Month: February 2013

By MoneyMorning.com.au

The name of infamous Wall Street investor Jim Chanos’s firm is Kynikos Associates.

Kynikos is a Greek word. It means cynic.

Chanos is a short seller. He tries to make money off stocks that go down in price. So he’s always on the lookout for businesses and industries heading for trouble, before that trouble is factored into share prices.

Chanos started his firm in 1985. He’s been shorting stocks for almost thirty years. So when he speaks, it’s worthwhile tuning in.

In 2009, Chanos warned of China’s credit-fuelled construction boom. He was shorting the companies in and around it.

It’s now 2013, and he isn’t changing his mind. Today’s Money Weekend will explore why…

Rumbles in China’s Economy

The Financial Times put the spotlight on China this week when it reported Chinese banks avoided a default by rolling over loans made to local governments. Here’s an excerpt:

‘Local governments borrowed heavily from banks to fuel China’s stimulus programme during the global financial crisis and are now struggling to generate the revenue to pay them back, a shortfall that could cast a shadow over Chinese economic growth.’

The ratings firm Standard & Poor’s also came out this week after finishing a study about investment spending. Think airports, highways and other infrastructure projects. They concluded China had the highest risk in the world of a severe correction.

China’s investment as a percentage of GDP is near 50%, much higher than in countries like Japan and the United Sates during their years of high growth. Like anything, you can have too much of a good thing.

The economics behind some of these projects are highly dubious, but they show up in GDP. They also fuel demand for commodities such as iron ore and therefore have a big impact on Australia.

Now this is interesting because it’s probably fair to say the market has turned much more bullish on Chinese growth in early 2013 than it was in the second half of last year.

You might remember there was a lot of political uncertainty around the change of Chinese leadership and confusion about whether the slowdown in China was ‘managed’ or not.

Here we are today and the S&P/ASX 200 is rallying close to 5000 points. And there has been nothing to rock the boat from official Chinese statistics release either.

But beyond the headline GDP figures in China lies a murky link between the central and local governments, the banking system and the big state-owned firms. China built its economy through this based on exports and investment.

That model has stopped working. The idea now is for China’s central planners to shift the economy away from this model and rebalance it towards consumption.

New Boss Same as Old Boss

That’s the idea, but has anything changed?

Since the global financial crisis China’s economy has been hanging on thanks to huge amounts of credit being pumped into the system. And so far the new leadership transition hasn’t changed anything.

The FT Alphaville blog headlined an article last week ‘China’s massive credit dependency’.

Here’ an excerpt:

‘China’s credit growth has been extraordinarily high in the past year – the government’s aggregate or “total social financing” measure, which includes some forms of non-bank finance, showed 23 per cent growth in 2012, compared to an 8.5 per cent contraction in 2011…When you compare it to the size and growth rate of the economy as a whole, the growth in credit is even more astounding. China now needs nearly 3Rmb of credit to generate 1Rmb of growth.’

If you were looking for a reason behind the 80% rally in iron ore since it dropped below US$100 in 2012, this is probably it. Why? Greg Canavan, editor of Sound Money. Sound Investments, says it’s mostly to do with the shadow banking system.

This is why he’s so wary of China’s economy right now. In his words:

‘It was the shadow banking system providing the credit for the boom. These are ‘wealth management products’, often distributed by the banks, which offer Chinese savers high rates of interest.

‘The funds are used to build railways or other forms of infrastructure. The underlying asset doesn’t produce enough income to pay the promised high interest, so the promoters use later investors funds’ to meet earlier investors’ demands. If that sounds like a Ponzi scheme it’s because it is. And at some point, it will all go pear shaped.’

Maybe it already is. The FT ran a story yesterday about ‘cash-strapped’ local governments asking the big steel mills for tax in advance! One problem: according to the article, last year profits at the steel mills dropped 98% from the previous year and losses reported by unprofitable mills increased more than sevenfold.

That’s one reason why Jim Chanos is still ‘short China’.

Still Leery on This Commodity

To be clear, Jim Chanos is not a ‘macro’ investor. He’s not making predictions about China as a whole.

According to this interview, he’s short the construction equipment companies, cement companies and property developers feeding the coastal real estate boom and the banks who have financed it. These are Chinese companies listed on the Hong Kong Stock Exchange.

But the catch for Aussie investors is the second way he says you can play this idea: the companies that ship raw materials into China for the construction industry.

This is not a new idea for him. Back in 2012 at the Grant’s Investment Conference in New York he said Aussie iron ore miner Fortescue Metals [ASX: FMG] was a ‘value trap’. In April 2012, Fortescue shares traded around $6.

This was before the big drop in the iron ore price that spooked the market and sent Fortescue shares down 50%. At that time, Chanos looked like he had nailed another big call.

Today, things look very different, especially for Fortescue Metals. It’s rallied strongly since September last year alongside iron ore to trade around $4.80.

But for investors Jim Chanos, at least, is still raising the red flag on iron ore.

Callum Newman
Editor, Money Weekend

PS. Don’t forget if you want to keep track of the latest things we’re reading and brief commentary on events that happen through the day, check out our Google+ page here or Kris Sayce’s here.

From the Port Phillip Publishing Library

Special Report: The Big Money Secret of Ironstone Mountain

Daily Reckoning: Economic News Just In: Ben Bernanke Linked to Global Warming

Money Morning: Make Sure You’ve Updated Your ‘Stock Insurance’ Policy

Pursuit of Happiness: The Bad Joke That Saved Your Freedom of Speech

By MoneyMorning.com.au

ENERGY

The shale gas boom has transformed the US economy. By 2030, integrated energy giant BP says the US will be energy independent and even a net exporter of energy.

But it’s not just the US where the shale story is taking off. We’ve followed the shale gas story on the Aussie market for the past two years in Australian Small-Cap Investigator. And the whole thing is now kicking off in earnest in the UK. In our Australian Small-Cap Investigator weekly update on Wednesday we referenced an article in the Register:

‘The government has given the go-ahead for further exploration of the UK’s shale gas reserves. Independent surveys suggest these reserves may yield more energy for the nation than North Sea oil.’

That’s a pretty big claim. But hold on there. Don’t write off North Sea oil just yet. PennEnergy reported this week:

‘Britain’s estimates of untapped resources in the North Sea have increased, leading to the approval of more offshore projects for 2013…

‘The source reported British Secretary of State for Energy and Climate Change, Ed Davey, announced the country could meet 70 percent of oil and gas demands until 2040 by exploring new offshore developments.’

Add together the resources from shale and North Sea oil and the UK could soon become energy independent again. So much for the claim that it will be an economic disaster if the UK leaves the European Union.

GOLD

It won’t surprise you to know that we work in an office full of gold bugs. Heck, we’re fond of gold too…although we don’t consider ourselves a gold bug.

Our old pal Dan Denning sent a chart around the office yesterday. It shows the ratio of gold to the S&P 500 index:

With the recent stock rally and the steady gold price, the S&P 500 is now nearing a ratio of 1:1. The high gold price and low stocks means the ratio has been low since 2008. But is it possible that we’ll see a breakout? Dan has overlaid a 200-day moving average (blue line). To our eye it looks as though that line is about to turn upwards.

That could be good news for stocks. If investors believe the economic recovery has arrived it could serve to push stocks even higher while the gold price stays relatively flat or even falls.

TECHNOLOGY

Earlier this week we placed a link on our Google+ page to what we can only describe as an extraordinary story. Yes, we know, people bandy around the word ‘extraordinary’ too much these days. But, this really is extraordinary. Here’s a clip from the article in the Wall Street Journal:

‘Scientists have stored audio and text on fragments of DNA and then retrieved them with near-perfect fidelity – a technique that eventually may provide a way to handle the overwhelming data of the digital age.

‘The scientists encoded in DNA – the recipe of life – an audio clip of Martin Luther King Jr.’s “I have a Dream” speech, a photograph, a copy of Francis Crick and James Watson’s famous “double helix” scientific paper on DNA from 1953 and Shakespeare’s 154 sonnets. They later were able to retrieve them with 99.99% accuracy.’

You can read the whole article here.

Those two paragraphs don’t do this technology justice. It’s mind blowing to think of the possibilities. And if you think this is pie-in-the-sky stuff with no commercial purpose, the scientist in charge of the project says that using DNA to store data could be economically viable within 10 years.

HEALTH

Eat more wild fish.

Or, grab a handful of Astaxanthin. According to Silicon Republic, Astaxanthin ‘has an antioxidant effect of 550 times that of vitamin E.’

Astaxanthin occurs naturally in fish. It’s the element in wild fish that gives it the pinkish colour. However, due to fish farming where Astaxanthin is absent, humans don’t get the benefit of this natural antioxidant.

Irish company Algae Health has received €1 million from AB Seed Fund to finance a project to produce Astaxanthin for sale to the consumer market as a supplement.

The article states:

‘Algae Health was set up in late 2009 and, following three years of R&D, developed its proprietary cultivation technology (patent pending). This technology enables the optimal control of the cultivation conditions, maximising yield, and allowing the process to happen at a far lower cost than traditional methods.’

We don’t know for sure, but we assume this is similar to spirulina. On a recent episode of Doomsday Preppers, a prepper (someone preparing to survive a specific catastrophic event) was cultivating spirulina as an emergency food source.

However, according to Wikipedia:

‘The U.S. National Library of Medicine stated that spirulina was no better than milk or meat as a protein source, and was approximately 30 times more expensive per gram.’

Arguably, cultivating spirulina in fish tanks is less labour intensive than rearing cattle for meat and milk. And you only need a vial of spirulina in order to cultivate a new supply. That makes it easier for preppers to transport, too.

But anyway, it just goes to show you that there’s always a lot happening in the health industry. It’s not just about cancer cures and diabetes treatments. It’s also about alternative medicines and treatments. If scientists can get these to work they can have just as important an impact on someone’s life as the drugs created by the big pharmaceutical companies.

MINING

It still pays to be in mining.

According to Australian Mining:

‘Despite falling commodity prices wiping close to $1 billion from Gina Rinehart’s fortune, new estimates show the mining magnate easily remains Australia’s richest person.’

The Forbes rich list values Ms Rinehart’s wealth at $16 billion.

Meanwhile, even though Fortescue Metals [ASX: FMG] chairman Andrew Forrest’s wealth dropped $480 million last year, he still has $4.6 billion to his name.

But the mining industry hasn’t been kind to everyone. As Australian Mining reports:

‘Nathan Tinkler was one of the hardest hit, with his position falling off the rich-list entirely after coming in at number 26 in 2011.

‘In 2011 Tinkler’s fortune was estimated to be worth around $800 million, but he is now being pursued by a range of creditors who claim he owes around $700 million.’

The Nathan Tinkler story appears to be a classic example of why we advise investors against over-borrowing. Using leverage is great when the market is going your way; it can magnify your returns. But it’s not so great when the market turns against you.

Use leverage, but use it carefully.

Cheers,
Kris

From the Archives…

Why the News Could Get Worse for Apple Shareholders
25-01-2013 – Kris Sayce

How to Play the EU Referendum for Profit
24-01-2013 – Kris Sayce

Here’s Why I’m Proudly Bullish About China’s Economy
23-01-2013 – Dr. Alex Cowie

How to Find Stocks for Troubled Times: Keep Scalable Businesses in Mind
22-01-2013 – Nick Hubble

Why It’s Still Not time to Buy the Japanese Stock Market
21-01-2013 – Murray Dawes

By The Sizemore Letter

Constellation Brands (NYSE:$STZ), the world’s largest publically-trading winery, took an absolute beating yesterday when the U.S. Department of Justice torpedoed the Grupo Modelo (OTC:$GPMCF) – Anheuser-Busch InBev (NYSE:$BUD) merger on anti-competitive grounds.

Kruk: Switched to whiskey.

Given the wide variety of alcoholic beverage choices, the government’s move seems a little absurd.  Yes, roughly 80% of all beer drunk in the United States is sold by just four mega-brewers.  But I hardly see this as being risky or detrimental to the wellbeing of American consumers.  It reminds me of a (perhaps apocryphal) quote from the baseball player John Kruk.  When told by his doctor that he needed to stop drinking so much beer, Kruk smiled and said he would switch to whiskey.

If beer became too expensive due to monopolistic pricing, U.S. consumers might do the same.

But whatever you think of the government’s decision, Constellation was the biggest loser here.  Under the planned merger, Constellation would have had exclusive distribution and marketing rights for Corona and Modelo’s other beer brands in the United States (Anheuser-Busch InBev would have acted as the supplier).

Constellation needed this.  As I wrote in July of last year when the deal was initially announced, Whiskey and Beer are Better Long-Term Bets than Wine.

While wine is more popular than ever among American drinkers, it’s not the best business to be in at the mass-market level.  Think about it.  Off the top of your head, how many beer brands can you name?  A dozen or more without even having to strain?

Now…how many wine labels can you name?

Unless you are a true connoisseur, you would have a hard time naming more than one or two.  Outside of the elite Château Lafite Rothschilds of the world, the vast majority of wines have very little in the way of name recognition.

As I wrote in July,“Outside of, say, Coca-Cola (NYSE: $KO), beer and spirits are probably the most recognizable and valuable brand names in existence.  Not surprisingly, premium beer and spirits businesses tend to enjoy high margins and high returns on equity relative to their peers. [As a case in point, Diageo (NYSE:$DEO) enjoys a return on equity roughly double that of Constellation.]

“Wine is a different story.  The attractiveness of a given vineyard varies from year to year, and few have national or international brand awareness.  Wine connoisseurs know their favorite vintages, but there is little brand loyalty at the mass-market level.  For a company of Constellation’s size, wine is a much harder business to operate.”

After yesterday’s 17% drubbing, Constellation trades for 15 times earnings and 2 times sales.  This is not expensive by today’s market standards, but it’s far from cheap.

Constellation Brands (NYSE:STZ)

Before the Modelo-Bud merger was announced last summer, Constellation was a $20 stock.  The merger announcement caused the stock to nearly double in the six months that followed.  So without Modelo, is Constellation a $20 stock again?

Probably not.  But without Modelo, it’s certainly not a $40 stock either.

I would recommend avoiding Constellation for now.   In the world of booze stocks, there are better values out there.  My favorite today?  Dutch megabrewer Heineken (OTC:$HEINY).

At 20 times earnings, Heineken is far from cheap.  But it’s one of the best options today for getting exposure to the rise of the emerging market consumer, and particularly the rise of the up-and-coming African middle class.

Disclosures: Sizemore Capital is long HEINY.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post Whiskey and Beer Still Better Long-Term Bets than Wine appeared first on Sizemore Insights.

By www.CentralBankNews.info 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 www.CentralBankNews.info      The Central Bank of the Dominican Republic (BCRD) held its key interest unchanged at 5.0 percent as inflation is forecast to remain within the central bank’s target range this year and in 2014.
    BCRD, which cut it benchmark Monetary Policy Reference (MPR) rate by 175 basis points in 2012, said its inflation target for 2013 is 5.0 percent, plus/minus one percentage point, and 4.5 percent for 2014, also with a one percentage point band.
    The economy of the Dominican Republic expanded by around 4 percent in 2012, above the average for Latin America, based on a moderate recovery in the second half of the year but still below trend, the central bank said.
    The Dominican Republic’s Gross Domestic Product rose by 3.9 percent in the third quarter, compared with a 3.8 percent growth rate in both the first and second quarters.
    The central bank said it expects the country’s production to remain below potential this year and then expand further in 2014 “supported by an improvement in private consumption and investment, as total credit recovers and boosts economic activity,” the bank said in a statement from Jan. 31.
    The inflation rate in the Dominican Republic rose slightly to 3.9 percent in December from November’s 3.7 percent and the impact on inflation from tax reform is estimated to be temporary so inflation will remain around the bank’s goal this year.

    www.CentralBankNews.info
   
   

London Gold Market Report
from Ben Traynor
BullionVault
Friday 1 February 2013, 07:00 EST

THE U.S. DOLLAR gold price recovered some of its losses from the previous day Friday, edging higher to $1666 an ounce by the end of the morning in London, while most stock markets also edged higher ahead of US nonfarm payrolls data due out 08.30 Washington, DC time.

A day earlier, gold dropped 1% during Thursday’s US session, in what one analyst describes as “a remarkable display of schizophrenic volatility”.

A few hours later there was “little buying on the physical side” in Friday’s Asian session according to one Hong Kong dealer quoted by newswire Reuters.

“There’s some buying from mainland China…but I think gold is a bit tired after it failed to break $1700 an ounce.”

European stock markets edged higher this morning, with exceptions in Italy and Spain. Spain’s IBEX 35 index extended recent losses and was down 1.4% on the day by lunchtime today, the first day of trading after a ban on short selling dating from last July came to an end yesterday. Spanish stocks have now erased their gains from January.

The S&P 500 by contrast has seen its best start to a year since 1997, rising 5.2% last month.

“Earnings are strong, the economies around the world are bottoming and valuations are attractive,” reckons Paul Zemsky, head of asset allocation at ING Investment Management in New York.

BNP Paribas today became the fifth big bank to follow Goldman Sachs and cut its 2013 gold price forecast by up to $100 per ounce.

The French bank’s analysts now believe gold will average $1790 per ounce this year.

Credit Suisse meantime published a note today entitled ‘Gold: The Beginning of the End of an Era’, arguing that the 2011 gold price peak could prove to have been the high “in this cycle” as the financial crisis grows less acute.

Like gold, silver also edged higher this morning, ticking above $31.40 an ounce, while other commodities were broadly flat.

China’s manufacturing sector meantime continued to expand in January, though at a slower rate than the month before, according to official purchasing managers’ index data published by Beijing Friday.

China’s official manufacturing PMI fell to 50.4 last month, down from 50.6 in December, with a figure above 50 indicating sector expansion.

HSBC’s manufacturing PMI by contrast rose to 52.3, up from 51.9 a month earlier, implying an accelerated growth rate. The HSBC PMI is more heavily weighted towards small and medium enterprises than the official PMI, which places greater emphasis on the views of purchasing managers at larger state-owned enterprises.

“Overall, I will put more weight on today’s official PMI, largely because the current recovery is still rather narrowly based,” says Li-Gang Liu, chief China economist at ANZ.

“We believe the state sector tends to benefit from this round recovery much more than the SME sector, a sector that tends to dominate the HSBC sample. The HSBC PMI also has a pattern of pro-cyclicality. When the markets are optimistic, the HSBC often becomes more so, and vice versa.”

Over in Europe, Germany’s manufacturing PMI rose from 46.0 in December to 49.8 last month, while for the Eurozone as a whole the manufacturing PMI rose from 46.1 to 47.9.

“Providing there are no further setbacks to the region’s debt crisis, these data add to the expectation that the Eurozone is on course to return to growth by mid-2013,” says Chris Williamson, chief economist at Markit, which produces the European PMI data.

In the UK meantime, manufacturing PMI fell last month to 50.8, down from 51.2 a month earlier. Similar PMI data for the US are released later today.

The US Senate Thursday approved legislation to extend the federal debt ceiling until May 19. The legislation now needs to be signed into law by President Obama.

The US Mint meantime reported a record monthly volume of silver American Eagle bullion coin sales for January. Just under 7.5 million ounces of the silver coins – which are produced specifically for investment purposes – were sold last month. Sales of gold American Eagle coins were their highest since July 2010 at 150,000 ounces.

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 can be found on Google+

(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.

Source: ForexYard

The euro saw a temporary downward correction during morning trading yesterday, following a worse than expected German retail sales figure that caused investors to shift their funds to safe-haven assets. That being said, the bearish movement was only temporary, and by the common currency had recouped virtually all of its losses by the afternoon session. As markets get ready to close for the weekend, all eyes are likely to be on today’s US Non-Farm Payrolls (NFP) figure, scheduled to be released at 13:30 GMT. As the most significant indicator on the forex calendar, traders can be sure that the NFP will generate significant market volatility.

Economic News

USD – Non-Farms Report Set to Generate Dollar Volatility

The US dollar saw temporary gains against its higher-yielding currency rivals yesterday, following the release of worse than expected euro-zone economic data. The GBP/USD fell more than 60 pips during early morning trading, eventually reaching as low as 1.5774, before bouncing back to the 1.5820 level during afternoon trading. Against the Japanese yen, the greenback advanced close to 30 pips during afternoon trading before peaking at 91.22, slightly below a recent 2 ½ year high.

Today, all eyes are likely to be on the US Non-Farm Employment Change figure, arguably the most important economic indicator on the forex calendar. Analysts expect today’s news to come in at 161K, slightly higher than last month’s 155K. A higher than expected result today is likely result in increased confidence in the US economic recovery, which may lead to gains for the dollar before markets close for the weekend. Conversely, if today’s news comes in below the forecasted level, the greenback could reverse its bullish trend against the JPY.

EUR – After Morning Losses, Euro Stages Bullish Recovery

The euro took losses during early morning trading yesterday, following a worse than expected German retail sales figure which led to doubts about the strength of the euro-zone economic recovery. The EUR/USD fell more than 40 pips during the first part of the day, eventually reaching as low as 1.3540, before an upward correction brought the pair back to the 1.3570 level, just below a 14-month high. Against the British pound, the common-currency spent the day fluctuating between 0.8557 and 0.887.

In addition to US employment data today, euro traders will also want to pay attention to several potentially significant EU economic indicators. Spanish and Italian manufacturing data, followed by the euro-zone unemployment rate, could all boost the euro during morning trading if they signal additional economic growth in the EU. Furthermore, the EUR/USD could see additional gains during afternoon trading if today’s NFP figure comes in below expectations.

Gold – Gold Prices Tumble amid Signs of Economic Growth

Signs of global economic growth yesterday, including a better than expected German Unemployment Change figure, caused investors to shift their funds away from safe-haven assets during European trading yesterday. As a result, gold prices tumbled more than $18 an ounce, eventually reaching as low as $1661.19, before bouncing back to the $1664 level.

Today, gold traders will want to pay careful attention to the US Non-Farm Payrolls figure, set to be released at 13:30 GMT. A better than expected figure is likely to generate further optimism in the global economic recovery, which may lead to additional losses for gold during afternoon trading.

Crude Oil – Crude Oil Takes Losses Following US Unemployment Data

The price of crude oil turned bearish during afternoon trading yesterday, following the release of a higher than expected US Unemployment Claims figure which led to concerns that American demand for oil could decrease in the near future. The commodity fell slightly less than $1 a barrel, eventually reaching as low as $96.82 before bouncing back to $97.25.

Turning to today, the US Non-Farm Payrolls figure is likely to have the biggest impact on oil prices before markets close for the weekend. A worse than expected figure is likely to lead to additional concerns regarding future American demand for oil, which may lead to another drop in prices.

Technical News

EUR/USD

A bearish cross is close to forming on the weekly chart’s Slow Stochastic, indicating that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently approaching overbought territory. Opening short positions may be the best option for this pair.

GBP/USD

The Williams Percent Range on the weekly chart has fallen in into oversold territory, signaling that an upward correction could occur in the near future. This theory is supported by the Slow Stochastic on the daily chart, which is close to forming a bullish cross. Opening long positions may be the best choice for traders.

USD/JPY

The Relative Strength Index on the weekly chart is currently overbought territory, indicating that a downward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Opening short positions may be the best choice for traders.

USD/CHF

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

The Wild Card

EUR/NOK

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

The EUR/USD shot up to a 15-month high during the Asian session last night, as confidence in the euro-zone economic recovery continued to generate risk taking among investors. Meanwhile, the Japanese yen extended its bearish trend amid speculations regarding future aggressive monetary easing from the Bank of Japan. The USD/JPY gained close to 60 pips to trade as high as 92.28.

Gold and crude oil were largely range trading throughout the overnight session, ahead of key US employment data today.

Main News for Today

US Non-Farm Employment Change- 13:30 GMT
• The Non-Farm figure is widely considered the most important economic indicator on the forex calendar
• If today’s news comes in below the forecasted 161K, investor confidence in the US economic recovery may go down, which would result in losses for the US dollar
• Additionally, if today’s news disappoints, gold prices may be able to stage a bullish correction before markets close for the weekend

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.