughout the day. The meetings may result in approval for Greece to receive a new round of bailout funds. If true, the dollar may take further losses against the euro, which could help gold extend its bullish trend.

Crude Oil – Supply Side Fears Drive Oil Prices Higher

The price of oil saw additional gains yesterday, as an escalation in Middle East violence generated supply side fears among investors. Crude advance close to $1.50 a barrel during European trading, eventually moving above $89, its highest price in nearly two weeks.

Today, oil traders will want to continue monitoring developments regarding the ongoing conflict in Israel. There have been rumors in recent days that a cease-fire between Israel and Hamas may soon come into effect. If true, the price of crude could reverse some of its recent gains. At the same time, any increase in violence may result in oil prices climbing further.

Technical News

EUR/USD

In a sign that upward movement could occur in the coming days, the MACD/OsMA on the weekly chart appears close to forming a bullish cross. That being said, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach until a clearer picture presents itself.

GBP/USD

The Bollinger Bands on the daily chart are beginning to narrow, indicating that a price shift could occur in the near future. Additionally, the MACD/OsMA on the same chart has formed a bullish cross. Opening long positions may be the smart choice for this pair.

USD/JPY

The Slow Stochastic on the weekly chart appears close to forming a bearish cross, indicating that this pair could see downward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Opening short positions may be a wise choice for this pair.

USD/CHF

Most long-term technical indicators indicate that this pair is range trading, meaning that a definitive trend is 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 coming days.

The Wild Card

EUR/SEK

The Williams Percent Range on the daily chart has crossed over into overbought territory, indicating that a downward correction could take place in the near future. Additionally, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of possible downward movement.

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

Hey Everyone,

Below are some market trends for today.

Good luck!

-Dan

Gold- May see a downward correction today
Support- 1711.10
Resistance- 1748.58

Silver- May see a downward correction today
Support- 32.21
Resistance- 33.97

Crude Oil- May see a downward correction today
Support- 87.20
Resistance- 90.12

Dax 30- May see a downward correction today
Support- 6993.48
Resistance- 7184.75

EUR/USD May see a downward correction today
Support- 1.2679
Resistance- 1.2875

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.

Source: ForexYard

The euro saw moderate gains against the US dollar in overnight trading, as hopes that a deal will soon be reached to provide Greece with a new round of bailout funds led to risk taking. After gaining close to 40 pips to trade as high as 1.2802, the EUR/USD saw a slight downward correction and is now trading at 1.2790.

The USD/JPY fell close to 20 pips during Asian trading, after the BOJ announced that Japanese interest rates would remain at 0.10% for the time being. The pair, which is currently trading at 81.15, remains within reach of its recent seven-month high of 81.59.

After posting steady gains since last Friday, the price of crude oil fell close to $0.60 during the overnight session and is currently trading at $88.60 a barrel. That being said, analysts were quick to warn that any further escalation in the current round of Middle East violence could result in the commodity resuming its bullish trend.

Main News for Today

Eurogroup Meetings- All Day
• Euro-zone finance ministers will be meeting today to discuss the Greek economic situation
• Should an agreement be reached to provide Greece with a new round of bailout funds, investors may shift their funds to riskier assets, which could boost the euro

US Building Permits- 13:30 GMT
• The building permits indicator is forecasted to come in at 0.84M, slightly below last month’s 0.87M
• Any worse than expected data could lead to dollar losses against the yen

Fed Chairman Bernanke Speaks- 17:15 GMT
• The Fed Chairman is scheduled to discuss the current pace of the US economic recovery
• Any signs that the US economy is slowing down could lead to losses for the dollar, which may boost commodities like gold and silver as a result

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 Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

By Central Bank News

By Central Bank News
    The Bank of Japan (BOJ) held its in benchmark overnight call rate unchanged at zero to 0.1 percent and made no mention of a further expansion of its asset purchase program, but added the economy is expected to remain weak and then gradually return to a moderate recovery path as domestic demand remains resilient and overseas economies should slowly improve.
    The BOJ, which has held its call rate unchanged since December 2008, said overseas economies remain in a deceleration phase and Japan’s economy has been weakening due to soft external demand.
    “With regard to the outlook, Japan’s economy is expected to remain relatively weak for the time being, and thereafter, it will return to a moderate recovery path as domestic demand remains resilient on the whole and overseas economies gradually emerge from the deceleration phase,” the BOJ said in a statement after a meeting of its policy board.
    It added that inflation is expected to remain around 0 percent for the time being and there is still a high degree of uncertainty regarding Japan’s economy, Europe’s debt problem, the momentum of the U.S. economy, a sustainable growth path for emerging economies and “the spreading effects of the recent bilateral relationship between Japan and China.”

     The BOJ, which last month expanded its asset purchase program by 11 trillion yen to 91 trillion – its fourth expansion this year – repeated earlier statements that it would “pursue aggressive monetary easing in a continuous manner by conducting its virtually zero interest rate policy as well as steadily increasing the amount outstanding of the Asset Purchase Program.”
    Japan’s economy contracted by 0.9 percent in the third quarter for an annual rise of 0.10 percent while consumer prices fell further in September. The annual inflation rate was minus 0.30 percent in September, the fourth month in a row with deflation.
    
    www.CentralBankNews.info
    

By MoneyMorning.com.au

Many mining executives had a chance to feel like Oliver Twist this year.

They stood humbled and downtrodden in front of the equity markets, cap in hand, saying, ‘Please sir…can I have some more?’

It’s been brutal for them. Plenty of companies with solid projects and great management got a total shellacking from the markets simply for trying to top up the company cash balance.

So I knew things have been pretty bad for some small resources stocks.

But nothing prepared me to see the numbers showing just how tight the equity markets have become in 2012…

The secondary market, which is what companies use to top up the kitty, has fallen from $42 billion last year – to just $17 billion worldwide this year: a stunning drop of 60%.

And the primary market, for listing new companies, has been smashed from $27 billion to just $5 billion globally. A drop of over 80%!

Ouch.

When the taps turn off, the market dries out. This is exactly why exploration companies have been decimated this year – they can’t get funding. And if they can’t get funding, it doesn’t matter how many ounces of gold are in the ground, because that gold will never see the light of day.

Just yesterday I heard about a good mining junior that had $80 million in debt funding lined up to build the mine, but equity markets are so tight it couldn’t get its hands on just $20 million. It’s total madness.

How Do You Invest in this Drought Ridden Market?

It’s essential for investors to make sure explorers have a year (or two) of cash in the bank, or takeover appeal. At the very least they should have backing from a cashed up partner or institution.

As for the developers planning to build mines, they must have funding sorted. In this market they can’t ask for too much or investors will run a mile.

That means until the equity markets loosen the purse-strings, producers with comfortable cashflow are probably the least risky bet.

Seeing just how tight the capital market is now, I’m glad that for this year in Diggers and Drillers I’ve focused far more on producers and funded developers, as well as a few cashed up, well-supported explorers.

For example, the five gold stocks I’ve recently tipped in Diggers and Drillers include two cashed-up producers, two well-funded developers, and just one gold explorer (with plenty of cash, and exceptional takeover prospects).

With funding in such short supply, it’s damn hard for investors to get a result in this market. This means being very careful about which parts of the market to focus on, because which sectors get the funding depends on how much enthusiasm there is for their specific commodity.

Be Patient for When Gold Stocks Payoff

Gold stocks are still an absolute standout, particularly after taking a last week’s body-blow.

After rallying for three months, gold stocks fell hard in a few days between Wednesday and Friday last week.

The fall is still impossible to account for. Fair enough, the stock market had taken a knock, with the S&P down 1.5% in a few days, but gold was pretty stable, losing just 0.7% in the same time.

So when the gold stock indices tanked 7%, and major gold stocks like Newcrest (ASX: NCM) fell 6%, you have to scratch your head a bit.

To explain what I mean, I’ve compiled this table to show some of the moves we saw late last week in gold and some gold stocks, compared to the rest of the market:

I should be clear and point out that none of these are Diggers & Drillers tips. Rather they’re just some large cap gold stocks on the ASX to illustrate the move. Some smaller stocks fared much worse! There was no fundamental reason to explain the drops in these gold stocks that I could see, or have found since. All the prices above are recovering rapidly.

And looking back to the charts in mid July, the gold stock indices had a similar sized smashing. That then set them up for the massive multi-month rally.

So if history repeats itself, the current pullback in gold stocks looks like one of the last opportunities to buy gold stocks on the cheap.

Time to Go Shopping For Gold Stocks

This is what I wrote to Diggers and Drillers readers on Thursday evening. The good news is that since then, many gold stocks have already started recovering strongly. One of my gold tips had fallen from a gain of 55% to a gain of 35% last week, but is already back up to the 51% level again today. There was a great trade in there for those who took it.

Other gold stocks are recovering more slowly, or holding their ground at least. I’d be surprised if all gold stocks rallied uneventfully from here. It’s rare that a steep fall results in a simple bounce. So we may possibly see gold stocks being tested one more time before taking off in earnest.

When they do, they will be rallying from close to historically low prices relative to the gold price.

The important point is that this gives them a lot of space to rise even faster than gold.

So if you believe gold has much higher to go, the right gold stocks could ‘leverage’, or amplify these gains much, much more. For example, our gold tip that is up 51% has made that gain in the time that gold (in $US) gained just 8%.

And right now, with the Fed’s QE3 money yet to filter through into the system, and the Fed already openly talking about increasing the size of the QE3 program (to cater for the end of Operation Twist), it’s hard to argue that gold will fall from here.

This means that the quality gold stocks can be a very profitable investment from here.

But they must have the ‘right stuff’; like being in the right country, having low costs, long life, good management, and exploration potential, amongst many other things.

And of course, in these nightmarish equity markets, they need to be producing cash, or at least be funded to production!

Dr Alex Cowie
Editor, Diggers & Drillers

From the Port Phillip Publishing Library

Special Report:
Retire Rich, Happy and Free From Money Worries

Daily Reckoning:
Australia’s ‘Eggs-in-One-Basket’ Banking Sector

Money Morning:
Picking the Hot Commodity Stocks of 2013

Pursuit of Happiness:
The Biggest Threat to Peace: A State of Warfare or Welfare?

Diggers and Drillers:
Five Reasons Why Gold Stocks Are Set to Rebound

Buy Quality Gold Stocks That Have the ‘Right Stuff’

By MoneyMorning.com.au

There’s one book that every central banker should read. It’s not by Friedrich Hayek or John Maynard Keynes.

It’s Mary Shelley’s Frankenstein.

In it, Dr Frankenstein has the hubris to believe he can use science to short-circuit nature, and re-animate something that should be dead. The creature he creates goes on to destroy him.

The parallels are striking. Central bankers thought that their audacious experiments in monetary policy could revive dying economic models.

Now Britain is being eaten alive by the monsters they have created.

Unfortunately, we suspect that – rather like Frankenstein – this story won’t have a happy ending…

Why Zombies are Taking Over the UK Economy

It’s easy to understand why the Bank of England acted as it did after the financial crisis.

The autumn of 2008 was crazy. I’d spend my day in the office, running between my desk and the Bloomberg terminal, waiting to see which bank would collapse next.

I’d read so many politicians and City boys shrieking about meltdowns that I’d get off the train home at night and emerge blinking into the street, marvelling that all the buildings were still standing.

You can see why the Bank of England might have thought that cutting interest rates to zero seemed like a good idea.

The trouble is, every action has consequences. Britain is now crawling with zombies, reports the Financial Times.

Low interest rates and quantitative easing (QE) have delayed or prevented the process of creative destruction from taking place. As a result, firms that should have gone out of business are grimly clinging on to a twilight existence, neither bust nor solvent.

One in ten companies are only paying the interest on their debt, according to the insolvency industry’s trade body, R3. They are unable to repay any of the actual loan.

So the firm sits there consuming resources inefficiently, dragging on the UK economy. And the zombies are spreading. Their numbers have grown by 10% over the last four months.

Now R3 is hardly a disinterested observer. It’d be very good for business if someone were to come along and decapitate all these undead companies.

Yet, it’s not just R3 who believes the zombie plague is bad for business.

The Bank of England warned last week that these ‘zombie’ companies were part of the reason why the UK economy is so weak.

The trouble is, a zombie company doesn’t just take up physical space. It takes up valuable bank lending capacity too. Zombies are only just able to pay the interest on their debts. If the banking system were healthier, they’d be put out of their misery.

But as it stands, notes the FT, ‘banks are reluctant to write off those loans…because, among other things, the banks might need to raise additional capital. And because those loans to zombies remain outstanding, banks do not have enough capital to extend to new, viable companies.’

The Bank of England’s Governor Has a Sick Sense of Humour

I’ve always suspected Mervyn King of having a droll sense of humour, but this really is jet-black comedy.

It’s not that I disagree with him.

But for our central bank to complain about zombie companies cluttering up the UK economy is a bit like a James Bond baddie moaning about all the sharks in his swimming pool. Who put them there in the first place?!

Worse still, it’s not as though this plague of zombies is going to change the Bank of England’s policy. King is still trying to dismiss inflation fears and continues to talk up the prospects for more QE.

You can see why. If interest rates were to rise now, it would inflict an awful lot of pain on the UK economy. King isn’t the only one worrying that perhaps banks have been a little too forgiving.

The other day, trade magazine Money Marketing reported that one of the Financial Services Authority’s risk specialists had warned that ‘lenders may have left “hundreds of thousands” of [mortgage] borrowers in a worse position by providing forbearance when they have experienced money problems.’

The point is that if you move someone onto an interest-only loan, you may leave them in a position in the future where they have no hope of ever paying back the original capital. Better to repossess now rather than leave people hanging on as ‘zombie’ households.

Of course, this is exactly what will happen once bank balance sheets have improved enough. Everyone who found their lender nice and accommodating when it was in trouble, will get a nasty shock when its balance sheet has been healed by sufficient injections of QE. It’s only a matter of time.

Unfortunately, this has left us all in rather an unfortunate position. We’re reliant on low interest rates to get by. But the low rate cure is also killing us. One way or another, it’s going to end badly.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This article first appeared in MoneyWeek

From the Archives…

Retirees and the Fed Face Off
16-11-2012 – Kris Sayce

Attention Investors: This Market is Worse Than it Looks
15-11-2012 – Kris Sayce

Avoid the Slaughter: Watch This Key Stock Market Pointer
14-11-2012 – Murray Dawes

Why Lithium is Another ‘Rare’ Element on China’s Radar
13-11-2012 – Dr. Alex Cowie

Who Says Gold Doesn’t Pay ‘Interest’?
12-11-2012 – Dr. Alex Cowie

Beware the Bank of England: UK Economy Going Down

By MoneyMorning.com.au

Everyone is worried about the damage the “fiscal cliff” might do to the US economy in 2013, but the reality is that’s only one of the potential problems in our 2013 US Economic Forecast.

At present there appears to be four problems – aside from the fiscal cliff – that could throw the US economy into recession in 2013.

These are international problems that include:

• Brewing trouble in Japan: Japan faces an election next month. More importantly, its government debt is currently 230% of GDP, with that ratio rising by about 10% a year. The current government has increased sales tax in 2014, which may cause a recession and will likely push its debt to GDP ratio even higher.

  The problem is no country has ever survived a debt/GDP ratio above about 250% without defaulting. Britain did succeed with this in 1815 and 1945, but on the second occasion it relied on exchange controls, inflation, and dozy domestic investors, while on the first occasion it had a government under Lord Liverpool far more capable than anything we have seen in the last 185 years.

  The point is, if Japan gets a weak coalition after its election, the market may panic and cause a Japanese government default.

• More Woe in Europe: The Eurozone mess continues and is getting worse rather than better. Investors are just beginning to wake up to the fact that France, by exceptionally foolish policies of fleecing the rich, has put itself in a position that may well prove worse than those of Italy or Spain.

  The Eurozone crisis is soluble – by the weak sisters leaving the euro – but this solution is unacceptable to the EU political elite, so we may get a crisis, a major default, a European banking collapse and deep recession instead.

• Troubles in the BRICs: All four of the BRICs are reaching the end of the road in terms of economic growth. Having had the world’s money thrown at them like confetti, they have used it to grow government and reward themselves through an orgy of corruption.

  China’s problems are hidden in its banks’ balance sheets. India needs a government that does not overspend (fat chance!), as does Brazil. As for Russia, its military will soak up all its gigantic oil revenues and its leaders will embezzle any money the Western banking system is foolish enough to lend it.

  These crises will worsen in 2013. At some point they will combine into a gigantic BRIC crash, affecting the whole world economy

• Iran, Israel, and the Middle East: Either Iran will get a nuclear weapon in 2013 or Israel will go to war to stop it. Either way, it’s bad for the world economy; the only question is how bad.

2013 US Economic Forecast

As for the fiscal cliff, the problem is that the package of “cliff” policy changes involves mostly increased taxes, so they will cause a recession of their own. That would, however, be salutary.

Since we do not currently have a banking crisis and have not levered ourselves up too far, an early recession would be fairly short and uncomplicated, and at the end of it we would more or less have solved the Federal deficit and US debt problems.

So, we should welcome this particular “problem” and hope the politicians don’t manage to avoid it. As I discussed earlier, facing the fiscal cliff would solve 77% of the deficit problem.

Should the politicians avoid the fiscal cliff, most likely by putting taxes up on high incomes while leaving most of the budget deficit in place, the short-term prognostication isn’t all that wonderful.

US economic growth has been held back in the last few years by the blizzard of regulations coming out of Washington, and there’s reason to believe there is an especially heavy storm of them coming in the next few months, having been held up before the election.

Thus, no matter much money Ben Bernanke creates, the US economy is not going back to robust growth in 2013. Creating more money will just increase inflation, and together with the continuing budget deficit will suck capital out of the US towards our creditors such as China and Japan.

In the long run, a recession is coming, like it always was. With bad policies in place worldwide, that recession will almost certainly be less painful if we get it over quickly, and don’t delay it into 2014 or later.

After all, with each year that passes under the current policies, the level of foolish investments in the financial system increases, so a delayed recession might well involve another financial crisis, like 2008 – and we’ve seen how much fun that was.

Overall, 2013 looks like a rough year for the economy. Gold and stocks in well-run emerging markets (of which there are only a few) seem to be the best safe havens.

Martin Hutchinson
Contributing Editor, Money Morning

Publisher’s Note: This article first appeared in Money Morning (USA)

From the Archives…

Retirees and the Fed Face Off
16-11-2012 – Kris Sayce

Attention Investors: This Market is Worse Than it Looks
15-11-2012 – Kris Sayce

Avoid the Slaughter: Watch This Key Stock Market Pointer
14-11-2012 – Murray Dawes

Why Lithium is Another ‘Rare’ Element on China’s Radar
13-11-2012 – Dr. Alex Cowie

Who Says Gold Doesn’t Pay ‘Interest’?
12-11-2012 – Dr. Alex Cowie

2013 Economic Forecast: A US Recession Looms

USDCAD breaks below 0.9980 support, suggesting that a cycle top has been formed at 1.0055 on 4-hour chart. Further decline would likely be seen, and next target would be at the lower line of the price channel on 4-hour chart. As long as the channel support holds, the fall from 1.0055 could be treated as consolidation of the uptrend from 0.9632 (Sep 14 low), and one more rise towards 1.0100 is still possible after consolidation. Key support is at 0.9874, only break below this level could signal completion of the uptrend.

Forex Technical Analysis