Month: January 2013

The Secret Word: Deflation – And the Next Five Years of Financial Turmoil

By Elliott Wave International

The following is a sample from Elliott Wave International’s new 40-page report, The State of the Global Markets – 2013 Edition: The Most Important Investment Report

You’ll Read This Year. This article was originally published in Robert Prechter’s July 2012 Elliott Wave Theorist.

In the first five months of 2012, there were 20 times as many Google searches on “inflation” as there were on “deflation.” This is down from a ratio of 50 times in June 2008. If any theme has been overdone over the past six years, it is the theme of inevitable inflation if not hyperinflation.

Inflation reigned for 75 years, from 1933 to 2008. People are so used to it that they cannot imagine the opposite monetary environment. Bullish economists have been calling for recovery, which means more inflation, and bearish advisors have been calling for a crash in the dollar, which means hyperinflation. No wonder those are the terms on which most people have been searching.

But only one word allows you to make sense of what’s going on in the world, and inflation is not it. The secret word is deflation.

Deflation explains:

• why interest rates on highly rated bonds are at their lowest levels in the history of the country;
• why the velocity of money is the lowest since the 1930s;
• why huge sectors among investment markets are down over 40%;
• why the Consumer Price Index (CPI) just had its biggest down month since 2008;
• why Europe is in turmoil.

Here are some details: Ten-year Treasury notes pay out less than 1.5% annually, their lowest rate since the founding of the Republic. Treasury bills yield essentially zero, their lowest level ever. The velocity of money failed to rise during the past three years of partial economic recovery, and it recently made new lows. Real estate prices have fallen 45% in the past six years. Commodity prices — as measured by the CRB Index — are down 39% over four years. This group includes oil and silver, two of the most hyped investments of the past decade. Remember in March when articles quoted analysts calling for $5, $6 and $8-per-gallon gasoline? In just three months since then, gas prices have fallen 15%, knocking the CPI into negative territory.

Deflation also explains why European loans are at risk, why Germany is tapped out, why Greeks are protesting in the streets, and why U.S. corporations’ overseas profits are down. Deflation lets you make sense of the world.

What is deflation? Economists define it three different ways, but I find only one definition useful: Deflation is a contraction in the overall supply of money and credit.

Why must deflation occur? Answer: There is too much unpayable debt in the world.

As argued in Conquer the Crash, it ultimately does not matter what the authorities do; they can’t stop deflation. This prediction is being borne out. Since 2007, the Fed has
monetized $2 trillion worth of debt; the federal government has borrowed another $7 trillion; and it has pumped out $1 trillion worth of student-loan credit. Yet real estate and commodities slumped 40% anyway.

These drunken-sailor-type policies have indeed succeeded in nearly maintaining the overall volume of money and credit.

But in the long run you can’t fight a systemic debt overload by piling on more debt. The Fed and the government are shifting the burden of trillions of dollars’ worth of debt obligations from reckless creditors onto innocent savers and hapless taxpayers. The ploy might work if the public’s resources were infinite, but they aren’t. Perhaps this policy temporarily prevented a series of big institutional disasters, but it was only at the ultimate price of a gigantic public disaster.

Such actions have become politically less palatable. Some observers realize that the student-loan program of lending at below-market rates is exactly the model the government used for housing loans, which ended in a spectacular bust. Others know that the government cannot continue to borrow at the current pace and expect to stay solvent. Politicians on both sides of the aisle are tired of the Fed’s bailing out of highly leveraged financial-speculation institutions.

But whether these policies continue or are curtailed is irrelevant to the outcome. If the government slows its borrowing, the overall value of debt will fall. If the government maintains or increases its present pace of borrowing, interest rates will eventually turn up, and the overall value of debt will fall. There is no escape from deflation.

Ironically, investors in the past decade have been doing exactly the opposite of preparing for deflation. Convinced of perpetually rising prices, they have bought every major investment. They chased real estate up to a peak in 2006. They bought blue chip stocks into the high of 2007. They pushed commodities up to a peak in 2008. They chased gold and silver up to highs in 2011. And through spring 2012, they continued to buy stocks and commodities on any rumor that promised inflation: European bank bailouts, Operation Twist, the Greek election, Group-of-8 summits, Fed meetings, Bernanke press conferences, improved economic numbers, predictions of QE3, central-bank interest-rate cuts, you name it. Meanwhile, the U.S. Dollar Index hasn’t made a new low for four years. During deflationary times, cash is king, and by far most investors have chosen to own anything but cash.

Deflation is still not obvious to the majority. Even now, most economists expect continued recovery, mild inflation and a rising stock market. But the essays on deflation.com are 180 degrees apart from conventional thinking. It may be too late for you to get out at the top, but there’s still time to learn how to sidestep the worst of the crunch.

People will be using the secret “d” word much more often over the next five years. By the end of that time, they will also be using its cousin “d” word, depression.

Robert Prechter is the founder and president of Elliott Wave International, the world’s largest financial forecasting firm. The rest of EWI’s 40-page report, The State of the Global Markets – 2013 Edition: The Most Important Investment Report You’ll Read This Year, is available for download. Follow this link to download the full report – for  free.

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This article was syndicated by Elliott Wave International and was originally published under the headline . EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

By Jeremy Watts

Active Forex traders who currently use MetaTrader 4 along with an Expert Advisor software package, but who do not use a dedicated MetaTrader server, have probably already encountered problems with data stream disruption, which can impact substantially on their trading. Disruption of data while trading Forex can be catastrophic, no matter whether you are trading manually or using an automated trading robot. In fact, this is regarded as being the number one complaint amongst traders.

When the data stream to the MetaTrader 4 terminal is interrupted, the automated trading software has to re-evaluate the data from the point of renewal. This can affect the entire trading process, leading to results that may be disappointing from software that should otherwise be, in theory, very profitable.

There is a simple solution and that is to have your automated trading hosted by a dedicated MetaTrader server. Dedicated servers offer constant connectivity, allowing your MetaTrader 4 platform to run much more efficiently, even with multiple Expert Advisors running.

A dedicated MetaTrader 4 server is a computer located in a data centre which traders can access online from their own PCs. Also known as a Virtual Private Server (VPS), you can take advantage of some great features that they offer which will greatly enhance your automated Forex trading experience.

For example, with a MetaTrader 4 server, you can safely run your MetaTrader and other automated programs without risk of an internet outage. Dedicated server providers are normally equipped with back-up power and are in extremely secure locations to ensure that your data remains intact.

Additionally, a dedicated server service allows you to back-up and store all of your important files on the server. You can also take advantage of around-the-clock access and market monitoring capabilities to help you become an overall better trader.

Furthermore, you can gain remote access to your server using Windows Remote Administrator or Remote Desktop Connection, which means that you can take the power of your MetaTrader server with you whenever and wherever you travel. Also, using the same applications, you can get together with other traders to collaborate and exchange trading strategies.

Many online Forex brokers that support MetaTrader also offer VPS hosting packages, although a number of MetaTrader servers can be found online that specialise in Forex hosting. Before you start shopping, though, be sure you are aware of what exactly you require.

Of there several key factors to consider, the most important are considered to be bandwidth, RAM and storage space, keeping in mind that the more you trade, the more you will need, however price should also play a large part in deciding upon a server.

Server services vary in price, from around 20 pounds per month for starters to well over 1,000 per month for power traders (or heavy users). If you are very active and run multiple expert advisors, or even an entire trading company, a larger dedicated server package is without doubt the most viable solution. Nevertheless, for most beginner and intermediate traders, a mid-sized server is usually sufficient and will cost, on average, 50 pounds per month.

Perhaps the most important feature to look for in a dedicated MetaTrader server service is dependability. You should make sure that the service you choose is highly rated by other Forex traders since you want your automatic trading systems running smoothly at all times to ensure maximum trade execution performance and profitability. Remember, the point of switching to a MetaTrader server in the first place is to increase reliability, not to decrease it and you should be able to rely on it to assist with your trading needs, regardless of how regular they may be.

About the Author

ODL Markets is a no dealing desk forex broker offering foreign exchange trading, spread betting and CFDs through the Metatrader software.

By The Sizemore Letter

I look forward to Barron’s Roundtable every January.  It’s a collection of ten contrarian investors who seldom agree on anything—which is precisely why I find it valuable.

Money managers and financial journalists are often prone to groupthink, and when they succumb to it they become useful only as contrary indicators.  Market insights only have value when they are independent, and the Barron’s Roundtable is anything if not independent.  Eccentric might be a better word.

Unfortunately, Barron’s is a man down this year, and he happens to be the most eccentric of the lot; Gloom, Boom & Doom Report editor Marc Faber was not able to attend.  I often disagree with Faber, but he always gives me food for thought.

Let’s take a look at what the panel is saying for 2013.

I’ll start with the Bond King Bill Gross, manager of the Total Return ETF (NYSE:$BOND).  As with Marc Faber, I also find myself disagreeing with Mr. Gross on a regular basis, though I take what he says very seriously.  And he is one of the few active managers I use when allocating client accounts.  So, what does Mr. Gross have to say?

“The US continues to have a “new normal” economy, with annual growth of 2% or less… There are several reasons for this.  There is too much debt, and the ongoing deleveraging process creates the fiscal drag we just talked about.  There is also a demographic issue: The population is getting older… Third, de-globalization leads to slower growth.”

Gross overstates the risk of “de-globalization.”  Free trade and globalization have stalled out to an extent, but they haven’t exactly gone into reverse, or at least not recently.  But he is absolutely correct about deleveraging and aging demographics, and I share his view that inflation will remain benign in 2013.  We’ll have to wait until Part II of the Barron’s story to get Gross’ specific recommendations for the year.

Moving on, Switzerland-based hedgie Felix Zulauf has a peculiar bullish take on Japan:

“The Japanese government is in a difficult position, with the country’s debt running at 230% of GDP.  Japan is in a recession.  The budget deficit exceeds 8% of GDP and could top 10% this year and next.  The deficit was easy to finance as long as Japan was running a structural current-account surplus and the domestic pool of savings was large enough to do so.  In recent times the country’s external accounts have deteriorated, and that could continue.”

The facts of Japan’s dismal position are indisputable, yet Zulauf is bullish on Japanese equities.  Why?   Because the deliberate policy of pushing the yen down and igniting inflation should be bullish for Japanese equities.

Thus far, Zulauf has been spot on.  The yen has cratered, and Japanese stocks have rallied.  But Japanese shares should be considered a short-term speculative trade, not an investment.  As I’ve written before, Japan is a dead man walking.  And moves to spur inflation could have the effect of pushing up long-term yields to the point that rolling over Japan’s gargantuan debts becomes problematic.  Japanese equities may have a good year in 2013.  But my bet is that the big money will be made shorting Japanese equities in the not-too-distant future.

Finally, we come to Mario Gabelli of Gabelli Asset Management, who had one of the most eclectic set of recommendations.  Gabelli is bullish on, of all things, sausage, recommending Hillshire Brands (NYSE:$HSH).  Continuing his breakfast theme, he’s also bullish Post Holdings (Nasdaq:$POST), the maker of Grape Nuts and other cereals.

But he’s also bullish on natural gas and MLPs (as am I), dental products, and water infrastructure.  Readers might want to keep an eye on Xylem Inc (NYSE:$XYL), a producer of pumps, filters, and technologies for water and wastewater treatment.  Earnings might be a little slow for the next few quarters, as a third of the company’s business comes from Europe.  Gabelli expects it to be acquired within two years at a 50% premium to its current price.

Disclosures: Sizemore Capital is long BOND. This article first appeared on MarketWatch.

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By www.CentralBankNews.info     South Africa’s central bank held its benchmark repurchase rate steady at 5.0 percent and said a deterioration in the outlook for inflation had limited the bank’s ability to ease its policy.
    The South African Reserve Bank (SARB), which cut rates by 50 basis points in 2012, said its current policy stance was “accommodative and appropriate” with the real policy rate slightly negative, notwithstanding the temporary breach of the inflation target.
    “However, further accommodation at this stage is constrained by the upside risks to the inflation outlook,” the bank said in a statement, quoting its governor Gill Marcus.

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 24 Jan, 07:30 EST

PRECIOUS METALS prices fell in Asian and London trade Thursday morning, taking gold and silver to 1-week lows as commodity prices also dropped and stock markets stalled.

Shares in Apple Inc. were set to open New York trade 8% lower after the gadget giant reported weak Christmas sales.

New purchasing managers’ data today showed business activity and sentiment in China rising to a two-year high.

Markit’s PMI data also rose faster than expected everywhere in the Eurozone except France.

“The reason we are lower today [in gold and silver] is simple,” reckons Marex Spectron’s head of precious David Govett in a note.

“The market is long, the market is bored, the market is getting restless.”

Longer-term however, “The investment case for gold looks robust,” says Blackrock fund manager Evy Hambro, interviewed by The Telegraph, “with recent action by governments indicating that real interest rates are likely to remain negative in 2013, and the risk of inflation has increased.

“The behavior of central banks,” adds Hambro, “suggests gold purchases look set to continue as diversification of currency exposure remains a key focus.”

The US Federal Reserve’s policy-making team will meet next Tuesday and Wednesday, and Fed chairman Ben Bernanke “can count on [his colleagues] to endorse the current program” of quantitative easing, says Nathan Sheets, Bernanke’s senior international economics advisor for four years to 2011.

“Markets overreacted to the [Dec. meeting] minutes,” reckons Dean Maki, chief US economist in New York for Barclays. “Nothing in the minutes said the Fed is going to be anything less than supportive of the economy in the coming months.”

“[Bernanke] is going to stay the course and engage in QE,” agrees Maki’s opposite number at Bank of America-Merrill Lynch, Michelle Meyer, also quoted by Bloomberg.

Despite Sterling’s 2007-2009 drop of 25%, “yesterday we found out that one UK official, [David] Miles of the [Bank of England], believes that the Pound has not fallen far enough,” says Standard Bank’s currency strategist Steve Barrow, pointing to Wednesday’s release of UK monetary policy minutes.

Furthermore, says Barrow, yesterday’s announcement of an “in or out” UK referendum on European Union membership in 2017 “play[s] into the hands of the Sterling bears.”

Having sought a “safe haven” during the Eurozone crisis, “Some foreign direct investment and other capital flows into the UK could turn around as the crisis eases and the UK threatens to cut its ties with the EU,” Barrow warns.

Meantime at the World Economic Forum of policy-makers and business leaders in Davos, Switzerland, “We are buying gold and will continue to pursue this course,” said Russia’s first deputy chairman Alexei Ulyukayev today.

Despite hitting the 10% target set by President Putin 7 years ago for gold as a proportion of Russia’s reserve assets, “This is a course of asset diversification in a situation when investing in securities or deposits remains risky,” Ulyukayev said.

Russia’s sovereign gold reserves are now the 4th largest in the world, worth some $520 billion.

Exports of physical gold from Spain to the UK have meantime multiplied 10-fold in the last decade to €1.2 billion, a report in yesterday’s Expansion newspaper claimed, with gold pawned by cash-strapped consumers finding its way into large bars for gold investing.

“The sale of second-hand gold is raising more than a billion Euros a year for Spanish families,” the paper quotes one analyst.

Instead of heirloom jewelry, “Families here need the liquidity.”

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2013

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.

By www.CentralBankNews.info     Latvia’s central bank kept its benchmark refinancing rate steady at 2.5 percent, saying there were no risks to price stability in the medium term as economic growth was expected to ease in 2013 even if domestic demand and consumption should rise moderately due to higher incomes.
    The Bank of Latvia, which cut its rate by 100 basis points last year, forecast inflation in 2013 of 2.0 percent and economic growth of 3.6 percent, mainly due to external risks and delayed investments.
    In 2011 Latvia’s Gross Domestic Product expanded by 5.5 percent but the economy slowed down in 2012 and was forecast by the International Monetary Fund to grow by 4.5 percent in 2012.
    In the third quarter, Latvia’s GDP expanded by 1.7 percent from the second quarter for annual growth of 5.2 percent, up from 5.0 percent in the second quarter.

The US dollar is believed to rise opposite the Swiss franc today after the US House of Representatives passed a bill to extend the nation’s debt limit until May, deferring a potential budget debate with the White House. Likewise, expectations that manufacturing in the US held up in January and that a leading economic index rebounded in December are seen to support the Greenback on continuing signs of recovery in the world’s largest economy.

The US House yesterday approved a short-term debt ceiling fix that would extend the country’s borrowing authority until May while also applying a provision that would suspend lawmakers’ pay if they do not pass a budget by April. The measure, which is widely expected to be approved by the Senate, would essentially buy lawmakers some breathing room to hammer out details for a more permanent solution to the nation’s fiscal woes. Named as the “No Budget, No Pay Act of 2013,” the bill aims to draw Senate Democrats into the debate by requiring both chambers to pass a formal budget resolution by April 15. If either chamber fails to meet this deadline, lawmakers’ pay is suspended until a budget is passed.

The measure also avoids for the time being a repeat of the 2011 debt ceiling standoff that rattled the financial markets and resulted in a downgrade of the government’s triple-A rating. The Treasury is expected to exhaust remaining capacity under the $16.4 Trillion debt limit between mid-February and early March. As such, the bill avoids the immediate threat of a US default by suspending limits on the government’s ability to borrow until May 19. Congress would then have to agree on a new, longer-term debt ceiling increase around that time. With the development likely easing some uncertainty over the US’ fiscal problems, the Dollar is deemed to continue to rise.

Meanwhile, a report by the Conference Board is believed to suggest that the US economy is continuing its economic recovery path. Its Leading Index is estimated to have gained by 0.4 percent in December after falling 0.2 percent in the previous month. Improvements in the housing market and on consumer spending likely drove the increase in the index. Meanwhile, factory conditions across the US likely held up this month. After registering 54.2 points in December, the index is projected to come in at 53.2 points in January, still the second highest reading since May 2012. Considering these, a long position is then advised for the USD/CHF trades today.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx Forex Trading Solutions

By Chris Vermeulen & JW Jones – TradersVideoPlaybook.com

The great market prognosticators have by now came out with their 2013 predictions about financial markets. It seems to me to be a fool’s game to try to predict what financial markets are going to do in the future.

I want to be clear in stating that I do not know what is going to happen in the future. I do not know where the S&P 500 Index is going to trade tomorrow let alone 6 months from now. Most market pundits simply will not admit to this fact.

These same market pundits seemingly are unable to be honest about their own fallibility. In their own mind they believe it undermines their credibility or will hurt their forward sales for some book or strategy they are going to unveil. I for one do not prescribe to that notion, I believe in telling the truth.

The truth is that these so-called market experts do not know anymore than you or I about price action in the distant future. However, what I do know is that forward price action remains a mystery until its unveiled in the present.

Instead of wasting time discussing potential price action in the future, why not focus on a few pieces of information that have occurred that are known facts right now. I think the chart below points out that in the intermediate time frame, equity indexes are reaching extreme overbought conditions.

As can be seen above, the number of stocks trading above their 50 period moving averages is reaching close to the highest levels in the past 5 years. Many times when these price levels have been reached we witness a correction at the very least and any short-term gains are usually given back in short order. This is not to say that prices are going to sell-off tomorrow or in the next few weeks, however it is a warning that a correction is likely lurking in the not-so-distant future.

To help confirm this notion, a quick look at the Volatility Index (VIX) demonstrates just how much complacency there is in the short-term spot VIX price which is currently trading below 5 year lows. For novice readers when the VIX moves lower the outcome is typically bullish for the S&P 500 Index and when the VIX moves higher the reaction is typically bearish in terms of the S&P 500 Index.

As can be seen above, the VIX is trading near the bottom of its recent range. This helps confirm the strength we have seen the past few weeks, however a reversal seems likely in the near future. Should the VIX pick up considerably it would have a negative impact on the S&P 500 Index. Furthermore, if we go out several months in time the Volatility Index Term Structure steepens wildly.

What this means is that traders and money managers have bid up forward VIX contracts in an attempt to hedge against a variety of perceived risk. I would also point out that at the moment February monthly options contracts are cheap relative to their historical volatility levels. However, the VIX could rally violently higher should the appropriate chain of events take place in the months ahead.

There are several catalysts in the short-term which will have a major impact on price action for the broader indexes. This coming week we will have earnings from major companies such as IBM, AAPL, and GOOG which all have the potential to move the tape significantly in either direction.

The other more obvious short-term inflection point is the dreaded U.S. debt ceiling debacle which is likely to begin permeating the financial media as the deadline for action draws near. In recent history both houses of Congress and the Executive Branch have struggled to achieve compromise until the 11th hour. The fiscal cliff was one issue, but the debt ceiling issue has the potential to have a major impact on financial markets.

Just to put into context what happened back in 2011 when Congress could not reach a compromise regarding a debt ceiling increase, the S&P 500 Index had the following reaction as shown below.

Obviously there are significant unknowns regarding how the debt ceiling process will unfold in 2013. However, what is known is that should the politicians wait until the 11th hour equity indexes could force their hands yet again.

Additionally the threat of credit rating agencies downgrading U.S. government debt is a major concern. The outcome of this decision alone has the potential to devastate investment portfolios should the government have a partial shutdown as a result of a failure to reach an agreement regarding the debt ceiling.

What is important to understand is that the longer-term price action in the future is impossible to know at this point. We have major earnings reports which are about to be released over the next few weeks which presents significant risks to the broader indexes in both directions. Furthermore we have a major macro event that is facing us and will have to be addressed in the next 5 – 8 weeks.

The outcome of these events as this point is entirely unknown. I would also point out that in 2011 prior to the debt ceiling debacle we saw equity prices rally higher in late June of 2011 while the VIX traded down near recent lows at that time. After a period of consolidation equity indexes remained patient and gave the politicians time.

Eventually the price action in risk assets forced both political parties and the President to come together. As shown in the chart above, the S&P 500 lost nearly 19% in less than 4 weeks of trading sessions. Even the most skeptical politician was forced into submission by Wall Street and the financial media.

Will history rhyme with the recent past? Will we see a compromise in advance of the dreaded shutdown date? Will the debt ceiling outcome create a major paradigm shift in U.S. financial markets and U.S. politics?

Unfortunately, there is no one that can tell us with any certainty what is about to happen in the next 5 – 8 weeks, let alone later this year. After all of the forthcoming analysis and discussion in the weeks ahead, price action will continue to remain a mystery until the debt ceiling situation is behind us. Until then, caution is warranted in both price directions. Trade safe.

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This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the TradersVideoPlaybook.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

By www.CentralBankNews.info     The central bank of the Philippines held its key policy rates steady, as expected, saying the risks to inflation appear balanced even if the strong inflow of capital threatens to push up inflation.
     Bangko Sentral ng Pilipinas (BSP), which cut its rates by 100 basis points in 2012, said it would leave is overnight borrowing, or reverse purchase facility rate, at 3.50 percent and the overnight lending, or repurchase rate, at 5.50 percent.
    “The Monetary Board’s decision is based on the assessment that the inflation environment remains manageable,” the BSP said in a statement following a board meeting. Last month the BSP also used the expression of “manageable” to describe inflationary risks.
    Inflation is forecast to track the lower half of the bank’s 3-5 percent target range in 2013 and 2014.
    Economic growth in the Philippines is expected to continue to remain sold and “pending domestic power rate adjustments and the strong inflow of capital continues to pose upside risks to the inflation outlook,” the bank said.
   Although global economic activity has stabilized, there is still uncertainty around fiscal consolidation and lingering market stresses in advanced economies, which weighs on global growth prospects and thus eases any upward pressures on commodity prices.

    Economists had expected the BSP to hold rates steady but are looking ahead to rate rises this year as inflationary pressures rises. Strong growth prospects, helped by higher remittances by overseas Filipino workers, has attracted international capital and pushed up the peso against the U.S. dollar by almost 7 percent in 2012.

     A recent review of the Philippine economy by the International Monetary Fund pointed to potentially volatile capital flows that could push up the exchange rate, presenting risks to growth and asset prices, according to press reports.
     The Philippine’s Gross Domestic Product in the third quarter rose by 1.3 percent from the second quarter for annual growth of 7.1 percent, up from 6 percent in the second.

    Inflation in the Philippines in December ticked up to 2.9 percent from November’s 2.8 percent.
    The BSP also set the interest rate on its Special Deposit Account (SDA) facility at 3.0 percent to fine-tune its policy tools, a move that it said was in line with international central banking practice.
    Previously, the SDA rate was priced at a premium, but the BSP said the operational refinement would help it ensure “that liquidity remains adequate to meet the requirements of the growing economy.”

    www.CentralBankNews.info

Source: ForexYard

A significantly better than expected British Claimant Count Change figure encouraged investors to shift their funds to higher-yielding assets during European trading yesterday. As a result, currencies like the euro and British pound saw upward movement throughout the day. Today, euro-zone news is forecasted to generate activity in the marketplace. Specifically, the German Flash Manufacturing PMI could potentially lead to more risk taking if it comes in above expectations. Additionally, traders will want to pay attention to the US Unemployment Claims figure, set to be released at 13:30 GMT.

Economic News

USD – Dollar Volatility Expected Following US Unemployment Data

The safe-haven US dollar took losses against most of its higher-yielding currency rivals during the European session yesterday, after better than expected British unemployment data led to risk taking in the marketplace. The GBP/USD gained more than 70 pips during mid-day trading, eventually reaching as high as 1.5889, before dropping back to the 1.5875 level. Against the Swiss franc, the greenback lost more than 30 pips to trade as low as 0.9276. By the beginning of the afternoon session, the dollar was steady at 0.9285.

Today, the main piece of US news is likely to be the Unemployment Claims figure, scheduled to be released at 13:30 GMT. Analysts expect the indicator to come in slightly higher than last week, which if true, may be a sign that the employment situation in the US is worsening and result in losses for the greenback during afternoon trading. That being said, traders will also want to pay attention to batch of euro-zone news during the morning session. If any of the data comes in below expectations, risk aversion may help the dollar against its main rivals.

EUR – German Manufacturing Data May Boost Euro

The euro saw upward movement against most of its main currency rivals yesterday, after positive British employment data led to risk taking in the marketplace. The EUR/USD advanced close to 70 pips during mid-day trading, eventually trading as high as 1.3353 before a slight downward correction brought the pair to 1.3340. Against the Japanese yen, the common-currency gained more than 100 pips during European trading to peak at 118.29.

Euro traders can anticipate volatility in the marketplace today, following the release of the German Flash Manufacturing PMI at 8:30 GMT. As the strongest economy in the EU, German indicators tend to have a significant impact on euro pairs. Analysts are expecting the manufacturing data to come in slightly higher than last month’s, which if true, may lead to additional gains for the euro during mid-day trading.

Gold – Gold Takes Losses amid Progress in US Debt Ceiling Talks

Gold prices increased by more than $4 an ounce during the first part of the day yesterday, following positive British employment data which led to risk taking in the marketplace. That being said, the precious metal was not able to maintain its gains, as signs of progress in talks between US lawmakers to raise the debt ceiling weakened demand among investors. Gold fell from a high of $1694.86 to $1688.90 toward the end of European trading.

Today, gold traders will want to pay attention to a batch of euro-zone news. If either the French or German Flash Manufacturing PMI comes in above their forecasted levels, risk taking could help gold recover yesterday’s losses.

Crude Oil – Oil Prices Stable Ahead of US Inventories Data

Crude oil was relatively stable throughout the day yesterday, as signs of progress in talks to increase the US debt ceiling kept prices within reach of a four-month high. The commodity traded as high as $96.89 during the mid-day session, before a slight downward correction brought prices to the $96.35 level.

Today, the US Crude Oil Inventories figure has the potential to impact oil prices. Analysts expect the indicator to come in at 2.8M, which if true, would represent a significant increase over last week, and may result in oil turning bearish during afternoon trading.

Technical News

EUR/USD

A bearish cross has recently formed on the weekly chart’s Slow Stochastic, indicating that a downward correction could take place in the coming days. This theory is supported by the Williams Percent Range on the same chart, which is currently in overbought territory. Opening short positions may be the smart choice for this pair.

GBP/USD

The Williams Percent Range on the weekly chart has crossed into oversold territory, indicating that an upward correction could occur in the near future. That being said, most other long-term technical indicators show this pair range trading, making a definitive trend hard to predict. Taking a wait and see approach may be the wise strategy until a clearer picture presents itself.

USD/JPY

The Relative Strength Index on the weekly chart has crossed into overbought territory, indicating that a downward correction could occur in the near future. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Opening short positions may be the wise choice for this pair.

USD/CHF

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

The Wild Card

USD/DKK

The Williams Percent Range on the daily chart has crossed over into oversold territory, indicating that an upward correction could occur in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bullish cross. Opening long positions may be the smart choice for forex traders, before possible upward movement takes place.

Forex Market Analysis provided by ForexYard.

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