Month: September 2010

By Anton Eljwizat – Gold prices rose significantly in the last two months and peaked at $1293 an ounce. However, the daily chart is suggesting that the recent up trend is loosing steam and a bearish correction is impending. Forex traders involved with commodities like this can take advantage of this knowledge by going short on crude oil now, and at a great entry price!

• Below is the daily chart for gold by ForexYard.

• The technical indicators used are the Slow Stochastic, RSI and Williams Percent Range.

• Point 1: There is a “doji” candlestick formed in the chart, indicating that a reversal should take place.

• Point 2: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.

• Point 3: The RSI signals that the price of this pair currently floats in the over-bought territory, suggesting downward pressure.

• Point 4: Williams Percent Range also supports the downward direction.

Gold-Daily Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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

Source: ForexYard

With rising fears about additional monetary easing by the Federal Reserve, speculators have begun to exit many of their USD positions in favor of higher yielding assets. Bank intervention in Japan also has many investors weary of entering yen positions in the near future, but poor fundamentals out of Europe have traders just as concerned about their investments in the euro zone, but have the added benefit of less government tinkering. The EUR’s best bet for the moment could be to lie low and reap the benefits of a rapidly dropping USD and JPY.

Economic News

USD – USD Stable despite Monetary Easing Speculations

The US dollar has been holding steady against most of its currency rivals, despite fundamentals showing a shift away from the safety of the greenback. A positive jobs report pushed the USD/CAD towards 1.0380, while conflicting reports out of Europe have the EUR/USD stalling at 1.3340 and the GBP/USD appearing to consolidate just below 1.5700.

With rising fears about further monetary easing by the Federal Reserve, speculators have begun to exit many of their USD positions in favor of higher yielding assets. A narrowing of the yield gap between the US and Japanese bonds also put pressure on the greenback as traders exited their carry trades, adding downward momentum to the dollar.

Today’s durable goods orders out of the United States have a chance to add modest support to the USD if the figure is in line, or above, expectations. Rising durable goods orders is representative of increased demand for US manufacturing goods and services, which has a residual effect across the American economy.

EUR – EUR Gaining Amid Global Monetary Changes

The euro’s rise continued in today’s Asian trading sessions, but some analysts have begun to anticipate a softening of the EUR in the hours ahead. The EUR/USD saw a healthy 60 pip gain since the opening of the Asian session, currently trading at 1.3350. The EUR/GBP also rose modestly, sitting just above 0.8505.

Bank intervention in Japan has many investors weary of entering yen positions in the near future, but poor fundamentals out of Europe have traders just as concerned about their investments in the euro zone. Today’s German Ifo Business Climate report could show a minor decline in economic sentiment in the region’s largest economy. However, most analysts do not expect the Ifo report to carry much weight given the load of speculation emerging from the US and Japan.

With Japanese bank interventions and potential monetary easing by the US Federal Reserve, the euro’s best chances of weathering the storm may be to lie low and do what it can to downplay its negative data releases. No news may be the best news for the euro zone’s single currency for the moment.

JPY – JPY on Shaky Ground; Traders Awaiting Second Wave of Bank Intervention

The Japanese yen slumped against the US dollar and the EUR in today’s early trading on speculation Japan is selling its currency after intervening in the market last week. The yen slid 1% to 85.22 per dollar from 84.38 in New York yesterday, however, it since stabilized back around $85.

Japan has yet to express satisfaction at the current value of its currency. This has led many speculators to anticipate a second wave of bank intervention sometime in the near future. The speculation alone has helped drop the yen against many of its currency counterparts. But should the Bank of Japan (BOJ) intervene in the market once more, traders are likely to see a very sharp drop in the value of the yen, primarily against the US dollar.

With no news expected out of Japan before the weekend’s close, European and American reports will likely control today’s movements, setting the pace for early next week. Traders would be wise to follow today’s two leading events, the German Ifo Business Climate and the US Core Durable Goods Orders report.

Crude Oil – Crude Oil Fundamentals Could Be Weaker than Many Expected

The price of Crude Oil continues to float between $73.50 and $76.50 as markets digest the impact of Japan’s bank interventions and speculation about further monetary easing in the United States. The summer driving season in Europe and America did little to support oil prices this year. Fundamentals remain weak for Crude Oil, and few expect growth levels to return to pre-2007 levels anytime soon.

With the current price of Crude Oil trading just below $75.00 a barrel, there appears to be technical pressures mounting to push the price higher in today’s trading. Retreating optimism in Europe and a possible boost to American manufacturing growth both provide fundamental support to oil prices, but the specter of additional quantitative easing in the United States remains overhead.

Traders appear weary of purchasing the dollar, and the expected result should be a rise in oil prices. On the contrary, though, the support currently being experienced seems softer than expected and has many analysts concerned that fundamentals are in fact weaker than most have forecast.

Technical News

EUR/USD

The price of this pair has been floating in the over-bought territory on the daily RSI for some time now, suggesting strong downward pressure. A fresh bearish cross on the daily Stochastic (slow) supports this notion. As the price tests an important psychological barrier near 1.3350, going short may be a wise tactic for fast profits today.

GBP/USD

The recent uptick on this currency pair has just pushed the price into the over-bought territory on the daily RSI, suggesting an increase in downward pressure today. The price has also recently turned downward and exited the over-bought territory on the weekly RSI, suggesting that a cascading downward movement may have already been initiated on a larger time-scale. Going short may turn out to be the preferred strategy before the weekend’s close.

USD/JPY

The price on the USD/JPY has recently shifted into an upward direction on the weekly RSI, also just exiting the over-sold territory, suggesting a rise in upward momentum. With impending bullish crosses on the daily and weekly MACDs, it may turn out that bullishness is on the way. Traders may want to take advantage of this movement by entering long positions on this pair throughout the day.

USD/CHF

This pair continues to decline, pushing the price into the over-sold region on the daily RSI, and even deeper into the weekly RSI, indicating that an upward correction is expected. An impending bullish cross on the daily Stochastic (slow) supports this notion. Going long may not be a bad idea.

The Wild Card

CHF/JPY

The movements of this pair seem to suggest that the price has reached a recent high which is unsupported. The 4-hour, daily and weekly RSI show the price as over-bought, while the daily Stochastic (slow) and MACD have impending bearish crosses. Forex traders may want to evaluate their positions on this pair, especially since it appears that a bearish correction may be imminent. Going short on this pair could turn out to be an excellent gamble before the weekend’s close.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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

EUR/USD

Corrects lower following the recent surge through 1.3332 resistance that peaked at 1.3438 on 22 Sep. Market has so far retraced 38.2% of 1.3028/1.3438 upleg at 1.3285, with further consolidation seen preceding the fresh strength towards 1.3510, 50% of 1.5144/1.1875 downleg and 1.3523, 20 Apr high. Downside, 1.3285/32 zone offers immediate support.

Res: 1.3363, 1.3379, 1.3419, 1.3438
Sup: 1.3285, 1.3266, 1.3232, 1.3185

GBP/USD

Correction off 1.5295, 07 Sep low, has seen renewed attempt at 1.5728, 61.8% retracement of 1.5997/1.5295 downleg, with 1.5740 seen so far, but failed to sustain gains. Break above the latter is required to resume near-term gains and expose 1.5822, 11 Aug high, next. Downside, 1.5610/03 offers support and potential break here to allow stronger reversal towards 1.5503.

Res: 1.5714, 1.5728, 1.5740, 1.5760
Sup: 1.5640, 1.5610, 1.5603, 1.5585

USD/JPY

Bounced strongly off 84.25, 22/23 Sep double dip, to reach 85.38, ahead of reversal. The upside rejection warns of possible return to 84.49/25, break of which would resume the near-term downtrend off 85.92. Upside, regain of 85.38 improves the tone for 85.92 retest.

Res: 85.38, 85.64, 85.80, 85.92
Sup: 84.49, 84.25, 84.05, 83.75

USD/CHF

Continues to trend lower, following reversal off 1.0181, with break below 0.9916, 2009 low, extending losses to 0.9803 so far. Minor correction from here is nearly over and break through 0.9803 to expose 0.9875, Mar 2008 lows net, with possible test of 0.9630, all-time low, not ruled out. Upside, 0.9880/98 caps for now.

Res: 0.9880, 0.9898, 0.9931, 0.9980
Sup: 0.9803, 0.9785, 0.9700, 0.9630

AUDUSD broke below the lower border of the rising price channel on 4-hour chart, suggesting that consolidation of uptrend is underway. Sideways movement in a range between 0.9430 and 0.9599 would more likely be seen. As long as 0.9330 key support holds, uptrend is expected to resume, and another rise to 0.9700-0.9750 area is still possible.

Daily Forex Signals

By Elliott Wave International

As the biggest credit bubble in history continues to shrink, consumer prices have stayed flat over the past several months, meaning there is no sign of inflation to come, despite growing commitments from the U.S. government.

So what’s keeping inflation at bay, given all the stimulus money promised? The answer: Deflation — an overwhelming urge for consumers to liquidate their assets for cash. And this new economic phase is finally becoming too obvious to ignore, as explained in recent commentary from the world’s largest technical analysis firm.

“The economy is moving into a critical new phase, an outright deflation in which ‘prices fall because people expect falling prices.’ Obviously, this implies an element of recognition, as efforts to protect against indebtedness and falling prices contribute to further declines. We can tell deflation is entering a new stage because of the language and ideas that financial observers now use to describe it.”
— The Elliott Wave Financial Forecast (September 2010)

Get an independent look at the future of the U.S. economy by reading Robert Prechter’s FREE Deflation Survival Guide now. Newly updated for 2010, Prechter’s 90-page ebook on deflation reveals the biggest threat to your money right now. You’ll learn not only how to prepare for deflation and adapt during it; you’ll also learn how to survive it and — most important — prosper during it, so you’ll be ready for the buying opportunity of a lifetime at its end. Click Here to Download Your Free 90-Page Deflation eBook Now.

Here are a few recent comments about the new economic reality:

• “[New Jersey Governor] Christie spelled out the details of his proposal Tuesday. They include: repealing an increase in benefits approved years ago; eliminating automatic cost-of-living adjustments; raising the retirement age to 65 from 60 in many cases; reducing pension payouts for many future retirees; and requiring some employees to contribute more to their pensions.” — Associated Press (Sept. 15)
• “U.S. Home Prices Face Three-Year Drop as Inventory Surge Looms” — Bloomberg (Sept. 15)
• “Atlanta Awash in Empty Offices Struggles to Recover From Building Binge” — Bloomberg (Sept. 14)
• “The world economy faces a long, hard slog toward recovery and could slide into deflation and financial instability if leaders fail to deliver on promises of reform.” — Reuters (Sept. 10)
• “Deflation seems to have the upper hand lately in the debate among investors about inflation versus deflation.” — Marketwatch (Sept. 8)
• “With the release of the August sales figures, one thing is clear for car shoppers — it’s a buyer’s market.” — Edmunds (Sept. 2)
• “20 Funds to Guard Against Deflation” — Smartmoney (Aug. 29)
• “Dividend-Yield Signal Screams Deflation” — Forbes (Aug. 25)

The word “deflation” also started appearing more in the financial media around 2002, but Robert Prechter, president of technical analysis firm Elliott Wave International and author of the 2002 New York Times best-seller Conquer the Crash, added in the updated 2009 edition of his book that the deflation references back then were in an entirely different context:

“The rarely used word deflation has become fashionable in financial discussion. … It is fashionable, however, not to predict its occurrence but primarily to dismiss the idea that it has any serious likelihood of occurring. The president of the Federal Reserve Bank of Dallas said in May [2004] that there is ‘maybe one chance out of four’ that deflation will occur.”
— Conquer the Crash, 2nd edition (2009)

And Prechter says the opinion from the Federal Reserve Bank of Dallas was not an isolated outlook at the time. Here’s another quote from around the same time:

“Not one economist [of 67 surveyed] said it was ‘very likely’ the economy would slip into deflation, and only 6% said it was ‘somewhat likely.’ About 95% said deflation was ‘not very likely’ to happen.” — Barron’s (2003)

In hindsight, we know that economists — in the aggregate — were dead wrong about their deflation predictions.

As we saw above, references to “deflation” are increasing now — because it’s obvious.

So if economists were unable — or worse, unwilling — to warn you in advance about the threat of deflation a few years ago, what are they not warning you about now?

Get an independent look at the future of the U.S. economy by reading Robert Prechter’s FREE Deflation Survival Guide now. Newly updated for 2010, Prechter’s 90-page ebook on deflation reveals the biggest threat to your money right now. You’ll learn not only how to prepare for deflation and adapt during it; you’ll also learn how to survive it and — most important — prosper during it, so you’ll be ready for the buying opportunity of a lifetime at its end. Click Here to Download Your Free 90-Page Deflation eBook Now.

Why You Can Do Better Than Bonds

By Sara Nunnally, Editor, Smart Investing Daily

The U.S. 10-Year Treasury bond is a safe investment… right? For the most part, yes. The U.S. government — for all its flaws — is not likely to go bust tomorrow.

But yields have been sliding for nearly 30 years, and we haven’t yet seen the bottom. At the same time, bond prices have been climbing in near bubble-like fashion. That means investors are spending more for a lower yield, all in the name of safety.

Yesterday, Bloomberg reported, “Goldman Sachs Group Inc. economist Sven Jari Stehn says the Fed could buy ‘at least’ $1 trillion in Treasury notes, and ‘sizeable purchases of Treasury securities’ will begin later this year or early next year.”

So yields could continue to drop through the rest of the year, and maybe even into next year.

Now, bonds play a part in any balanced investment portfolio, but if you’re looking for steady extra income, you can do better.

Much better.

As of midday yesterday, the yield on a 10-Year Treasury note was 2.69%. But the annual dividend yield for AT&T, Inc. (T:NYSE) is 6%! That’s an extra $1.68 a share…

Unsung Portfolio Heroes

Investors looking for value in the stock market sometimes discard companies that offer regular dividends. In many cases, these investors would rather see that cash pumped back into the company.

But dividend stocks, over the long term, have outperformed non-paying stocks. According to Ned Davis Research and Income Stock Report, “dividend stocks on the S&P 500 generated a total return of 10.19% per year compared to the 4.39% generated from non-dividend stocks” over the past 30 years through November 2009.

And the difference between the two has been widening over the past couple years.

That could mean that in times of economic uncertainty, dividend-paying stocks are a better choice for all types of investors. When you’re looking for steady gains in the stock market, rather than the fast appreciation of a company’s share price, dividend-paying companies shine all the more.

Dividends can help you determine the fundamental health of the company, because dividends are paid to investors from “leftover” earnings.

A company paying regular dividends, even in a bearish market climate, is ensuring investor confidence, and lowering volatility. This is because investors tend to hold dividend-paying stocks through bear markets, according to Bloomberg Businessweek.

So not only do dividend-paying stocks take some volatility out of your investment portfolio, but these companies pay you money for being an investor…

A Peek Behind the Dividend Yield Curtain

Dividend yield is calculated by dividing the annual dividend per share by the stock’s share price. Simple enough, right? By this calculation, the higher the yield, the more attractive the dividend stock.

But let’s take a closer look at this equation.

Let’s assume that Company X, which is trading for $20 a share, keeps its dividend, of $1.00 annually, steady as the market turns against it. At this point, the annual dividend yield is 5%. If Company X’s share price falls to $15, the annual dividend yield becomes 6.67%.

The dividend is still $1 a share… The difference is that Company X has dropped in share price. In other words, a high dividend yield isn’t the only thing you should look for in a dividend-paying company.

(Do you like my breakdown on dividend stocks? Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the stock market for you with our easy-to-understand investment articles.)

Forbes has compiled a list of the top 10 dividend-yielding stocks from the Dow Jones Industrial Average.

You can find the list here, but besides the companies listed, take a look at the other parameters Forbes took into consideration:

• Price-to-Earnings Ratio
• Price-to-Book Ratio
• Free Cash Flow
• Market Cap
• Profit Margin
• Revenue

Notice anything about this list? The first three are the same key statistics we used on Friday, Sept. 3, to determine value in a cheap market.

And lastly, take a look at the company’s share price.

Let’s take AT&T, for example…

Great Value, Great Dividend

Here are the statistics:

This is a comparison of AT&T and Verizon. As you can see, both companies offer a great dividend yield.

But AT&T is clearly the better value with a much lower P/E ratio, lower Debt-to-Equity ratio, and lower PEG ratio. Now look at the difference in each company’s share price over the past year. AT&T has climbed more than 5%, while Verizon is slightly under par for the past 52 weeks.

That means had you invested in AT&T a year ago, you’d be sitting on a gain of 11.87%, much better than the 10-Year Treasury bond.

But even if AT&T hadn’t made any share price gains over the past year, you’d still be raking in 6% from that dividend… more than double the T-bond’s 2.69%. In fact, AT&T could have dropped to $25.60 in a year, and you would’ve still come out ahead of the Treasury’s yield.

The long and short of all this is that you can do much better that the declining yield in government bonds. High-yielding dividends can even help eliminate some downside risk of investing in stocks. If you add dividend stocks to your value criteria, the combination can really pay off, as it has for AT&T over the past year.

Don’t forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

About the Author

Sara is Co-Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country.

As Senior Research Director, global correspondent and co-editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.

The THREE Things You Must Do to Be a Successful Investor

By Jared Levy, Editor, Smart Investing Daily

In over 15 years of trading, investing and risk management, I realized the three things that make the real difference between a successful investor and one who struggles have nothing to do with technology, strategy or even a personality type (although some personalities have an easier time applying them).

I mean, when you think about the multitude of successful strategies and investments that are made every day, there may be some common threads between them, but with all the diverse and sometimes conflicting methods used, how can they all be the key to successful investing?

They can’t…

Here are a few smart investing ideas for you to remember:
(And by the way, none of these ideas are the three strategies you have to follow to be truly successful.)

• Acquire stocks when they seem to be cheap (or more importantly, valuable) on a fundamental and technical basis. This is sometimes achieved when the rest of the market is in a panic selling mode.
• Buy bonds when yields are high (when monetary policy is tight, but expected to loosen).
• Purchase soft commodities when they are at relative historical low values (perhaps at the end of an economic contraction) and increased demand is on the horizon.
• Buy gold and dollar-denominated commodities like oil when increased inflation is on the horizon and before certain seasonal rallies.
  • Gold before September
  • Oil before spring and summer (ahead of driving & hurricane season)
• Diversify your portfolio, not just with stocks in different industry sectors, but with stocks that have different Betas (Beta tells you how volatile a stock is in relation to the market) as well as a blend of defensive and cyclical stocks when appropriate.
  • Of course, a further mixture of commodities, bonds and options in your portfolio will add even more levels of diversity and increase your chances of beating the biggest fat cat fund managers (most of them can barely beat the S&P).

All of these techniques, plus the multitude of tactics and trades that Sara and I offer in Smart Investing Daily, will give you an edge. (That said, if you’d like to receive our advice, sign up for our easy-to-understand investment articles.) But even following these practices I’m sorry to say you can still lose. Because without the following three covenants, you are surely doomed. Let me explain…

#1 – DON’T FORGET TO TAKE PROFITS!

Far and away, the most important thing you can do as an investor is to have an END to your trade, preferably a profitable one! Most novice traders jump into a trade with good intentions, but don’t have a goal to reach.

When you buy any investment, set a target for yourself (be realistic) and once you reach that target (or if the market seems to be changing) exit the trade! Even with all the great techniques listed earlier, they all mean nothing until the profits are booked in your account!

Use Trailing Stops to Help

A relatively new “order type” that most brokers offer nowadays is called a trailing stop. It can help mechanize your trade and assist in taking profits for you, especially if you have a hard time hitting the “sell” button. Think of it as a stop-loss order that follows your stock price up, but not down.

How It Works

Let’s assume I buy a stock at $40 and place a $1 trailing stop below it. If the stock moves up to $45, the stop moves up with it and is still $1 below the current stock price (the stop is now at $44). If the stock drops, the trailing stop locks in place and my stop loss will trigger at $44, taking me out of the trade for a profit! Cool, right?

#2 & 3 – DON’T BE GREEDY AND FOLLOW YOUR PLAN!

Call them the “trifecta to profit” or whatever you need to remember them, because they might just save you some dollars.

A Friend Who Broke All the Rules

I have a close friend who has been an extremely successful trader on Wall Street for many years. He has made a living his entire life trading his own account.

He called me on Friday, Sept. 3, to discuss a bullish option swing trade (swing trades usually last one to three days) he had on in CREE. He was up about 20% in the trade in less than a week (which is about 1,000% annualized, but let’s not go there). I urged him to sell it, which he did and he was more than happy with his realized return and that his profit target was reached.

And Then…

The day after Labor Day, CREE dropped from $57 to $54 and boy, was he happy. Seeing dollar signs and ignoring his rules, he jumped all in with a position that was twice the size of what he just took off. He did this when the charts were NOT looking bullish at all and ADDED RISK!

On Wednesday, he now had a big problem, because the stock was trading down to $49 and he was long the equivalent of 10,000 shares at a much higher price.

Now the tide shifted – he went from being in complete control to hoping, wishing and praying the stock would move higher and feeling bitter because he just made a great return in the stock. Luckily, the stock rallied a bit and he was able to trade his way out for a little better than breakeven.

The moral of the story is that his first trade was a successful one, because he executed his plan, used good money management (controlled greed), and took a profit when he reached his goal and the stock was looking weak.

The second trade was done in an excited, uncontrolled state of mind with no plan and poor money management.

In your own account, monitor how much money you put into any investment and don’t be afraid to take a profit if you are happy with your returns. There will always be another trade!!!

Don’t forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

About the Author

Jared Levy is Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to successfully trade and invest while keeping risk low.

Jared has spent the past 15 years of his career in the finance and options industry, working as a retail money manager, a floor specialist for Fortune 1000 companies, and most recently a senior derivatives strategist. He was one of the Philadelphia Stock Exchange’s youngest-ever members to become a market maker on three major U.S. exchanges.

He has been featured in several industry publications and won an Emmy for his daily video “Trader Cast.” Jared serves as a CNBC Fast Money contributor and has appeared on Bloomberg, Fox Business, CNN Radio, Wall Street Journal radio and is regularly quoted by Reuters, The Wall Street Journal and Yahoo! Finance, among other publications.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar continued to weaken in the wake of the FOMC as markets priced in the prospect of a further round of quantitative easing later this year. Lower US yields continued to weigh on USDJPY. EUR and GBP continued top rise vs. the USD as did AUD and NZD. The exception was CAD, which lost some ground to the USD today as a result of a weaker than expected Canadian retail sales result. EURUSD traded 1.3271-1.3441, while USDJPY traded 84.27-85.18. US equity markets closed lower for the second consecutive day following Tuesday’s FOMC announcement.

EUR

The Portuguese bond auction was relatively firm. Bid to cover ratios came in at 4.9x and 3.5x for the 10 year and 4 year bonds respectively, though the yields were both higher. Spread of Ireland and Portugal over bunds had already risen sharply ahead of the auction, clearly showing that even though investors are still willing to fund these economies, the challenges remain immense.
Industrial new orders were much weaker than expected at -2.4%m/m (cons. -1.4%m/m) and +11.2%y/y (cons. 16.2%). Euro-zone consumer confidence for September was unchanged from its August reading at -11. Ahead Thursday, Germany’s PMI for manufacturing and Services are released, as well as Euro-area PMI services and manufacturing. The German Ifo will be released on Friday.
JPY

BoJ Board Member Miyao said that the BoJ would continue to provided ample liquidity but has no preset idea about future policy. Miyao said that an increase in the pace of monthly JGB buying is one option. While the BoJ has traditionally been less then enthusiastic in its assessment of the benefits of past episodes of quantitative easing, intriguingly Miyao said that how the policy is assessed today could differ from how it was assessed in the past. This is the clearest sign yet that further BoJ easing could be on the cards in the near term.
On the back of the falling dollar, PM Kan reiterated Japan’s active plans for intervention in the currency markets, stating that intervention would be unavoidable” if the market pushes JPY stronger. It appears that policymakers have set a clear floor for the currency which will be habitually maintained if and when it is breached.
GBP

BoE minutes fell broadly in line with expectations, showing an 8-1 vote split, with Andrew Sentence again calling for a rate hike. Sentence effectively revealed this information in an interview last night where he stated that the UK should “gradually move interest rates up in a slow way which will not destabalise business confidence”.
CAD

Canada’s retail sales for July came in below expectations, falling 0.1% m/m at the headline and 0.4% m/m for the ex auto figure. This weighed on CAD vs. the USD during the trading session, but was not enough to break the current CADUSD trading range.

TECHNICAL OUTLOOK

EURUSD resistance at 1.3509.
EURUSD NEUTRAL Climb through 1.3334 has scope for 1.3509 and 1.3818 next. Near-term support comes in at 1.3268 ahead of 1.3159.
USDJPY NEUTRAL Pullback from 85.93 targets 84.05 ahead of 82.88.
GBPUSD BULLISH Momentum is positive; move above 1.5729 would expose 1.5999 key high. Support holds at 1.5297 holds.
USDCHF BEARISH Break through 0.9933/18 region reinstates the bearish trend. Next support lies at 0.9786 ahead of 0.9625. Resistance at 0.9983 intraday high.
AUDUSD BULLISH Move above 0.9850 would open up the way towards 1.0211 Fibonacci level. Near-term support is at 0.9442 ahead of 0.9309.
USDCAD NEUTRAL Choppy action holds between 1.0108 and 1.0509.
EURCHF NEUTRAL While resistance is at 1.3391 ahead of 1.3482, support comes in at 1.2991.
EURGBP NEUTRAL Continues to rally towards 0.8609, with scope for 0.8774 next. Support defined at 0.8459 ahead of 0.8390.
EURJPY NEUTRAL Break of 114.74 would put odds in favour of positive tone. Next resistance at 116.68. Support holds at 110.66 ahead of 107.73.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Russell Glaser – The dollar continues to fall as traders sell the dollar in light of the Fed’s recent comments that open the door for more quantitative easing. However, the euro is rising despite a selloff in equities.

Yesterday the Dow Jones Industrials finished the day down 0.2%. Despite the down day for equities, the dollar was also weaker with the euro and the Swiss franc putting in a strong performance.

Today traders are going to be eyeing data releases in the US for direction in the FX markets.

USD – Unemployment Claims – 12:30 GMT
Expected: 451K. Previous: 450K.

The weekly data for new unemployment benefits may surprise the market with a positive outcome, helping to increase risk appetite and a rise in the rate of the EUR/USD. Traders should be targeting their EUR/USD bets at 1.3510.This level is the 50% Fibonacci retracement from the 2009 high. Support is found at the height of the June to August bullish move at 1.3330.

USD – Existing Home Sales – 14:00 GMT
Expected: 4.11M. Previous: 3.83M.

This report measures the annualized number of residential buildings that were sold in August. If the report comes in positive, it is typically dollar positive. But this time we may see the report serve to increase risk taking and provide a boost to the weakened US equity markets. This would in turn spur traders to sell the dollar and buy higher yielding currencies such as the Aussie dollar. The AUD/USD could rise to yesterday’s high just below the 0.9600 level.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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

Source: ForexYard

The US dollar traded near a five-month low versus the EUR before a U.S. report today that may show existing home sales are close to a 10-year low, adding to signs the world’s largest economy is struggling to recover.

Economic News

USD – US Dollar Extends Losses

The US dollar fell against most of the major currencies on Wednesday, a day after the Federal Reserve said it was ready to take further action to boost the U.S. economy and fend off any deflationary threats. As a result, the dollar fell to its lowest level versus the yen since Japan intervened last week and closed around 84.50. The dollar experienced similar behavior against the EUR to trade at session highs above 1.3400.

The U.S. Federal Reserve’s policy-making open market committee on Tuesday set the tone after it said it was prepared to take new stimulus measures if necessary. While the Fed left interest rates at record lows, it suggested further credit easing in a statement. Those measures would likely include buying treasury bonds, causing the market to brace for further dollar losses. The Fed comments will likely keep the dollar weak in the near-term, as the bank’s stance is expected to keep downward pressure on U.S. interest rates, analysts said.

Today’s Unemployment Claims and Existing Home Sales releases are expected to have a strong impact on the US currency. Any result could be a surprise, and the dollar could go either way as a result. In any case, traders are unsure how the market will react to today’s data. A weak report could feed risk aversion, boost Treasuries and actually aid the US dollar. Then again, a better than expected result might be seen as a sign of relative US economic strength, and lift the dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the dollar’s expense.

EUR – EUR/USD Hits 5-Month High

The EUR experienced a bullish trading session yesterday, as it appreciated in most of its major currency pairs. The 16-nation currency extended gains versus the dollar during yesterday’s trading session, rising to its highest level in five months to trade above 1.3400 amid a broad sell-off in the USD. The European currency finished around 60 pips higher against the JPY to finish yesterday’s trading session at the 113.30 level.

The pound slipped against the EUR on Wednesday to the lowest level since May, after the report showed the British budget deficit widened in August more than expected, increasing the possibility of further budget spending cuts. The EUR/GBP reached today 0.8560, the highest level since May 28th, after it dropped to the intraday low of 0.8462.

The UK public sector net borrowing was £15.9 billion in August, compared to the borrowing of £14.1 billion in a year ago. The current budget posted the deficit of £13.3 billion in August. Analysts say that the pound may fall further versus the EUR.

JPY – Yen Makes Big Gains on Dollar

The Yen rose on Wednesday to its highest level against the dollar since Japan intervened last week, fuelling speculation of more intervention after the Federal Reserve raised expectations it would print more dollars to help the U.S. economy. The USD/JPY fell yesterday as low as 84.26 before correcting itself. Currently the pair is trading around the 84.60 level.

Top Bank of Japan officials flagged rising risks to the nation’s growth as the yen climbed in the aftermath of the US Federal Reserve signaled its willingness to consider more monetary stimulus. The remarks came a week after Japan sold yen for the first time in six years in response to a strengthening currency that threatened to derail the economy’s recovery. The BOJ may be pressured to consider further liquidity injections after the government’s decision to intervene and the Fed’s signal it may ease more.

Many traders expect Japan to step in between 83.00 and 85.00 yen. They said the authorities had called banks to ask if they will be staffed on Thursday, a Japanese national holiday, in an apparent attempt to keep traders cautious over intervention.

OIL – Crude Oil Rises Above $75 a barrel

Oil prices rose above $75 a barrel Wednesday, boosted by a weaker dollar. But gains were limited by a report showing an unexpected rise in US supplies last week, a sign demand for crude oil may not be improving.

Oil and other commodities denominated in dollars for global trading tend to rise when the U.S. currency falls as they become cheaper for holders of other currencies. A move away from dollar-based pricing of the world’s leading commodity could further weaken the greenback.

As for today, traders should pay attention to the US Crude Oil Inventories report as it tends to have a large impact on Crude Oil prices recently, especially for the short-term.

Technical News

EUR/USD

After a strong rally over the last few days, the pair is finally seeing some downward correction with some room for the trend to continue. Looking at the daily chart, a breach of the upper Bollinger Band is evident with the RSI for the pair floating in the overbought territory. A bearish cross is evident on the 4 hour and 8 hour chart’s Slow Stochastic. Going short with tight stops may be preferred for the day.

GBP/USD

The pair is currently range trading between 1.5630 and 1.5690 with most indicators in neutral territory. The RSI for the pair floats near the overbought territory on the 4 hour and daily chart indicating some downward movement may still be expected from the pair. Going short with tight stops for the day may be advised.

USD/JPY

After a strong downward move some correction may be expected for the pair as the RSI is floating in the oversold territory on the 4 hour and 8 hour charts and a bullish cross is evident on the 8 hour chart’s Slow Stochastic. Going long for the day may be a good option.

USD/CHF

A breach of the lower Bollinger Band is evident on the daily chart with the RSI for the pair floating in the oversold territory on the 8, 4 and 2 hour charts. Furthermore, a bullish cross is evident on the 8 hour chart’s Slow Stochastic. Going long with tight stops may be advised for the day.

The Wild Card

AUD/CAD

After a long bullish run, some correction may be in store for the pair. A bearish cross is evident on the daily chart’s Slow Stochastic with the RSI for the pair floating in the overbought territory on the 4 hour, 8 hour and daily charts. Moreover, a breach of the upper Bollinger Band can be seen on the daily chart, indicating an imminent downward move. Forex traders are advised to go short for the day.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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