Month: September 2011

Source: ForexYard

After last week’s better-than-forecast confidence indicators out of the United States, similar reports out of the euro zone now seem to be coming into focus. Tomorrow’s release by ZEW is forecast to show a deep contraction in the region’s economic outlook. Speculators appear to be taking cues from such reports and going short on the region, stoking the flames of the EUR’s current value crisis.

Should tomorrow’s ZEW report on Germany come in as poorly as anticipated, there is a strong likelihood that regional investors will flee risk and move more strongly towards the US dollar (USD). The correlated economic sentiment report on the broader euro zone carries similar implications and traders would do well to anticipate a sharp increase in risk aversion should tomorrow’s data be as dismal as many expect it to be.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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

Source: ForexYard

Tomorrow’s early morning release of the Reserve Bank of Australia’s (RBA) monetary policy meeting minutes will not likely carry a hefty impact on currency markets, though the commentary will be very prescient for analysts interested in what the RBA has to say about the current freefall of Australia’s economic outlook.

No doubt Australia’s economy is coming under pressure lately. Housing reports seem to have leveled off, giving few indications of growth. Consumer confidence seems to be rickety, at best. Commodity prices are helping to hold the value of the AUD from entering a deeper devaluation, but high export prices and interest rate appear to be pulling some value away from the Aussie economy. What the RBA notes in its minutes will be worth reading for savvy investors.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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

Sept. 20 (Bloomberg) — Gabriel Stein, a director at Lombard Street Research Ltd., discusses the prospects for the euro amid a deepening debt crisis. Talking with Owen Thomas on Bloomberg Television’s “Countdown,” he also comments on U.S. fiscal policy.

Sept. 20 (Bloomberg) — Andrew Su, chief executive officer of Compass Global Markets in Sydney, talks about global currencies. Su also discusses Standard & Poor’s downgrade of Italy’s credit rating, and Federal Reserve monetary policy. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By ForexYard

Today will see the publication of several US economic releases, with most news focused on housing. Liquidity will likely be higher in today’s later trading as these data points are published, though the impact of Europe’s ZEW confidence readings in the morning could overshadow these figures, driving traders into a frenzy for the duration of the European sessions.

Economic News

USD – US Dollar Stabilizes as Bullishness Sentiment Holds

The US dollar (USD) was seen trading only mildly bullish early Tuesday morning as investors remained pessimistic about growth in Europe and Asia. A sudden wave of risk aversion seemed to have lifted the greenback following a move the weekend’s ECOFIN meetings in Europe which showed the region fraying at the edges.

Data on the American housing sector today may indicate mild optimism that could drive the greenback lower in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts. Housing inflation is forecast to hold steady in several nations this week, which could have the effect of lifting the value of riskier assets, though this will need further data to be confirmed.

As for today, there will be several US economic releases, with most news focused on housing. Liquidity will likely be higher in today’s early trading as these data points are published, though the impact of Europe’s ZEW confidence readings may not be enough to force a surge in any direction on USD pairs and crosses. Housing and consumer confidence are in focus this week and traders will want to pay attention to the latter in the case of mounting pessimism and its affect on dollar values.

EUR – EUR Trading Bearish as ZEW Data Anticipated

The euro (EUR) is expected to be seen trading with bearish results this week ahead of a slew of reports on the region’s consumer confidence and manufacturing sector. Against the US dollar (USD) the euro has been trending downwards from a recent flight to safety after the weekend’s dismal ECOFIN meetings.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in global stocks at the moment has many investors on edge and looking for safety. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets make long strides.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Great Britain, however, appears positioned for a relatively better quarter than its southerly neighbors. With several minor reports expected all week, most expecting bullish figures, the GBP is in a position to continue its recent streak, though the same cannot be said for the EUR.

JPY – Japanese Yen Consolidating as Traders Weight Global Sentiment

The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending intervention by the Bank of Japan (BOJ). Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. With industrial production data out this week, traders are waiting to see what the BOJ will do in the face of a downturn. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.

Oil – Oil Prices Holding Steady amid Market Turmoil

Crude Oil prices held steady Monday as sentiment appeared to favor a mild downtick in global stocks following policies of monetary stagnation being executed by several central banks last week. Data releases out of Europe and the US are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected jump in dollar values due to this week’s risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains leveling off this morning, sentiment appears to have the price of crude oil holding steady near $89 a barrel. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Technical News

EUR/USD

As often occurs with a break of a trend line a currency pair has a tendency to pull back to the trend line only to continue in the direction of the breach. This is this situation with the EUR/USD following a break of the pair’s long term trend line that runs off of the May 2010 and January low. Support for the pair will be located at 1.3425 where the February low coincides with a 50% retracement of the May 2010 to May move. The 61% Fibonacci retracement at 1.3040 may only be a mile marker as many market players have their eyes on the big round number of 1.3000 followed by the 2011 low of 1.2860. Resistance to the upside will be found back at the previously broken trend line at 1.4030 followed by the August high of 1.4550.

GBP/USD

Cable has fallen 4-consecutive weeks and a close below the 1.5780 support puts the 1.4585 level in play. This price carries additional significance as it coincides with a 50% Fibonacci retracement level from the May 2010 to April bullish trend and intersects the previous falling trend line from the 2007 and 2008 highs. This old trend line provided the GBP/USD with support in July and could once again prove to be supportive. Below that rests the December 2010 low of 1.5340 and the 61% Fibonacci retracement at 1.5190, followed by the rising trend line off of the 2009 and 2010 lows which comes in at 1.4950. Resistance may be found at 1.5780, followed by old trend line at 1.6030.

USD/JPY

After making a new all-time low at 75.94 the USD/JPY has failed to mount any meaningful rally above the 77.70 resistance with a slow and steady grind lower. Should the pair once again make a new push below the all-time low support may be found at 75.00 off the bottom of the channel line from the 1999 low and the March 2011 low. To the upside a break of 77.85 may find resistance off of the August high of 80.20 followed by the trend line that falls from the 2007 high which comes in at 80.80.

USD/CHF

The USD/CHF made an attempt to trade back below the 200-day moving average at 0.8770 but only fell back below that level for two days before gapping higher after the weekend. Resistance comes in at the mid-September high of 0.8930 with a break here opening the door to the April 1st high of 0.9200. To the downside 0.8550 may be supportive while the rising trend line from the July and September low is the next support at 0.8175.

The Wild Card

EUR/SEK

After moving sharply lower on a combination of a safe haven bid and speculation the lack of liquidity in the Scandinavian currencies was felt as the shorts got squeezed when the pair failed to break the 8.8500 support level from the April pivot. A scissors pattern may have been formed at the 9.1800 level though a move above here would nullify the bearish candlestick pattern forex traders looking to the next resistance at the August high of 9.3500.

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

An early report on housing inflation in the UK was released by Rightmove this morning, revealing a mild expansion in the asking price of home sales. The data has been mulling about in negative territory for the past two months, making this month’s jump to positive territory more meaningful in a longer-term context.

The Rightmove figure does not tend to carry as significant an impact as other housing reports, however. While it is a gauge of inflation, it only measures the asking price, not the selling price, of housing sales. Today’s HPI report may be enough to bump the pound mildly, though traders shouldn’t bank on today’s figure.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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

AUDUSD broke below 1.0177 support and reached as low as 1.0148. Key resistance is at 1.0398, as long as this level holds, downtrend from 1.0764 could be expected to continue, and next target would be at 1.0050 area. However, a break above 1.0398 will indicate that the fall from 1.0764 has completed, then the following upward move could bring price back to 1.0800-1.0900 area.

Forex Signals

Will diversifying your investments help you now?

By Elliott Wave International

So what is this popular investment approach?

You’ve heard the answer before: Diversification.

You probably know that the purpose of diversification is to spread risk across asset classes. The assumption is that if one asset goes down, the others will be stable or perhaps even move up.

But what if we’re in a time when an “all the same market” scenario is unfolding in the financial world? What if the following description proves accurate:

“In recent years the financial markets have turned roughly together. Although to date they have not topped and bottomed on precisely the same day or even the same month (that would be too easy), their correspondence is getting tighter and tighter.”

Elliott Wave Theorist, May 2011

Please take a look at the chart below.

As noted in the quote above, not all financial markets are trending together exactly. Yet the chart speaks for itself: the correlation is becoming increasingly visible.

In the stocks category alone, diversifying between sectors can leave your portfolio beaten and tattered:

“More than ever on record, individual stocks in the Standard & Poor’s 500 Index are moving in unison…

“‘It’s not just stocks. It’s actually all asset classes,’ said [Andrew] Lo, who is…the chairman and chief investment strategist of a hedge fund. ‘The U.S. dollar relative to other currencies, gold, oil and hedge fund returns have now all become very highly correlated.'”

Huffingtonpost, (8/24)

No other investment approach has been more widely preached than “diversification.” It’s important to dispel the myth of diversification — especially now.

Let me introduce you to a free report called “Death to Diversification: What It Means to Your Investment Strategy.”This publication’s ten sections are packed with uncommon analysis which tells the truth about the too-common advice to diversify your investments. Moreover, the written analysis is accompanied by 18 fact-based charts.You can instantly access your free report after joining Club EWI.Club EWI is the world’s largest Elliott Wave Community with more than 325,000 members. It’s free to join with no strings attached We look forward to welcoming you as a Club EWI member. “Death to Diversification: What It Means to Your Investment Strategy” can be on your computer screen in moments as you follow this link >>

By The Sizemore Letter

World stock markets are down this morning on renewed worries of a Greek default.   Adding fuel to the fire, President Obama’s proposal to levy a new tax on millionaires—dubbed the “Buffett Rule” after being suggested by billionaire superinvestor Warren Buffett—has drawn a sharp rebuke from Congressional Republicans and threatens to unleash more political instability on a crisis-weary public.   And U.S. homebuilders, citing the effects of never-ending foreclosures, are even more despondent than feared according to the National Association of Home Builders survey released this morning.

With the finance world appearing to teeter on the edge of disaster, one might expect that standby crisis hedge—gold—to rise.

Yet a funny thing happened this morning.  The price of gold actually fell sharply.

The spot price of gold has continued to drift lower after surging to new all-time highs above $1,900.  As this article is being written, the price has fallen to $1,783 and appears to have lost all momentum.

Gold’s recent weakness comes even as competing crisis hedges have lost their luster.  The Swiss National Bank took a sledgehammer to the Swiss franc two weeks ago, pledging to lower its value against the euro.  The tactic worked, sending the franc down nearly 10%.  U.S. Treasuries—considered by many to be the ultimate safe haven for their liquidity—now yield far too little to be attractive for most investors.  The 10-Year note yields a miniscule 1.95%.

Gold’s recent action should be deeply disturbing to gold bugs or to anyone using gold as a refuge from the market’s volatility.

While I hesitate to definitely say the gold bubble has burst (the market gods tend to punish those who would be so vain), it is becoming increasingly likely that this is the case.    You can never say with certainty until after the fact, but the anecdotal evidence suggests that the peak—if we haven’t seen it already—is near.  Let’s take a look at a few today:

1. European central banks are buying gold again.  The Financial Times reported this morning that European central banks have become net buyers of gold again for the first time in more than two decades.  These bankers buying gold near its all-time highs above $1,900 were the same people who couldn’t get rid of their gold fast enough when it was trading below $300 per ounce.  This shocks even me.  While I’m not surprised to see emerging-market central banks go down this route—Mexico, South Korea, and Thailand have all been big buyers this year—even a cynic like myself expected the Europeans to have learned their lessons.

In any event, given the dismal timing record of central bankers, investors should use this as a contrarian indicator to bet the other way.

2. Gold appears to be overvalued relative to other precious metals.  The price of platinum will generally trade at a significant premium to that of gold; as recently as five years ago, the platinum price was nearly double the gold price.  This makes sense, as platinum is far rarer and has far more industrial uses in addition to its role as jewelry.  Yet today, gold is more expensive than platinum.  Why?  Because it’s not being aggressively hoarded by speculators and by investors searching desperately for a safe haven.

Gold’s traditional use as jewelry has been in steep decline for years, even while record amounts of it are being salted away in bank vaults for “investment purposes.”  This doesn’t mean that the price will fall tomorrow, but it should raise questions about the durability of a bull market in gold.

3. The smart money has started to lose interest.  George Soros made quite a splash earlier this year when he exited his rather large position in gold (See “Soros is Selling Gold”).  While no one should mindlessly ape the trading moves of another investor—even one as talented as Soros—it can still pay to take note of what the all-time greats are doing.  If Soros no longer sees value in gold, it is fair to ask:  Why should we?

The Donald likes the gold.

4. It’s all about The Donald.  I include this one more for comic appeal than anything else.  Donald Trump made headlines last week by accepting $176,000 in gold bullion as a security deposit from a new tenant.

In his comments to The Wall Street Journal, Trump said “It’s a sad day when a large property owner starts accepting gold instead of the dollar…  If I do this, other people are going to start doing it, and maybe we’ll see some changes.” 

While Mr. Trump has made billions as a property developer, he also has a habit of putting his foot in his rather large mouth.  It would only be appropriate if this blustery political rant marked the top of the bubble.  Add Trump’s little publicity stunt to the “bear” column for gold.

The gold bubble appears to have sprung a small leak.  It could still be patched, of course, and we could see the bubble expand a little more before it pops.  But given gold’s recent lackluster performance in the face of continued crisis, I wouldn’t bet on it.  Once the bubble begins to deflate in earnest, the gold bugs are not likely to fare any better than Miami condo speculators or “dot com” true believers.

If you liked this article by Sizemore Insights, you’d probably enjoy The Sizemore Investment Letter, our premium members-only newsletter. Click here for more information.