Nov. 18 (Bloomberg) — Sue Trinh, a senior strategist at Royal Bank of Canada in Hong Kong, talks about the global currency market and investment strategy. Trinh speaks with Rishaad Salamat on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)
Forex CT 18-11-11 Video News Update
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.
Central Banks Ramp up Gold Buying
A report released from the World Gold Council showed central banks more than doubled their gold purchases in Q3. With increasing expectations of QE3 coming from the Fed this quantity of gold buying may continue to support the long term uptrend in gold prices.
Economic News
USD – Why the EUR/USD is Trading Above 1.30 and Not 1.10
The European debt crisis continues to drag on and has now fully engulfed both Spain and Italy. Spanish 10-year bonds are quickly approaching a dangerous 7% yield while the Italian 10-year continues to trade above this threshold. It is at this level that the nations of Greece, Portugal, and Ireland sought a financial bailout from the EU/IMF.
So how is it that the EUR/USD continues to trade above the 1.30 level and not closer to 1.10? The EUR continues to be supported by rising expectations of additional quantitative easing by the Fed. Inflation data for the month of October showed that US prices actually fell. Fed forecasts continue to call for a decline in inflation pressures. Thus when the European debt crisis is eventually solved the US dollar may be weakened by another round of bond buying the Fed (QE3).
EUR – ECB Continues to Buy European Bonds
Right now there is an interesting game of cat and mouse being played out in the bond markets. Investors are selling their holdings of Spanish and Italian bonds. The ECB will then step into the market to take the other side of the transaction. At the same time the EUR/USD will rise some 20-30 pips. This action by the ECB may only increase the amount of speculators participating in the European bond markets. A game of back and forth continues between investors/speculators and the ECB while the EUR is caught in the middle.
Yesterday Spain sold EUR 3.56 bn of 10-year bonds with a yield of almost 7%. This is the highest rate Spain has paid since entering the EMU and highlights the pressures building in European financial markets. The reason for the increased interest charge may be due to the lack of a political solution in Italy. There is much debate over the role the ECB should play, whether or not it is the lender of last resort. This is a role the ECB and Germany have both resisted. Until a political solution is found to the debt crisis European bond yields will likely continue to rise and the EUR could come under pressure.
The downside may beckon for the EUR/USD which has made new lows for the past three trading sessions. Support for the pair may be found at the late September low of 1.3360. A break here would open the door to test the October low of 1.3150. The upside could be capped at the top of the early November consolidation pattern at 1.3850.
JPY – Yen is Still a Safe Haven Currency
The Japanese economy has continued to recovery in the face of the earthquake and tsunami that struck the nation in the spring. Q3 GDP rose by 1.5% though the revised Q2 data shows the economy contracted -0.5%. Now the island economy will likely face headwinds from both flooding in Thailand and a gloomy outlook for the euro zone. This negative forecast was highlighted in the recent BoJ Monetary Policy Statement.
Despite the gloomy outlook the JPY continues to see inflows from investors seeking to park funds in times of high market stress. Investors choose the JPY because the country has a current account surplus and Japanese government bonds (JGB) have a large and liquid market. Japanese bonds also offer investors the potential opportunity to gain from JPY appreciation. Keep in mind that 10-year JGB only returns a tiny 0.96%. Thus traders have the ability to safeguard their funds and make a forex play at the same time during periods of low risk sentiment.
Traders should also remember that once the SNB put a floor underneath the exchange rate of the EUR/CHF it took away one of the market’s primary safe haven currencies. Also the potential for QE3 from the Fed makes holding the USD undesirable. Given a lack of safe haven currencies decent economic fundamentals, and a strong bond market the JPY may make for an attractive play in the markets.
Gold – Central Banks Increase Gold Buying
According to a World Gold Council report in Q3 central banks reported more than double their previously reported holdings from Q2. The data shows central banks are holding over seven times their holdings on a year-over year basis and purchased 148.4 metric tons of gold.
Yesterday’s report is a surprise to some analysts as the sheer quantity of gold purchased shocked market followers. It was known that central bankers have been diversifying out of the USD and into other assets. This could be a result of the Fed’s dovish monetary policies and QE programs. Expectations for QE3 may have the same effect on the USD as previous programs, thereby driving more central banks to buy gold rather than USDs.
Technical News
EUR/USD
The resilience of the EUR has led many traders to adopt the strategy of selling the EUR/USD on rallies. The key resistance level is 1.3860 from the early November consolidation pattern. This is also the 50% retracement from the late October to early November downtrend (1.4246-1.3483). Approaches to this key level and the pair may run into selling pressure. Both monthly and weekly stochastics continue to move lower and initial support may be found at 1.3650, followed by last week’s low of 1.3480. A break here could open the door to 1.3145 from the October low. Additional resistance is located at the 200-day moving average at 1.4105.
GBP/USD
Sterling has been met with selling pressure on approaches to its 200-day moving average which comes in at 1.6140. This moving average comes in just above a bull flag pattern located on the daily chart. The support line of the chart pattern falls from the October 26th low and has a potential measured move of 480 pips which makes the August high at 1.6615 a convenient target. Should the pair fail to break out of the consolidation pattern, support may be located at 1.5850 as well as 1.5680.
USD/JPY
Yen strength has reemerged after a period of little movement. The USD/JPY may find support at its 55-day moving average at 76.95 though the one way movement in the price action hints at additional declines in the pair. Additional support may be located at 76.10 from the bottom of the September consolidation with a final destination at least the all-time low at 75.63. Resistance may be found off of the September high of 77.85 while the long term downtrend from the 2007 high is located at 79.30.
USD/CHF
The USD/CHF made a breach but failed to make a significant move above the 0.9080 resistance from the October 20th high. An additional push higher will likely target the October high of 0.9310. Traders should also have their eye on the 20-month moving average which comes in at 0.9450. Initial support is located near 0.8950 followed by the November low of 0.8760.
The Wild Card
AUD/USD
The Aussie dollar is struggling to maintain a bid in this risk off environment. Yesterday the pair held at the support level from Thursday’s low of 1.0050. Falling daily and weekly stochastics point to additional declines and a break here could trigger stop loss selling. Forex traders may see a break of the initial support test the August low of 0.9925. Resistance is found at the top of the consolidation pattern from the November high which comes in at 1.0350.
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.
USD/JPY Breaking Below Support
Source: ForexYard
The JPY is moving early this morning following a bout of USD weakness. With the USD/JPY breaking below the 76.80 support level there is little support remaining on the charts to stand in the way of the pair’s all-time low.
Most of the majors have been consolidating in the latter half of the week but the USD is weaker across the board to begin the London trading session. There is little data on the economic calendar to affect the majors with the exception of CPI numbers from Canada later this afternoon.
The USD/JPY has been on the move early this morning, breaking through support at 76.80. The pair has retraced more than 61% of the most recent Japanese government intervention. Expectations are for the USD/JPY to continue to decline towards its all-time low at 75.55. Resistance will be found back at 76.80 followed by the long term downtrend from 2007 which comes in today at 79.15.
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.
Stock Trading Secret of Ancient Greek Fortune Tellers
By MoneyMorning.com.au
“Know thyself…”
That inscription stood in the forecourt at the Temple of Apollo at Delphi for 763 years.
The temple’s rubble now. The Christian emperor Theodosius I flung out the Oracle of Delphi and razed the temple in 390AD. But this 2384-year-old Ancient Greek maxim has stood the test of time.
And believe it or not – it’s a stock trading secret. One that holds the key to trading this market successfully – for fun and for profit.
When Slipstream Trader, Murray Dawes started out on the trading floor in Sydney, his job was to stand behind a trader in the pits and communicate with the brokers on the phones with trading floor ‘sign language’. He stood there day after day watching the markets trade. Murray would see prices go up. And prices go down. He started to notice patterns. And trends. Movements he thought he could spot in advance and profit from. And then he did the most valuable thing he ever did to become the trader he is today. And it’s the same thing we’re urging you to do…
He wrote it all down.
Unless you understand how you work and how the market works, you’ll never improve as a trader.
The best way to know thyself, Murrays says, is to keep three trading journals.
Yes, this does sound like work. But once you get in the habit of writing down your thoughts after each trading session, you could do it in as little as 15 minutes a day… you’ll be amazed by the extra confidence and improvement you’ll make.
Write your thoughts down after every trading session. And when you do, write with this goal in mind: Your aim is to increase your awareness of your own behaviour… and increase your knowledge of the market’s behaviour.
1) Keep a Market Journal…
In this journal, keep notes on different things you observe in the market. Jot down patterns you believe may be profitable… Or just thrash out ideas for money management strategies. This is the key journal to find a trading method that works for you.
Print out charts and scribble comments on them. Write out what you expect could happen for the day. And then review how right – or wrong – your view was.
Add any insights you get from this review to a list. And use that list to make goals for reviewing charts and possibly back-testing ideas.
2) Keep a Trading Journal…
In this journal, keep track of your trades. Set out what actions you believe you should take for each trade before the trading day starts. Stop losses, targets and risk/reward are all important here. Also, you can go deeper into your performance to understand win/loss ratios, average wins to average losses, biggest drawdown, biggest win, volatility of returns etc.
This is where you will find clues about your strengths and weaknesses. And this will give you areas for improvement to focus on in the future.
It is important to compare what you were supposed to do with what you actually wind up doing. It is in this difference you will find the keys to your own psychology.
3) Keep a Psychological Journal…
This journal is for when you have found a method that works for you, but know there is a difference between having a trading plan and sticking with it.
This is the journal that will help you become a profitable trader.
If you are really honest in answering questions like, what made me buy? And, what made me sell? Was it nerves, excitement?… and if you are able to decide not to trade when you feel angry or confused… you will be amazed how many dumb trades you will avoid.
I would add that your journals are not just to pull you up for things you’re doing wrong. You should also use them to uncover what you’re doing right.
If you have a good win, it’s helpful to know what you did differently… so you can do it again. Were you feeling calm and focused when you traded? Did you have a strong intuitive sense that this was a good trade to make? Was there a set of indicators that you used to filter out the opportunity that you might be able to formulate into a trading plan for the future?
It’s only through reviewing your trading decisions that you will improve.
Not many people have the dedication or the discipline to put the work in outside of trading hours to improve their performance. Often it’s just the thrill of trading that drives people. And when this is the case they usually lose money.
Aaron Tyrrell
Editor, Money Morning
P.S. Click here to see his new video market update, released Wednesday, to find out where the market’s heading next… and how ‘scarily accurate’ you could become if you start using Murray’s system.
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For editorial enquiries and feedback, email [email protected]
Australia’s Natural Resources War
By MoneyMorning.com.au
“During periods of occupation by a foreign power or the collapse of a monetary system, gold’s liquidity, acceptability and portability have been particularly important qualities and may well be more pertinent than gold’s rate of exchange with paper money. In periods of economic dislocation and high inflation gold has consistently proved a better wealth preserver than other assets.” – Stephen Harmston, World Gold Council, 1996
So, which is more likely? Occupation by a foreign power? The collapse of the monetary system? Or both?
Perhaps Australia’s set for a Natural Resources War?
Well, someone in Canberra must be scared of something. Why else would Australia need 2,500 American marines stationed in the Northern Territory by 2017?
Or maybe the American marines are the foreign occupation… stranger things have happened. The West has gone to war over resources before (oil in the Middle East).
So who’s to say the next battle won’t be over iron ore in the Pilbara… or natural gas in Queensland’s Cooper Basin?
Of course, a war over Australia’s natural resources seems impossible. It would be an extreme event. But that doesn’t mean it won’t happen. The federal government has already declared a domestic war on the mining industry.
At the Sydney Gold Symposium, keynote speaker Ben Davies spoke about “Financial Oppression”.
He said, financial oppression is “where we see the State impose socialism.” That it will come about through, “mining taxes, windfall taxes, [or] nationalisation of mines.”
Well, we’ve got the mining tax… and we nearly had the windfall tax. What about nationalisation of mines? Four years ago you would have called us bonkers if we suggested U.K. or U.S. banks would get nationalised.
But it happened… unexpected things happen. And when they do, most investors are caught out by it.
Cheers.
Kris.
Related Articles
Totally Standard Hyper-Inflation
Is There Any Upside for Gold Investors?
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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]
When Safe Stocks Took a Beating
By MoneyMorning.com.au
This morning we’re following on from yesterday. We promised to show how you can set your portfolio to make gains… whichever way the market goes.
It’s not fool-proof. But it will help you limit losses from extreme events… and potentially profit.
More on that in a moment. First…
This chart shows the S&P/ASX 200 Consumer Staples Index. It’s an index of ‘safe stocks’. Stocks you’d call safe and dependable – supermarkets, food companies, etc.:
Source: CMC Markets Stockbroking
But “safe and dependable” didn’t stop the index falling 33% from the 2007 peak to the 2009 low.
Investors who bought “safe” stocks took a hit to their wealth.
For instance, in June 2008 just as the market was about to fall off a cliff, the average Aussie investor had more than 50% of their investable assets in the stock market:
When stocks fell nearly 50%, those investors saw their wealth fall by a quarter!
And the war for Australia’s natural resources doesn’t help either.
The key to keeping and building your wealth is something our old pal Dan Denning has banged on about over at Australian Wealth Gameplan. It’s called asset allocation. Dan gets his inspiration from Harry Brown and what he calls a “Permanent Portfolio”.
Well, we’ve got our own spin on asset allocation. And we get our inspiration from… the racetrack!
Always the Winner
Who are the only folks guaranteed to walk away from the racetrack with more money than they arrive with?
That’s right, the bookies win regardless of which horses win.
In short: Bookmakers don’t care who wins a race… so you shouldn’t care which of your investments does best.
That was one of our biggest takeaways from the Gold Symposium. The experts were determined that gold had to be the best investment. In fact, we’ll go further. They were convinced gold was the only investment to hold.
In our view that puts them in the same category as the housing spruikers who say, “Only invest in housing.” Or the share spruikers who say, “Shares have been the best performing asset for 100 years.”
All three investment strategies could potentially fail. And what if they do? That’s where we look to the winners on the racetrack.
Bookmakers always walk away from the track in profit because they don’t care who wins. They play the odds (in truth they make the odds, that’s why they always win).
Simply put: if punters back a horse heavily, the bookie will shorten the odds. At the same time the bookie will adjust the odds on other nags to attract punters.
All the time the bookie holds a position that ensures he or she will make a profit… whoever wins.
Of course, as an investor you don’t have the same advantage as a bookie. You can’t control the odds of winning. But you can shift them in your favour by moving your asset allocation around.
But make no mistake, this isn’t about diversification. Diversification is where you stick cash in a bunch of different investments and hope things balance out.
Asset allocation is different. It’s about managing your investments to benefit from specific market movements.
As we’ve suggested for some time, right now your biggest asset allocation should be in cash. Why? Because crazily enough, cash offers one of the best returns for the risk you take.
Allocate, Don’t Diversify
The point is, don’t wed yourself to one particular asset class.
Have a core holding in different assets. But if one asset looks set to do better than another, do as a bookie would and adjust your portfolio.
Remember, building wealth isn’t about obsessively backing one asset, like safe stocks and ignoring all others. It’s about moving the odds of success in your favour… by protecting what you’ve got and then building on it.
In fact, it’s pretty much how bookies clear up at the racetrack!
Cheers.
Kris.
Related Articles
Totally Standard Hyper-Inflation
Is There Any Upside for Gold Investors?
What a 2,300 Year-Old Coin Reveals About Gold
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From the Archives…
The Onward March of the State
2011-11-11 – Kris Sayce
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2011-11-10 – Kris Sayce
Neither a Borrower Nor a Seller Be…
2011-11-09 – Kris Sayce
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2011-11-07 – Kris Sayce
For editorial enquiries and feedback, email [email protected]
Retail Earnings Abound Ahead of Holiday Shopping Kick-Off
Just about a week to go until Black Friday marks the beginning of the holiday shopping rush, and several retailers are reporting earnings today. Sears Holdings (SHLD) posted a wider loss for its fiscal third quarter, or $421 million, or $3.95 per share, compared to a loss of $218 million, or $1.98 per share, last year.
France and Germany Break Ranks Over ECB Intervention
Having presented a unified front through much of the ongoing European debt crisis, the recent intervention by the European Central Bank in the sovereign bond markets has led to a major disagreement between France and Germany. In a nutshell, France wants to see the ECB do more to keep the lid on bond yields, while Germany feels the ECB lacks the authority to carry on a major bond purchase operation.
Markets were initially caught off-guard as the two largest Eurozone economies engaged in a little public sniping. Should this escalate beyond a simple disagreement on a single aspect of the ECB’s role, it could further undermine confidence in the Eurozone’s ability to manage the debt crisis.
Still, France’s pushing for the ECB to buy up bonds to suppress further yield increases has a whiff of self-preservation about it. It also confirms that the debt contagion spreading across Europe is now fixing its sights on France, with the first casualty likely to be France’s triple A credit rating.
The first hint of the scope of the trouble awaiting France is that like Greece, Spain, and Italy, the yield spread between French sovereign debt and the benchmark German Bunds continues to grow. For Italy and Spain, yield rates are rapidly approaching levels analysts say will be unsustainable making the prospect of a default all but inevitable.
Despite the Euro-era record spread of 195 basis points recorded on Wednesday, French bond yield rates still remain manageable. This could all change very quickly should France suffer a credit downgrade and French officials are clearly spooked at the prospect of investors demanding even higher premiums. This certainly explains the appeal to the Bank to expand its asset purchase program.
Eurozone Solidarity Showing Cracks
As the threat of debt contagion continues to spread through the Eurozone, deeper divisions are starting to appear in the solidarity of the member states. Dutch Prime Minister Mark Rutte was quoted as saying that there should be a mechanism to expel countries that continue to flout the fiscal guidelines required for Eurozone membership.
Even Merkel’s own party voted to allow for Eurozone members to unilaterally secede from the union.
Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog.
Learn About the Relative Strength Index
When researching a stock, many investors are the most familiar with Fundamental Analysis — looking at a company’s balance sheet, earnings, revenues, and what’s happening in that company’s underlying business. Investors who use Fundamental Analysis to identify good stocks to buy or sell can also benefit from Technical Analysis to help find a good entry or exit point.
