Month: February 2014

AUDUSD broke below the lower line of the price channel on 4-hour chart. However, the price action in the trading range between 0.8906 and 0.9080 is likely consolidation of the uptrend from 0.8660, as long as 0.8906 support holds, another rise towards 0.9400 could be expected. On the downside, a breakdown below 0.8906 support will indicate that the upward movement from 0.8660 had completed at 0.9080 already, then the following downward movement could bring price to 0.8500 zone.

Provided by ForexCycle.com

By John Mauldin

Janet Yellen, the new Fed chair, has her admirers and her detractors. One unabashed admirer is my good friend David Zervos, Jefferies’ chief market strategist, who during the past several months has taken to hollering “Dammit Janet, I love you!” He was at it again yesterday:

Last week was certainly a week for the lovers. Q’s broke to new cyclical highs, spoos moved to within just a few points of all time record highs, and Friday was St. Valentine’s day! It was all about LOVE, LOVE and LOVE! But for those folks still hiding out in the HATER camp – those who probably spent Friday evening watching Blue Valentine, War of the Roses or Scenes from Marriage – last week must have felt more like a St Valentine’s day massacre. These folks, and their econometrically deceitful overlay charts of 1927-1929 vs 2012-2014, were shredded by our new goddess of pleasure, beauty, love and of course easy money – Janet “Aphrodite” Yellen. She gave the haters a taste of the Hippolyos treatment!! And once again it was a triumph of love over hate!!

Janet delivered the perfect message for markets. Her focus on underemployment was unquestionable. Her commitment to eradicate joblessness via the power of monetary policy was also unwavering. And for anyone who thought she would be hawkish, or even middle of the road, this speech was a wake up call. The reality is that we are dealing with a die-hard Keynesian dove! It’s really not that complicated.

That said some folks seem to think the rally was mostly a function of the data. Weak ISM, payrolls, retail sales and IP were apparently the drivers of a 5 percent rally off the lows. Pullease!! That is preposterous. The reality is the market was jittery (and downright freaky) into the Fed chairmanship transition. Risk was pared back by folks who began to incorrectly price in a surprise from Janet! And leverage induced illiquidity created an overshoot to the downside. Weak hands sold, and all the usual haters came out of their bunkers to once again warn of impending doom. But as per the norm, their day in the sun was short-lived. The dust has settled and the haters lost again! Love is in the air my friends, and we owe a great deal of thanks to our new goddess of easy money. Dammit Janet, I love you! Good luck trading.

Take note of this phrase: “the new Goddess of Easy Money.” It is now in the lexicon. I wonder how many virgins will be sacrificed to this new deity. (Just kidding, Janet!)

Now, David is not above having a bit of fun in his always-entertaining commentaries, but for a somewhat more substantial take on the opening of the Yellen era, I suggest we turn to John Hussman. I wouldn’t call John a Yellen detractor, exactly, but he is certainly inclined to take the Fed down a notch or three. Check out these zingers:

While we all would like to see greater job creation and economic growth, there is little demonstrated cause-and-effect relationship between the Fed’s actions and the outcomes it seeks, other than provoking speculation in risk-assets by depriving investors of safe yield….

[T]he “dual mandate” of the Federal Reserve is much like charging the National Weather Service to balance the frequency of sunshine versus rainfall….

The FOMC should be slow to conclude that monetary policy is what ended the credit crisis…. The philosophy seems to be “If an unprecedented amount of ineffective intervention is not sufficient, one must always do more.”

At present, U.S. equity valuations are about double their norms, based on historically reliable measures.

The primary beneficiary of QE has been equity prices, where valuations are strenuously elevated. QE essentially robs the elderly and risk-averse of income, and encourages a speculative reach for yield.

I think John would agree with me that the current economic theory driving our monetary policy is both inadequate and outdated. Is it any wonder that he concludes that monetary policy as it is practiced today is simply part of the problem? It is as if we are trying to fly a 747 using the knowledge and skills we learned while driving a car, and all the while looking in the rearview mirror. (Do those things have rearview mirrors?)

You can find John’s “Weekly Market Comment” and other valuable analysis at the Hussman Funds website.

This weekend I will be writing about some of the recent analysis concerning income inequality. I’ve actually been thinking a lot about it in conjunction with the rise of the Age of Transformation. I think about it a lot, most personally in terms of my own seven kids. I’m not so concerned about income inequality as I am about income opportunity. It seems to me that we have an education system that was designed to meet the needs of the US and the Second Industrial Revolution that was grown atop the industrial British Empire.

We are simply not preparing most of our children for the challenges that lie ahead. Many of course are going to do quite well, but that will be in spite of the educational process, not because of it. The complete higher-academic and bureaucratic capture of the educational process is as much at the root of income inequality as the other usual suspects are. There is more than one cause, and another root is the manipulation of capitalism and free markets by vested interests.

But that’s all too serious, because now it’s time to hit the send button and think hard about an Italian dinner and the Miami Heat being in town. Even if Lebron James is on the other team, he is simply a pleasure to watch. Lebron, you should’ve come to Dallas to play with Dirk!

Your getting ready to sit courtside analyst,

John Mauldin, Editor
Outside the Box[email protected]

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Notes to the FOMC

John P. Hussman, Ph.D.

The following are a few observations regarding Dr. Yellen’s testimony to Congress. The objective is to broaden the discourse with alternative views and evidence, not to disparage FOMC members. We should all hope that Dr. Yellen does well in what can be expected to be a challenging position in the coming years.

1. While we all would like to see greater job creation and economic growth, there is little demonstrated cause-and-effect relationship between the Fed’s actions and the outcomes it seeks, other than provoking speculation in risk-assets by depriving investors of safe yield. That’s essentially the same M.O. that got us into the housing crisis: yield-starved investors plowing money into mortgage-backed securities, and Wall Street scrambling to create “product” by lending to anyone with a pulse. To suggest that fresh economic weakness might justify further efforts at quantitative easing is to assume a cause-and-effect link that is unreliable, if evident at all, and to overlook the already elevated risks.

2. In this context, the “dual mandate” of the Federal Reserve is much like charging the National Weather Service to balance the frequency of sunshine versus rainfall. If Congress was to require the Federal Reserve to change itself into a butterfly, it would not be the fault of the Federal Reserve to miss that objective. Moreover, what is absent from nearly every reference to the dual mandate is the phrase “long run” that is repeatedly included in that mandate. It seems probable that the cyclical response to economic weakness following the 2000-2001 recession – suppressing safe yields in a way that encouraged yield-seeking and housing speculation – was largely responsible for present, much longer-term difficulties.

3. The FOMC should be slow to conclude that monetary policy is what ended the credit crisis. The main concern during that period was the risk of widespread bank insolvency, resulting from asset losses that were wiping out the razor-thin capital levels at banks. In the first weeks of March 2009, in response to Congressional pressure, the Financial Accounting Standards Board changed accounting standards (FAS 157) to allow “significant judgment” in the valuation of assets, instead of valuing them at market prices. That change coincided precisely with the low in the financial markets and the turn in leading economic measures. By overestimating the impact of its actions, the FOMC may underestimate the risks. The philosophy seems to be “If an unprecedented amount of ineffective intervention is not sufficient, one must always do more.”

4. At present, excess reserves in the U.S. banking system amount to $2.4 trillion – more than double the total amount of demand deposits in the U.S. banking system, far more than all commercial and industrial loans combined, and 25% of total deposits in U.S. banks. Short term interest rates have averaged less than 10 basis points since late-2009, when the Fed’s balance sheet $2 trillion smaller. Based on the tight relationship between monetary base / nominal GDP and short-term interest rates, it is evident that even an immediate and persistent reduction in the Federal Reserve’s balance sheet of $20-25 billion per month would be unlikely to result in even 1% Treasury bill rates until 2020, absent much higher interest on reserves. The FOMC has done what it can – probably too much. A focus on the potential risks of equity leverage (where NYSE margin debt has surged to a record and the highest ratio of GDP in history aside from the March 2000 market peak), covenant lite lending, and other speculative outcomes should be high on the priorities of the FOMC.

5. Dr. Yellen suggests that equity valuations are not “in bubble territory, or outside of normal historical ranges.” The historical record begs to differ on this. The first chart below reviews a variety of reliable valuation measures relative to their historical norms. The second shows the relationship of these measures with actual subsequent 10-year equity returns. With regard to alternate measures of valuation such as price/unadjusted forward operating earnings, or various “equity risk premium” models, it would be appropriate for the FOMC to estimate the relationship between those measures and actual subsequent market returns. Having done this, the spoiler alert is that these methods do not perform very well. In contrast, the correlation between the measures below and actual subsequent 7-10 year equity returns approaches 90%. At present, U.S. equity valuations are about double their norms, based on historically reliable measures.

The chart below shows how these measures are related with actual subsequent 10-year total returns in the S&P 500. The specific calculations are detailed in a variety of prior weekly comments (the price / revenue and Tobin’s Q models are straightforward variants of the others).

6. Finally, when confronted with the difficulties that quantitative easing has posed for individuals on fixed incomes, Dr. Yellen asserted that interest rates are low not only because of Fed policy, but because of generally lackluster economic conditions. This argument is difficult to support, because there is an extraordinarily close relationship between the level of short-term interest rates and quantity of monetary base per dollar of nominal GDP (see the chart below). With regard to long-term interest rates, it’s notable that the 10-year Treasury yield is actually higher than when QE2 was initiated in 2010, and is also higher than the weighted average yield at which the Federal Reserve has accumulated its holdings. In order to restore even 1% Treasury bill yields without paying enormous interest on reserves, the Fed would not only have to taper its purchases, but actively contract its balance sheet by more than $1.5 trillion.

The primary beneficiary of QE has been equity prices, where valuations are strenuously elevated. QE essentially robs the elderly and risk-averse of income, and encourages a speculative reach for yield. Importantly, one should not equate elevated stock prices with aggregate “wealth” (as higher current prices are associated with lower future returns, but little change in long-term cash flows or final purchasing power). Rather, the effect of QE is to give investors the illusion that they are wealthier than they really are. It is certainly possible for any individual investor to realize wealth from an overvalued security by selling it, but this requires another investor to buy that overvalued security. The wealth of the seller is obtained by redistributing that wealth from the buyer. The constant hope is to encourage a trickle-down effect on spending that, in any event, is unsupported by a century of economic evidence.

The risks of continuing the recent policy course have accelerated far beyond the potential for benefit. The Fed is right to wind it down, and as it does so, the FOMC should focus on addressing the potential fallout from speculative losses that to a large degree are now unavoidable. Ultimately, the U.S. economy will be best served by a return to capital markets that allocate scarce savings toward productive investment rather than speculative activity. The transition to that environment will pose cyclical challenges, but is well worth achieving if the U.S. economy is to escape the grip of what is now more than 15 years of Fed-enabled capital misallocation.

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By MoneyMorning.com.au

A funny thing happened in the stock market last year.

It was the first time we can remember it happening.

In fact, it was so rare we’re not sure it will happen again…or not for a long time anyway.

What was it that was so strange…?

It was the fact that large blue-chip stocks led the market higher rather than small-cap stocks.

That may not seem like such a big deal, but it had an important impact on stock prices last year, and could have an even bigger impact on stock prices this year.

Here’s why…

No Choice But to Buy Income

Normally during the beginning phase of a stock market rally, it’s the small-cap stocks that move first. There’s a simple reason for that.

Small-cap investors tend to be some of the biggest risk-takers in investing. Small-cap investors buy the kind of stocks most investors would never touch.

So when the market falls and looks ready for a rebound it’s no surprise that big risk-taking small-cap investors are among the first to look for bargains.

And because small-cap stocks have less volume (meaning fewer shares trade each day) than blue-chip stocks, it means small-cap stocks can rise in big moves quickly.

That’s how things normally work. But it didn’t work like that from late 2012 through to last year. In fact, the opposite happened. There was a simple reason for that – dividend stocks.

Rather than surge into risky small-cap stocks, investors had more important things on their mind – low interest rates. With the Reserve Bank of Australia (RBA) cutting rates to record lows, many investors who rely on cash or term deposits had no choice but to buy dividend-paying shares.

The impact of the demand for shares was that it drove up share prices. In many cases investors were able to get better capital growth from dividend stocks than they could from growth stocks.

In that environment it was no wonder small-cap stocks performed so poorly.

But that’s changing.

More Than Just Miners

The RBA has indicated it’s quite happy with where interest rates are today, thank you very much. That means you can’t expect to get the same kind of rocket-fuelled growth from boring old income stocks any more (unless the Aussie economy really takes off and company earnings improve more than the market expects).

That’s why we see cash starting to flow towards growth stocks. And the biggest beneficiary of a flow towards growth stocks should be small-cap stocks.

Sounds easy, right? Find a small-cap stock and put some money on it. Well, it’s not quite that easy. There are just under 2,000 stocks listed on the ASX. Of those, you could easily classify 1,800 of them as small-cap stocks.

But it’s not just the number, it’s the diversity.

When most people think of small-cap stocks they think of mining stocks – gold miners, iron ore miners, copper miners.

The truth is that there is much more than that, as small-cap analyst Tim Dohrmann would be only too happy to tell you. It all depends on the risks you’re prepared to take and the type of companies you’re prepared to invest in.

So, where should you look to invest, and which sectors are our top picks for the next three years?

Tim gave you some insight into his favourite small-cap sectors a few weeks ago. But in the interests of giving you a wider choice, here are our top sector ideas for this year.

First, we’d suggest you look at some of the quality low-risk small-cap stocks (remember this is relative, all small-cap stocks are higher risk than blue-chip stocks). You could look at one of the conservatively leveraged listed property trusts.

We like one in particular that we’ve had on the Australian Small-Cap Investigator buy list for nearly three years. It’s doing a nice job of producing a steady income and a bit of growth too.

Then there are the listed food stocks. A couple of our favourite plays are current Australian Small-Cap Investigator open recommendations, as are four small-cap non-bank lenders and finance companies.

China’s Boost for Small-cap Stocks

The great thing about these stocks is for the most part they’re profitable companies. Even better is the fact that many of them pay a dividend with the potential for dividend growth.

That may surprise you. We know it surprises a lot of investors to find out that many Aussie small-cap stocks are profitable, let alone that some of them pay a dividend.

But for many investors, small-cap stock investing is about one thing – speculation. That’s why we also suggest you add some ‘spice’ to your small-cap portfolio too. But even there you don’t just have to limit your small-cap portfolio to mining stocks.

Few realise it, but the Aussie market is home to some of the most exciting and innovative biotech and tech stocks in the world. Sure, the Aussie market can’t compete with NASDAQ in terms of the number of opportunities, but in terms of quality, the Aussie market is right up there.

Finally, remember that you’re investing in the Aussie market. That means you should invest in small-cap resource stocks. Australia has a huge comparative advantage in the resource sector due to the close proximity to China.

Whatever you may have heard in the news, there’s no doubt that China will continue to demand resources such as iron ore, copper and bauxite. We’re confident in that view because if China maintains its current growth rate above 7%, its economy will double in size within the next nine years.

That’s an opportunity Aussie investors shouldn’t miss. It may not be the last stock market boom you’ll see in your lifetime, but if China continues to grow as much as the forecasts suggest, it stands to be one of the best booms you’ll ever see. And one of the best ways to capitalise on that boom could well be in Aussie small-cap stocks.

Cheers,
Kris+

Special Report: 2014 Predicted

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By MoneyMorning.com.au

By MoneyMorning.com.au

There’s a little known fact about crypto-currencies. Most people don’t realise they’re part of an entirely new global financial system, the ‘Cryptoconomy‘.

What If I were to tell you that there are 102 different crypto-currencies? And that around two weeks ago there were only 86? Their market caps range from $7.6 billion (Bitcoin) to $21,161 (RapidCoin). And then, just to make things even more interesting, 24 hour price fluctuations range from +253.19% to -26.74%.

On the 5th of February a new crypto-currency launched. Within the week MaxCoin had a market cap of $6.7 million. I’ve actually watched its market cap rise by $1 million in the last few hours…

Let me run you through a few of the crypto-currencies that are now available and exchangeable with ‘traditional money’. Of course there’s Bitcoin. Then there’s Ripples, the only other crypto-currency to exceed a $1 billion market cap. Then there’s Dogecoin, Quark, Vertcoin, SexCoin (I’m not joking) and…Unobtanium. These are just a few of the growing list.

With this many crypto-currencies, the billion dollar question is what does it all mean?

I’m going to set out three factors that answer that question, and explain why the new cryptoconomy is here to stay.

Factor #1 Bitcoin – the Big Bang of Crypto-currencies

You can attribute this explosion in crypto-currencies to Bitcoin. Bitcoin is the first crypto-currency; it’s the ‘Big Bang’. Bitcoin’s success has led to an entire universe of crypto-currency.

Bitcoin started because of the GFC. It’s an alternative medium of exchange based solely over the internet. Some call it a currency, some call it a digital commodity, some call it an investment. In reality it is – and isn’t – all of those at once.

It’s like nothing else the world has ever seen. And regulators and governments across the globe are struggling to make heads or tails of it.

Russia says Bitcoin is illegal, the US is looking to regulate it, and Norway has said it’s not real ‘money’. Meanwhile Bitcoin exchanges are being frozen and hacked while the price bounces around from $1,000 to $200 and everywhere in between. This morning it’s US$253, a long way from the peak of US$1,203 late last year.

No wonder people are confused.

Bitcoin gets a lot of media attention. Every major rise or fall is on the homepages of the Wall Street Journal, Bloomberg and the BBC. And both the positive and negative news make the price go up and down. It’s a bit of a self-fulfilling prophecy from time to time.

Regardless of the day to day insanity of Bitcoin, there’s a bigger picture in play. And that’s where the 101 other sizable crypto-currencies come into play. With any new kind of system, there has to be a pioneer. And in the case of the cryptoconomy, Bitcoin is that pioneer.

Factor #2 – The Rise of The Crowd

A reasonably important invention called the internet has completely changed everything. Its ability to connect everyone around the world is possibly the most influential technology ever.

And because of this connectivity, communities – ‘crowds’ – have grown all over the world. These crowds now place greater trust in each other than they do in any bank or government.

The evidence of this is in the success of companies like Zopa, SocietyOne and Lending Club. These are companies built on networks of people. The term used online is ‘peers’. And in this particular case people use the crowd to source loans from each other. Instead of going to banks, people are now getting loans from the crowd.

Then there’s CurrencyFair, MidPoint and TransferWise. These are all currency exchanges. You use them to exchange money. Except rather than getting stung by banks with margins and fees, they’re low cost, based online and also use peer-to-peer networks.

This explosion of peer-to-peer networks is possibly the most influential trend of the current decade.

It’s a concept of technology driven networks destabilising old, outdated bureaucratic systems.

You also see it with companies like AirBnb, Uber and AirTasker. They all use expanded, technology driven, social networks to connect online to get things done.

I personally use many of them. If I want a taxi, Uber is faster, safer and easier than most cabs (certainly the case in Melbourne). If I want accommodation anywhere in the world I turn to AirBnb. It offers simple, easy and affordable accommodation. And if I want to exchange AUD for GBP then I can do so with CurrencyFair. It’s cheaper, faster and easier than any of the Aussie banks.

In effect the internet has allowed people to regain power. Now more than ever we all have the ability to use the digital world to get things done. But that’s not all…

Factor #3 – The Financial Identity Crisis

The world has lost faith in banking systems around the world. In fact the entire global financial system looks and feels defunct. People don’t trust central banks, let alone the banks they have their hard earned savings sitting in day to day.

The whole financial system is suffering from an enormous identity crisis. Banks want to be tech companies. Why? Because that’s who we trust these days. Banks lost our trust about six years ago, and they never got it back.

The GFC crippled the world. It also crippled confidence in banks, central banks and governments. The effect is still rippling around the world. Global economies are in a perilous state and have been for a number of years.

People simply don’t trust that their money is secure…anywhere.

The banks don’t help themselves either. In September last year I attended one of the world’s biggest banking and finance conferences in the world, SIBOS. Held in Dubai, the likes of Barclays, CommBank, Wells Fargo and JP Morgan were there.

One of the clear takeaways from the conference was major banks don’t seriously appreciate the state they’re in. Financially some of them may have plenty of capital to be secure. But over the next 10 to 20 years they’re going to suffer from a bigger problem; having no customers.

I’m from generation Y, the beginning of a completely tech-dominated demographic. And each subsequent generation after Y is going to be more tech-savvy than the last.

Gen Y and subsequent generations are an enormous and growing consumer base. Banks need us as customers in the coming years, or they’ll die.

The interesting part is the lack of trust in banks, government and central banks.

The bank down the street is a necessity for now, but soon enough it won’t be. I have greater confidence in Amazon and PayPal than I do Lloyd’s or CommBank. And I can confidently say almost anyone born in the 1990s, 2000s and 2010s will have a similar feeling.

As each generation engages more with the technology available they start to drift away from the ‘traditional’ methods of the previous century. As mentioned before, what’s the point of a bank if you can store cash in an encrypted wallet, get a loan from the crowd, pay for goods online or even automatically with an app on your phone. What need is there for cash, cards…banks?

The Sum of All Parts Equals The Cryptoconomy

And these three factors come to a head with the current explosion of crypto-currency. If anything it’s the final piece of the puzzle for a whole new global economic system.

If you take the creation of Bitcoin, the rise of peer-to-peer and the great financial identity crisis, you get a perfect storm.

Now anyone with an understanding of cryptography and computer programming can ‘create’ their own unit of currency. Not only are these new crypto-currencies popping up everywhere, people are placing value in them.

Think about paper money, gold, and crypto-currencies. On the surface they’re all very different. But as money, or a store of wealth they’re all effectively the same thing. By that I mean the only value in each of them is what people believe their value to be.

If I place greater value in Bitcoin than gold, then that’s worth more to me. And if an entire community places greater value in Bitcoin than gold, then the value is even larger. And if the whole world places more value in it…you get the picture.

And that’s what’s happening now. People, peers – the crowd is placing greater value in these crypto-currencies than the paper money that sits in your wallet. As the community grows, so does the value attributed to these currencies.

Now the big problem in the short term is the saturation of new crypto-currencies. Too many varieties dilute the importance of the whole cryptoconomy.

However, many of them will die a quick and painless death. Security and safety issues will be the end of many. Government intervention and regulation might slow down others.

But crypto-currencies and the bigger cryptoconomy is here to stay. More and more merchants are accepting them as payment every day. All it takes is for an Amazon, Apple or Google to accept a crypto-currency for it to really take off.

20 years ago Bitcoin wouldn’t have worked. None of these crypto-currencies would have. The connected network wasn’t particularly dominant. There was no great global crisis. But now the perfect storm has arrived and the world is ready and desperate for a new, better economy.

The Cryptoconomy has arrived. It’s early days, but as it flourishes and simply becomes a way of life you’ll look back and wonder why anyone ever doubted it.

Regards,
Sam Volkering
Editor, Tech Insider

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By MoneyMorning.com.au

Source: Kevin Michael Grace of The Gold Report  (2/19/14)

http://www.theaureport.com/pub/na/supply-and-demand-key-to-base-metals-success-adam-low

Adam Low of Raymond James believes that the outlook is excellent for zinc, good for copper and neutral for iron ore. In this interview with The Gold Report, he argues that it comes down to supply and demand. Copper supply may soon lag demand, and zinc demand, which is increasing steadily, will soon face a 10% decline in supply. Low suggests eight miners that should benefit from providing the metals the global economy will need to support future growth.

The Gold Report: Your 2014 prognosis for industrial metals is largely positive, correct?

Adam Low: Yes, although our view is not universal. We are most positive on copper and zinc, somewhat less enthusiastic about nickel. We’re fairly neutral on iron ore, although we do expect a bit of softening in iron ore prices.

TGR: Why do you like zinc?

AL: We are starting to see fundamental changes occurring in the market. This is a supply story. Zinc has been an unloved metal for decades. As a result, there has been very little investment, which means that six major mines in operation for decades have or will soon end production.

The first two, in Canada, closed in 2013. The next major shut down, scheduled for mid-2015, is MMG Inc.’s (1208:HK) Century mine in Australia, the world’s second-largest zinc mine.

TGR: How much global supply will be lost as a result?

AL: About 10%.

TGR: So prices will rise?

AL: Yes. Visible inventories on the London Metals Exchange, as well as on the Shanghai Futures Exchange, are down about 30% over the last year. And zinc demand is increasing steadily. There are some suggestions that we have a small zinc deficit already.

TGR: What are the supply and demand fundamentals in copper?

AL: I’d characterize the copper market as being infected with “short-termism.” Mine supply grew quite spectacularly in 2013: between 6% and 7%. How sustainable is that growth? In a couple of years, we could easily have the same problem we had a decade ago, when mine supply lagged behind demand.

TGR: Why would this happen?

AL: One-third of global copper supply comes from Chile. This country is increasingly constrained by power and water supplies; labor rates are rising as well. Chile’s state-owned copper enterprise, the Corporación Nacional del Cobre de Chile (CODELCO), produces about one-tenth of global copper, and it requires something on the order of $20–27 billion ($20–27B) in reinvestment over the next five or six years in order to maintain both current production and grow its production base. That will be quite difficult.

TGR: Why are you less enthusiastic about nickel?

AL: In the long term, we remain skeptical about that market. Indonesia, one of the world’s largest nickel miners, has implemented a ban on exports of raw ore, which curtailed a major source of global supply. Nevertheless, nickel has abundant visible inventories. It also has growing supply from long-beleaguered laterite projects now finally coming to fruition: Ambatovy, Koniambo and Onça Puma.

TGR: Why are iron ore prices softening?

AL: We expect supply growth from mines to outweigh demand growth, particularly as major mines start up in Australia and Brazil. At current prices, the industry is making phenomenal margins, more than 100%. At lower prices, companies at the high end of the cost curve will struggle, but the others should continue to do very well.

TGR: To what extent are higher base metal prices dependent on positive global economic news?

AL: Growth is a key factor. The U.S. economy appears to have improved, although I’m a little bit skeptical about just how robust or sustainable this growth is, especially now that the Federal Reserve has decided to reduce its bond buying.

TGR: How do you view the short-term economic prospects of China and Europe?

AL: In Europe, the latest purchasing manufacturers’ index is at its best since 2011. We are beginning to see some resurgence from some of the weakest economies, such as Greece. And Germany still looks good. Even so, I don’t think we can count on Europe being the key driver for world economic growth quite yet.

TGR: And China?

AL: China is still growing and from a larger base. So while its relative growth may be less impressive than it was, its absolute growth is still quite extraordinary. Any industrialized Western nation would be incredibly envious of “only” 6–7% GDP growth per year.

TGR: There is a growing concern that the equities markets are overheated, particularly with the Fed tapering quantitative easing. If there is a significant correction, will base metals equities follow suit, or could we see instead a flight to safety in metals?

AL: If there is a significant correction, we could see base metals equities follow suit, even though they didn’t enjoy the upside the rest of the market did. In the longer term, the widening gap between the growing demand and the dwindling supply of many base metals should spark a resurgence of investor interest in this sector.

TGR: Will base metals equities continue to lag prices in 2014?

AL: This trend should begin to correct. Base metals prices have been quite steady over the last year despite headlines that have generated fear and volatility. This steady price environment should provide investors with greater comfort about metals prices, which should, in turn, lead to greater confidence in investing in the equities.

TGR: What are Raymond James’ top base metals picks for 2014?

AL: In copper, our preferred stocks are Capstone Mining Corp. (CS:TSX), First Quantum Minerals Ltd. (FM:TSX; FQM:LSE), Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) and Rio Alto Mining Ltd. (RIO:TSX.V; RIO:BVL).

In zinc, Trevali Mining Corp. (TV:TSX; TREVF:OTCQX; TV:BVL), Nevsun and Lundin Mining Corp. (LUN:TSX).

In iron ore, Labrador Iron Ore Royalty Corporation (LIF.UN:TSX) and Alderon Iron Ore Corp. (ADV:TSX; AXX:NYSE.MKT).

TGR: First Quantum has announced production estimates for its Cobre Panama copper project significantly higher than those of previous owner Inmet Mining Corp. (IMN:TSX). Will this allay fears over its cost?

AL: The new Cobre Panama capital expenditure (capex) is $6.4B, only about 4% higher than Inmet’s former guidance. It has projected a design rate of 70 million tons (70 Mt)/year ore being processed versus Inmet’s 55 Mt/year. It is also projecting a higher throughput rate. So the capex is slightly higher, but the cash flows to be generated from the mine have been increased significantly.

Given the size of this project and the inflationary nature of this industry, the market has taken the view that Cobre Panama is actually very well managed.

TGR: When will Cobre Panama begin production?

AL: My colleague Alex Terentiew covers First Quantum, and he’s forecasting 2017–2018.

TGR: To what extent is the company’s future leveraged to Cobre Panama?

AL: First Quantum is now a fairly well-diversified company. It has done numerous acquisitions recently, and it has a base of operations that includes Australia, Africa, Europe and South America. Cobre Panama is certainly its largest growth project but not its only growth project; it has many other mines generating cash flow.

TGR: What distinguishes Cobre Panama from Barrick Gold Corp.’s (ABX:TSX; ABX:NYSE) Pascua Lama white elephant?

AL: First Quantum has a phenomenal record of executing major projects, including those that other companies have stumbled on. For instance, the Ravensthorpe nickel mine in Australia, which BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK), the world’s largest mining company, struggled with for many years. First Quantum bought it and got it operating at the rates it promised.

Unlike Barrick, First Quantum does much of its engineering and construction in-house. It uses teams it has used multiple times for projects around the world. It takes lessons from previous successes and replicates them elsewhere. It leverages a vast amount of experience and thus contains its costs.

TGR: What’s your rating for First Quantum?

AL: We have an Outperform rating and a $25 target price.

TGR: Nevsun has transitioned its Bisha mine in Eritrea from gold to copper. Has that been successful?

AL: Very much so. Bisha is a polymetallic volcanogenic massive sulfide deposit that had a gold oxide-rich cap. Nevsun was fortunate to produce that gold when prices were at their peak. It had a very successful commissioning period with the new copper plant in late 2013, with production coming in near the high end of its guidance and exceeding our estimates. It has already declared commercial production of copper.

TGR: And Nevsun pays a dividend of $0.07/share.

AL: Actually, it’s $0.07 twice annually, so you’re actually getting $0.14/year.

TGR: Why do you say that Nevsun trades at a significant discount?

AL: It trades at a significant discount relative to its peer group. Its valuation is cheaper based on key valuation metrics: price/cash flow, price/net asset value (NAV); enterprise value/earnings before interest, taxes, depreciation and amortization or price/earnings.

TGR: What explains this discount?

AL: Two key factors. First, country risk. Bisha is located in Eritrea, which suffers from a perception problem. I’ve been to Eritrea twice, and I’ve been impressed, both with Nevsun’s operation and its level of cooperation with the government, a 40% partner in Bisha.

Second, a mergers and acquisitions (M&A) overhang. This is probably a larger factor right now than geopolitical risk. Nevsun has about $300 million ($300M) in cash, no debt and it’s a one-asset company. This makes it a likely M&A suitor, and the company has been vocal about its intentions. M&A always involve risk, and we often see an acquirer’s share price trade down on an announcement, so investors are taking a cautious approach.

TGR: How does Nevsun overcome these obstacles?

AL: On Eritrea, we believe that the impressive cash flow accruing to the company over the next couple of years will force the market to re-evaluate its risk assessment.

With regard to M&A, Nevsun has been very prudent. It refrained from acquisitions when valuations were much higher than now. It doesn’t want to grow for growth’s sake. Its key criterion in evaluating potential acquisitions is return on investment. So a smart buy now could actually improve its valuation, as it would no longer be an all-eggs-in-one-basket company in a country that people don’t understand. If we look at recent examples, some base metals companies have had their share prices perform quite well after acquisitions, most notably Capstone and Lundin.

TGR: What’s your rating for Nevsun?

AL: We have an Outperform rating and a $5.50 target price.

TGR: Rio Alto’s La Arena mine in Peru is now a gold producer. When will it begin to mine copper, and what effect will that have on its future?

AL: Rio Alto has a relatively large copper-gold porphyry deposit at La Arena. Currently, it is a fairly significant gold producer, about 200,000 ounces per year. It has a gold oxide processing plant on site. That said, the future of La Arena really is more in copper. The transition will likely happen in 2016 or 2017. But if it were to find additional gold within its concessions, we could see the life of the gold mine extended.

We have a favorable view of La Arena’s copper project. We expect it to have a very low capital intensity, $11,000–14,000 per ton annual copper equivalent, about half the industry average. It can benefit from existing power and transportation infrastructure. As well, it can use the existing open-pit oxide deposit for the tailings during the startup of the copper. At current gold prices, it should be possible to fund the copper expansion using cash flow from the existing gold mine.

TGR: Will Rio Alto be aggressive in beginning new projects in Peru?

AL: La Arena is in a very prospective region of Peru. It is surrounded by many major gold mines, and its concession is relatively underexplored. Rio Alto most likely will look for potential gold oxide satellite deposits that could provide supplemental feed to its existing plant.

Longer term, future acquisitions wouldn’t surprise me, given its cash flow. But Rio Alto could be a potential acquisition target itself, given that we view it as an undervalued company with a good organic growth project.

TGR: What’s your rating for Rio Alto?

AL: Companies that transition to base metals from precious metals typically encounter trading volatility because these different sectors have different investor groups. However, companies with good projects should weather this volatility well. Nevsun managed a very similar transition quite well. We have an Outperform rating and a $3.50 target price.

TGR: Not long ago, Peru was seen as a country not friendly to mining. Has that changed?

AL: It’s hard to classify Peru as being friendly or unfriendly. Projects should be assessed on a case-by-case basis. Some areas have been opposed to mining, and we have seen violent protests. However, several mining companies have succeeded in Peru, despite its pitfalls of left-wing political parties and social community activism.

Rio Alto has flourished with a concentrated, hands-on, local approach, using a predominantly Peruvian management team. Even some members of its non-Peruvian management team have moved to the country.

TGR: Trevali is also in Peru, where its Santander zinc-lead-silver mine is about to begin commercial production.

AL: Trevali is the only pure-play producer listed on the Toronto Stock Exchange and one of a few in the world. By pure-play, I mean it will be generating the majority of its revenue from zinc. This is an enviable position. Because of the coming zinc scarcity I mentioned above, investors will be funneled into zinc equities to gain leverage to the zinc market. I’ve followed Trevali for about four years, and it is in a stronger position now than I’ve ever seen it. The Santander commissioning process has gone well, and its balance sheet is robust.

TGR: How do you rate its non-Peru operations?

AL: Trevali has quite a bit of organic growth potential through its other operations, particularly the Halfmile and Stratmat brownfield sites in New Brunswick, which it intends to restart in the next year or so. The bulk of our NAV for Trevali comes from New Brunswick. That’s where we’re going to see a lot of the value in this story start to accrue.

TGR: What’s your rating for Trevali?

AL: We have an Outperform rating and a $1.40 target price.

TGR: Capstone announced that it had met its overall 2013 copper production targets from its Pinto Valley, Cozamin and Minto mines in Arizona, Mexico and Yukon. Even so, shares fell 14% in January. Why?

AL: First, Capstone has been one of the best-performing stocks in the sector, so it faced some profit taking. Second, there has been some waning of momentum. Yes, it came in very close to its 2013 production guidance, but its 2014 production guidance was weaker, particularly for Minto, than we expected. Third, some lackluster economic data from China has caused a selloff in many base metals equities in the early part of this year.

TGR: What’s your rating for Capstone?

AL: We have a Strong Buy rating and a $4.25 target price.

TGR: What’s your outlook for Lundin?

AL: Lundin has a solid management team and a very steady portfolio of mining assets. It also has pretty good cash flow growth coming in soon from its stake in the Tenke Fungurume copper-cobalt mine in the Democratic Republic of the Congo, as well as from the startup of its Eagle copper-nickel mine in Michigan, recently acquired from Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK).

Like Nevsun and Trevali, Lundin should benefit from the coming zinc scarcity. It could leverage this by increasing production at its Neves-Corvo zinc-copper mine in Portugal.

TGR: What’s your rating for Lundin?

AL: We recently upgraded it from Market Perform to Outperform. Our target price is $6.25.

TGR: The various iron ore projects in the Labrador Trough have been bedeviled by transportation costs. How serious is this problem?

AL: I think it’s been overemphasized. There are already two existing railways in the region that supply existing ports, and both have upside capacity potential. Unfortunately, these railways are controlled by two companies that restrict access. The Cartier Railway is controlled by ArcelorMittal S.A. (MT:NYSE), and because it doesn’t cross any provincial boundaries, ArcelorMittal is under no obligation to provide third-party access.

The other route, Quebec North Shore and Labrador Railway, is owned by the privately held Iron Ore Company of Canada (IOC), Canada’s largest producer of iron ore pellets. That railway does cross provincial boundaries and is bound thereby to provide third-party access. But that access doesn’t come cheap. The challenge is to build a new railway to break the monopoly. Access to existing infrastructure is the reason why our preferred iron ore companies are Alderon and Labrador Iron Ore Royalty Corporation.

TGR: What do you like about Alderon?

AL: Alderon has a very good project, Kami, which, as noted, is close to an existing rail line. It has a top-notch management team poached from IOC and strong backing from China’s largest steel company, Hebei Iron & Steel Co. Ltd. (000709:CH). We think 2014 is going to be a monumental year for Alderon, as it will complete many milestones: receiving key permits, bringing on additional offtake and/or joint venture partners and securing financing for mine construction.

TGR: What’s your rating for Alderon?

AL: We have an Outperform rating and a target price of $2.60.

TGR: Why do you like Labrador Iron Ore Royalty?

AL: It owns 15.1% of IOC and gets a 7% revenue royalty on IOC’s production. So here you have a company that owns a stake in a mine that not only operates throughout the commodity cycle—IOC has been operating its current mine for five decades—but it also owns its own transportation infrastructure.

We see this company as one of the safer ways to play iron ore, and it’s also a dividend growth story due to an expansion that is underway at IOC. Its royalty payments should increase because IOC’s capital expenditures will decline, as that expansion is nearly completed.

TGR: What’s your rating for Labrador Iron Ore Royalty Corp.?

AL: We have an Outperform rating and a $37.25 target price.

TGR: Any other iron ore companies?

AL: Champion Iron Mines Limited (CHM:TSX) is still at the discovery stage. It has a very large tonnage but low-grade specular hematite and magnetite deposits at its Consolidated Fire Lake North project, which is close to the Cartier Railway. Its challenge is that its transition to production is hampered by a lack of interest from the capital markets in Canadian iron ore projects and ready access to infrastructure.

Mamba Minerals Ltd. (MAB:ASX) of Australia intends to buy Champion. Mamba’s chairman, Michael O’Keeffe, sold Riversdale Mining and its Mozambique coking coal project to Rio Tinto for $4B in 2011. Mamba will bring credibility and know-how to Champion in its transition from developer to producer.

TGR: What’s your rating for Champion?

AL: We have a Market Perform rating and a target price of $0.45.

TGR: What are the characteristics common to your top picks in base metals?

AL: Almost all are companies with current production. Cash flow is key to positive investor sentiment. We like companies with strong and stable balance sheets, such as you find with Nevsun, Capstone, First Quantum and Lundin.

TGR: Adam, thank you for your time and your insights.

Adam Low joined Raymond James Ltd. in April 2005 and is part of the equity research team covering mining and metals producers and developers. Prior to joining the firm, he was employed as a financial analyst with IBM. Low has a Bachelor of Commerce degree from the University of Manitoba and holds the Chartered Financial Analyst designation.

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DISCLOSURE:
1) Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Trevali Mining Corp. and Champion Iron Ore Mines Ltd. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Adam Low: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Trevali Mining Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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Guest Post By www.fxlight.co

Thinking about trading now I can see why many people fail. If you were born into a regular home with a regular upbringing then believe it or not you are at a disadvantage. Trying to operate in a trading environment and in a way that ordinarily brings success, a new trader will find himself in a constant state of anxiety, frustration and even fear.  Personally I remember ripping off a t-shirt in anger and frustration in 2009. It seems quite funny now!

It is funny because trading looks fairly simple on the face of it. However a trader’s frustration will continue until they acknowledge the simple fact that they are operating in a different environment. They must stop using methods that only work in the “normal” environment.  Astronauts on the moon at least had the rocket ship, the training and the hopes of a nation to persuade them that they were entering into a different environment.  However for a trader who still wakes up in the same bed and can walk around in his familiar physical environment, the only discernable clues that something is different is the different outcome.

You see old habits die hard and sometimes a new belief system can only be entertained after a trading disaster and a thorough mental reality check, which often coincides with a trading account being cleaned out too. Most of us have boundaries  where our lives are sort of predictable, and we go about the same tasks each day with little or no change and then sleep and wake up to another largely predictable day. Markets on the other hand are never ending and always changing. To borrow a well-worn phrase “Money Never Sleeps”. They are in constant motion and from the perspective of a new trader, almost without structure too. Each trading day is loaded with unlimited potential for profit and the effect is powerful. It can destroy a trader’s sense of security by forcing him in real time to confront reality. “The market is moving against me, I need to take a loss, but I can’t take another loss because I want to be a winner, so if I just stick with it like I did with other achievements in my life..” Where this need to win combined with old fashioned perseverance meets the fear of financial ruin, you will see a trader pacing up and down in the dark at night or getting into a car a driving far away, in order not to see the market prices changing. The need to face reality is being fought hard by other values that usually work in all other aspects of life. Sticking with it, not giving up etc.

In ordinary society time and effort are often associated with reward. “The harder I work the luckier I get” says the successful entrepreneur with a wink. Other jobs will offer a fixed salary which the worker will get irrespective of effort, the worker just needs to show up! In contrast the trading environment is not certain. Effort can be irrelevant and certainly there is no relationship between how many hours I looked at the screen and the amount of money I made, so sometimes even turning up to work doesn’t help. A trader can click a button just before non-farm payrolls and within seconds have his wildest dreams come true. Believe it or not even this can be a problem if the individual concerned was raised to think about money as a reward for effort. A sudden windfall may even conflict with their sense of religion. He may not say “I don’t deserve this” but through his subsequent trades he will find a way to “give the money back”.

So is it all doom and gloom? To perform in any activity whether it is a physical activity like a triathlon or a mental activity like trading forex you will need to learn specialised skills that allow us to see the environment for what it is, and operate effectively within it. Beyond how to click on the buy or sell button we also need to learn ways of thinking that allow us to excel in the activity. These thinking skills can be for example learning how to recognise the errors in your trading, and address the lack of skill rather than the money itself which is simply the bi-product of the skill. If you risk 10% on each trade then addressing that position sizing or wide stop error rather than thinking about the money itself may be a way to master the technique. Learning how to achieve and maintain a state of objectivity is a powerful skill imitated by many and mastered by few. Can you adapt your thinking when the evidence tells you that something is different? This is not so much a trading system as it is a way to interface with the market including any trading system that you may follow. It is a way to psychologically interface with the market so that even if your trading system is no longer working you will have the psychological ability to see it and act effectively.

Think differently. You are in zero gravity.

This was a Guest Post By www.fxlight.co

By CentralBankNews.info
    Namibia’s central bank maintained its repo rate at 5.50 percent, saying an accommodative policy is still needed to support the economy while targeted measures should slow down the growth in installment credit, reduce imports of non-productive goods and address over-indebtedness.
    The Bank of Namibia, which last cut its rate in August 2012, said inflation is projected to increase to 6 percent in 2014 – a level it described as acceptable – from 5.6 percent in 2013, with upside risks mainly from a depreciation of the Namibia dollar.
    Namibia maintains a fixed exchange rate system with its dollar pegged at one to one to South Africa’s rand to ensure stable prices of imports from the anchor country. With last month’s rate rise by the South African Reserve Bank, the differential between the two countries has been eliminated.
    Namibia’s inflation rate was unchanged at 4.9 percent in January from December and the country’s international reserves rose to N$18.2 billion at the end of January from N$15.7 billion end December 2013, a level the central bank said was sufficient to support the fixed exchange rate.
    Prospects for Namibia’s economy this year “remain encouraging,” the bank said, forecasting growth of 5.3 percent in 2014, with growth supported by the construction sector, mining and strong consumer demand.

    In the fourth quarter of 2013, Namibia’s Gross Domestic Product expanded by a quarterly 4.3 percent after a contraction of 3.7 percent in the third quarter.
    In December the central bank revised down its 2013 growth forecast to around 4.0 percent from a previous forecast of 4.7 percent due to weak agriculture.
    Some economists had expected the central bank to raise its rates today to avoid the economy overheating and keep down inflation.

    With its fixed exchange rate regime, any change in Nambia’s dollar mirrors the South African rand. Both the Namibia dollar and the rand have declined steadily against the U.S. dollar since early 2011 and in 2013 it fell 19 percent against the U.S. dollar as capital started to flow back to advanced economies from emerging economies.
    This year the Namibia dollar and rand continued to decline through January, falling by 8 percent to 11.37 to the U.S. dollar by Jan. 30 but since then the currencies have rebounded, trading at 10.87 earlier today.
   Growth in private sector credit eased to 14.3 percent by end-December 2013 from 17.0 percent end-December 2012, reflecting lower overdraft credit and no growth in loans and advances to the business sector. However, the central bank said growth in installment credit for individuals remains elevated and warrants “constant monitoring” and it has started targeted intervention to slow it down.
   
    http://ift.tt/1iP0FNb
   
   
   

By HY Markets Forex Blog

Crude prices traded flat on Wednesday, dropping from its highest level in four months on Chinese credit growth data and speculation that inventories in Cushing Oklahoma, declines in the previous week.

West Texas Intermediate (WTI) added 0.03% to $102.14 per barrel on the New York Mercantile Exchange at the time of writing, while Brent crude for April settlement came in 0.36% lower at $110.09 a barrel on the ICE Futures Europe exchange.

Crude – Cushing Inventories

A report from Genscape revealed crude stockpiles at Cushing, Oklahoma declined by 1.4 million barrels since Tuesday.

Analysts are expecting reports from the Energy Information Administration, which will be released on Thursday and the weekly crude stockpiles report from the American Petroleum Institute which will be delayed by a day.

The North American West Texas Intermediate crude climbed to a four-month high of $102.01 a barrel on Tuesday, as the world’s second largest oil consumer, China, reported its record new credit growth data.

According to a Citigroup Inc. analyst, the European benchmark Brent crude is turning into a “broken benchmark” due to the drop in supplies from the North Sea.

Crude – Libya

The ongoing protest in Libya continues to weigh on the oil supply from the country’s largest oil field El Sharara as production dropped to 375,000 barrels per day, a spokesman from National Oil Corporation (NOC) confirmed.

Iran

Meanwhile talks between Iran and the six world powers are expected to commence on Tuesday to finalize the settlement on the Persian Gulf’s nuclear program in the near future.

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The post Crude Prices Trades Flat on Chinese Credit Growth Data appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Gold prices continues to decline on Wednesday, from its highest level in more than three months as investors expect the Federal Reserve’s (Fed) minutes with predictions the minutes will reveal policy makers backing stimulus cuts despite the weak economic reports.

The increased demand for the metal from China; which overtook India as the world’s largest consumer for gold, remained close to a three and a half month high.

Gold futures for April delivery declined as much as 0.6%, trading at $1.317.10 an ounce at the time of writing, at the same time silver for immediate delivery edged up 0.5% to $22.0448 an ounce, the highest since Nov 6, before dropping to 1.1% at $21.7016 an ounce.

The dollar index, which measures the strength of the US dollar against six major currencies, dropped 0.07% lower at 79.950 at the time of writing.

Gold – Fed Minutes

Market participants are expecting the official minutes from the Federal Reserve’s January meeting later in the day. Market analysts forecast the central bank would proceed with tapering its monthly bond purchases despite the recent weak US economic reports.

The Federal Reserve (Fed) Bank of New York released a data on Tuesday, which showed a drop in the Empire State Manufacturing Index from its previous reading of 12.51 to 4.48 in February, compared to analysts forecast of 9.00.

High Demand from China

The World Gould council (WGC) confirmed global gold demand dropped by 15% last year as a high number of outflows from the investment fund outweighed record consumer demand.

The World Gold Council also confirmed China overtook India as the world’s largest gold consumer as the demand from China climbed by 4% in the final quarter of 2013.

Visit www.hymarkets.com   to find out more about our products and start trading today with only $50 using the latest trading technology today.

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AUDUSD: With the pair’s failure to recapture the 0.9085 level triggering price consolidation, more downside pressure could be building up. Support lies at the 0.8926 level and then the 0.8900 level. However, in case it fails to follow through lower, expect AUDUSD to retake the 0.9080/5 levels. A cut through here will resume its short term uptrend towards the 0.9150 level where a break will pave the way for a run at the 0.9200 level and subsequently the 0.9250 level. Conversely, below the 0.8926/00 levels will mean further downside could be seen towards the 0.8887 level and followed by the 0.8800 level. All in all, the pair remains biased to the upside on corrective recovery.

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