Month: November 2010

By Forex Signs, Inc. – After a volatile session of uptrend last Friday, which resulted from the positive development regarding the rescue of the Ireland’s banks that will likely prevent contagion across the region’s debt markets, the Euro is now anticipated to go back from consolidation pattern.

In Europe, traders now expect the important public engagement of ECB President Jean-Claude Trichet at the European Parliament’s debate, in Strasbourg. This much awaited speech is viewed to shed some light on the debt crisis and the economic situation that could trigger interesting statements by which will rock the Euro, drive key interest rates decision and influence future monetary policy to adjust.

On the other hand, the announcement of the European Union finance ministers regarding the deal that will create a capital fund for Ireland’s banks and may restructure the financial industry had considered to be so influential, causing the risk sentiments in the EU region to weaken. This incident had also in return made the higher-yielding assets, specifically the Kiwi and Aussie, to appreciate as it shows that sovereign issue in the euro zone isn’t going to go away in a hurry.

So far, investors are observed to become more nervous and worried about what’s going on in the EU regions, and what will happen to the sovereign debt crisis is still seen to be the key driver of this growing anxiety.

Europen Session Outlook

The Euro had a fairly good performance on its last session, as prices closed higher against most major currencies due to the better than expected economic figures. Although Current Account fell to -13.1B and French Preliminary NFP rose only by 0.3%, the overall sentiment was positive most notably the ZEW Economic Sentiment as it posted a high 13.8 points, which was above analysts’ expectations.

For the upcoming session, the Euro to be volatile as ECB President Jean-Claude Trichet is scheduled for a speech at the European Parliament. He might discuss the current economic situation of the European Union; especially that Ireland has sought 95B Euros in international aid to rescue its troubled banking sector. Expect high volatility when parliament members throw their questions and it would be interesting to hear their statements after Trichet’s speech.

About the Author

Forex Signs, Inc., Founded in 2006 in Wall Street, New York City, FSI relentlessly strives to be the premier Forex brokerage company in the industry by providing exclusive and unmatched trading and investment related services while constantly developing innovative solutions that cater to the vast requirements of both individual and institutional market participants.

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EURUSD broke below the rising price channel on daily chart, signaling a change in trend. Bearish movement is expected to continue next week and next target would be at 1.3000 area. Resistance is at the downtrend line from 1.4281 to 1.3785, only a clear break above the trend line resistance could indicate that consolidation of downtrend is underway.

For long term analysis, EURUSD has formed a cycle top at 1.4281 level on weekly chart. Deeper decline towards 1.1876 previous low is expected in next several weeks.

Weekly Forex Forecast

An Irish bailout by the EU looks to be on the way next week, but the markets have already reacted to that news.  So what should investors be considering when looking ahead to the coming days?

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By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The dollar made strong gains during the Asia session after an article in the Financial Times Deutschland claimed that the ECB and a majority of Eurozone nations are urging Portugal to accept a bailout. Sentiment was not helped either by reports of further firing on the Korean peninsula. Finally, RBA Governor Stevens provided extensive policy guidance, effectively ruling out any further rate hikes in the near future. This dulled the allure of the risk-on trade, also causing the NZD to weaken. EURUSD traded 1.3294-1.3376 and USDJPY 83.56-83.92. Despite the lack of US economic data there remains plenty of event risk today, with Portugal’s budget in focus. Parliamentary approval is expected but there are larger forces at work at present for the euro and the market will probably continue to trade on a risk-averse note. If negotiations between Ireland, the IMF, the EU and the ECB result in an agreement over the weekend, this could offer the euro some support on Monday. But any relief rally is likely to be short-lived given uncertainty surrounding the Irish budget vote which is currently scheduled for Dec. 7.
The common view is that by resisting currency appreciation against the US dollar, Asian central banks are importing the Federal Reserve’s interest rate policy and generating asset price inflation. While there’s clearly truth in this, the difficulty is that during any transition to a more orthodox policy in Asia, capital inflows could actually accelerate in the first few years before current account deficits of sufficient size emerged to relieve upward pressure on money and credit aggregates.
EUR

A German government spokesman noted that both it and France have agreed that the current Eurozone rescue mechanism should remain unchanged until mid-2013, but Germany authorities continue to stress that private market bond holders are expected to bear losses under the new framework.
Peripheral bond spreads remain wide but even bunds are now suffering as investors begin to contemplate the cost of any Eurozone bailout to Germany and its own sovereign condition.
Funding concerns remain in the Eurozone as investors have noted a sharp rise in usage of the ECB’s marginal lending facility, while the basis swap market is pointing to renewed demand for dollars, despite the presence of central bank swap lines.
JPY

Headline CPI turned positive in October for the first time in almost two years, reaching +0.2% y/y, in line with consensus. However, our Japan economist notes that this was largely due to a hike in tobacco tax. The core CPI reading remains in negative territory at -0.6% y/y for the twentieth consecutive month.
GBP

MPC members King, Tucker, Dale, Posen and Sentance appeared before UK lawmakers today and the Governor affirmed his view that inflation risks are balanced, but the BoE would be ready to act if necessary.
AUD

RBA Governor Stevens commented extensively on the outlook for monetary policy and clearly signaled the RBA is in no hurry to hike the cash rate. He said it is reasonable for the market to assume that the next hike will likely come around the middle of next year. Stevens maintained a tightening bias though, noting that the “medium-term risks on inflation lie in the direction of it being too high, rather than too low”.
CHF

The KoF leading indicator is due in Switzerland and we expect a decline to 2.12 from last month’s 2.17. Nonetheless the Swiss economy is expected to continue outperforming the Eurozone and we still expect EURCHF to trend lower in the current environment.

TECHNICAL OUTLOOK
AUDUSD targets 0.9652 support.
EURUSD BEARISH Momentum is negative; break of 1.3235 would expose 1.2988. Resistance at 1.3634.
USDJPY BULLISH Climb above 83.99 would expose 85.93. Initial support at 82.40 ahead of 81.66 reaction low.
GBPUSD BEARISH Violation of 1.5650 would open up the way towards 1.5297. Near-term resistance at 1.5838.
USDCHF BULLISH Rise above 0.9998 exposes 1.0183. Near-term support at 0.9849.
AUDUSD BEARISH The pair targets 0.9652 with scope for 0.9542 next. Resistance at 0.9954.
USDCAD BEARISH Holds below 1.0374 keeping our focus on the downside. Initial support defined at 1.0076 ahead of 0.9978.
EURCHF BEARISH Pullback from 1.3674 eyes 1.3229 support, break of the level would expose 1.3072. Near-term resistance at 1.3488.
EURGBP BEARISH Push below 0.8449 exposes 0.8390 next. Initial resistance at 0.8543.
EURJPY BEARISH Break of 109.35 would expose 107.73 ahead of 105.44. Near-term resistance at 113.67.

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 Natalie R. – Gold continued its decline in European trading today, dropping to $1365 an ounce from an overnight price of $1372.  The decline came as the dollar strengthened further versus the euro, as the ERU/USD pair reached a two week low of 1.3260.

The drop came as concerns intensified that Ireland’s debt problems will widen to Portugal and Spain. Though Gold prices still receive support from the euro-zone debt crisis as investors turn to the precious metal as an alternative investment, the strong dollar reduces the appeal of the metal as it makes it more expansive.

It seems that Gold has a strong support at $1365 an ounce, as the euro-zone debt concerns persist and the tension between North and South Korea remain in the background. Trading returned to normal market conditions today as U.S banks open after yesterday’s holiday, however, the lack of major news events will likely keep the markets subdued ahead of the weekend. Gold will likely remain between $1365 and $1372 for the remainder of the day.

Silver continues to follow Gold’s trading pattern, also seeing a decline in today’s trading, albeit it still remained within its recent range. Silver for immediate delivery declined to $27.25 an ounce, after briefly dropping to a low of 27.02. Silver, however, is still up overall this week. The price reached $29.36 an ounce on Nov. 9, the highest level since 1980.

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.

The outlook for the euro remains less than sunny this morning.

The latest figures from the EU indicate that credit default swaps for government bonds (insurance rates that investors pay to protect themselves in the event that banks default) have increased not only for EU periphery states but core states too. This means investors must pay more for government bonds in EU pillar nations including France and Germany.

This is pessimistic news for the euro. It indicates that the bond crisis now threatens to envelop the euro zone entirely, and confidence in the common currency is not high.

The reasons for this disheartening development are multiple. For one there are conflicting reports within the EU about the need to expand the EFSF bailout fund. EU officials inside the European Commission for instance have commented that the fund should be increased to protect Spain in the event it needs a bailout.

Yet other officials inside Brussels have denied this report, stating that the present €440 billion EFSF rescue pot is sufficient. In addition, the German Chancellor Angela Merkel has expressed an unwillingness to contribute more to the fund. She faces a backlash from the German public if she contributes to rescuing other EU states while imposing benefit cuts on the German public.

However, the most important reason for pessimism toward the euro is a market recognition that the present crisis has exposed fundamental flaws in the common currency.

This is: The euro unites member states in a common currency without binding them to a common fiscal policy. Hence, the comparative economic weakness of some member states can bring down more robust states. The fact that France and Germany now face increased insurance rates for government bonds because of events inside Ireland and Portugal demonstrates this.

This has led some economic commentators to claim that the euro now faces collapse. At the very least, important revision to the way the common currency works seem inevitable.

Elsewhere on the currency markets in the UK, a public argument between two members of the Monetary Policy Committee dampened confidence in sterling yesterday. Speaking to the Treasury Select Committee, MPC member Adam Posen accused the Committee’s Chairman Mervyn King of political bias.

These comments, coming from one of King’s senior policy makers, will undermine confidence in the Chairman’s policy making decisions.

King stated yesterday that he doesn’t intend to increase interest rates in the UK nor initiate a second round of quantitative easing, unless export demand in the UK drops. But Posen’s comments might make the markets question whether this is the correct tactic.

Finally it was a quiet day in the US yesterday because it was Thanksgiving. The dollar though gained against sterling and the euro because risk appetite on the exchange markets is low. This could continue until officials inside the EU decide the exact course of action they’re taking.

Upcoming later? The German Consumer Price Index figures are released accounting the average prices of goods and services consumed by the German public. Strong numbers are traditionally strong for the euro, though on the current market they could increase German desire to unshackle themselves from currency partners that are proving a liability.

By Peter Lavelle with foreign exchange specialist PureFX.co.uk.

Source: ForexYard

A potential bearish chart pattern signals an impending drop in the price of gold.

Economic News

USD – Flows Returning to Normal Following US Holiday

Liquidity was light yesterday as US banks were closed in observance of Thanksgiving. During the Asian and European trading sessions the US dollar was mixed against the majors. The Irish bailout continues to dominate the headlines along with speculations of whether the European financial problems will intensify in the nations of Portugal and Spain.

An absence of high impact economic data and low liquidity left the pairs trading in moderate trading ranges. The EUR/USD was up at 1.3343 after beginning the day at 1.3321. The GBP/USD was even on the day at 1.5760. The USD/JPY was higher at 83.66 following an opening day price of 83.51.

Today’s trading should see a return to normal market conditions as US banks will be open. Traders’ sights will be set on developments in the euro zone surrounding the European debt crisis along with a slew of European data releases. Support for the EUR/USD comes in at 1.3080, the 50% retracement level for the June to September move. Resistance is found at 1.3360, the 61.8% retracement for the June to September move.

EUR – Euro Receives Support from ECB Member

The euro continues to receive supporting words from the President of the German Bundesbank, Axel Weber. Weber is also a voting member on the ECB governing council. The highly influential banker, and frontrunner to replace ECB President Jean-Claude Trichet next year, said the euro is one of the world’s most stable currencies and it is unlikely that Spain will require aid from the euro zone or the IMF.

The comments helped to drive the euro higher yesterday. This follows three consecutive days of declines for the euro where the currency has given up 4 cents to the dollar in this week’s trading.

The Wall Street Journal reported yesterday that the European Commission is attempting to increase the size of the European bailout fund to 880 billion euros from 440 billion euros. This does not bode well for European officials who are attempting to stave off the spread of the European debt crisis to other nations at risk such as Spain, Portugal, and Italy.

Today traders will be following developments in Europe for direction of the euro. Also set to be released today are German preliminary CPI data along with money supply figures. Positive numbers for both of these economic releases could help the euro build on today’s gains.

AUD – RBA Governor Supports Strong Aussie Dollar

In a speech today, the Royal Bank of Australia (RBA) Governor Glenn Stevens said the strong Aussie dollar is helping to drive inflation lower and reaffirmed that current interest rates were at an appropriate level. Governor Stevens expects inflation to maintain its present rate with rising labor costs factored in.

Stevens’ comments helped to push down the AUD in trading as hopes waned for another quick increase in Australian interest rates.

The AUD/USD is trading lower at 0.9750, down from an opening day price of 0.9785.

However, long term inflationary pressures remain in the fast growing Australian economy. A commodities boom has led the way for strong economic expansion. As such the RBA will not be able to maintain the current interest rate environment in the long term. This should lead to a stronger Aussie dollar. A near term target for the AUD/USD is the November high of 1.0181.

Commodities – Gold Shows Potential Reversal Pattern

Commodity prices were steady yesterday as US exchanges were closed in observance of Thanksgiving. Spot crude oil is trading at its opening day price of $83.74. This comes one day after strong gains were booked with the price of spot crude oil rising over $1.40.

Gold prices continue their climb and are currently trading at $1372. The price of spot gold has come off of a low when the price fell to the support level of $1330.

Technical News

EUR/USD

Some correction may be seen for the pair today as the RSI for the pair is floating gin the oversold territory on the hourly, 8 hour and daily charts while a bearish cross is seen on the hourly chart’s Slow Stochastic. Going long with tight stops may be advised for today.

GBP/USD

A breach of the lower Bollinger Band is seen on the hourly chart with the RSI for the pair floating in the oversold territory on the daily and 8 hour charts. Going long may be a good choice for today.

USD/JPY

A breach of the upper Bollinger Band is evident on the 8 hour chart with a bearish cross seen on the 2 hour, 4 hour and 8 hour charts’ Slow Stochastic. The RSI for the pair is floating in the overbought territory on the 2 hour and 4 hour charts. Going short may be advised for today.

USD/CHF

Some downward correction may be expected for the pair as a bearish cross is seen on the 8 hour chart’s Slow Stochastic and the RSI for the pair is floating in the overbought territory on the daily chart. Traders may be advised to go short for the day.

The Wild Card

NZD/USD

A breach of the lower Bollinger Band can be seen on the hourly chart while the RSI for the pair is floating in the oversold territory on the 8 hour chart. A bullish cross is seen on the hourly chart, indicating an impending upward move. Forex traders may be advised to go long on the pair for today.

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.

Canadian Economist Jeff Rubin is known for his prescient calls in the oil markets over the past few decades.  His most recent book, Why Your World is About to Get a Whole Lot Smaller, explains why continuously rising oil prices will mean the end of globalization.

We caught up with Rubin at the Global Wealth Management seminar in Copenhagen to talk about how rising oil prices will affect everything from home loans to the price of Salmon.

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Elliott wave subscribers were prepared for municipal bonds troubles months in advance

By Elliott Wave International

This November, the whole world tuned in as the greater part of the U.S.A.’s 50 states turned red — and no, I don’t mean the political shift to a republican majority during the November 2 mid-term elections. I mean “in the red” — as in, financially fercockt, overdrawn, up to their eyeballs in debt.

Here are the latest stats: California, Florida, Illinois, and New Jersey now suffer “Greek-like deficits,” alongside draconian budget cuts, job furloughs, suspensions of city services, and the growing “rent-a-cop” trend of firing city workers and then hiring outside contractors to fill those positions.

Next is the fact that the municipal bond market has been melting like a snow cone in the Sahara desert. According to recent data, 35 muni bond issues totaling $1.5 billion have defaulted since January 2010, three times the average annualized rate going back to 1983. Also, in the week ending November 19, investors withdrew a record $3.1 billion from mutual and exchange-traded funds specializing in municipal debt, triggering the largest one-day rise in yields since the panic of ’08.

In the words of a recent LA Times article “It’s a cold, cold world in the municipal bond market right now.”

And for those who never saw the muni bond crisis coming, it’s a lot colder.

Since at least 2008, the mainstream experts extolled munis for their “safe haven resistance to recession.” And while muni bond woes are only now making headlines, one of the few sources that foresaw the depth and degree of the crisis coming ahead of time was Elliott Wave International’s team of analysts. Here’s an excerpt from the April 2008 Elliott Wave Financial Forecast (EWFF):

“One of the most vulnerable sectors of the debt markets is the municipal bond market. Instead of being a source of state and local funding, many residents will become a cost. Default could hit at any moment after times get difficult… Yields on tax-exempt municipal bonds are above yields on US Treasuries for the first time in as long as anyone can remember, another sign of how limited the supply of quality bonds will become.”

EWI continued to warn subscribers ever since:

February 2009 EWFF: Special section “Out of the Frying Pan and into Munis” showed the continued rise in muni yields ABOVE Treasury yields and cautioned against the idea that tax-exempt debt was a “safe bet.”

September 2010 Elliott Wave Theorist: “The Next Disaster: The public has withdrawn some money from stock mutual funds… But most investors … are shunning treasuries for high-yield money market funds and bond funds, which hold less-than-pristine corporate and municipal debt.”

And now, in the just-published November 19 Elliott Wave Theorist, EWI president Robert Prechter captures the full extent of the unfolding muni crisis via the following chart:

Read more about Robert Prechter’s warnings for holders of municipals and other bonds in his free report: The Next Major Disaster Developing for Bond Holders. Access your free 10-page report now.