Month: December 2011

EUR/GBP Daily outlook – 12 December

Early last week started fairly slow for the pair with little movement and direction. Wednesday however saw more action with a modest fall towards the 0.8500 area. Thursday closed with a bullish pin bar and Friday closing as a Doji.

With the market nearing lower support areas again, price action in the latter part of last week suggests we may see the bulls returning before any continuation of the bearish momentum we’ve been accustomed too. A look at the chart below shows the strength of lower support sitting at 0.8500 – 0.8520.

The chart below shows Thursdays bullish pin bar and Fridays Doji. Although a Doji usually suggests indecision in the market, it’s important to take note of the rejection Fridays price has shown to our identified support area at 0.8500 – 0.8520.

The bullish price action rejecting strong support areas opens the doors to the bulls regaining power (at least for the short term) before seeing any bearish momentum continuing. Possible targets could be at 0.8630 which is the next higher level we may see the market find resistance at.

Article by vantage-fx.com

Last week in comparison to the previous was rather flat with the market not showing any clear direction. Friday did however produce a large bearish pin bar suggesting the bears seen from the last week of November could be making a return in the coming days/week.

Last weeks price showed a solid rejection of a strong support/resistance area; which can be seen in the chart below.

In early trading last Friday we saw the market once again pushing towards resistance at 1.5500; however as the session progressed we saw the market rejecting this area leading to the large bearish pin bar seen below:

 It’s wise to take into consideration the size of Fridays pin bar. A possible entry for shorting this market could be at a 50% retrace of the pin with a stop either at the high of Fridays price or just above our identified resistance area at 1.5500.

The next most obvious level of support comes in at 1.5200 which can be used as an initial profit taking area.

Article by vantage-fx.com

Major Economic News Releases this Week for the Forex Market: December 12-16th

Monday, December 12

Australian trade balance
Australian home loans
Japanese consumer confidence
Japanese tertiary industry index
United States monthly budget
New Zealand Westpac consumer confidence
New Zealand house sales

Tuesday, December 13

Great Britain nationwide consumer confidence
Great Britain RICS house prices
Australia housing starts
Australia nab business confidence
Switzerland SECO economic forecast
Great Britain consumer price index
Great Britain retail price index
Germany ZEW survey
Euro zone ZEW survey
United States retail sales
United States business inventories
United States Federal open market committee interest rate decision
Australia Westpac consumer confidence

Wednesday, December 14

China FDI
Japan industrial production
Switzerland producer and import prices
Great Britain jobless claims
Great Britain unemployment rate
Eurozone industrial production
Switzerland ZEW survey
Canada leading indicators
Japan Tankan manufacturing Outlook
Japan Tankan non-manufacturing

Thursday, December 15

Japan machine tool orders
Switzerland industrial production
Germany purchasing managers index
Switzerland interest rate decision
Eurozone ECB monthly report
Eurozone purchasing managers index
Great Britain inflation report
Great Britain retail sales
Eurozone consumer price index
Eurozone employment data
United States producer price index
United States current-account balance
United States Empire manufacturing
United States weekly jobless claims
United States net long term TIC Flows
United States industrial production
United States Philadelphia fed survey

Friday, December 16

Australia RBA foreign-exchange transactions
United States consumer price index

See full economic calendar here

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators trimmed their long bets of the US dollar last week, according to the latest data which shows trader positions as of December 6th. US dollar positions fell against the euro one week after speculators had increased their bearish bets against the euro to the highest level since June 2010. Speculators continued to be overall bullish in favor of the US dollar despite last week’s pullback.

Non-commercial futures traders, usually hedge funds and large speculators, decreased their short positions in the euro, British pound sterling, Canadian dollar and Mexican peso while increasing long positions in the Australian dollar and the New Zealand dollar. Japanese yen long positions edged lower while traders added to short positions in the Swiss franc.

EuroFX: Currency speculators reversed three consecutive weeks of declining positions as short positions were trimmed for the euro, according to data on December 6th. Euro short positions declined to a total of 95,814 net contracts from the previous week’s total of 104,302 net short contracts. The November 29th short position was a new low level for euro positions all year and the highest short level since June 8th of 2010 when euro short positions totaled 111,945.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: Currency speculators decreased their bearish bets of the British pound sterling as of December 6th after increasing bearish bets for three consecutive weeks. British pound positions stood at a total of 43,560 short positions on December 6th following a total of 46,660 net short positions registered on November 29th.

JPY: The Japanese yen net long speculative contracts fell slightly for a second consecutive week as of December 6th. Yen long positions declined to a total of 38,271 net long contracts reported on December 6th following a total of 40,547 net long contracts that were reported on November 29th.

CHF: Swiss franc positions fell lower for a fourth consecutive week and to a new low level all year against the dollar last week. Speculator positions for the Swiss currency futures edged down to a total of 11,158 net short contracts on December 6th following a total of 9,327 net short contracts as of November 29th. The Swiss currency has been moving in small and tight ranges in forex trading since the Swiss National Bank implemented a policy to weaken the strength of the currency which the SNB feels is overvalued.

CAD: Canadian dollar positions edged higher after declining for four consecutive weeks. CAD net contracts improved to a total of 20,171 net short contracts as of December 6th following a total of 26,869 short contracts reported on November 29th. CAD positions on November 29th were at their lowest level of the year, surpassing the previous low that was reached on October 11th when net short positions fell to 24,913.

AUD: The Australian dollar long positions surged higher and reversed three consecutive weekly declines as of December 6th. Australian dollar positions rose to a total net amount of 29,824 long contracts following a total of 12,542 net long contracts reported as of November 29th. The AUD speculative positions last week ascended to their highest level since September 13th when Australian dollar long positions totaled 36,934.

NZD: New Zealand dollar futures speculator positions edged just slightly higher last week after falling for the previous three straight weeks. NZD contracts edged up to a total of 3,857 net long contracts as of December 6th following a total of 3,718 net long contracts registered the previous week. The November 29th level had represented the lowest New Zealand dollar position level since April 5th when positions equaled 2,695 long contracts.

MXN: Mexican peso contracts rose last week after declines for two consecutive weeks that brought Mexican peso positions to a new low level for the year. Peso positions improved to a total of 20,862 net short speculative positions as of December 6th following a total of 36,240 short contracts that were reported on November 29th.

COT Currency Data Summary as of December 6, 2011
Large Speculators Net Positions vs. the US Dollar

EUR -95,814
GBP -43,560
JPY +38,271
CHF -11,158
CAD -20,171
AUD +29,824
NZD +3,857
MXN -20,862

According to Iraqi Council of Representatives Oil and Energy Committee member Furat al-Sharei, the 10 oil fields that spread across the Iraqi-Kuwaiti frontier are still waiting to have a line drawn through them to delineate the border, more than eight years after a coalition led by U.S. forces toppled the regime of Iraqi President Saddam Hussein.

According to al-Sharei, the two countries must first collaborate in developing legislation for equitably sharing the fields before oil extraction can begin, noting, “The problem of the common fields can be resolved by developing legal mechanisms.”

While Iraq and Kuwait are now at peace, many of the border issues that led to conflict two decades ago remain, which no amount of diplomatic bonhomie can completely paper over.

In 1993 the United Nations Security Council Resolution 833 precisely delineated the previous borders between Iraq and Kuwait following Saddam Hussein’s invasion of his neighbor in August 1990. Iraqi forces were summarily expelled by a 34-nation coalition led by the United States during Operation Desert Storm, which began in February 1991. That conflict left Iraq with a $22 billion reparations bill to Kuwait that it is still struggling to pay off, tithing 5 percent of its oil revenue to its tiny plutocratic southern neighbor.

What were some of Saddam Hussein’s grievances against Kuwait? By the time Iraq signed the ceasefire in its punishing eight year war with Iran in August 1988, Iraq was virtually bankrupt, owing $80 billion in debt to Saudi Arabia and Kuwait, which now pressured Baghdad for repayment with interest. Iraq pressured both nations to forgive the debts, but they refused. Iraq also accused Kuwait of exceeding its OPEC quotas and driving down the price of oil, thus further hurting the Iraqi economy, as collapsing oil prices further decimated the Iraqi economy.

Baghdad also repeatedly protested to no avail about what it claimed was economic warfare waged by Kuwait’s slant-drilling into disputed border regions, which reached as far as Iraq’s Rumaila oil field.

Despite the overthrow of Saddam Hussein’s regime in March 2003, two years later Kuwait began the construction of a 125-mile metal barrier along its land borders with Iraq in early 2005.

But with a new administration in Baghdad, on 23 November 2006 Kuwait’s Foreign Ministry Undersecretary Khaled al-Jarallah told reporters following talks with Iraq’s Foreign Ministry Undersecretary Mohammad al-Haj, “We have signed a deal … after which Kuwait will be able to complete the construction of the security fence,” noting that as the arrangement calls for the payment of “compensation to Iraqi farmers” on the border, the requisite amount “had been deposited with the United Nations.” Al-Haj added, “We have completed the practical requirements for the demarcation of borders,” based on UN Security Council Resolution 833.

Five years later, little has moved since “the practical requirements for the demarcation of borders.” The reestablishment of bilateral Iraqi-Kuwaiti diplomatic relations has been even more glacial. Kuwait reopened its embassy in Iraq in 2008 after nearly 19 years of broken diplomatic relations, while the Consulate of Iraq was again opened in Kuwait only last year.

Local Iraqis based in Basra have a very different view of UN Security Council Resolution 833, stating that it led to the transfer of a significant amount of Iraqi land, hosting both oil wells and agriculture such as tomato farms to Kuwait, as well as the establishment of a wide zone of neutrality between the two countries which again favored the emirate. A high-ranking Iraqi government official in the Safwan border region, who had had some of his own land confiscated when the new border was marked out, commented that the locals describe “the unjust demarcation of borders as well as their government’s reluctance to put an end to this injustice.”

Once again, local Iraqis two decades later are complaining that Kuwaitis are “stealing” Iraqi oil in border areas by using directional drilling techniques. Local Basra government officials say that they have proof of the Kuwaiti theft and have forwarded it to Baghdad, offering as proof the fact that pressure in some oil reservoirs near the border has dropped significantly, which local Iraqi government officials believe has been caused by Kuwaiti drilling to tap the same reservoirs.

Ratcheting up the tension, Kuwait’s ambassador to Baghdad, Ali al-Mu’men recently denied Iraqi allegations and instead, accused Iraqi companies of extracting oil from Kuwaiti oil reserves.

For Farid Khalid, head of the energy committee of the Basra provincial council, the issue is simple – “No oil work was done on the Iraqi-Kuwaiti-Iranian borders by the Iraqi government for years which is why the oil reserves were open for looting.”

So, as in the immediate aftermath of Operation Desert Storm, Kuwait has the cash and the backing of the U.S. government – hardly a recipe for regional stability. Further weighting the scales in Kuwait’s favor, as some of the U.S. forces leaving Iraq by year’s end are due to redeploy there, with the Pentagon discussing shifting a combat brigade team of about 3,500 troops and possibly other units to Kuwait to join the roughly 20,000 U.S. forces already there.

For those seeking to read the tea leaves about Iraq’s oil future, Iraq also has ten common oilfields on its eastern border with Iran that are waiting for the demarcation process to be completed before extraction can begin, but that’s another story for another time.

Source: http://oilprice.com/Geo-Politics/Middle-East/Could-War-Flare-Again-Between-Iraq-and-Kuwait.html

By. John C.K. Daly of Oilprice.com

By MoneyMorning.com.au

When it comes to buying physical gold and silver, there are a range of options you can take.

Precious metals Exchange Traded Funds (ETFs) are the cheapest and most convenient way to buy and sell gold and silver.

But if you take that route, you also expose yourself to counterparty risk. In short, when you buy an ETF, the metal you buy is not held by the ETF provider. It’s held by a large global bank, like HSBC or Morgan Stanley.

If the bank goes bust, your gold and silver could be gone too. Besides, you can never really be sure they’re holding the gold they claim.

Why do you need to worry about this?

Because the US Commodity Futures Trading Commission, with the Gold Anti Trust Action Committee, reports there is now one hundred times more ‘paper gold’ in the world than physically exists above ground.

For this reason we believe it’s much safer to have the bullion in your hand (details on how to store it in a moment).

But, buying physical gold or silver is more expensive than investing in an ETF. Dealers charge a premium. Then you’ve got the cost of delivery, storage and insurance. And when you sell, your dealer will take a cut.

On top of that, buying bullion isn’t ‘risk free’.

The risk, of course, is that gold and silver prices fall through the floor and you take a loss on an asset you can’t always buy and sell easily. Please note: I don’t expect this to happen, but it’s a risk to be aware of.

So what sort of gold do you buy? You have a choice of coins, nuggets or bars…

Coins are elaborate, and more expensive to make than bars or nuggets – so they cost more to buy per ounce. Some may be rare collectables, but this ‘added value’ can be in the eye of the beholder. The same can be said with antique gold and silver coins. This is a specialised market and is best avoided unless you really know your stuff.

Nuggets are beautiful. But the price can vary a great deal depending on purity and other factors. They aren’t as straightforward to buy and sell as bullion bars or coins.

If you’re after a long-term investment, in my opinion it’s best to go with bars.

With silver, one kilo bars are a convenient size and are worth about A$1000 today.

An ounce of gold is surprisingly small – nearly A$1700 of value squeezed into just one centimetre squared. You can get two-ounce, five-ounce and 10-ounce bars. And a kilo bar of gold will set you back about A$53,900. Each bar is iPhone sized – truly portable wealth.

Just remember that with precious metals, the ounces are ‘troy ounces’, which are equal to 31.1 g.

Australia has quite a few bullion dealers, and I’ve listed the main ones in this table below. Click on the name to link to the website.

Australian bullion dealers

Take the time to shop around for the lowest premiums and commissions. It’s quite surprising what the difference can be. And make sure you’re comparing prices to the Australian gold or silver price.

You can head to the bullion office directly to buy gold. But if you don’t have one located near you, you can place an order over the phone or even online. Delivery is easy to arrange, but ask questions about the method used and whether it is insured.

And then you’ve got eBay.

Bizarrely, eBay has quite an active silver market. I’ve bought and sold successfully this way quite a few times before. Selling is particularly good, as you’re the one charging the commission for once!

Using eBay is riskier than going through a registered dealer. So it’s essential to get the metal tested. This is as easy as going to a business that buys scrap gold and silver, and asking them nicely to scan it for you. When you find a good seller, stick with them. It’s also a smart move to get the seller to send it recorded delivery and insure it. Make sure you’re familiar with eBay if you want to go down this route.

The other interesting way to cut out the cost of the middle-man is through SilverStackers, a precious metals forum. This puts you directly in touch with other buyers and sellers, as well as providing plenty of market commentary.

Now, you’re faced with the problem of storing it. A shoebox under the bed? Your home safe? A bank deposit box? Store it with the dealer you bought it from?

A home safe can be installed for about $500 from a local security company. But you should only store small amounts this way. If you do keep it at home, you need to increase your home and contents insurance to cover the metal. And you’ll need to avoid telling everyone down the pub about your stash…

Most bullion dealers have storage facilities. When you buy bullion from a dealer you can ask about the storage options available.

Depending on how much you buy, it quickly becomes cheaper – and safer – to store it at the dealer, or rent a safety deposit box for a few hundred bucks each year… This is what I do.

Safety deposit boxes are a great option. They provide security and easy access.

Banks offer safety deposit boxes, but then we are back to square one with the risk of having a bank as the counterparty.

If you want to remove counterparty risk, you can store it with a company that has nothing to do with the banking system. These are in short supply. I found just one company called Guardian Vaults that does this. They’re only in Melbourne for now, but they have clients nationwide.

I hope this all helps put some new options forward.

Enjoy that bullion!

Alex
Editor, Diggers & Drillers

P.S. Over the last 15 months I’ve been travelling the world visiting the projects of a whole host of resource companies on my watch list. I’ve virtually exhausted myself but it’s been worth it. I’ve found what I believe are my top six Australian resource stocks for 2012. The last few weeks I’ve been busy writing up my research. To get it now, click here.

How to Buy Gold and Silver

The past week in monetary policy saw interest rate decisions announced by 14 central banks around the world.  Those changing interest rates were: Australia -25bps to 4.25%, EU -25bps to 1.00%, and Serbia -25bps to 9.75%.  Meanwhile those holding rates unchanged were: Canada 1.00%, Armenia 8.00%, Iceland 4.75%, Poland 4.50%, Namibia 6.00%, New Zealand 2.50%, UK 0.50%,  Botswana 9.50%, Peru 4.25%, Korea 3.25%, and Indonesia 6.00%. 

Following are some of the key quotes from the central banks that announced interest rate changes in the past week. Many of the banks made reference to the downside risks posed by the ongoing European sovereign debt crisis, and financial market disruption.  However more than a few also noted ongoing strength in their domestic economy, despite signs of slowing global growth.

• ECB (cut rate 25bps to 1.00%): “The intensified financial market tensions are continuing to dampen economic activity in the euro area and the outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest over the policy-relevant horizon. At the same time, the underlying pace of monetary expansion remains moderate.”
• Reserve Bank of Australia (cut rate 25bps to 4.25%): “Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.”
• Bank of Canada (held rate at 1.00%): “On balance, recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October. Household expenditures have more momentum than had been expected and business investment remains solid. Going forward, the weaker external outlook is expected to dampen GDP growth in Canada through financial, confidence and trade channels. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar.”
• Bank Indonesia (held rate at 6.00%): “This decision is based on overall assessment on recent economic condition, risk factors, and economic prospects. Board of Governors views that current BI Rate is still consistent with inflation targets, and remains conducive for financial stability and mitigating the impacts of worsening global economic outlook on Indonesian economy. The assessment on economic condition and outlook show that domestic economy remains strong and stable.”
• National Bank of Serbia (cut rate 25bps to 9.75%): “The key disinflationary factors, both now and in the foreseeable future, will be weaker cost-push pressures arising from administered and food prices as well as low aggregate demand. The process of disinflation will be further aided by the continued drop in inflationary expectations. Inflation is expected to retreat within the target tolerance band in the first quarter of the next year.”
• Bank of Korea (held rate at 3.25%): “In Korea, exports have shown a steady increase, but consumption has remained at a level similar to that in the previous month and facilities investment has decreased sharply. The trend of improvement in employment conditions has been sustained, led by the private sector. The Committee anticipates that the domestic economy will not deviate significantly from its long-term trend of growth going forward, but recognizes the situation to be one in which downside risks to growth remain high due to the impact of external risk factors.”
• RBNZ (held rate at 2.50%): “Domestically, economic activity continues to expand, though at a modest pace. Although off their peaks, export commodity prices remain elevated. In addition, the depreciation of the New Zealand dollar provides some support for the tradable sector of the economy. Over time, repairs and reconstruction in Canterbury will also provide a significant boost to demand for an extended period. Annual headline inflation is estimated to have returned within the Bank’s 1 to 3 percent target band in the December quarter. Underlying inflation continues to sit close to 2 percent. In addition, wage and price setting pressures have remained contained.”

Looking at the central bank calendar, there’s a handful of central banks meeting next week for the last time this year.  The most watched one will be the US FOMC, many will be looking for clues to any further quantitative easing or other measures, and of course a keen eye will be cast on the Fed’s assessment of the US economy.  India will also be closely watched as a key emerging market.

The People’s Bank of China announced that it plans to create an investment fund to manage $300 billion worth of foreign exchange reserves in more aggressive investments and largely internationally.  According to Reuters the fund would invest in the US via the Hua Mei fund, and Europe via the Hua Ou fund.  It is understood that the fund has been under development for some time, and will seek to invest in real assets and company shares, rather than government securities such as US treasuries.  

The fund will operate alongside the State Administration of Foreign Exchange (SAFE), and separately from China’s sovereign wealth fund; China Investment Corp (CIC).  The recent IMF Financial System Stability Assessment provides an overview of China’s key financial institutions and structure.

The National Bank of Serbia cut its 2-week repo rate by 25 basis points to 9.75% from 10.00% previously.  The Bank said: “The key disinflationary factors, both now and in the foreseeable future, will be weaker cost-push pressures arising from administered and food prices as well as low aggregate demand. The process of disinflation will be further aided by the continued drop in inflationary expectations. Inflation is expected to retreat within the target tolerance band in the first quarter of the next year.”

The Bank also cut the interest rate by 75 basis points in November, 50bps in October, and 50bps in September, after pausing in August, while previously the Bank reduced the 2-week repo rate by 25 basis points to 11.75% at its July meeting, and cutting the rate 50 basis points at its June meeting to 12.00%.  Serbia reported inflation of 8.7% in October, down from 10.5% in August, compared to 12.1% in July, 12.7% in June, 13.4% in May, 14.7% in April, and above the bank’s inflation target range of 3-6%.  

Indonesia’s central bank, Bank Indonesia, held the BI reference rate unchanged at 6.00%.  Bank Indonesia Governor, Darmin Nasution, said: “This decision is based on overall assessment on recent economic condition, risk factors, and economic prospects. Board of Governors views that current BI Rate is still consistent with inflation targets, and remains conducive for financial stability and mitigating the impacts of worsening global economic outlook on Indonesian economy. The assessment on economic condition and outlook show that domestic economy remains strong and stable.”

Previously the Bank cut the interest rate by 50 basis points at its November meeting, and also cut the key monetary policy rate (the BI Rate) by 25 basis points to 6.50% at its October meeting.  Previously the Bank raised the BI rate by 25 basis points to the current 6.75% in February 2011.  Indonesia reported annual inflation of 4.1% in November, down slightly from 4.61% in September, compared o 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Bank Governor Nasution previously said the Bank expects “inflation next year will be below 5%”.  Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter this year.  

The Indonesian Rupiah (IDR) has weakened by about 1% against the US dollar so far this year, and the USDIDR exchange rate last traded around 9045.