Sept. 6 (Bloomberg) — Stefan Collignon, international chief economist at the Center of European Research, discusses the euro-area economy and the Swiss central bank’s decision to impose a ceiling on the franc’s exchange rate. Collignon speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”
The Black Monday the Public Doesn’t Know About
By Chris Vermeulen, thegoldandoilguy.com
I hope everyone had a fantastic Labor Day weekend. I truly enjoyed myself and was able to have some creativity with my 18 month daughter. I got some new office chairs last week and I finally had time to assemble them during the rainy and windy black Monday here in Canada… Just like a child on their birthday, I tossed the chair parts aside and played with the large boxes with Mirabelle.
With the black clouds rolling overhead, waves pounding the shoreline, rain gushing off the roof, and a pirate book sitting on the coffee table. It was only an hour later which Mirabelle was riding a huge cardboard pirate ship across the room AArrrr’n everything… So I truly enjoyed my day off with the family to say the least
Ok back to the market…
So after I built the Brown Pearl I jumped on the computer so see what the futures market was up to. The good news was that our short trade on the equities market was up 10% from our entry point last week. The bad news was that the stock market overseas was selling off big and so were US stocks. It was a black Monday in both the sky and on the screen…
I’m not really sure how many people watch the futures market but I do know the majority of people do not. So Tuesday morning there will be a lot of people in a panic when they see stocks gap down sharply.
Taking a look at the 4 hour charts you can see the recent price action which unfolded today. We have been anticipating this from early last week. So none of this should be a surprise.
Dollar Index 4 Hour Chart:
The dollar index broke out of it falling pattern and has made a run up to the first resistance level of 75.40. I feel we could see it go a little higher on Tuesday but overall it looks ready for a pause or pullback here.
SP500 Futures 4 Hour Chart:
The equities market has fallen sharply in the past week and the green circle is where we shorted the market using the SDS etf. We did take partial profits last week to lock in 7.4% profit in a couple days, but we still hold the balance of the position which is currently up over 10% using today’s futures price.
The SP500 looks to be getting oversold here and is now entering the previous low set a few weeks back. I will be looking to tighten stops and or exit the position early this week before a sharp rebound takes place.
Bond Futures 4 Hour Chart:
Bonds are a safe haven for investors when fear is running high. The past couple trading session’s the price of bonds have shot up. This tells me panic selling in the stocks market has starting and that generally means we are nearing and tradable bottom for stocks…
Gold Futures 4 Hour Chart:
Gold is the other safe haven. Here again we see money flow into gold at a very quick pace… We will need to see some resolutions in Euro-land before gold will trade lower or sideways, but until then I think scared money is going to keep rolling into gold.
Crude Oil Futures 4 Hour Chart:
Oil has drifted its way up into a resistance level as of late last week only to find overhead supply. Once the selling started oil slid lower at a steady rate all the way back down to a short term support zone. Now we are waiting to see if it will make a double bottom at $79 or bounce here
Weekend Trading Conclusion:
In short, Tuesday will be a volatile session judging from today’s sharp price action. Fear is driving prices at the moment and until everyone panics out of stock positions and dumps their money into the save havens we will not see a bottom form. Generally this takes 2-5 days to play out but time will tell.
I hope this quick Labor Day update helps get you back on track for trading this week.
Consider joining me at TheGoldAndOilGuy for ETF trade ideas on the SP500, Oil, Gold, and Silver with great accuracy.
World Bank’s Zoellick Says World in ‘Dangerous’ Time
Sept. 6 (Bloomberg) — World Bank President Robert Zoellick indicates that risks to the global economy are intensifying, with the euro region’s outlook dependent on European leaders making the right decisions. He speaks with Bloomberg’s Haslinda Amin in Singapore. (Excerpts. Source: Bloomberg)
Swedish Riksbank Expected to Cut Rates in 2012
Abandoning previous plans for continuous interest rate hikes through 2011, the Swedish Riksbank now appears to be expected to slash rates at least twice in 2012. Citing weakened global growth and poor recoveries in Europe and the United States, officials at Nordea Bank AB claim that Swedish exports will simply be too far diminished to warrant the previously anticipated rate hikes.
Expected this Friday, the Riksbank is due to announce its latest decision on interest rates, but with little optimism emerging from its southerly neighbors, and with exports to the euro zone plummeting from 7.8% to 4.1%, the forecast 25 base point hike may get delayed.
The impact this is having on the Swedish krona (SEK) is still getting priced in, but traders are beginning to see some depreciatory ticks favoring a return to safety by investors. The International Monetary Fund (IMF) noted that the global economy is entering a “dangerous new phase” which could see the global recovery pushed off track by a European debt crisis run amok and persistent unemployment and stagnation in the US.
This is impacting the Scandinavian countries, which saw solid growth over the past two years, and may end up pulling the regional kroner (SEK, NOK, and DKK) off their current bullish channels and into downward trends. Friday’s rate announcement by the Riksbank, therefore, may be more important for speculators than previously assumed.
Read more forex trading news on our forex blog.
Swiss Franc Plunges as SNB Sets Limit at 1.20 Per Euro
Sept. 6 (Bloomberg) — The Swiss franc plunged versus the dollar and euro after the Swiss National Bank set a minimum exchange rate of 1.20 francs per euro. Maryam Nemazee and Linda Yueh report on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
Bank of Canada Forecast to ‘Play it Safe’ with Rates
Interest rate decisions have traders agog this week, with an above average number of such releases expected in the three days ahead. Canada’s rate decision is something for traders to particularly keep an eye on. Though fundamentals have been mixed in the Canadian economy, many expect a downgrade of growth outlook in Canada which could result in an interest rate slash in the next few months.
The Bank of Canada (BOC) is expected to play it safe this week with a holding of its rates at the current level of 1.00%. Speculators, however, will want to pay particularly close attention to the subsequent announcement by BOC Governor Mark Carney which is expected by some to reveal hints at future cuts due to growth outlook changes. The news could rock the Canadian dollar (CAD) and push its value significantly lower over the coming weeks.
Read more forex trading news on our forex blog.
EUR Edging Lower, Interest Rates Eyed
The onset of euro (EUR) weakness these past few days has generated some calls for the European Central Bank (ECB) to take action and intentionally depreciate its currency’s value. The euro zone has been struggling to stay afloat with financial uncertainty wracking its periphery and several economists believe an interest rate cut could help alleviate some of the pressure.
The ECB is scheduled to publish its latest interest rate decision, known as the Minimum Bid Rate, this Thursday at 12:45 GMT. Forecasters are expecting the bank to hold rates at 1.50%, but speculators appear to be raising their voices in a bid to change the picture of the region’s economy, which appears bleaker by the day.
Read more forex trading news on our forex blog.
CHF-update: SNB sets minimum target of 120 to the euro
Video courtesy of en.jyskebank.tv
Senior Strategist Ib Fredslund Madsen comments on The Swiss National Banks (SNB) decission to set a minimum target of 120 Swiss Francs to the euro.
Australia Leaves Rates at 4.75%, Citing Weakened Global Outlook
The Reserve Bank of Australia (RBA) left its interest rate benchmark unchanged at 4.75% this morning, citing concerns of weakened international growth. Australia has left rates unchanged since last November and many economists had been hinting that a “wait-and-see” approach was in play among Australian policymakers.
Australia’s economic growth outlook remains within its current uptrend, but RBA Governor Glenn Stevens noted that the trend may slump somewhat if international growth continues to get subdued. A less certain picture of what the next six months may entail has made Australia’s, as well as a few other nations’, central bank wary of hawkish policies.
Read more forex trading news on our forex blog.
Euro Currency Peg Aims to “Substantially Weaken” Swiss Franc, Eurozone Banks Now “Worried about Counterparty Risk”
London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 6 September, 08:00 EDT
U.S. DOLLAR prices to buy gold fell to a low of $1877 an ounce on Tuesday morning in London – a 2.3% drop from their new record high set hours earlier – while stocks and the Euro rallied after the Swiss National Bank announced plans to peg its currency to the Euro.
Yields on 10-Year US Treasury bonds hit an all-time low of 1.97% – while yields on Italian and Greek debt moved the other way.
Prices to buy silver meantime dropped to $41.87 – a 3.2% drop from Friday’s close.
“Markets are concerned that steps taken by Eurozone leaders to address the problems engulfing some of Europe’s smaller economies are insufficient,” says one gold bullion dealer here in London.
“Europe has the capacity to drive gold higher,” adds Darren Heathcote, head of trading at Investec.
The Swiss National Bank announced Tuesday that will peg the Swiss Franc to the Euro – citing once again the “massive overvaluation” of the Franc – as it aims for a “substantial and sustained weakening” of its currency.
The Franc will be pegged to the Euro at a rate of one Euro to SFr1.20 or more.
“The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” read a statement from the central bank.
“If the economic outlook and deflationary risks so require, the SNB will take further measures.”
Swiss consumer price inflation fell to 0.2% per year last month – down from 0.5% in July – according to official figures published this morning.
The Swiss Franc price to buy gold jumped 7.1% to a record high of SFr 1620 per ounce immediately following Tuesday morning’s announcement. The gold price in Swiss Francs is now showing a 22% gain for the year so far.
Elsewhere in Europe, growth in the Eurozone slowed to 1.6% in the second quarter – down from 2.5% in Q1 – according to data released this morning.
Politicians in Rome will today begin debating Italy’s austerity package – while the country’s largest union has begun a nationwide strike in protest at proposed measures.
Last week Italian prime minister Silvio Berlusconi abandoned plans for a so-called ‘solidarity tax’ on high earners.
“The Italian government appears to be in some disarray,” says Goldman Sachs Asset Management chairman Jim O’Neill.
“[Already] it has backtracked on some of the more unpopular measures.”
A sell-off of Italian government bonds saw benchmark 10-year yields breach 5.6% this morning – their highest level since the European Central Bank began buying Spanish and Italian bonds on 8 August.
Greek sovereign bonds meantime saw yields rise to all-time highs. The 10-Year rate hit a record high of 19.4%, with the yield on 2-Year bonds breaching 50%.
“The consensus seems to be that the second bailout package for Greece might be obsolete before it has been put into law,” explains Michael Leister, London-based fixed-income strategist at German bank WestLB.
“The ECB is having a hard time stabilizing these markets. The pressure is rising.”
A note published Tuesday by UBS argues that “the Euro should not exist.”
“With its current structure and current membership…[the] Euro creates more economic costs than benefits for at least some of its members – a fact that has become painfully obvious.”
Eurozone banks deposited €166.85 billion overnight with the ECB – the highest overnight level in more than two years – the central bank announced Tuesday morning.
“Banks that would normally lend to each other would rather deposit money at the ECB because they are worried about counterparty risk,” says Don Smith, economist at interdealer brokers Icap.
“When you buy gold,” renowned investor and publisher of the Gloom Boom & Doom Report Marc Faber said Monday, “it’s an insurance against systematic failure and problems in the financial markets. I’d buy every month a little bit of gold.”
Ben Traynor
BullionVault
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
