Month: December 2011

By ForexYard

Today at 8:15 GMT the market will digest Swiss CPI data for the month of November. The report is expected to show inflation rose by only 0.1%, up from a decline of -0.1% in October. The risk is the report will show another contraction in Swiss prices and may force the SNB to act again to prevent deflationary forces from creeping into the Swiss economy.

Economic News

USD – Non-Farm Payrolls Nothing to Brag Home About

Friday’s NFP data was nothing to brag home about. While the headline number was in-line above consensus forecasts of +140k on expectations of +120k the data in the report was less inspiring. Currently the 12-month average for new private job growth is just under +160k which is less than the latest jobs report. The drop in unemployment rate initially looks promising but the details are less inspiring. When digging through the numbers you can find 315k job seekers dropped out of the work force, allowing for the unemployment rate to fall to 8.6% from 9.0%.

Yes, the jobs data does show an improvement from the beginning of the year but last week’s release points to slow gains in US employment. While the Fed seeks price stability it also has the task of brining the US to full employment. As this goal goes unfulfilled the risk is for additional quantitative easting (QE) by the Fed.

CHF – SNB Could Act if Swiss CPI Shows Deflation

Today at 8:15 GMT the market will digest Swiss CPI data for the month of November. The report is expected to show inflation rose by only 0.1%, up from a decline of -0.1% in October. The risk is the report will show another contraction in Swiss prices and may force the SNB to act again to prevent deflationary forces from creeping into the Swiss economy. There have been discussions in the market that the SNB could raise the floor of the EUR/CHF to 1.25 or perhaps 1.30 but the market has done a fine job of pushing the pair higher based on expectation of further intervention by the SNB. Perhaps the SNB will wait to see what the outcome is of this week’s EU economic summit on Friday and the market’s reaction before making its next policy move.

Looking at the price action the EUR/CHF found support at its 200-day moving average which comes in at 1.2220. The pair has resistance at 1.2470 from the October high. Meanwhile the USD/CHF could have upside potential should it succeed in moving above the November high of 0.9330. Additional resistance may be found at the 20-month moving average at 0.9375 followed by the 20111 high at 0.9780. Support comes in at last week’s low of 0.9065.

CAD – Interest Rate Decision for the BoC

The BoC meets on Tuesday to set its overnight rate. Consensus forecasts are for the BoC to keep interest rates on hold at 1.00% despite the recent economic data coming in on the downside of market forecasts. The Q3 GDP report was marginal at best with GDP rising 0.2%. Last Friday gave us weaker than expected employment numbers. However, with the BoC keeping monetary policy as is the CAD may prove to be attractive. Expectations of quantitative easing by the Fed, ECB, and BoE, and an increase in crude oil prices above the $100 level all support the CAD. According to the most recent CFCT IMM data traders have increased their bearish bets against the CAD with a decrease in risk exposure. This could put pressure on CAD shorts should there be a turnaround in market sentiment with a solution to the European debt crisis. The USD/CAD could test the rising trend line from the July and October lows at 1.0090 followed 0.9890 at the October low. The 1.0250 from Tuesday’s low is the initial resistance.

Crude Oil – Crude Oil Prices Continue to Climb

Spot crude oil prices continue to move higher as Europe takes steps towards closer integration and enforceable budget rules. Crude oil prices rose to their highest level since mid-November following Merkel and Sarkozy’s speech yesterday. The press conference by the two leaders coincided with the release of the ISM services PMI which came in at 52.0 on consensus forecasts of 53.6. While data was below market expectations the survey points to continued growth in the US services sector and increased US Q4 GDP. For the remainder of the weak there is a lack of big name economic data on the calendar until Friday’s UofM consumer sentiment and trade balance numbers. Resistance for spot crude oil is found at the November high of $103.30 while support is located at the November 28th high of $100.75 and November 25th low of $95.00.

Technical News

EUR/USD

The weekly chart shows the pair is trading in a symmetrical triangle pattern with the resistance line falling from the May high and support line rising from the yearly low. The first support from this chart pattern comes in this week at 1.3200. A break here will likely open the door to not only the October low of 1.3145 but also1.3050 from the 61.8% Fibonacci retracement of the bullish move spanning 2010 to 2011. The January low of 1.2875 could contain the near-term price action. To the upside the November 18th high of 1.3610 is the initial resistance followed by the mid-November consolidation at 1.3860 where the 100-day moving average also lies. The top of the triangle pattern would likely contain any move higher near 1.4230-1.2350.

GBP/USD

Last week cable found resistance at 1.5780, a level that has proven to be resistive in the past. Additional resistance is found at the October high of 1.6165. Monthly and weekly stochastics continue to move lower and as such the November low of 1.5435 is the initial support followed by the October low of 1.5270. The last bastion of support for the GBP/USD is found off of the rising trend line from the 2009 and 2010 lows which comes in at 1.0590.

USD/JPY

The USD/JPY is encroaching on its long term trend line off of the 2007 high and comes in at 78.70. A break above this level is needed to confirm the recent price appreciation. Both weekly and monthly stochastics are moving higher so traders may look for additional resistance at 79.50 from the post intervention high. The 200-day moving average is also lurking just below this price. Should the pair fail at the long-term trend line the congestion between 77.50-77.60 may prove to be supportive while the all-time low near 75.60 stands out as the last support.

USD/CHF

As weekly stochasttics have already turned lower the monthly stochastics are beginning to roll over. This is occurring after the pair looks to have failed to break above the 0.9330 resistance level. As such the pair has support at last week’s low of 0.9065 followed by the November low of 0.8760 and the October low of 0.8565. A break above the 0.9330 resistance could spur gains towards this year’s high of 0.9780.

The Wild Card

Gold

Spot gold prices have ran into resistance at the trend line from the September and November high which comes in at $1,754. Additional resistance is found at the November high of $1,708. Forex traders should note that if the trend line holds spot gold has support at $1,700 from the November 30th low followed by the November 21st pivot of $1,666.

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

A report this morning that the German Bundesbank won’t support using additional IMF funds for a European bailout added to the EUR’s woes a day after S&P placed 15 euro zone nations on a negative ratings watch.

S&P did not spare the AAA countries as six of the countries placed on negative credit watch hold the top rating including Germany and France. These nations could face a downgrade within the next 3-months. The report comes on the heels of the negotiations between Merkel and Sarkozy which look to have made some progress going into this week’s euro zone summit. The EUR/USD has support at last Friday’s post NFP low of 1.3260.

Swiss CPI will be released this morning and a contraction in the inflation rate may have traders attempting to get out in front of any future move by the SNB to weaken the CHF. Any gains in the EUR/CHF will likely be capped by the 1.25 level.

In the North American trading session we’ll get an interest rate decision from the BoC which is expected to hold rates steady. The USD/CAD could test the rising trend line from the July and October lows at 1.0090 followed 0.9890 at the October low.

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.

The Reserve Bank of Australia (RBA) cut the cash rate by 25 basis points to 4.25% from 4.50% previously.  The RBA said: “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.”  The Bank cited the risks of slowing growth in China, and sovereign credit and banking problems in Europe, as well as declining commodity prices; as posing downside growth and inflation risks.

By MoneyMorning.com.au

China controls the rare earth market. The country mines 97% of the world’s rare earths.

And since China started restricting export quotas at the end of 2009, the price of some rare earths has climbed over 1600%.

Yet, the market has overlooked a group of smaller metals that are just as vital to industry.

Like rare earths, you’ll find rare industrial metals (or RIM’s) in smart phones and flat screen TVs. But there are heaps of other applications for them as well.

Take Gallium (Ga) for example. It’s been commonly used for tumour imaging in the medical profession. And Bismuth (Bi) is found in digestive medication and even some eye drops. But Bismuth’s uses don’t end there.

It’s even used in pretty much every cosmetic and paint product around the world.

Then there’s Tellurium (Te). The latest technological advances have seen it become essential to manufacturing solar cells – yet for years it’s been useful as an alloy component for steel and copper.

As for Germanium (Ge), you’ll find it in dietary supplements aimed at boosting the immune system and has even proven to be a key component in high blood pressure medication.

Because these metals are used in old and new technology, demand has increased rapidly. And for investors, this could lead to a new investment opportunity.

In fact, in the last two years, the price of a key basket of these rare industrial metals has risen 85%:

And there’s more good news for investors if you want to get involved. While demand is just being satisfied at the moment for some of these metals, demand for Tellurium is set to outstrip supply soon.

At present, 180 tonnes of Tellurium is produced but as soon as 2013 it’s expected that 400 tonnes per year will be needed. The good news is, that unlike rare earths China doesn’t control the supply of rare industrial metals.

Mexico, Canada, China and the US are all miners of these metals. But just because more countries mine these metals than rare earths, doesn’t automatically mean there’s a large supply.

Rare earths mines can be standalone mines. But the problem with RIMs is they are a by-product of other metals. Tellurium is a by-product of copper mining. And Gallium is a by-product of Zinc and Aluminium mining. This means these metals are only mind as long as Zinc and Aluminium mining is profitable.

If at any point the price of copper, or zinc falls so low that it’s not worth mining, the supply of Tellurium and Gallium could be cut off… and that would likely mean a spike in the price for these rare metals.

Shae Smith
Editor, Money Morning

Related Articles

Why the Fed’s Actions Make Perfect Sense

Too Big to Bail

Swiss National Bank Intervenes…

Bailouts Still Boosting the Market

Was This Just Another Rigged Market?

From the Archives…

How to Profit from the Inevitable Return to Sound Money
2011-12-02 – Kris Sayce

Two Reasons the Market Should Have Fallen…
2011-12-01 – Shae Smith

Ditch Your Investor Pride to Avoid an Investing Fall
2011-11-30 – Kris Sayce

How to Play a Volatile Market for Profit
2011-11-29 – Kris Sayce

No Thanks to Central Banks
2011-11-28 – Kris Sayce

For editorial enquiries and feedback, email [email protected]

Place These “Rare Earth Metals” on Your Watch List

By MoneyMorning.com.au

Today I’d like to tell you about some of the ideas and themes that will be shaping my investment strategy in 2012 and beyond.

As a Money Morning reader you probably know the argument for the price of gold and silver to go much higher from here.

In short – we see more of the same financial conditions that caused the precious metals bull run of the last 10 years.

And by this I mean more money printing, loose monetary policy, and unstoppable sovereign debt growth.

The US is already up against its debt ceiling yet again. And it has almost $3 trillion of short-term debt to roll over in the next 12 months. Europe is getting closer to printing money by the day. And China has just started to loosen bank lending for the first time in three years.

Now imagine this happening for another eight years.

If it continues at the average growth rate we’ve seen since 2006, gold would be above US$10,000 an ounce and silver would be above US$200/ounce by 2020.

Your wealth should have been preserved, and your view validated.

Congratulations.

But I’m not writing to you today to sing the praises of gold and silver.

I’m writing to put a few questions to you.

A great deal of my time involves researching small-cap mining companies, looking for great investing opportunities. This is exciting work, and these companies can be anywhere in the world.

I’ve been to more than a few far-flung places this year. I’m a big believer in putting in the time to look at something before recommending it.

But that’s not enough anymore.

It’s one thing to make the claim that gold and silver will go through the roof, and then look for the best ways to leverage those moves…

But what we need to ask ourselves is – what are the social and geopolitical conditions that have allowed gold and silver to reach these prices?

Have you considered what they could be – and is your portfolio prepared?

Financial crises are the foundation of social change, geopolitical tensions and conflict. Think the great depression, the rise of Hitler and the Second World War.

So, what could the current circumstances lead to?

Who knows?

China and the US have fought a currency war in the trenches. And there is also that sticky question of whether China will ever get the trillions back that it has invested in US government bonds. This has graduated into a trade war, and right on cue we now see military posturing.

The Chinese military seems to see the weakening of the Western economies as a chance to flex some muscle. And things have quickly got very hot.

In fact, we now have two serious potential flash points for the young and restless Chinese military machine today: Iran and the South China Sea.

Iran’s nuclear ambitions are well known. The US and its allies have put the pressure on the Iranians to back off with sanctions, and Israel is ready to point the nukes at Iran.

But Major General Zhang Zhaozhong, a professor from the Chinese National Defense University, said:

“China will not hesitate to protect Iran even with a third World War”

What the hell is going on? When did things get so heated?

It’s all about the scramble for diminishing commodities. Iran is oil rich and everyone wants a slice. Fighting back against the US sanctions, Iran is warning of oil at $250 a barrel if the West doesn’t back off.

China is flexing its muscle in the South China Sea as well.

It has boldly laid claim to mineral-rich areas that also host strategic international shipping channels.

Meanwhile the US has stated its intention to police this area – as part of the Asia-Pacific region – throughout the 21st century.

An aggressive China versus an impoverished US? Is this the start of the next cold war?

As part of the US’s move into the Asia-Pacific region, it has started posting 2,500 US marines right here in Australia. Australia is now a political pawn… We are in a difficult position; because we are increasingly at political odds with our biggest customer, China.

To paint an extreme example, can we supply iron ore to China so it can build warships if this war of words turns into something more?

As Dan Denning reported in his recent Australian Wealth Gameplan update: China’s state-run Global Times – a mouthpiece for the ruling communist party – ran an editorial saying:

The US is carrying out smart power diplomacy that takes China as its target in Asia. Stopping it is not realistic, but it is equally unrealistic to expect China to stand idly by and indulge Asian countries as they join the US alliance to guard against China one by one. Confronted with such frictions, which has the most resources and means at its disposal?

Is an all-out confrontation possible? These should be the real concerns….China has more resources to oppose the US ambition of dominating the region than US has to fulfil it…

As long as China is patient, there will no room for those who choose to depend economically on China while looking to the US to guarantee their security [that’s us guys]…Any country which chooses to be a pawn in the US chess game will lose the opportunity to benefit from China’s economy…This will surely make US protection less attractive.

China has aggressively built its gold reserves in recent years, and is both the biggest producer and biggest importer of the metal. It can see the writing on the wall for its dollar-denominated debts.

So if China pushes its dominance into the South China Sea, what becomes of gold producers in SE Asia, the Philippines, and Indonesia?

And what of the companies operating in resource-rich countries bordering China like Mongolia and Kazakhstan? Each of these countries has a population of just a few million… Their citizens are already outnumbered by Chinese military personnel. Neighbouring Tibet was taken by China without a sweat, and their people are ruthlessly suppressed to this day.

As part of this country risk, many companies may find the ground moving beneath them as geopolitical plates shift during the coming decade. This will affect commodities such as oil, gold and copper in different ways.

Thinking about what all this means for you, and your investments, will be important as this situation unfolds.

Dr. Alex Cowie
for Money Morning Australia

Related Articles

Why the Fed’s Actions Make Perfect Sense

Too Big to Bail

Swiss National Bank Intervenes…

Bailouts Still Boosting the Market

Was This Just Another Rigged Market?

From the Archives…

How to Profit from the Inevitable Return to Sound Money
2011-12-02 – Kris Sayce

Two Reasons the Market Should Have Fallen…
2011-12-01 – Shae Smith

Ditch Your Investor Pride to Avoid an Investing Fall
2011-11-30 – Kris Sayce

How to Play a Volatile Market for Profit
2011-11-29 – Kris Sayce

No Thanks to Central Banks
2011-11-28 – Kris Sayce

For editorial enquiries and feedback, email [email protected]

China, the US and the Scramble for Commodities

Monday, Italy PM Mario Monti announced a new plan to help tackle the nation’s deficit.

Islamist candidates on Monday looked to extend their crushing victory in Egypt’s first parliamentary elections since the toppling of Hosni Mubarak, as voters turned out for second-stage run-off polls. Though turnout was lower than last week’s vote, many insisted on going back to polling stations to confirm their choices. Duration: 01:12.

President Nicolas Sarkozy and Chancellor Angela Merkel say France and Germany want a new EU treaty by March with tougher budgetary rules to deal with the eurozone debt crisis. The two leaders made the announcement after crunch talks in Paris at the start of a crucial week for the euro, teetering on the brink because of its indebted member states, ahead of a key EU summit in Brussels on Thursday. Duration: 02:27

Eight Ferraris and a Lamborghini were among the vehicles involved in a chain collision of luxury cars on a Japanese expressway Sunday. They’d been heading to a motor festival in Hiroshima. (Dec. 5)

EWI’s Jeffrey Kennedy shows you what a simple price bar can tell you about a market

By Elliott Wave International

Senior Analyst Jeffrey Kennedy has spent over 15 years developing techniques to “read between the lines” on a price chart, and he shares some of his techniques with you in a new FREE eBook: Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns.

You’d be amazed at how a simple price bar can provide you with so much information that can improve your trading success. In this excerpt from his new eBook, Jeffrey explains how to interpret price bars and what that means for the subsequent market moves. Learn how you can download the entire 14-page eBook below.

Here’s a picture of two different price bars that we will consider to be daily price bars. What story does the single price bar on the left tell you?

Prices opened that day at the lowest price and closed at the highest price, which means that the buyers, or bulls, are in total control of the market. The bears have no power whatsoever, and, because the market closed so high, odds are that the price will continue up the next day. As I said, one price bar can give you tons of information about a financial market.

Now, look at the price bar on the right. It tells you a similar story in the opposite direction. Once the market opened, it got slammed to the down side. It stayed down hard all day and closed on the lows. A market like this is dominated by the bears, the sellers, and odds favor further decline the following day. It means that the bulls, or the buyers, have no control in this market.

Although these kinds of price bars are fairly rare, they may open your eyes to how much information a single price bar can contain, especially if you know how to interpret it.

These two price bars are more like what you will encounter every day.

The price bar on the left side shows that the bears, or the sellers, opened the market up and pushed it down a little bit. In a sense, they had some control, but not much. Then the buyers, or the bulls, took control of this market so that it closed above the open. This type of price bar shows up in an uptrending market.

Conversely, the price bar on the right often shows up in downtrending markets. It signifies that the bears control the market. You could say that the buyers gave it a feeble attempt early on, but by the close, the sellers had taken over. Closes don’t lie, and they are the most important item on the price chart.

Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns When you look at a price chart, can you quickly spot the dominant trend? What about important reversals, or possible support/resistance levels? EWI has just released a free 14-page eBook: Learn to Identify High Probability Trading Opportunities Using Price Bars and Chart Patterns. Senior Analyst Jeffrey Kennedy has spent over 15 years developing techniques to “read between the lines” on a price chart, and he shares some of his techniques with you in this new resource. You’ll be amazed at how a simple price chart can provide you so much information that can improve your trading success. Download your free report now.