Month: November 2011

By ForexYard

As investors reduce their exposure to higher yielding currencies the USD has become the overwhelming favorite.

Economic News

USD – US Sovereign Credit Rating Affirmed by Moody’s and S&P

After the US congressional super committee failed to come to an agreement both Moody’s and S&P left the US sovereign credit rating unchanged while Fitch will release its decision later in the month. Expectations are for Fitch to put the US on review for a potential downgrade. In the wake of the failure of the congressional super committee to agree to a deficit reduction plan there will be 1.2 trn combined mandatory budget cuts from the military and an expiration of tax savings and unemployment benefits.

Despite the failure of the US government to agree to any program that would put the US on a path of fiscal responsibility the USD continues to be favored. The most recent IMM data from the CFTC Commitment of Traders report shows speculators are increasing their USD positions as market sentiment deteriorates.

Today will have the release of US durable goods orders and weekly unemployment claims. Both of which are expected to show improvements which is in-line with the recent trend of improving US economic data. With the approaching Thanksgiving holiday liquidity may begin to fall during the North American trading session and increasing volatility in the FX pairs. The trend of a stronger USD may continue into the holiday weekend.

EUR – Is the FX Market Becoming Overly Bearish on the EUR?

Talks of a potential euro zone break up are doing no favors for the EUR as the EUR/USD continues to trade near the psychologically important 1.35 level. A meeting between the leaders of the euro zone’s three largest economies Germany, France, and Italy will commence in Strasbourg on November 24th as the crisis deepens. The meeting of Merkel, Sarkozy, and Monti will be important as one of the weaknesses of the euro zone has been the inability of euro leaders to tackle the issues together and to bridge the differences between Germany and France. The meeting will also carry additional significance as it is prior to the euro zone finance minister meeting on November 29th. Here it will be decided whether or not to release the next tranche of aid to Greece. The EU Economic Council meeting on December 9th will also be a significant event to watch for.

While the threat of an EU nation defaulting and leaving the EMU is real given recent comments by both Merkel and Sarkozy, one has to note the increased level of bearish sentiment that is being baked into the market. After browsing through research notes from some the bulge bracket investment banks it is easy to notice the trend of recently updated bearish EUR forecasts. Given the additional bearish sentiment, should the upcoming meetings provide a potential solution with the creation of euro bonds or additional ECB involvement the EUR shorts could be squeezed.

GBP – Sterling is on the Ropes

The GBP has been pushed lower as the USD continues to strengthen. Yesterday’s news that the budget deficit shrank in October helped sterling to recoup some of its gains as the data was in-line with consensus estimates. The UK budget deficit is beginning to fall following the implementation of past austerity measures. Reducing the budget deficit has become a major part of the economic plan by PM David Cameron.

Today the BoE Monetary Policy Committee (MPC) meeting minutes will be released and may push the GBP lower as the dovish MPC could signal their support for additional quantitative easing.

The major test for the GBP/USD is at the 1.5600-30 level where the October 18th low coincides with the 61% Fib retracement of the October move. Versus the EUR, sterling has been on the ropes this week with the EUR/GBP climbing as high as 0.8660 but failing to make a close October 21st low. Additional tensions in Europe could drive pair lower to test the November low of 0.8485.

Copper – Copper Prices Rise from this Week’s Low

Copper prices came off of their lows as market sentiment picked up slightly. This comes after Monday’s move lower to a 1-month low. The December copper contract for delivery traded as high as $3.3700 before falling back to $3.3000. Europe’s largest copper producer Aurubis AG, issued a report suggesting despite the troubles in Europe surrounding the euro zone debt crisis demand for copper remains healthy.

Copper prices continue to fall given the sharp drop in market sentiment. Should the European debt crisis worsen, copper prices could retest the October 20th support at $3.050.

Technical News

EUR/USD

There is a bullish wedge pattern that has formed on the EUR/USD daily chart. The falling resistance line is off of the October high and the support line falls off the November 1st low. Resistance is found at 1.3615. A break here and the EUR/USD could test the November highs near 1.3850. Should the pair continue its trend lower the pair could encounter support at the rising trend line from the January 2010 and October 2011 lows at 1.3270. Traders may be eyeing the October low of 1.3145 followed by a deeper move to the 2011 low of 1.2875.

GBP/USD

After breaking lower from the late October-mid November consolidation pattern the GBP/USD rose back to the previous support line at 1.5850 only to turn lower once again. This is a textbook retracement to a previously known support that has now turned into resistance. Support may be found at the October 18th low of 1.5630 followed by the October low of 1.5270. Resistance comes in at the top of the previous consolidation pattern at 1.6075.

USD/JPY

The slow decline of the USD/JPY back to its all-time low at 79.60 continues while the charts show very little support to prevent the move. Any attempt to bid the pair higher may encounter selling pressure at the November 15th high of 77.50 followed by the long term downtrend from the June 2007 high which comes in at 79.10.

USD/CHF

The rally from the late October low continues to gain steam as the pair approaches the October high of 0.9310. Both weekly and monthly stochastics continue to move higher. A break of 0.9310 will expose the 20-month moving average at 0.9450 followed by the February high of 0.9770. Support is off of the November 3rd low of 0.8760 which coincides with the 100-day moving average. While perhaps a bit extreme the pair may eventually target the falling trend line off of the 2003, 2008, and 2010 highs which comes in at 1.1200.

The Wild Card

EUR/GBP

After breaching below its rising trend line from the 2010 low the EUR/GBP has pulled higher only to find resistance off of the October 21st low at 0.8665. Yesterday’s price action had the pair testing this resistance but the pair never succeeded to break above this level. Forex traders may note that EUR shorts may have stops placed above this price and should the euro zone debt crisis intensify the pair could quickly move lower to test the November low of 0.8485.

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.

By The Sizemore Letter

Charles Sizemore,  editor of The Sizemore Investment Letter, was quoted in Lou Carlozo’s recent Reuters article:

For most American families, there’s one major money-related tradition associated with Thanksgiving: Black Friday shopping. But for others, bargain hunting takes a back seat to a financial reality check. They use this time together as an opportunity to discuss and review a host of financial issues ranging from estate planning and wills to investment and philanthropy. And financial advisers, who sometimes attend more formal versions of these Thanksgiving conversations, have much to share in terms of what direction these meetings can take. They stress that with a little preparation, and a lot of nonconfrontational goodwill, families can come out with an increased sense of connectedness, cooperation and shared vision.

Still, it’s hard to gauge how family members will react, even to the most innocuous statements. Every tribe has its more emotional and melodramatic types, and so it’s crucial to limit the chances of misinterpretation or outbursts. This may be especially true if younger adults are involved and feel cornered in front of the whole family, experts say…

Then you have families facing pressure on both ends. “Boomers in particular worry about being ‘sandwiched’ and having to support both elderly parents and adult children who are unemployed or facing financial difficulties,” says Charles Sizemore, principal of Sizemore Capital Management in Dallas, Texas and author of the Sizemore Investment Letter. He thinks that this Thanksgiving, discussions of this type will dominate many family meetings. But how much gets done at these summits depends on the sum total of interruptions, as no football-loving guy will keep his mind on the big picture when he has his eyes on the big screen.

The full article can be viewed here.

Sizemore Financial Publishing wishes all of its readers a Happy Thanksgiving.

Source: ForexYard

Today will have a significant amount of data on the economic calendar. European PMI data will likely show the euro zone slipping towards a recession. The BoE meeting minutes could hint at additional easing of UK monetary policy. EU industrial data is expected to drop and will cap out the morning which is coming off of a volatile Asian trading session.

US data later today will have weekly unemployment claims and durable goods orders before the Thanksgiving holiday.

Earlier today the release of a surprise drop in the Chinese manufacturing PMI had risky assets trading sharply lower with the EUR/USD trading as low as 1.3440 and the AUD/USD down to 0.9760. A break of 1.3440 may open the door to the September low of 1.3360 and 0.9700 from the March low.

With increasing tensions in Europe and liquidity expected to fall off due to the holiday, volatility could begin to pick up in the FX markets. This could bring oversized moves in the markets, pushing the current trends even further.

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.

By MoneyMorning.com.au

Just as the Archbishop of Canterbury isn’t likely to preach from his pulpit that there’s a chance God doesn’t exist… it’s clear the Archbishops of Gold and Bishops of Silver weren’t about to admit the price of gold and silver could fall… or even just hold steady.

Of course, that’s no surprise when you consider how invested they are in the idea. In terms of their own and their clients’ wealth.

It was interesting to read how the collapse of futures trading firm, MF Global impacted the wealth of another gold bull, Gerald Celente. Business Insider reports:

“Everyone’s buzzing about Trends Research founder Gerald Celente’s recent interview on RT America, where he railed on MF Global for taking his money and closing his positions on gold.

“On RT America, Celente denounces MF Global, saying he was building up collateral in his account in order to receive gold contracts due to deliver in December. But then, he received a margin call and a broker told him his money (up to 6-figures) was with the court-appointed trustee.”

In short, according to Celente, he only owned gold futures contracts so he could lock in a price today, save up and then take delivery of the physical gold in the future. That’s fine, and good luck to him.

But to our mind that’s like a housing investor insisting they’ve got no debt, but they do have a mortgage over a property… but only so they can lock in the house price today while saving up to buy the house in the future (mortgage repayments).

Either you’re leveraged to something or you aren’t. Even if you say you’re saving up for something… if you buy today without making the full payment, you’re leveraged. There’s no getting around it.

That’s one of the dangers of holding a religious-like view on any investment. You can become so convinced you’re right that you start taking more risks than you should.

So for sound money advocates to use highly leveraged (read, risky) financial instruments to buy “paper” or “electronic” gold… well, it doesn’t add up.

Bottom line, attending the Gold Symposium was a landmark event for your editor. We’re still bullish on gold. We’re still bullish on silver. And we’ll continue to hold on to every ounce of our investment (plus, we’ll buy more over time).

But it did confirm something we’d knew all along…

It’s important to have a Plan B investment strategy.

Western governments, central bankers and organisations like the IMF have manipulated the monetary system for 70-odd years. So who’s to say that won’t continue?

And who’s to say it won’t result in stocks recovering and going on another credit-fuelled bubble?

Our view is that won’t happen. That’s Plan A.

And that’s why we invest in cash and gold. But what do we know? What if we’re wrong? Well, that’s why we’ve got Plan B… It doesn’t mean we’re any less committed to Plan A.

It’s just that we know we aren’t God. We can’t predict with 100% certainty when an event will happen.

That’s why we recommend investors have some stock investments. Enough to benefit from another possible credit-fuelled bull market, but not enough to break the bank if we’re right and the global economy and stock markets crash.

Cheers.
Kris.

Related Articles

Totally Standard Hyper-Inflation

Is There Any Upside for Gold Investors?

The Gold Bubble and China

What a 2,300 Year-Old Coin Reveals About Gold

Gold Investing Far From a Bubble

From the Archives…

The Onward March of the State
2011-11-11 – Kris Sayce

Lose a Shirt, But Gain a Wardrobe
2011-11-10 – Kris Sayce

Neither a Borrower Nor a Seller Be…
2011-11-09 – Kris Sayce

Roman or Zimbabwean
2011-11-08 – Kris Sayce

Lighting a Match to Inflation
2011-11-07 – Kris Sayce

For editorial enquiries and feedback, email [email protected]

The Gospel of Gold and Silver

By MoneyMorning.com.au

Few investors think about what they’ll do if what they thought would happen doesn’t happen… or if something they don’t think will happen does.

That’s partly why most Western (and soon Eastern) economies are in a hole. They thought the last 30 years of economic growth was real. So what did they do? They leveraged up…

And they thought that was working too. So they leveraged up even more. Trouble is it wasn’t working. And they had no Plan B investment strategy… Why? Because no-one asked, “What if…?”

So, the banks went hell-for-leather into the housing mortgage market. They thought house prices could never fall. Why? Because their financial models told them so.

Turns out their financial models were wrong. But they had no Plan B investment strategy.

And – this is where we get back to you – individual investors rarely have a back-up plan either. They’re convinced they’re right… that what they believe should happen, will happen.

But what if doesn’t happen? What if it never happens? Or, what if it happens… but not when you think.

It’s the subject of our short presentation at the Doomers’ Ball. And it’s part of what we were getting at during the panel discussion at the Gold Symposium last week. We wanted to know whether the experts had a Plan B investment strategy – or was it just all about gold and silver.

They’re convinced they’re right and no-one could knock them off their path. But why are they so certain? Perhaps the answer can be found in a comment made by Eric Sprott during an interview on Sky Business Channel’s Perrett Report.

Sprott said, “I think it was important for people like Ben [Davies of Hinde Capital] and myself to come here and kind of

Having a Plan B Investment Strategy

By MoneyMorning.com.au

If you want to avoid the biggest mistakes most investors make, today’s posts are the most important Money Morning posts you’ll read this week… maybe this year.

First, we’ll set the scene…

“In its first formal evaluation of China’s financial system, the [International Monetary Fund]… today blamed ‘heavy’ government involvement in the country’s banks and watchdogs for reducing market discipline and corporate governance.” – News.com.au

“The International Monetary Fund (IMF) today announced a new lending facility aimed at helping ‘bystander’ countries protect themselves from contagion during financial crises.” – News.com.au

On one hand the IMF says “heavy” government is bad… because it reduces market discipline.

On the other hand the IMF stands ready to interfere and bail out countries that lacked market discipline.

Because make no mistake, there are no “bystander” countries. All nations and banking systems are up to their armpits in the cesspit of ill-discipline.

As we wrote yesterday, “Greece borrows from Italy… Italy borrows from France… France borrows from Germany… and even Germany borrows from someone – the French, Italians and Greeks probably!”

Even saver nations, Germany and China, must share the blame. Savers carelessly loaned cash… searching for higher returns, believing nothing could go wrong. But it did.

This is something we’ve thought about for the past few days. We’re preparing a speech for the Daily Reckoning Doomers’ Ball…

It’s a small sold-out ticket-only event taking place this Friday in Melbourne. Daily Reckoning editor, Dan Denning has asked each of the editors (Dr. Alex Cowie, Murray Dawes, Greg Canavan and I) to come up with our biggest ideas or forecasts for 2012.

The gist of our idea is: make sure you’ve got a Plan B investment strategy… ask yourself, “What if…?” before you invest a cent.

Cheers.
Kris.

Related Articles

Totally Standard Hyper-Inflation

Is There Any Upside for Gold Investors?

The Gold Bubble and China

What a 2,300 Year-Old Coin Reveals About Gold

Gold Investing Far From a Bubble

From the Archives…

The Onward March of the State
2011-11-11 – Kris Sayce

Lose a Shirt, But Gain a Wardrobe
2011-11-10 – Kris Sayce

Neither a Borrower Nor a Seller Be…
2011-11-09 – Kris Sayce

Roman or Zimbabwean
2011-11-08 – Kris Sayce

Lighting a Match to Inflation
2011-11-07 – Kris Sayce

For editorial enquiries and feedback, email [email protected]

IMF – International Mockery Fund

By Elliott Wave International

In an interview with the Mind of Money, Robert Prechter stresses the importance of keeping your money safe in this bear market environment. According to the Elliott wave model, we have entered a critical phase in the market. This 3-minute video clip will help you to prepare for what’s ahead.

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Nov. 22 (Bloomberg) — Lucy MacDonald, chief investment officer for global equities at RCM UK Ltd., talks about the outlook for corporate earnings in 2012 and her recommendation for consumer stocks including Diageo Plc and Unilever Plc. She speaks with Francine Lacqua on Bloomberg Television’s “Countdown.”

Nov. 22 (Bloomberg) — Natalie Berg, an analyst at Planet Retail Ltd., talks about the retail industry’s outlook ahead of the festive shopping season. She speaks with Owen Thomas on Bloomberg Television’s “Countdown.”

The National Bank of Georgia reduced its benchmark refinancing interest rate by 25 basis points to 7.00% from 7.25%.  The Bank said: “Given that the total output is below the potential and the existing forecasts indicate that the inflation in the next year will remain below the target, the Monetary Policy Committee of the NBG considered it appropriate to continue easing the monetary policy and decided to decrease the policy rate by 25 basis points.”


The Bank also cut rates 25 basis points at its October meeting and another 25 basis points at its August meeting; previously the Georgian central bank also cut the interest rate by 25bps to 7.75% in Jun, after holding steady in May (the bank last increased the rate by 50 basis points in February this year).  Georgia reported annual consumer price inflation of 2.3% in October, down markedly from 4.6% in September, 7.2% in August, 8.5% in July, and 13.5% in April, and below the Bank’s inflation target of 6.0%.