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.
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.
With another unusually intense news day ahead, traders are anxiously awaiting the large string of reports out of the US which should clear up the picture somewhat in regards to inflation, manufacturing, and industrial production. The Current Account will also be published, though its impact is not expected to be as high as the manufacturing reports out of New York and Philadelphia. Traders should look towards another bullish day on the dollar should news continue to disappoint.
The US dollar (USD) was still seen trading bullish Wednesday after retail sales reports out of the United States disappointed many investors and drove trades towards safe haven assets. A sudden wave of risk aversion seems to have helped the greenback surge this week and data so far has only reinforced this momentum.
Additionally pessimistic data was released from several other economies as well. Switzerland inflation at the producer level appears to be in decline, industrial production across the euro zone and in Japan is stagnating, and the Australian housing market is contracting. The only optimistic piece of data out yesterday was the employment reports from Great Britain which saw, not necessarily job growth, but a not-as-bad-as-expected rate of unemployment growth.
With another unusually intense news day ahead, traders are anxiously awaiting the large string of reports out of the US which should clear up the picture somewhat in regards to inflation, manufacturing, and industrial production. The Current Account will also be published, though its impact is not expected to be as high as the manufacturing reports out of New York and Philadelphia. Traders should look towards another bullish day on the dollar should news continue to disappoint.
The direction of the Swiss franc (CHF) has been sharply pressured into one of distinct bearishness among investors as the Swiss National Bank (SNB) rate decision approaches. Against the US dollar (USD) the franc has actually been trending mildly flat despite the greenback’s bullish moves against its other currency rivals. But the Swissie has seen some setbacks brought about by poor regional fundamentals and a general atmosphere of risk flight, particularly following the SNB’s move to peg the CHF to the value of the EUR at 1.20.
A mood of deep pessimism is growing in regards to the investment in Europe at the moment. Market bears still seem to be gnawing on the EUR’s strength, sapping its value as its peripheral members struggle with bond auctions and other financial woes. Switzerland was formerly in a position to capitalize on the flight to safety, but saw its exporting capability deeply gouged by an unremitting currency appreciation. The SNB move to peg the currency has so far done its job by keeping the CHF’s rise in check.
Sentiment in Switzerland appears to have turned negative this week as well, with many analysts and economists expecting moves towards safety by traders following the SNB’s rate statements. An attitude of dovishness has gained traction and investors are worried that a continuation of low rates, coupled with the possibility of a rate reduction in Europe in 2012, could diminish currency values as we get deeper into the third quarter.
The Australian dollar (AUD) is expected to be weighed down this week as market reports continue to show contraction across the boards. Piling atop recent reports on Australia’s shrinking housing sector, recent publications of Australian consumer and business confidence is starting to show a broadening contraction striking several sectors of Australia’s economy, as well as its psyche.
Expectations for these recent reports have been for modest growth, and in some instance, at best, zero movement. The week’s reporting has so far led many investors to pull away from the Australian dollar (AUD) in recent trading. National data on housing and employment has also driven many investors away from the once-burgeoning AUD. This data, combined with dismal housing starts figures and building approvals reports, has so far dragged the Aussie lower and looks to continue doing so this week.
Crude Oil prices gained mild support Wednesday as sentiment appeared to favor an uptick brought about by a sharp reduction in US stockpiles. The weekly report revealed yesterday that the US has shed roughly 6.7 million barrels from its reserves. This news has so far countered the notion of a sinking price of oil brought about by higher USD values and pushed oil into a bullish posture from supply shortfall speculations.
An expected dip in oil values due to this week’s risk sensitive environment, which saw the greenback climbing sharply, has so far not affected the price of physical assets in any clearly visible way. The stockpile report out Wednesday surprised many investors who had priced in a far milder decline in reserves. With this sentiment grabbing hold among many traders, oil prices could see resurgence above $90 a barrel in the near future.
A sharp decline in the value of pair and EUR/USD has put in serious technical damage when it closed below its long term uptrend from May 2010. Both weekly and monthly stochastics are falling as the pair undergoes a sharp correction. Support comes in at a range of 1.3400-25 from the February low and the 50% Fibonacci retracement from the bullish move that took the pair from the May 2010 low to the May 2011 high. The 61% retracement at 1.3040 is a significant mile marker while long term players may be focused on the January pivot of 1.2875. To the upside the July low of 1.3835 is the initial resistance, followed by the previously trend line which could prove to be resistive as often occurs with broken trend lines and this level is found at 1.3990.
Three weeks of declines and cable has broken below its long term rising trend line from the May 2010 low. The pivot at 1.5780 is a significant support level which coincides with a 38% Fibonacci retracement from the May 2010 to April 2011 move. Below here the GBP/USD has support at the October lows/early January highs of 1.5650 followed by December pivot at 1.5350. Initial resistance may be found at 1.6080 followed by 1.6375 and the late August high of 1.6450.
The yen has been range bound between its all-time low of 75.94 and 78.85 to the upside. Price action in the crosses has been much more volatile. Daily, weekly, and monthly stochastics are mixed and the next major resistance level is found at the post intervention high of 80.20 followed by the long term trend line from the June 2007 high which comes in at 81.00. A lack of support on the daily chart makes it difficult to predict a downside target but the big round number of 75 stands out.
Last week the pair surged higher by almost 13% on the back of the SNB protective floor at 1.20 for the EUR/CHF. The USD/CHF continues to move higher and is now testing its falling trend line from November 2010 which comes in at 0.8890. This level has additional importance as it coincides with the 68% Fibonacci retracement from the November 2010 high to the August low. Both weekly and monthly stochastics are rising and with a break here the pair could extend its gains to the resistance at 0.8945 from the April 1st high. Support comes in at 0.8545 and 0.8250.
The S&P 500 has been consolidating since its sharp decline in August and price action has formed a triangle chart pattern from the August 21st low that measures a potential move of 100 points. Forex traders can be prepared for a breakout in either direction though the current trend is to the downside. Initial support is found at 1,130 followed by the early August low of 1076. A break here could open the door to the August 2010 low of 1,037. To the upside resistance is located at the upper boundary of the triangle at 1,183 followed by the August high of 1,229 as well as 1,247 from the 61% Fibonacci retracement off of the July high.
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
Despite the string of negative headlines coming from Europe the EUR has firmed as a renewed discussion of Eurobonds and the French/German/Greek conference call have markets responding in a positive way. The consolidation in the EUR may have some EUR shorts cutting their positions though price action is bearish in nature.
Yesterday European Commission President Jose Manuel Barroso stated that the Commission would soon be presenting options for Eurobonds backed by all of the EMU nations up to 60% with the remaining amount backed by individual states using their respective credit ratings. The idea for jointly issued euro bonds found support this morning from ECB board member Yves Mersch. Dow Jones quoted him saying the creation of euro bonds for AAA rated nations would be “the embryo of a stability-oriented fiscal union with an agency for debt management as is the case in larger countries.” The introduction of euro bonds has the support of the peripheral nations but German Chancellor Angela Merkel said today it is, “absolutely wrong” for the creation of a euro bond. Also this month’s ruling by the German Constitutional Court forbids the Bundestag from assuming liabilities from other sovereign states. Given Germany’s opposition to euro bonds both from a political and legal standpoint, one must question how long the renewed euro bond chatter can support the EUR.
The Sarkozy/Merkel/Papandreou conference call also helped to support market sentiment with a joint statement affirming the nations’ commitment to “the Greek economy to return to a path of lasting and balanced growth,” as well as Papandreou determination to achieve Greece’s budget targets. The statement also stressed Greece’s place belongs in the euro zone but the statement by no means nullifies comments from within Chancellor Merkel’s coalition from those who believe Greece should be expelled from the EU, nor does it prevent Greece taking unilateral action to leave the EUM should it default on its debt.
Looking at the technical picture the EUR/USD continues to recover from its Monday morning low of 1.3500 and a break of 1.3800 would encounter resistance at 1.3835 followed by an initial retracement target of 1.3900. While the EUR temporarily recovers the price action shows a distinct bearish flag pattern forming on the charts. Support from the chart pattern comes in at 1.3650 with additional support at the Monday low.
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.
The Swiss National Bank held its target for the 3-month franc LIBOR unchanged at 0-0.25 percent, and reaffirmed its commitment to the EURCHF 1.20 floor set on the 6th of September. The Bank said: “The Swiss National Bank will enforce the minimum exchange rate of CHF 1.20 per euro set on 6 September with the utmost determination. It is prepared to buy foreign currency in unlimited quantities. It continues to aim for a three-month Libor at zero and will maintain total sight deposits at the SNB at significantly above CHF 200 billion.”
The Reserve Bank of New Zealand kept the Official Cash Rate (OCR) steady at 2.50%, noting the impact of global developments. The Bank Said: “If recent global developments have only a mild impact on the New Zealand economy, it is likely that the OCR will need to increase. For now, given the recent intensification in global economic and financial risks, it is prudent to continue to hold the OCR at 2.5 percent.”
Previously the Bank also held the OCR unchanged at 2.50%, while the Bank cut the rate by 50 basis points in March this year, following the Canterbury earthquake. New Zealand reported consumer price inflation of 5.3% in Q2 this year, up from 4.5% in Q1, and 4.0% in Q4 of 2010, and above the official inflation target of 1-3% as short term factors such as tax increases caused a spike in prices. The New Zealand dollar (NZD) is up about 6% against the US dollar so far this year, having touched all new highs close to 0.88, meanwhile the NZDUSD last traded around 0.82.
By MoneyMorning.com.au
For years your editor – and our colleagues – has written things like, “Well, you’ll know it’s a bubble and the time to sell gold when [blank] happens.”
Some of those “blanks” have included, when Michael Pascoe says gold will go higher… or when mainstream bankers are bullish on gold… or when the mainstream press prints a “Gold Special Issue” edition of a newspaper.
Of course, we’ve made those throw-away lines to make a point. The point being that gold wasn’t in a price bubble, and that it would only go higher.
But, what do we do when the warning signs appear? Not just one, but all three.
And how can we justifiably explain that despite the warning signs, we’re still bullish on gold? And that we advise you to ignore the bubble warning signs.
In a moment we’ll explain all. But first you have to ask why gold has already gone up so much.
The main reason is the influence of meddlers in the market. The kind of lunatic who thinks they can control every aspect of the economy. U.S. comedian, Larry Miller explains what goes through the minds of these people:
“To me the real lunatics of the world are anyone who wakes up in the morning, looks in the mirror and thinks, ‘Maybe I’ll lead. Yes, that’s it I’ll be a leader and then everyone will follow me because I’ll be leading. And I’ll run for office and people will vote for me so I can get off a plane and nod gravely when people ask questions.’ To me this is a serious maniac, this is a real maniac…”
Last night and this morning, markets rallied on news of lunatics planning to inflict more meddling on the markets:
“French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are ‘convinced’ Greece will stay in the euro area as they faced international calls to step up efforts in fighting the region’s debt crisis.”
We always enjoy the imagery of someone “fighting” a debt crisis.
But how will they fight debt?
Another maniacal leader has the answer. This time it’s European Commission President, Jose Barroso:
“The commission will soon present options for the introduction of euro bonds. Some of these options could be implemented within the terms of the current treaty; others would require a treaty change.”
In other words, “we need to change the rules, otherwise what we’re about to do is illegal.”
What they’re about to do is steal from European taxpayers… again.
But today’s letter to you isn’t about the political madhouse. Rather it’s about the impact it has on what we believe should be your most important investment – gold.
Earlier we mentioned the three warning signs that have appeared. Each one is a sign we’ve said should indicate the top of the gold market… For short we’ve called it Pascoe, Oliver and Pull-out (or POP!):
Warning Sign 1: last week Michael Pascoe wrote in his Yahoo! 7 Finance column:
“Once financial markets sense that financial disaster has been averted, the gold price could fall even more quickly than it has risen. Before then, the peak might be $2000 or $3000 or whatever, but it’s still a bubble.”
OK. It’s not advice to buy gold. But it is an admission that gold could go higher.
Warning Sign 2: this from AMP Capital chief economist, Dr. Shane Oliver:
“Gold is likely to remain a key beneficiary (from US-dollar weakness); with US$2000 an ounce set to be breached soon and much higher levels likely over time.”
Warning Sign 3: two weeks ago, on 31 August the Australian Financial Review printed a four-page special report with the headline, “Theories abound on peak gold price”.
A quarter-page ad headlined, “HOW TO BUY GOLD BULLION”.
Inside, another headline cheered, “Silver remains a valuable treasure for investors”.
All that taken together… by our own rules… that should at least hint at a gold bubble. Right?
No. (Incidentally, you could also see our rejection of our own gold bubble alert rules as a sign the gold price is in a bubble!)
If anything, the fundamentals for gold are stronger today than they were two years ago – hence the rising gold price.
But we will agree the gold price could fall in the short term… especially if the market foolishly believes the political maniacs can win the “fight” against debt.
But that’s the thing. As Pascoe says, “Once financial markets sense that financial disaster has been averted…”
Financial disaster can’t and won’t be averted. Only ever delayed.
The reality is they can’t win the fight… not when they’re fighting against themselves. It’s like saying you can win a boxing match by knocking out your shadow!
Besides, the bullish calls on gold by Pascoe and Dr. Oliver aren’t really bullish… and neither was the AFR special pull-out (it’s just a way to raise advertising revenue from gold companies).
The fact is the mainstream doesn’t really understand why gold is going up. They compare it to the Tulip bubble without realising the idiocy of their argument.
Gold isn’t going up as the result of a speculative bubble. It’s not a self-fulfilling spiral – the old gold-is-going-up-because-it’s-going-up argument. Gold is rising because investors are starting to get the vital reason for buying and holding gold…
That it has been a genuine store of value for thousands of years, and it will continue to be. Savvy investors know the only way governments can “win” (or rather admit defeat) the debt fight is to allow central banks to print away the debt.
The trouble is, even if they succeed, it won’t be the end of it.
Because the cause of the debt problem will remain. That is, loony politicians and bureaucrats who wake up in the morning and think, “I’ll be a leader and then everyone will follow me because I’ll be leading.”
As far as we’re concerned, as long as the lunatics are in charge gold remains a buy and always will.
Cheers.
Kris
P.S. Slipstream Trader Murray Dawes feels the ASX may be on the verge of a squeeze. In his new free video market update, Murray will take you through what’s happened in our market recently and where he thinks it will head. To view the video, simply click here to visit Slipstream Trader YouTube channel.
By MoneyMorning.com.au
The US Federal Reserve isn’t the only central bank to print money. The Bank of England has too. It followed the failed attempt to stimulate the UK economy by dropping interest rates to 0.5%.
So with neither plan working, what’s a central banker to do?
Adam Posen, a member of the Bank of England (BoE) Monetary Policy Committee (MPC – the body that sets official UK interest rates) has an idea.
He feels the UK government should set up two new lending institutions. One would lend money to small businesses…
The other would be ‘…an entity to bundle and securitise loans made to SME’s (Small and Medium Enterprises) – a “good version” of the US’s Fannie Mae and Freddie Mac,’ he said.
He says these ‘new’ banks would give businesses the chance to ‘dust off’ their old loan applications and approach new lenders. It’s no wonder the BoE is desperate. Look at the following chart:
It shows lending to businesses is shrinking.
That’s despite UK banks committing to a government program to lend £76 billion (AUD: $116.6 billion) to SMEs. But half way through the year the banks are set to fall short of the target.
But is a UK version of ‘Fannie Mae’ and ‘Freddie Mac’ (pet names for government sponsored bodies that underwrote the US housing bubble) the answer to the problem?
Probably not. As it stands, ‘Fannie & Freddie’ cost U.S. taxpayers USD$160 billion (AUD: $155.8 billion). And Barclay’s Capital Inc. calculates that if house prices in the U.S. dropped another 20%, it will take USD$500 billion to keep ‘Fannie & Freddie’ solvent.
The UK banking system has flown under the radar in recent months, thanks to the problems in Greece, Italy and now France. In a credit-fuelled banking system, banks need to keep making loans to stop the system from collapsing…
And it’s something that’s clearly not happening now in the UK. When the French banks have collapsed, the market will look for the next sickest banking system… the UK could be the market to watch.
Shae Smith
Editor, Money Morning
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From the Archives…
HarveyNormanomics in One Lesson
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2011-09-08 – Kris Sayce & Dr. Alex Cowie
Manipulation on a Grand Scale
2011-09-07 – Kris Sayce
Three Steps to Wealth: Leverage, Volatility and Risk
2011-09-06 – Kris Sayce
Why it’s Not Too Late to Avoid This Investing Mistake
2011-09-05 – Kris Sayce
For editorial enquiries and feedback, email [email protected]
Will Greece default, or won’t she? This seems to be the question on every investor’s lips, and the uncertainty surrounding the outcome has the markets on edge.
I have no inside information about how this crisis will be resolved, and even if I had the phones of every European leader bugged I’m not sure the information gleaned would be particularly useful right now. The EU leaders tasked with resolving this crisis seem to have no more of a grasp on the situation than those of us on the outside.
No one said that investing is easy or that it should be easy. Investing is an exercise in making difficult decisions under conditions of uncertainty. If we knew the future ahead of time, there would be no risk and thus no possibility for return.
The questions investors should be asking is not “What will Greece do?” but rather “How will my portfolio perform regardless of what happens in Greece?” and “Am I being properly compensated for the risk I’m taking?”
We’ll answer that question shortly, but readers should first understand a very important point:
There are two—and only two—risks that we as investors face every day:
We tend to focus on the first type of risk, and it appears that we are hardwired to do so. In their landmark 1979 study, psychologists Daniel Kahneman and Amos Tversky found that people dislike losses 2.5 times more than they like comparable gains, and that most will actually engage in risk-seeking behavior in order to avoid realizing a loss.
Yet the second type of risk—opportunity cost—can be equally damaging to your long-term financial health. If you pile into “safe havens” like cash or Treasuries that yield next to nothing, your standard of living is almost guaranteed to fall over time.
A good investment strategy should balance these two risks, offering decent upside potential while keeping risk to a tolerable minimum. Given the pricing in today’s market, this is actually easier to do today than at any time in recent memory. As I wrote in the last post, at current prices I like “boring” blue chips that you know will survive anything like the “Wintel” duo of Microsoft (MSFT) and Intel (INTC)—see “The Ugly Sister.” I also like consumer products maker Procter & Gamble (PG) and healthcare giants like Johnson & Johnson (JNJ). If we have another 2008-caliber meltdown, these companies will survive it intact and will continue to pay solid (and likely growing) dividends throughout. And if we avoid a meltdown, they should at least match the broader market’s upside. Companies like these would seem to give you the best risk / return tradeoff given the unknowns we face.
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.
GBPUSD continued its downward move from 1.6453 and the fall extended to as low as 1.5707. Resistance remains at the downtrend line on 4-hour chart, as long as the trend line resistance holds, downtrend could be expected to continue, and next target would be at 1.5600 area. However, a clear break above the trend line resistance will indicate that a cycle bottom has been formed on 4-hour chart, then consolidation of downtrend could be seen.
