Month: November 2011

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By ForexYard

The rebound the EUR received late last week was short lived after Italian and Spanish bond yields moved higher. Today the economic calendar is filled with important economic data points from Europe, the UK, and the US, with the most important likely to be euro zone GDP and US retail sales.

Economic News

USD – Focusing on US economic Data

After two weeks of following the European political scene US economic data releases return to the spotlight. Today important data will be released beginning with retail sales, PPI, and the Empire State Manufacturing Index. Markets expect that the positive economic momentum that began in Q3 will likely carry over into Q4. An improvement in market sentiment is forecasted with a sharp pickup in the manufacturing sector. Retail sales numbers are expected to show continued growth in consumption though at a slower pace than in the month of September. Inflation pressures on the producer side (PPI) are forecasted to fall while the headline consumer inflation numbers (CPI) continue to rise to 3.9% y/y in September. CPI data for October will be released on Wednesday.

The Fed expects inflationary pressures to drop and in the worst case scenario a deflationary environment would take hold of the US economy. To avoid the threat of deflation the Fed would likely increase its balance sheet through additional bond purchases (QE3). This puts extra significance on Wednesday’s CPI figures as some economists expect the Fed could announce QE3 as early as its December 13th meeting.

EUR – Pressure Returns to Peripheral Europe

Yesterday the EUR came under pressure as peripheral bond yields began to climb once again. Italy had a successful debt auction of 5-year notes but the bonds were priced at their highest yield since Italy came into the EMU. Yields on the Spanish 10-year note climbed above 6% for the first time since the summer and the spread between the Spanish and German 10-year bond yields widened; an indicator of market stress. Spain is coming back into the picture as the Spaniards will go to the polls on Sunday in a general election.

Today brings euro zone flash GDP data. Consensus estimates are for growth of 0.2% and will likely highlight the struggling European economy. ECB President Mario Draghi said the euro zone economy will slip into a mild recession and previous PMI surveys suggest a slowdown in growth. The German ZEW Economic Sentiment survey should also show a more severe downturn in market sentiment, potentially weighing on the EUR.

With increased pressure on peripheral Europe the EUR has come off of its Friday highs versus both the USD and against the JPY. The EUR/JPY is approaching the key 104.70-105 level with the only support remaining on the charts coming in at at the September low of 100.75.

JPY – Japanese Growth Weakens but JPY Strengthens

Yesterday Japanese Q3 GDP was released in-line with consensus expectations as the Japanese economy grew by 1.5. However, the report had a negative tone as the revised Q2 data showed the economy contracted by -0.5%, more than the previous results showed which were at -0.3%.

The JPY continues to strengthen despite a Japanese economy that is stalling. Neither the traditional intervention nor the “covert intervention” as discussed in yesterday’s FOREXYARD Daily Analysis has been able to stop the JPY’s appreciation.

Wednesday will bring the BOJ meeting and no new policy measures are expected. This could continue the one way movement in the USD/JPY. Yesterday the pair dipped below its 55-day moving average. There is a lack of supports for the USD/JPY until the all-time low at 75.63. Resistance is back at the October 12th high of 77.50.

GBP – Rising UK Inflation Holding the BoE Back

Today will bring another letter from BOE Governor Mervyn King to the Chancellor of the Exchequer George Osborne, explaining why the rate of inflation is yet again above the central bank’s target of 3%. However, there are some economists who are of the opinion that UK inflation has peaked and will begin to decline. Certainly King and a majority of the Monetary Policy Committee believes this as the BOE suggested in their previous meeting minutes the BOE could start another round quantitative easing to stave off deflationary pressures. Today’s CPI is expected to come in at 5.1%, down from a peak 5.2% in September. A surprise to the upside will likely support sterling while a reading below market expectations and traders could sell sterling on expectations of additional easing by the BOE.

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

EUR/JPY

The EUR/JPY is approaching the key 104.70-105 level. This price level has increased significance as it is the support from the October 26th low as well as the 61% Fibonacci retracement level from the October rally. A break of this support level and forex traders may look for the pair to fall to its last remaining support level at 100.75 from the October low.

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

Euro zone economic data out this morning shows the French and German economies performed in-line or better than consensus forecasts. However, traders need to remember that the data is not forward looking and is most likely already included in the value of the EUR. The was ZEW economic sentiment survey is forward looking and shows German investor confidence tumbled to a 3-year low, further highlighting fears of a euro zone recession.

French Q3 GDP climbed by 0.4% on consensus forecasts of 0.3%. The bullish tone of the data was reduced as a downward revision to the Q2 GDP showed the French economy contracted by -0.1% from the previous release of 0.0%. Despite the negative growth in Q2 today’s data does provide some spark of hope that France will meet its deficit reduction targets.

A positive note in today’s economic data releases was the German Q3 data which came in as expected at 0.5%, rising from 0.3% in Q2. However, the worrying part of today’s data barrage is the German ZEW survey which missed forecasts by a mile, falling to -55.2 from -48.3, on expectations of a decline to -51.8. The survey is yet another sign of a potential slowdown of euro zone GDP in Q4.

With continued pressure on Italian and Spanish bond yields the EUR/USD is trading near its lows for the day at 1.3530 with near-term support at 1.3480 from the November 10th low. A break here may open the door to the October low of 1.3145. Resistance is found at the overnight high of 1.3650.

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

Today forex traders should be focusing on the economic calendar. We have already seen better French Q3 GDP results but the forward looking German ZEW Economic Sentiment will likely attract much of the attention in today’s European trading session.

In the North American trading session US retail sales and the Empire State Manufacturing survey could support the theory of a US economy that is beginning to grow. This would likely be a positive for higher yielding currencies such as the AUD and the SEK and could reverse the negative market sentiment that was seen in yesterday’s forex trading.

Early this morning the AUD/USD failed to break below 1.0150, a level that is suspected to contain a large amount of stop-loss orders. A break here would likely send the pair lower with support at last week’s low of 1.0050. A lift in the AUD/USD could see resistance at 1.0350 from the top of the early November consolidation pattern.

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.

USDCAD stays in a trading range between 1.0055 and 1.0265. The price action in the range is treated as consolidation of uptrend from 0.9891. As long as 1.0055 key support holds, another rise towards 1.0400 is still possible, and a break above 1.0265 could signal resumption of uptrend. On the downside, a breakdown below 1.0055 will indicate that the rise from 0.9891 had completed at 1.0265 already, then the following downward move could bring price to 0.9600 zone.

By MoneyMorning.com.au

Researching gold stocks takes up a big chunk of my time. So as editor of Diggers and Drillers, you might ask why I’m not attending the annual Gold Symposium in Sydney with your regular editor, Kris Sayce.

The truth is I’d love to have gone. Some of the best and brightest in the gold sector are presenting. The timing of the conference is excellent as well. Gold spent most of last month out of the spotlight, finding strong buying support in the $1600s. But it has quickly bounced more than 7% in recent weeks to be closing in on $1800 again.

So why didn’t I make it to the conference?

Well, I’ve just stepped off a plane from Latin America. I’m a big believer in the value of taking the time to visit a company if I’m going to recommend it. Many Aussie juniors are now exploring overseas to get ‘fresh dirt’, as well as to seek refuge from tax-hungry redheads.

So if a stock passes all my number crunching research, and the management team is up to scratch, it’s normally time for me to get a cab to the airport.

The company I’ve just looked at in Latin America impressed me. It is just a few months from first production of around 65,000 ounces of gold a year, with 600,000 ounces of silver as well. Yet the company is still valued cheaper than most explorers. And this stock has some hot looking exploration projects lined up. I think 2012 will be its year to shine.

West Africa has been the hot destination for Aussie gold exploration for years. Many Aussie juniors have had great results over there, and the list of hopefuls gets longer all the time. The four gold explorers I tipped there over the last two years have come in with average gains of 85%. And there are more are on my radar.

The region is still full of potential. But South and Latin America is shaping up as the next ‘West Africa’. There are so many promising areas that are still wide open, and valuations are still cheap in comparison.

I’ve been tipping more gold stocks in that region recently to prepare for when the market shifts its gaze in this direction. One stock I tipped is off to the races already, sitting on 110% gains in just six months. I’m convinced this is just the start, and I reckon investors could easily double their money from here within the next six months.

Being able to speak a bit of Spanish has helped get around this part of the world. But I definitely need some more practice before my next visit to the region. I was chatting with one of the host company’s drivers, who mentioned he had a family of four. So I asked whether his children were boys or girls.

After some confusing back and forwards discussion, he bluntly told me that: ‘No, Sir. I am DEFINITELY the father of ALL the children in my family’.

Who knows what I said. But it was something of a conversation killer…

Investing in promising junior gold stocks is one way to accelerate your gains from a rising gold price. But I’m a big believer in holding physical gold as well. (I’m an even bigger believer in storing it safely too; i.e. with a bullion dealer, or in a non-bank safety deposit box.)

I’ve been getting more emails from readers who are having a tough time getting physical gold and silver. Perth Mint told clients last month that demand was:

‘… currently running at unprecedented levels and we have been inundated by high levels of web and telephone traffic from clients all around the world.”

“It’s not just them. KWN reported that:

‘ …Peter August, CEO of Australian Bullion Company, Melbourne Australia, which is one of the largest and most respected bullion dealers in the country told KWN, “We have never, ever seen these levels of demand for physical gold and silver. “‘

There is every reason for the gold price to keep rising.

The media is rightly focused on the accelerating unravelling of Europe. Every week we get a ‘big solution’. Yet each ‘solution’ is destined to fail like the others. The latest plan is a new leader for Italy, Mario Monti. But even if he could walk on water, he still has a country in a complete mess to get to grips with, as well as Europe’s biggest sovereign debt to resolve.

So what to do? Well – of course the country issued more debt last night. And the yield was a record high of 6.29%.

But don’t let the media distract you from the bigger sovereign debt story.

The US is almost back up to the new-and-improved debt ceiling. This story will be back on the radar again by Christmas. This is important to the gold price, as where the US debt level goes, gold follows.

The US is also due to have a debt-reduction debate later this month, which could be a trigger for the gold price rising ahead of reaching the debt ceiling.

For want of a better phrase, gold is a ‘no-brainer’.

But don’t forget silver. Diggers and Drillers readers will know that I’m also big on gold’s little cousin. It has been outperforming gold in recent years and I expect it will continue to do so. It has had an eventful year to say the least, with a massive rally followed by a couple of big falls. Despite the snakes ‘n ladders, it is still up 37% in 12 months.

Better still, I suspect it is just a week or two from its next rally. Crossing over its 50-day moving average has marked the start of each rally over the last few years. In the last few weeks it has been closing in this level, and just broke it yesterday before retreating.

So if we see if get comfortable above $35 in the next week or so, then I suspect we could move very quickly up from here – particularly after moving up from so far under the 50-day moving average.

Next stop would be the ‘war-zone’ of the $42–45 range. If buyers get past it this time, it’s a quick road to $50–60. And I expect silver stocks would follow…

Dr. Alex Cowie
for Money Morning Australia

How to Accelerate Your Gains From a Rising Gold Price

Fundamental Forex Market Outlook for the Upcoming Week

The key fundamental economic events that can strongly influence the forex market this week feature the U.S. inflation and Retail Sales data, the BOJ Rate Decision and the UK Employment Report. Those key economic releases and others due out during this week are detailed further below, with the current market consensus expectations or the last result included in parenthesis whenever available.

The coming week’s highlights start early on Sunday with New Zealand Core Retail Sales (0.7%) and Japanese Preliminary GDP (1.5%). Monday has little of note due out.

Tuesday’s highlights include Australian Monetary Policy Meeting Minutes, UK CPI (5.1%), the German ZEW Economic Sentiment survey (-51.7) and the tentatively scheduled UK BOE Inflation Letter, plus U.S. Core Retail Sales (0.2%), Retail Sales (0.3%) and PPI (-0.1%).

On Wednesday, the market will closely monitor the tentatively scheduled Japanese Monetary Policy Statement, Overnight Call Rate (<0.10%) and BOJ Press Conference, in addition to the UK Claimant Count Change (20.8K), a speech by BOE Governor King and the BOE Inflation Report. Also due out Wednesday are U.S. Core CPI (0.1%) and TIC Long-Term Purchases (63.4B), a speech by Australian RBA Governor Stevens and New Zealand PPI Input (0.6%).

Thursday’s key data includes UK Retail Sales (-0.3%), and then U.S. Building Permits (0.60M), Weekly Initial Jobless Claims (397K) and the Philly Fed Manufacturing Index (9.3).

Friday then concludes the week with Canadian Core CPI (0.2%).

Technical Forex Market Outlook

NZD/USD:

Weekly Forecast: Somewhat higher
Resistance: 0.7881/88, 0.7955/96, 0.8066/93, 0.8109/90, 0.8240, 0.8269/78, 0.8327/39, 0.8365/86, 0.8423, 0.8469/72, 0.8500, 0.8534/75, 0.8676, 0.8764, 0.8793 and 0.8841.
Support:, 0.7855/59, 0.7804, 0.7795, 0.7741, 0.7731, 0.7605/72, 0.7549, 0.7523, 0.7504, 0.7500, 0.7453/67, 0.7426, 0.7404, 0.7342, 0.7321, 0.7189, 0.7115, 0.7000 and 0.6945/62.
200-day MA: 0.7990 and rising slightly.
14-day RSI: 44.7 and falling.

Technical Forex Market Outlook

USD/CAD:

Weekly Forecast: Somewhat lower
Resistance: 1.0132/42, 1.0210/33, 1.0262/71, 1.0337, 1.0417, 1.0481/90, 1.0500, 1.0506, 1.0646/56, 1.0669, 1.0742, 1.0756, 1.0785, 1.0853, 1.0868, 1.1000 and 1.1101/23.
Support: 1.0105, 1.0075, 1.0053, 1.0026/30, 0.9969, 0.9934, 0.9891, 0.9828/77, 0.9763/96, 0.9734/39, 0.9724, 0.9686, 0.9645, 0.9567, 0.9526, 0.9496, 0.9448/56, 0.9422, 0.9405/09, 0.9056 and 0.9000.
200-day MA: 0.9819 and rising slightly.
14-day RSI: 48.0 and flat.

Technical Forex Market Outlook

AUD/USD:

Weekly Forecast: Somewhat higher
Resistance: 1.0303/70, 1.0444/98, 1.0608, 1.0654, 1.0718/26, 1.0730, 1.0751, 1.0763, 1.0784, 1.0909, 1.1000, 1.1015, 1.1064 and 1.1079.
Support: 1.0229, 1.0214, 1.0201, 1.0116, 1.0100, 1.0052, 1.0012, 1.0000, 0.9983, 0.9925, 0.9863, 0.9732, 0.9689, 0.9667, 0.9651, 0.9620/27, 0.9536/41 and 0.9500.
200-day MA: 1.0415 and flat.
14-day RSI: 49.4 and falling.