Month: June 2010

Prechter on Yahoo! Finance: “Even $1 Trillion Can’t Save the Euro, But Gold is No Safe Haven”

The euro’s recent loss has been the dollar’s gain, which means that it’s not the best time to buy the U.S. dollar. Meanwhile, the most popular alternative to currencies, gold, isn’t such a good buy either. Watch the second excerpt from Robert Prechter’s May 20 interview with Yahoo! Finance Tech Ticker host Aaron Task to hear what Prechter thinks is in store for the U.S. currency and gold.

For more information from Robert Prechter, download a FREE 10-page issue of the Elliott Wave Theorist. It challenges current recovery hype with hard facts, independent analysis, and insightful charts. You’ll find out why the worst is NOT over and what you can do to safeguard your financial future. Hurry! This free offer expires June 7.

By GCI Forex Research

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro depreciated sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.1960 level and was capped around the $1.2215 level.  The common currency dove below the psychologically-important US$ 1.2000 figure during the North American trading session and has not traded at these levels since March 2006.  Technicans are now eyeing the 1.1640/ 1.1210 levels as key downside areas of possible support.  One major catalyst for the weaker euro today was a worsening of the financial situation in Hungary where the government admitted it is in a “grave situation.”  The situation in Hungary poses an interesting problem for European policymakers because Hungary is a member of the European Union but is not a member of the eurozone.  The European Union cobbled together a bailout package for Greece along with the International Monetary Fund and the European Central Bank reduced their credit rating requirements for eligible collateral for repo purposes to make sure banks could post Greek bonds as collateral to receive cash.  Many European banks – inside and outside of the eurozone – are likely sitting with Hungarian sovereign, corporate, and other debt on their books and a worsening of the crisis in Hungary could test Europe’s resolve once again.  French Prime Minister Fillon today said good things would result if the common currency traded as low as parity.  French government debt may be downgraded on account of its massive fiscal debt position and high debt-to-GDP level.  There is ongoing talk that Germany wants to leave the common currency altogether, a strong rumour that would rock the financial markets if it ever materialized.  Group of Twenty officials will convene in Busan, South Korea this weekend and their top priority will be deficit reduction.  Finance officials may also agree on some semblance of a global bank tax.  Data released in the eurozone today saw Q1 GDP up 0.2% q/q and 0.6% y/y.  In U.S. news, data released today saw May non-farm payrolls up 431,000, about 100,000 below consensus and up from 290,000 last month.  The number was quite bad because around 411,000 of the jobs that were counted included temporary census workers.  Absent those, today’s number would have been quite weak.  The unemployment rate moved lower to 9.7% from 9.9%.  Average hourly earnings growth accelerated 0.3% m/m and 1.9% y/y and average weekly hours worked ticked higher to 34.2 from 34.1.  Atlanta Fed President Lockhart reported job creation remains too weak.  Euro offers are cited around the US$ 1.2620 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥91.50 level and was capped around the ¥92.85 level.  Traders reduced exposure to higher-yielding currencies and moved back into yen in a risk aversion trade.  Hungary’s problems are the latest excuse to sell higher-yielders and get long lower-yielders like the yen.  Nikkei reported Bank of Japan may spend as much as ¥2 trillion for a new lending program to stimulate economic growth.  Finance minister Kan was named the new Prime Minister of Japan overnight following this week’s resignation of Hatoyama.  Vice finance minister Minezaki will represent Japan in Busan, South Korea this weekend at the Group of Twenty meeting and may become the new finance minister.  Kan may apply more pressure on the central bank to ease monetary policy further.  The yield on the five-year Japanese government bond reached a multi-year low overnight below 0.395%.  This reflects increasing deflationary pressures and a perception the central bank may be forced to buy more Japanese government bonds.  BoJ currently purchases about ¥1.8 trillion in debt every month.  The Nikkei 225 stock lost 0.13% to close at ¥9,901.19.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥109.75 level and was capped around the ¥113.35 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥132.45 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥78.75 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8288 in the over-the-counter market, up from CNY 6.8283.  People’s Bank of China Governor Zhou said “there are many factors” that may have contributed to the decline in May manufacturing and said the European crisis may not be attributable.  China’s economy is expected to expand about 9% to 10% this year following a strong performance in the first quarter.

£

The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4455 level and was capped around the $1.4680 level.  Data released in the U.K. today saw May Halifax house prices off 0.4% m/m.  The BRC retail sales monitor will be released on Monday.  Bank of England Monetary Policy Committee member Posen this week warned the eurozone financial crisis could spread to the U.K. and U.S.  BoE Deputy Governor Bean warned against using inflation to reduce debt, adding “a bit of inflation” can turn into “a lot of inflation.”  Bank of England Governor King this week said the system must seize the opportunity for reform and banks should not be permitted to be “too big to fail.”  King reiterated support for the BoE’s policy framework, reporting “Despite its volatility, inflation remains low by historic standards, and on track to meet the target in the medium term. The framework has proved resilient to the stress of the financial crisis.  It guided our monetary decisions going out into the crisis, and it will guide them coming out of it.”  Cable bids are cited around the US$ 1.4220 level.  The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8250 level and was capped around the £0.8335 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1625 level and was supported around the CHF 1.1420 level.  Swiss National Bank President Hildebrand today said “There’s a consensus that the financial system needs to become more resilient.  It’s absolutely decisive that the regulatory focus remains on capital, liquidity, and a diffusion of the too-big-to-fail problem.”  There is increasing speculation again that Swiss National Bank may reduce its franc-selling intervention on account of the massive amount of market operations it has undertaken already this year.  SNB member Leuthard verbally intervened against the strong franc this week..  U.S. dollar bids are cited around the US$ 1.1420 level.  The euro lost ground vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.3865 level while the British pound lost ground vis-à-vis the Swiss franc and tested bids around the CHF 1.6725 level.

Forex Daily Market Commentary provided by GCI Financial Ltd.

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By CountingPips.com

The European common currency has traded sharply lower against the U.S. dollar today in the forex market following the release of the U.S. government nonfarm payroll report. The euro-dollar currency pair (EUR/USD) touched under the 1.2000 exchange rate for the first time since late March of 2006 today and has established a fresh four-year low. The EUR/USD had previously touched a low of 1.2110 on June 1st before rallying back to a high of 1.2326 in yesterday’s trading. Today’s trading action saw the pair open the day at 1.2178 and move to a high of 1.2214 when risk appetite turned bearish and propelled the EUR/USD sharply downwards to new lows.

Today’s release of the market-moving U.S. nonfarm payrolls report showed that the U.S. economy added 431,000 workers in May, according to the Department of Labor. This increase of employment is usually cause for rejoicing after a deep recession but the overwhelming majority (411,000) of new hires were added to the government payroll due to an increase in census employment. The total jobs number gained failed to meet market forecasts seeking 536,000 new jobs and is seen as a disappointment due to just 41,000 new private-sector employees being added for the month.

Also adding to the sour economic mood was news from Europe that an “informal” visit by the IMF to Hungary had taken place to assess the country’s fiscal health in the past few days. Following that was a warning by the new Hungarian government that the country’s finances were in a “grave situation” that was hidden by the previous administration and that the country could fall into a Greece-like crisis. More details are scheduled to be released this weekend by the new government. (More from an FT article)

The US stock markets, meanwhile, are feeling the effects of the risk aversion in the markets today with the Dow Jones lower by over a 200 points, the Nasdaq decreasing approximately 45 points and the S&P 500 down by over 20 points at time of writing.  Oil has fallen lower by $2.92 to trade at the $71.69 per barrel level while gold has gained by $4.80 to level at $1,213.10 per ounce at time of writing.

The U.S. dollar, acting as a safe haven, has been sharply higher in the currency markets today. The American currency has risen versus the euro, British pound, Swiss franc, Canadian dollar, Australian dollar and the New Zealand dollar while falling against the (other major currency safe haven) Japanese yen.

EUR/USD 1-Hour Chart – The Euro started the day off trending higher against the US dollar in the forex markets but fell sharply lower as risk aversion set in and a disappointing US jobs report was released. The EUR/USD has fallen to trade below the 1.2000 exchange rate for the first time since March 2006.

By Russell Glaser – The price of spot crude oil climbed almost 1% yesterday on reports that the federal government would limit new offshore drilling permits that would allow the expansion into shallow water. The report was later denied. However, this did not stop spot crude oil prices from holding their gains

The report startled traders into buying spot crude oil as investors bid up the price to $74.21, from an opening day price of $73.54.

Due to the ongoing oil leak that has oil flowing into the Gulf of Mexico and BP’s inability to plug the deep water oil rig leak, the Obama administration has already enacted a moratorium for new deep water drilling sites. This could slow new production of crude oil supplies in the long term. A second moratorium on new shallow water drilling sites could affect the crude oil trading in the near term as the length of time to bring oil to production from shallow sites is much less than deep water sites.

The rumor was later denied by officials, but the sharp rise in price underscores just how susceptible crude oil trading has become. Supplies are already beginning to be tightened as refineries have cut output due to the economic slowdown. An oversupply of crude oil stocks is apparent in the market from the continuing increase in the weekly U.S. crude oil inventory report.

Concerns of an improving economy will be addressed today with the release of the U.S. Non-Farm Employment report, also known as NFP, and the nation’s official unemployment rate. This month traders are expecting a large increase to employment, and a 0.1% decrease in the unemployment rate.

Spot crude oil prices could continue their climb with a breach of the resistance level at $75.60. This could propel prices to the next resistance level which lies just below $78.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Yan Petters – The U.S. NonFarm Payrolls report is expected today at 12:30 GMT. This indicator measures the change in the number of employed individuals during May, excluding the farming industry. This is considered to be the most accurate indicator for employment data in the U.S. In addition, the NonFarm Payrolls is released on the first Friday of the month, which makes it the most significant economic data from the U.S. This combination, of both importance and earliness, makes this report to be one of the most vital publications, and its release is usually accompanied with harsh volatility.

The employment condition in the U.S. is finally stabilizing, and is providing signals of recovery. The payrolls have climbed in both March and April, and the current estimate is that payrolls have increased in May as well. Analysts have forecasted that payrolls have climbed by 529,000 new jobs during May, which will further prove that the U.S. economy continues with its recovery pace, and that the Euro-Zone crisis has very little affect on the economy. The impact of such positive data is likely to boost the Dollar further, and the market seems ready to take advantage of such a development.

Let’s look at the EUR/USD weekly chart, and see how the technical indicators can assist us analyzing the market’s reaction to this publication.

The first thing you see when looking on the chart, is the abnormal freefall of the pair. The EUR/USD, which is considered to be the most stable currency pair, has dropped about 3,000 pips in 7 months. While this chart is of currencies, it accurately depicts the economic conditions of the Euro-Zone and the U.S. over the past 7 months. While the U.S. economy is recovering at a faster pace than expected, the Euro-Zone is suffering from an ongoing debt crisis. The outcome, as shown by the nations’ currencies, is quite clear. Here are several technical indications that can be noted from the chart:

• The pair is currently trading below the lower Bollinger Band, which indicates that the momentum is still bearish.
• The MACD continues to point down, with plenty of room left to drop further. The MACD indicates that the pair’s freefall is far from reaching its end.
• The RSI is floating in the Over-Sold section for several months now. Once the RSI will point up and exit the Over-Sold section, we should see it as an indication that the trend is reversing. Until then, the bearish trend is likely to proceed.
• The only indicator that provides a signal for a potential correction is the Slow Stochastic, and this is no accident. The Slow-Stochastic is considered to be the leading short-term indicator, and is very useful for news publication analysis. This teaches us that the market is waiting for the actual result before declaring its reaction to the NonFarm Payrolls release. This means that if the end result will fail to reach expectations, the pair might see a bullish correction.
• In a case that the pair will drop following the NonFarm Payrolls, the EUR/USD has potential to reach the 1.2000 level.
• If the EUR/USD will see a bullish correction, it might go as high as the 1.2500 level.

Forex Market Analysis provided by Forex Yard.

© 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: Forex Yard

Ahead of the US Non-Farm Payroll data, expected at 12:30 GMT today, the Dollar seems to be trading on the upside. The forecast has put American employment into a healthy increase for the previous month, with a concurrent drop in the official unemployment rate alongside it. The NFP is expected to show an increase of over 500,000 jobs last month. Should the figure come in near what is expected, the USD will likely see a gratuitous increase given the risk averse climate currently in play.

Economic News

USD – USD Outpacing Majors; NFP Should Help Advance Gains

The US Dollar advanced against all of its primary currency rivals yesterday, gaining modestly against the EUR, JPY, GBP, AUD, and NZD primarily. A downturn in US stocks towards the end of the day helped to fuel another surge of risk aversion in the forex market. The result has been a steady boost to the USD, a decline to stocks, and falling commodity prices, albeit only slightly.

Against the EUR, the greenback returned to the 1.2155 price level before turning back slightly for a current price near 1.2175. Versus the Yen, the buck has only seen steady improvement, with the price floating strongly above 92.50. Gains similar to that seen against the EUR can be seen against almost all of the other currency rivals.

Ahead of the US Non-Farm Payroll data, expected at 12:30 GMT today, the Dollar seems to be trading on the upside. The forecast has put American employment into a healthy increase for the previous month, with a concurrent drop in the official unemployment rate alongside it. The NFP is expected to show an increase of over 500,000 jobs last month. Should the figure come in near what is expected, the USD will likely see a gratuitous increase given the risk averse climate currently in play.

EUR – EUR Appears Poised for Losses Following Today’s NFP Report

The Euro appears to be continuing the losses it has been experiencing since the Greek debt crisis began a few months back. Given the decision to put forth a financial bailout for struggling economies in the region, many would expect the EUR to be in a corrective posture, yet this does not seem to be the case.

Against the US Dollar, the 16-nation single currency has remained at all-time lows and currently trades near 1.2175. The EUR/GBP has been devastated by a sustained drop which currently puts the price just over 0.8300. Versus the Yen the EUR appears to be doing well, matched only because of Japan’s recent political crisis. The EUR/JPY, as a result, is currently trading for 112.75, up slightly from the 112.05 seen earlier today.

Most of today’s market expectations lie not within the Euro-Zone, but rather in North America. Canada and the United States will both be publishing their employment figures. The US Non-Farm Employment Change report will be released, alongside the American official unemployment rate, at 12:30 GMT. This will come after Canada releases similar figures, however. The US is expected to publish figures which are substantially higher than last month’s. Should this be the case, we may see the USD continue to gain steadily against its primary rivals, particularly the EUR.

JPY – Yen Trading Lower as Investors Bank on Positive NFP

The Japanese Yen (JPY) appears to be on the selling side of many trades recently. The island currency has suffered deep losses to a number of its primary rivals, primarily the British Pound and US Dollar. Against the Pound, the JPY has plummeted and currently trades at 135.75 after coming down from 136.50 – a 3-week high for the pair – earlier this morning.

Asian stocks saw modest gains yesterday, and currencies in the region appear to be in decline as a result. If the NFP data from the US today can spur market optimism traders may see a continuation to the trend of rising equities. Many investors are expecting a strongly positive NFP report and this fact is being priced in. So long as the release is in line with expectations, more or less, we should see the JPY continue its recent decline. If risk aversion returns in force, however, the Yen may yet become resurgent.

Crude Oil – Oil Prices Rebounding Amid Speculation of Market Reversal

Despite a strengthening US Dollar, Crude Oil prices appear to be on the rise. Many investors have expressed a more long-term perspective on the oil spill in the Gulf of Mexico and anticipate rising oil prices in the near future. This speculation combined with a sudden draw-down in US oil inventories helped this commodity to gain sharply in last minute trading yesterday.

The sentiment that oil prices will rise does have merit. Even while oil prices were dropping sharply amid the Greek bailout crisis in Europe, a large number of commodity speculators were counting on a quick rebound. Once momentum turned in favor of this notion, a band-wagon effect took place and we’ve seen Crude Oil rebound to trade just under $75 a barrel, up from $67 just a few days ago.

However, if today’s NFP figures prove positive, we should see the USD gain strength and put some pressure on Crude Oil to correct downwards a bit through mid-day trading.

Technical News

EUR/USD

The pair has recorded much bearish behavior yesterday. However, the technical data indicates that this trend may reverse anytime soon. For example, the 4-hour chart’s Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the daily chart’s RSI. Going long with tight stops may turn out to pay off today.

GBP/USD

The 4-hour chart is showing mixed signals with its RSI fluctuating in neutral territory. However, there is a bullish cross forming on the weekly chart’s Slow Stochastic, indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.

USD/JPY

The price of this pair appears to be floating in the over-bought territory on the 4-hour chart’s RSI indicating a downward correction may be imminent. The downward direction on the daily chart’s Slow Stochastic also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.

The Wild Card

Gold

Gold prices have dropped significantly yesterday and peaked at $1206.90 an ounce. However, on the 4-hour chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By eToro – The Euro again tested levels below 1.22 and closed close to the low.  Issues continue to perpetuate as overnight deposits at the ECB rose to a record high of 320.4 billion Euros.  The Euro should remain on the defensive.
Click here to read the full daily Review

Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

USDCAD remains in downtrend from 1.0852 and the fall extends to as low as 1.0333 level. Deeper decline is still possible later today and target is the lower border of the price channel on 4-hour chart. Resistance is at the falling trend line from 1.0852 to 1.0571, as long as the trend line resistance holds, downtrend will continue. However, a clear break above the trend line resistance will suggest that lengthier consolidation of downtrend is underway, then further rise towards 1.0571 could be seen.

Daily Forex Reports

In a severe sell-off, 99 percent of ALL stocks can fall.

By Elliott Wave International

Approximately three out of four stocks go down in a bear market. This ratio doesn’t just apply to high beta names; historically, 75 percent of all stocks go down when the general market falls.

Considering we could be headed into a severe bear market (read Bob Prechter’s latest special two-issue Elliott Wave Theorist, if you haven’t yet), we could see more than 75 percent of stocks take a dive. In that case, even a basket of “defensive” or “quality” names isn’t likely to help your portfolio. What good are dividends when you’re losing far, far more through capital depreciation?

On May 20, when the DJIA lost 376 points, 497 out of the S&P 500 stocks ended the day lower. (In other words, 99 percent of stocks fell.) Yet a financial television host recommended “defensive” names the day after. Wouldn’t his viewers be better served if he said, “You may want to step aside for now”? Apparently, stocks of one kind or another must be recommended — no matter what the market is doing or is expected to do.

Read Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled “Deadly Bearish Big Picture” reveals a lucid picture for 2010-2016. It’s the flipside of Robert Prechter’s February
2009 forecast for a “sharp and scary” rally. Click here to download the 10-page part one for FREE now.

How about “quality” stocks that don’t fit the “defensive” category, like blue chips or major technology names? The 1973-1974 bear market provides a clue. The “nifty fifty” stocks were “glamour” stocks; pundits said the “nifty fifty” should “be bought and never sold.” However, by the time the bear market bottomed,

• Polaroid cratered 91% (eventually went bankrupt)
• Avon nose-dived 86%
• Xerox fell 71%
• Standard Brands Paint (eventually went bankrupt)

Here’s what Prechter said on the matter in his September 2009 Theorist: “When the stock market overall ended its bear market in the fourth quarter of 1974, the nifty fifty had fallen substantially from their highs, and many investors continued to hold them under the belief that they would come roaring back. But they underperformed most other groups of stocks throughout the rest of the 1970s and into the 1980s.” [emphasis added]

Similarly, big-name stocks that fell in 2007-2009 have yet to come close to fully recovering. Today’s favored stocks could likewise nose-dive.

Learn from the past. Avoid the mistake of holding a defensive or quality stock “all the way down.”

Read Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled “Deadly Bearish Big Picture” reveals a lucid picture for 2010-2016. It’s the flipside of Robert Prechter’s February
2009 forecast for a “sharp and scary” rally. Click here to download the 10-page part one for FREE now.

By Russell Glaser – The price of spot gold has fallen the past two days as a rise in risk taking has boosted riskier assets such as equities and higher yielding currencies. Better than expected U.S. pending home sales have increased traders risk appetite and the positive sentiment may continue into the end of the trading week.

Following the rise in global equities, spot gold prices are trading lower at $1216 from an opening day price of $1221.

Yesterday and today the major equity indices have been trading higher following better than expected U.S. pending home sales numbers. New home sales rose 6.0% for the previous month. Market expectations were for a rise of only 4.9%.

The Dow Jones Industrials Average finished the day up 2.25%. The DAX is up 1.77% today while the Nikkei Average is up 3.24%.

The higher risk taking is fueling the declines in spot gold along with spot crude oil, the dollar, and the yen. The main benefactors to the risk taking environment have been equities and higher yielding currencies such as the Australian dollar and the euro.

A trend of rising risk taking may continue to prevail in the market with the major upcoming economic data releases. Today will bring the ADP Non-Farm Employment Change and U.S. manufacturing data. Tomorrow will have the all important U.S. Non-Farm Employment Change numbers. The key data release will provide clarity as to the extent of the economic recovery in the U.S.

Positive numbers, especially from the unemployment picture could continue to bring declines in spot gold prices. The next minor support level for spot gold rests at the level of $1213 while the next major support rests at $1192.

Forex Market Analysis provided by Forex Yard.

© 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.