Month: December 2011

By The Sizemore Letter

Charles Sizemore, the winner of InvestorPlace’s “10 Stocks for 2011″ contest, offers his favorite stock for 2012.  Read about Charles’ pick and the other contestants below.

Wondering what the best stocks to buy for next year are? Well, look no further than the 10 Best Stocks for 2012.

This InvestorPlace feature lists 10 long-term investments from a group of money managers, market experts and financial journalists. The 10 Best Stocks for 2012 is meant to provide buy-and-hold picks you can purchase now and sit on for a year — ideally, winding up richer on the other side.

The buy list this year is a diverse group of stocks — from banks to technology, from emerging markets to Dow components, from old favorites to a stock that went public just a few months ago.

Throughout the year, the writers will regularly offer updates on the good, the bad and the unexpected as it relates to their best stock for 2012. We’ll find out in a year who had the best pick — but first, let’s examine each writer’s recommendation and what made them pick their stock as the best investment for the New Year:

Best Stock for 2012: Turkcell

Money manager and stock picker Charles Sizemore, CFA, picked Visa (NYSE:V) as the single-best stock to buy and hold for all of 2011 — and thanks to market-trouncing returns of 40% year-to-date, his Visa pick was the winner among 10 picks in our similar contest last year.

This year, Charles gets a purer play on emerging markets with telecom stock Turkcell Iletisim Hizmetleri AS (NYSE:TKC), a mobile phone operator more commonly known just as “Turkcell.”

Yes, there is unrest in the Middle East and in the euro zone right now. But as Charles writes, this means you can buy a great company at a fire-sale price.

“If you believe, as I do, that Turkey has one of the brightest futures of any country on the planet, then the crises on Turkey’s borders should be viewed as a phenomenal opportunity to buy shares of some of Turkey’s finest companies,” Charles writes. “And my choice for 2012 is Turkcell.”

Read Charles’ complete recommendation on Turkcell.

Best Stock for 2012: Caterpillar

Investor and CBS MoneyWatch columnist Dan Burrows picked industrial giant Caterpillar (NYSE:CAT) as his best stock for 2012.

His reasons? Dan says CAT stock was oversold during the summer volatility, has good fundamentals (including retail sales that grew 31% in October) and a bargain valuation with a forward price-to-earnings ratio of about 10.

“Wall Street’s mean (and median) price target for Caterpillar currently stands at $114.50, according to Thomson Reuters data. Add in the 2% yield on the dividend, and the stock offers an implied return of 28% in the next 12 months or so,” writes Dan. “Not too shabby for a company with a market cap of more than $58 billion.”

Read Dan’s complete recommendation on Caterpillar.

Best Stock for 2012: FedEx

CNNMoney’s Paul R. La Monica said, “When I was asked to pick one stock to write about for InvestorPlace that I was confident would do well next year, I immediately started thinking of companies that should benefit from a steadily improving U.S. economy.”

At the end of his deliberation, Paul settled on FedEx (NYSE:FDX).

Don’t think this is just a play on a broad-based recovery, though. A discounted P/E ratio vs. rival UPS (NYSE:UPS), a strong dividend history, recent rate increases and the lack of competition from a U.S. Postal Service in disarray are all reasons to be bullish on FedEx.

“FedEx may not be flashy. But that’s kind of the point,” Paul writes. “In a market where volatility seems to be the new black, you could do a lot worse than a stable blue chip with steady earnings growth.”

Read Paul’s complete recommendation on FedEx.

Best Stock for 2012: Hershey

Renowned trader, journalist and money manager Jon Markman has a sweet play for you in 2012: confectioner Hershey (NYSE:HSY).

Why this consumer stock? Well, because in the short-term Jon is decidedly bearish on just about all corners of the market. The euro zone debt crisis will continue to rock Europe and subsequently affect nations that export goods there or rely on plush government subsidies from the content.

In fact, Jon thinks that in the short term, “the simplest trades next year will likely be short iShares Europe (NYSE:IEV), short iShares Emerging Markets (NYSE:EEM) and short solar energy equipment producers like First Solar (NASDAQ:FSLR).”

But what does this mean for buy-and-hold investors? Simply put, get defensive with consumer staples stocks.

For those who think that chocolate is discretionary, Jon adds, “Well, try explaining to my daughter that chocolate isn’t a household staple.”

Read Jon’s complete recommendation on Hershey.

Best Stock for 2012: Capital One

Banks aren’t exactly super popular right now, so it might surprise you to see senior analyst Philip van Doorn of TheStreet picking Capital One Financial (NYSE:COF) as his best best for 2012.

But a closer look at the stock shows a lot to be bullish about, even as the rest of the financial sector melts down. Namely, strong fundamentals and a historically low valuation and book value.

Capital One also has two very important mergers in the works that will provide future growth beyond its generally well-run banking operations.

Philip is adamant that this is not just a dumpster dive, saying “the most important factor in Capital One’s strong performance this year is its outstanding earnings performance.” Compared with the big banks on Wall Street, COF is in a class of its own.

Read Philip’s complete recommendation on Capital One.

Best Stock for 2012: Mako Surgical

David Gardner knows a thing or two about picking stocks. As co-founder of The Motley Fool, he is the brains behind the innovative Motley Fool CAPS rating system. And from his own research and what other investors are saying, David thinks he has a quite a pick for 2012 in Mako Surgical (NASDAQ:MAKO).

What makes Mako special? It’s an innovative medical device company that has revolutionized joint replacement. It’s not profitable yet, but the potential is huge, and stories of treatments and recovery are quite dramatic.

“It’s a long way from here to there, but for the speculative portion of your portfolio, MAKO could richly reward a little patience,” David writes.

If you don’t mind taking a little risk with your investments in 2012, consider this up-and-coming medical company.

Read Dave’s complete recommendation on Mako.

Best Stock for 2012: Microsoft

Blogger, author and founder of Stockpickr James Altucher joined a similar InvestorPlace.com feature in the beginning of 2011, picking one stock to buy and hold all year. Back then, he picked Microsoft (NASDAQ:MSFT) — and his choice is the same a year later.

Similar to his previous write-up, the highlights of this year’s recommendation include:

• 8x earnings
• Huge stock buybacks
• Secret weapon: Skype replaces all smartphones within next five years

The idea of Skype taking over the mobile market is intriguing, considering voice represents so little of what we can do with our smartphones these days.

Read James’ complete recommendation on Microsoft.

Best Stock for 2012: Arcos Dorados

Josh Brown, adviser at Fusion Analytics and the author of The Reformed Broker blog, picked freshly minted Arcos Dorados (NYSE:ARCO) as his top pick for 2012. ARCO is the largest McDonald’s (NYSE:MCD) franchisee in the world with more than 1,750 locations, largely in Latin America.

Arcos Dorados went public in April and has been up and down ever since — not a newsflash, considering the volatility of the market in general. But in the new year, Josh is expecting the stock to take off due to four factors:

1. Expanding consumer spending in Latin America
2. The ferocity of McDonald’s as a global brand
3. Growth within a defensive sector
4. The comeback potential for emerging-market equities in 2012

If you’re sick of trying to bargain hunt in struggling U.S. blue chips, and if you aren’t afraid of looking for growth abroad, ARCO could be your best bet in the new year.

Read Josh’s complete recommendation on ARCO.

Best Stock for 2012: Alcoa

As with previous picks Caterpillar and FedEx, InvestorPlace.com editor Jeff Reeves has leaned in favor of broad economic recovery with his recommendation of aluminum giant Alcoa (NYSE:AA).

Not only will growth in demand and higher prices result in bigger Alcoa profits, but overly negative sentiment has provided a great entry point, Jeff writes.

“Yes, big problems persist in the global economy, and aluminum demand and prices remain weak as a result,” he writes. “However, Alcoa hasn’t seen the $9 level since spring 2009. Are the macroeconomic fears really worse now than in 2009?”

In addition to valuation, Jeff likes Alcoa’s improving earnings, dividend potential, streamlined operations and hope for better margins in 2012.

Read Jeff’s complete recommendation on Alcoa.

Best Stock for 2012: Banco Santander

According to longtime stock picker, financial columnist and money manager Jim Jubak, your best bet for 2012 is a European bank. Really!

It’s an aggressive play, but Jim’s faith in Banco Santander (NYSE:STD) comes from a lot of number crunching — and the idea that as bad as things are over in the euro zone, they aren’t as bad as you think.

“The worry about European banks right now is that they can’t raise capital in the financial markets,” Jim writes. “During the past two quarters, Banco Santander has very clearly demonstrated that this bank doesn’t fit that profile of worries.”

It has attractive assets to sell if it has to, Jim says, and that’s on top of accessing credit markets just fine at the present — on top of $8 billion in free cash flow that shows a nice cushion for STD. The only catch is that Banco Santander holds almost $50 billion in Spanish government debt.

“If you think Spain will have to write off part of that debt, then Banco Santander sure isn’t the pick for you,” Jim writes. “If you think Spain is in better shape than Italy (or Greece), I think that in Banco Santander you’re looking at one of the best performers in 2012.”

Read Jim’s complete recommendation on Banco Santander.

By Elliott Wave International

The following series is excerpted from two classic issues of Robert Prechter’s Elliott Wave Theorist. Although originally published in 2004, the valuable series has been re-released in the Independent Investor eBook, along with over 100 pages of other reports that challenge conventional economic thinking.

Here is Part 1 of the series. Check back in a few days to read Part 2, or you can download your free copy of the Independent Investor eBook here.

See if you can answer these four questions:

1. In 1950, a good computer cost $1 million. In 1990, it cost $5000. Today it costs $1000.
   Question: What will a good computer cost 50 years from today?
2. Democracy as a form of government has been spreading for centuries. In the 1940s, Japan changed from an empire to a democracy. In the 1980s, the Russian Soviet system collapsed, and now the country holds multi-party elections. In the 1990s, China adopted free-market reforms. In March of this year, Iraq, a former dictatorship, celebrated a new democratic constitution.
   Question: Fifty years from today, will a larger or smaller percentage of the world’s population live under democracy?
3. In the decade from 1983 to 1993, there were ten months of recession in the U.S.; in the subsequent decade from 1993 to 2003, there were 8 months of recession. In the first period, expansion was underway 92 percent of the time; in the second period, it was 93 percent.
   Question: What percentage of the time will expansion take place during the decade from 2003 to 2013?
4. In 1970, Reserve Funds kicked off the hugely successful money market fund industry. In 1973, the CBOE introduced options on stocks. In 1977, Michael Milken invented junk bond financing, which became a major category of investment. In 1982, stock index futures and options on futures began to trade. In 1983, options on stock indexes became available. Keogh plans, IRAs and 401k’s have brought tax breaks to the investing public. The mutual fund industry, a small segment of the financial world in the late 1970s, has attracted the public’s invested wealth to the point that there are more mutual funds than there are NYSE stocks. Futures contracts on individual stocks have just begun trading.
   Question: Over the next 50 years, will the number and sophistication of financial services increase or decrease?

Observe that I asked you a microeconomic question, a political question, a macroeconomic question and a financial question.

Trend Extrapolation
If you are like most people, you extrapolated your answers from the trends of previous data. You expect cheaper computers, more democracy, an economic expansion rate in the 90-95 percent range, and an increase in financial sophistication.

It appears sensible to answer such questions by extrapolation because people default to physics when predicting social trends. They think, “Momentum will remain constant unless acted on by an outside force.” This mode of thought is deeply embedded in our minds because it has tremendous evolutionary advantages. When Og threw a rock at Ugg back in the cave days, Ugg ducked. He ducked because his mind had inherited and/or learned the consequences of the Law of Conservation of Momentum. The rock would not veer off course because there was nothing between the two men to act upon it, and rocks do not have minds of their own. Earlier animals that incorporated responses to the laws of physics lived; those that didn’t died, and their genes were weeded out of the gene pool. The Law of Conservation of Momentum makes possible our modern technological world. People rely on it every day. Despite its use in so many areas, however, it is inapplicable to predicting social change. For most people in most circumstances, the proper answer to each of the above questions is, “I don”t know.” (Socionomics can give you an edge in social prediction, but that’s another story.)

The most certain aspect of social history is dramatic change. To get a feel for how useless — even counterproductive — extrapolation can be in social forecasting, consider these questions:

1. It is 1886. Project the American railroad industry.
2. It is 1970. Project the future of China.
3. It is 1963. Project the cost of medical care in the U.S.
4. It is 1969. Project the U.S. space program.
5. It is 100 A.D. Project the future of Roman civilization.

In 1886, you would have envisioned a future landscape combed with rail lines connecting every city, town and neighborhood. Small trains would roll around to your home to pick you up, and a network of rail lines would help deliver you to your destination efficiently and cheaply. Super-fast trains would make cross-country runs. You could eat, read or sleep along the way.

Is that what happened? Would anyone have predicted, indeed did anyone predict, that trains in 2004 would often be going slower than they did in 1886, that they would routinely jump the tracks, that they would be inefficient, that they would have little food and few sleeper cars, that the equipment would be old and worn out?

In 1970, the Communist party was entrenched in China. Over 35 million people had been slaughtered, culminating in the Cultural Revolution in which Chinese youths helped exterminate people just because they were smart, successful or capitalist. Would anyone have imagined that China, in just over a single generation, would be out-producing the United States, which was then the world’s premier industrial giant?

In 1963, medical care was cheap and accessible. Doctors made house calls for $20. Hospitals were so accommodating that new mothers typically stayed for a week or more before being sent home, and it was affordable. Would anyone have guessed that forty years later, pills would sell for $2 apiece, a surgical procedure and a week in the hospital could cost one-third of the average annual wage, and people would have to take out expensive insurance policies just in case they got sick?

In the space of just 30 years, rockets had gone from the experimental stage to such sophistication that one of them brought men to the moon and back. In 1969, many people projected the U.S. space program over the next 30 years to include colonies on the moon and trips to Mars. After all, it was only sensible, wasn’t it? By the laws of physics, it was. But in the 35 years since 1969, the space program has relentlessly regressed.

In 100 A.D., would you have predicted that the most powerful culture in the world would be reduced to rubble in a bit over three centuries? If Rome had had a stock market, it would have gone essentially to zero.

Futurists nearly always extrapolate past trends, and they are nearly always wrong. You cannot use extrapolation under the physics paradigm to predict social trends, including macroeconomic, political and financial trends. The most certain aspect of social history is dramatic change. More interesting, social change is a self-induced change. Rocks cannot change trajectory on their own, but societies can and do change direction, all the time.

Learn to Think Independently — Download Your Free Independent Investor eBook “The Stock Market is Not Physics” is just one report in the more than 100 page, two-volume Independent Investor eBook. You’ll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International’s 30-year history; you’ll also get new analysis, forecasts and commentary to help you think independently in today’s tumultuous market. Download Your Free eBook Now.

Here’s the latest news for Wednesday, December 21st: Payroll tax debate hits stalemate; Winter arrives with wicked weather; World’s largest menorah lit in NYC; Chinese hotel makes plastic bottle Christmas tree.

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 21 December, 08:45 EST

U.S. DOLLAR gold bullion prices dropped to $1609 an ounce Wednesday lunchtime in London – 1.9% down from the high for the week so far, set less than three hours earlier.

Stocks and commodities also traded lower following an announcement by the European Central Bank about its latest liquidity operation.

“We don’t see much fresh [gold] buying from investors as the year end nears,” says Dick Poon, Hong Kong-based manager at precious metals group Heraeus.

Silver bullion fell to $29.29 per ounce – having briefly passing the $30 mark – as the Euro fell against the Dollar following news that European banks borrowed a total of €489 billion at the ECB’s 3-Year Longer Term Refinancing Operation, which settled Wednesday morning.

The LTRO – through which the ECB offered to lend to banks for three years against collateral that includes distressed Eurozone government debt – saw 523 bidders.

The ECB offered the loans at a rate of 1%.

“It was obviously an offer the banks could not refuse,” says Laurent Fransolet, head of fixed income strategy at Barclays Capital in London.

“It shows the ECB is not out of ammunition and it gives banks security on liquidity for a few years. On the other hand it means banks will rely on the ECB for longer.”

“This is basically free money,” said Jens-Oliver Niklasch, Stuttgart-based strategist at Landesbank Baden-Wuerttemberg, speaking before the ECB announced the LTRO results.

“The conditions are unbeatable. Everybody who can will try to get a piece of this cake.”

“It remains to be seen [however],” warns ING economist Carsten Brzeski, “whether the money will filter through to the real economy as the ECB hopes. Many banks still have to increase their capital ratios.”

“The cash could be used simply to shore up [banks’] balance sheets,” agrees Kit Juckes, currency strategist at Societe Generale.

“Or some of it could go into assets, including but not exclusively higher-yielding peripheral debt.”
Deutsche Bank has estimated that around half of the €442 billion borrowed by banks at a 1-year LTRO in 2009 was used to buy sovereign debt – the majority going into Greek and Spanish government bonds – the Financial Times reports.

The Euro fell 0.9% against the Dollar immediately following the ECB’s announcement, breaking a rally that began early on Tuesday and continuing to fall throughout the rest of the morning.

European stock markets also fell, while Dollar gold bullion prices dropped more than 1% in an hour from $1640 per ounce, their high for the week so far.

In the same period, the gold price in Euros fell 0.6% to €39,847 per kilogram (€1239 per ounce), while the Sterling Price of gold bullion also dropped 0.6%, hitting £1033 per ounce.

Despite rallying for most of this week (until the ECB announcement), the Dollar price of gold bullion remains 5.6% down on the start of last week.

“Gold is not the asset of choice on a search for liquidity,” says Dominic Schnider, head of commodity research at UBS Wealth Management.

“It gives you comfort against currency risks, inflation, sovereign debt problems, but not liquidity crunch…[however] holdings of gold ETFs are still holding up despite the recent sell-off, which is a good sign.”

The volume of gold bullion held to back shares in the SPDR Gold Trust (ticker: GLD) – the world’s largest gold ETF – fell by around 15 tonnes last week, but on Tuesday remained more than 40 tonnes above its 2011 average.

Here in Britain, minutes from the Bank of England’s Monetary Policy Committee meeting earlier this month show all nine MPC members were unanimous in voting to keep the bank’s main interest rate at 0.5% – where it has stayed since March 2009.

The MPC was also unanimous in maintaining the size of the Bank’s quantitative easing program at £275 billion – to which it was increased in October.

“The Committee agreed that a decision to change policy was not warranted at this meeting,” the minutes record.

“Some members [though] continued to note that the balance of risks to inflation…[means] that a further expansion of the asset purchase programme might well become warranted in due course.”

Over in the US, the Federal Reserve Tuesday proposed new rules aimed at curbing US banks’ risk-taking activities. The plan calls for banks to assess their liquidity needs at least once a month. It stops short, however, of mandating minimum levels of liquid capital, with the Fed saying it will wait to hear the recommendations of the Basel Committee on Banking Supervision.

Analysts meantime expect US banks to post worse results for the fourth quarter of 2011 than they did in Q3, newswire Bloomberg reports.

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.

(c) BullionVault 2011

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.

Dec. 21 (Bloomberg) — Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, talks about her forecast for Japan’s yen. She also discusses the euro, yuan, and Australian and New Zealand dollars. She speaks with John Dawson, Rishaad Salamat, Mia Saini, and David Ingles on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

Source: ForexYard

The ZEW Economic Sentiment reports for the Euro-Zone and Germany, which were released Tuesday at 9:00 GMT, showed much better than forecasted data resulting in a jump for the EUR. The ZEW Economic Sentiment is a leading indicator of economic health which aims to rate the 6 month economic outlook for the Euro-Zone. Since Germany is its largest economy, the German ZEW tends to have a much greater effect on the currency upon release.

German investor confidence rose to a 3-year high in June, increasing to 44.8 from 31.1 in May, signaling that investors believe the recession in Europe’s largest economy is coming to an end, showing increased optimism among the financial markets.

However, this optimism may be a bit premature as industrial production and incoming orders are still weak. According to the German Institute for Economic Research (DIW), economic outlook forecasts would likely drop 7% in the 2nd quarter. This is worse than previously predicted. The Bundesbank has also forecast that the economy will contract by 6.2%. It seems as though the growth expectations of most financial analysts seem to be a bit rash since the backbone of the German economy remains weak.

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.

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.

Source: ForexYard

The SEK was up after the Riksbank lowered interest rates to 1.75% from 2.00%. There are two explanations for this counterintuitive move in the SEK. Firstly, the Swedish central bank delivered on the expected 25 bp of monetary policy easing while refraining from a larger policy change. Secondly, risk sentiment improved following a strong Ifo survey and a successful Spanish bond auction.

Economic News

SEK – SEK Strengthens Despite Interest Rate Cut

The SEK was up after the Riksbank lowered interest rates to 1.75% from 2.00%. There are two explanations for this counterintuitive move in the SEK. Firstly, the Swedish central bank delivered on the expected 25 bp of monetary policy easing while refraining from a larger policy change. Secondly, risk sentiment improved following a strong Ifo survey and a successful Spanish bond auction.

The Riksbank also signaled its intention of additional monetary policy easing as it revised lower its repo-rate path. The Swedish central bank now expects to lower interest rates again in the beginning of next near. 2011 GDP estimates were moved up while 2012 forecasted GDP was revised lower to 1.3% from 1.5%. Inflation forecasts were also lower for 2012, down to 1.5% from 1.9%.

As the SEK is a high beta currency, the Swedish krona rises when risk sentiment improves and falls when risk comes off the table. Yesterday’s better than expected German Ifo confidence survey supported the risk on trade, as did a successful Spanish T-bill auction.

While the Riksbank delivered on the 25 bp, we did not appreciate the market may have been pricing in 50 bp of rate cuts which was carried out last week by the Norges Bank. Thus traders were quick to capitalize on the “less-dovish” Riksbank. Also the USD/SEK failure at the 7.00 level and the subsequent formation of the double top reversal pattern may have been the giveaway. Support is now found at the December low of 6.70.

EUR – EUR Jumps Following Successful Spanish Debt Auction

Higher yielding currencies such as the EUR, GBP, and AUD began to recover after a better than expected German Ifo confidence survey supported risk sentiment. A Spanish T-bill auction that was oversubscribed also had traders hitting the bid for the EUR. This was Spain’s last debt auction of the year and comes on the heels of last week’s successful auction. Spanish 10-year yields are down sharply from one week ago.

There is talk surrounding today’s Long Term Refinancing Operations (LTRO) from the ECB which explains the pick-up in demand for EU sovereign debt. Analysts are increasingly optimistic for the amount banks will draw from the LTRO tool which was announced during the last ECB meeting. The wave of ECB liquidity could help to relieve the USD funding pressures that have plagued European banks for the past 3-months. Banks will be allowed to borrow as much as they want from the ECB for 3-years using enhanced collateral rules. There is talk of a potential draw between EUR 300-500 bn. The greater the draw and the EUR could see additional support. EUR/USD resistance is found at the October 4th low of 1.3140. The rising support line comes in at 1.3015 followed by the yearly low of 1.2870.

JPY – BoJ Interest Rate Decision

The USD/JPY continues to trade in a tight range prior to the BoJ interest rate decision. Today the BoJ is not expected to adjust rates or expand its balance sheet.

Japanese Finance Minister Azumi confirmed the government will increase its currency market intervention capabilities by JPY 30 trn to JPY 195 trn. This shows the Japanese have not become complacent to a strong JPY and will likely continue to intervene in the FX markets as the need arises. There is resistance for the USD/JPY at 78.30 from the 2007 downtrend. Support comes in at the December 8th low of 77.15.

Copper – Copper Prices Push Lower

Copper prices have struggled to recover from their lows and are once again testing the rising support line from the October and December lows. The risk off environment has continued as the European debt crisis drags on. Also weighing on the price of copper has been a slowdown in China. Recent PMI surveys have hinted at declining growth in the economic juggernaut which would likely dampen demand for the metal. According to the most recent CFTC Commitment of Traders report speculators are betting on a continued decline in copper prices. A break of the previously mentioned support line and copper prices could find support at $3.00.

Technical News

EUR/USD

On a weekly basis the EUR/USD broke some important technical barriers, closing below the rising trend line from the January and October lows. The weekly close 1.3045 was also in-line with the 61% Fibonacci retracement from the 2010-2011 bullish trend. While weekly stochastics are currently oversold the monthly stochastics may have room to run lower. The January low of 1.2870 is the near-term support with additional support coming in at 1.2665 from the monthly chart off of the 2008 and 2010 lows. Resistance is back at 1.3140 and the 20-day moving average of 1.3275, followed by the December high of 1.3550.

GBP/USD

Sterling has consistently been sold at previous resistance levels and with falling weekly and monthly stochastics this strategy could remain intact. Initial support is found at Friday’s high of 1.5560 and the pair may have scope back to the range between the 55-day moving average at 1.5740 and the late November high of 1.5775. Any rally could be capped at 1.5890 from the falling trend line off of the August and October highs. The test for sterling shorts will come at the October low of 1.5270. A break here may find support at the trend line stemming from the January 2009 low which is found at 1.5100.

USD/JPY

The USD/JPY is encroaching on its trend line from the 2007 high which comes in at 78.30. Weekly and monthly stocahstics are both moving higher and a break above the trend would expose the post-intervention high of 79.50 and the August high of 80.20. A failure to make a significant close above the trend line could have the USD/JPY testing the December low of 77.50 and the November low of 76.55.

USD/CHF

Last week’s break above the 0.9330 resistance opens the door to this year’s high of 0.9782 as well as the December high of 1.0065. The falling trend line from the 2003 trend line comes in at 1.1165 and makes for a long term resistance level. To the downside 0.9330 will now act as a support followed by the late November low of 0.9065 and the 200-day moving average at 0.8925.

The Wild Card

EUR/CHF

The EUR/CHF is slowly slipping below its 200-day moving average at 1.2190. A close below this technical level and forex traders should eye the November low of 1.2230. Resistance comes in at the November 30th low of 1.2225.

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 Bank of Japan kept its interest rate unchanged at 0-0.10% and made no changes to its 55 trillion yen quantitative easing program.  The Bank said: “The pick-up in Japan’s economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen.  As for domestic demand, business fixed investment has been on a moderate increasing trend and private consumption has remained firm.  On the other hand, exports and production have remained more or less flat, due in part to the effects of the slowdown in overseas economies and of the yen’s appreciation as well as of the flooding in Thailand.  Improvement in business sentiment has slowed on the whole despite steady improvement in domestic demand-oriented sectors.”

The Bank al-Maghrib of Morocco kept its main policy rate steady at 3.25%.  The Bank said: “In this context where the central inflation forecast is permanently consistent with the price stability objective and the balance of risks is tilted to the downside, in conjunction with international developments, the Board decided to keep the key rate unchanged at 3.25 percent.”