Month: January 2012

Source: ForexYard

The euro staged a downward reversal yesterday, following a German debt auction that caused investors to once again place their funds in safe-haven assets. Today, traders will want to pay attention as major market volatility is expected following news events from the UK, US and Canada.

Economic News

USD – USD Rebounds Following Return to Safe-Haven Assets

The US dollar had a very bullish day yesterday, following a less than enthusiastic German debt auction which sent investors back toward safe-haven assets like the USD and CHF. The dollar saw upward movement against many of its main currency rivals, particularly the euro and UK pound. The EUR/USD tumbled well below the psychologically significant 1.3000 level, while the GBP/USD fell under 1.5600 before staging a slight correction.

Turning to today, US and euro-zone news are forecasted to generate major volatility, so traders should be prepared for heavy market movement. Most notably, the ADP Non-Farm Employment Change is likely to influence USD pairs. The ADP report is a precursor to Friday’s Non-Farm Employment Change figure. While it is not considered as serious as Friday’s report, it has been known to generate major price shifts.

Analysts are forecasting the ADP figure to come in at around 176K, which if true, would signal significant job growth for the month of December in the US. Should the ADP figure come in at 176K, it may boost investor confidence in the US economic recovery and signal a return to riskier assets. The USD would likely fall as a result. On the other hand, if tomorrow’s news comes in under analyst predictions, investors may decide that the economic recovery is not happening as quickly as possible, and revert back to the safe-haven dollar.

EUR – German Debt Auction Leads to Bearish Euro

Yesterday’s German debt auction caused the euro to slide throughout the day, particularly against the USD. The EUR/USD once again fell below the 1.3000 level, in a clear sign that investor’s lack confidence in the euro-zone economic recovery. The euro also recorded a bearish day against the UK pound. The EUR/GBP fell throughout the day following a better than expected British construction PMI.

Turning to today, in addition to the ADP Non-Farm Employment Change, euro traders will want to keep their eyes on the UK Services PMI. Analysts are predicting a solid PMI figure, which if true, may cause the euro to slide even further against the pound. Also, traders should pay attention to any news coming out of the euro-zone relating to the current debt crisis. Any further negative news will likely lead to further bearish movement for the single currency.

JPY – Safe-Haven JPY Records Gains Wednesday

The Japanese yen saw a very bullish day Wednesday, especially against riskier currencies like the euro. At the same time, confidence in the US economic recovery led to slight increases for the USD/JPY.

The yen is likely to maintain its bullish trend against the euro as long as negative news regarding the euro-zone debt crisis stays in the headlines. That being said, traders should note that a positive ADP Non-Farm Payroll figure today may help boost riskier currencies like the euro against the JPY.

Additionally, Friday’s US Non-Farm Payrolls report is likely to create a lot of volatility for yen pairs. A positive figure may boost risk taking which could cause the JPY to close the week in a downward trend.

Crude Oil – Crude Maintains Upward Momentum

Crude oil maintained its upward momentum yesterday, despite some slight downward movement during mid-day trading. Oil was able to stay above the $102 a barrel level as tensions between Iran and the US stayed high. Investors are worried about crude oil supplies out the Middle East should the current situation between the US and Iran maintain.

Today, oil could see further price shifts depending on how the ADP Non-Farm Payrolls figure comes in. A positive number may increase risk appetite, which typically causes commodities like oil to rise. At the same time, a less positive number may cause investors to revert back to safe-havens which could cause oil to fall.

Technical News

EUR/USD

Technical indicators are showing that the pair may see an upward correction this week. The Relative Strength Index on the weekly chart has entered the oversold region, while the Stochastic Slow on the same chart has formed a bullish trend. Taking a bullish long term trend may be a wise choice.

GBP/USD

Most long term indicators show this pair trading in neutral territory, meaning that major market movements are not expected this week. That being said, the Williams Percent Range on the weekly chart is creeping toward the oversold region. Should the indicator fall below the -90 level, it may be a sign for traders to go long in their positions.

USD/JPY

Following the bearish trend late last week, technical indicators are showing that the USD/JPY may be due for an upward correction this week. Daily chart indicators, like the Relative Strength Index and Stochastic Slow, are showing the pair in the oversold region. Going long this week may be a wise strategy for the pair.

USD/CHF

Following the slight upward movement the USD/CHF experienced last week, technical indicators are showing that the pair may turn bearish in the coming days. The Williams Percent Range on the daily chart is creeping toward the -20 level. Should it go above this level, it may be a sign that the pair will stage a downward correction. Traders will want to keep an eye on the daily and weekly chart for further signs of bearish movement.

The Wild Card

Silver

Technical indicators are showing that silver may fall during the trading day today. The Stochastic Slow on the 8-hour chart has formed a cross above the upper resistance line, meaning that bearish movement could occur. Furthermore, the Williams Percent Range on the daily chart has entered overbought territory. Forex traders may want to go short in their positions today.

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.

Written by Andrew Snyder, Editorial Director, Inside Investing Daily, insideinvestingdaily.com

After more than 30 years, ethanol subsidies are gone. It’s the best thing Congress will (or won’t) do all year.

We’re just four days into a fresh year and I’m about to do something that typically happens just once or maybe twice a year.

I am going to tell you why I agree with Washington.

Sure, Capitol Hill was deserted. And it’s true what happened is the action of a do-nothing Congress. But the results are the same nonetheless.

You and I — the strangled American taxpayer — are on the hook for one fewer subsidy. And it’s a good thing.

Here’s the deal. It was not covered on the evening news and it was never the focus of the Sunday-morning talk shows, but the 45-cent subsidy Uncle Sam paid for every gallon of ethanol is gone.

It was here for 33 years… yet it died a quiet, lonely death.

We’re glad it’s gone.

The figures behind the subsidy aren’t all that nauseating, at least when you compare it to Washington’s long list of generous handouts.

The ethanol “bribe” cost you and me about $6 billion last year. In its lifetime, the fuel’s artificial life support cost us roughly $20 billion — a pittance compared to the $35 billion or so we send farmers each year.

Now that Congress quietly let the law expire — eliminating direct payments to the Big Oil refineries that blend ethanol into their gasoline — the price you pay at the pump will rise. Again, that’s a good thing.

It will cost you about 4 cents more a gallon. But that’s the price we pay to get Uncle Sam out of our way. That’s the price of a free market.

Believe me… it will pay off in the end.

Any subsidy is questionable. But one that stretches the span of a generation is pure waste… a political payback to one of the nation’s fattest lobbies.

While the payouts are gone, the ethanol boondoggle is far from over. The law that says Americans must burn 15 billion gallons of renewable fuel by 2015 is still alive and well. It’s a gimmick that ensures ethanol is here to stay — whether the free market likes it or not.

But there is a glimmer of hope in all this.

I’ve said it before… 2012 is the year natural gas will reach its tipping point. It won’t be our top fuel source for at least two more decades. But this is the year its fate turns from speculation to certainty.

The elimination of the ethanol subsidy is the first step in that journey.

For 30 years, Washington has dumped money into ethanol. The goal was to toss it a lifeline until the industry was strong enough to swim on its own.

But Congress has lost its political will. We’re broke… and a dependence on ethanol is worse than a dependence on foreign oil.

What’s worse, though, is the idea that fuel was America’s top export last year. With the ethanol subsidy in place, Washington was giving our neighbors a taxpayer-funded discount.

The bottom line to all of this is the idea that the economy’s natural forces always win… there is no exception.

Here’s some proof.

Over the past five years crude jumped by over 50%, coal is up by 23% and yet natural gas is down by 75%. And now, without the ethanol subsidy, the price we pay at the pump will rise.

One of the questions I hear all of the time is how long will the government stand in the way of natural gas. Most Americans realize natural gas is the economic fuel of choice (it’s cheap and abundant). Yet, Washington treats it like a dirty stepchild.

That era is ending. The quiet eradication of the ethanol subsidy is proof. The economic forces are too strong.

In the most recent issue of Safe Haven Investor, I told readers how to take advantage of this opportunity. So far, the timing has been perfect. The mid-cap stock I recommended was up by over 16% thanks to a big surge yesterday.

But here’s the good news. There is more to come.

Like I said yesterday, we’ve got a big announcement coming tomorrow. It will be the conduit that allows you to take advantage of the action in a way most folks will never have access to.

Again… it’s unconventional. It’s edgy. And it’s never been done before.

Editor’s Note: What’s the best way (it’s nearly foolproof) to spot an investment before it explodes in value? It’s not complicated, but you need to read the complete story.

EURUSD failed to break above the upper line of the price channel on 4-hour chart, and pulled back from 1.3076. Further fall to test 1.2858 support would likely be seen, a breakdown below this level will signal resumption of the longer term downtrend from 1.4246 (Oct 27, 2011 high), then further decline could be seen to 1.2500 area. Key resistance is now at 1.3076, only break above this level could indicate that the fall from 1.4246 is complete.

Daily Forex Forecast

By MoneyMorning.com.au

If you’re still banking on China’s economy and the Chinese consumer to bail out the West, stop. The following news from the BBC should make you think again:

“Satellite broadcasters in China have cut entertainment TV by two-thirds following a government campaign, state news agency Xinhua has reported.

“An order by the State Administration of Radio, Film and Television (SARFT) to curb ‘excessive entertainment’ came in effect on 1 January.”

According to the BBC, the Chinese fun police will allow only two entertainment programs per week… for 90 minutes, max. Any more than that is “excessive”.

Yet some contrarians will tell you China is freer and more capitalist than the West!

Of course, whether China’s economy embraces consumerism or not, it’s a lose-lose situation for us all.

If China’s economy does not consume, the era of credit and easy money is over. The world will fall into a needed economic recession.

If China’s economy does consume, the era of credit and easy money will last a while longer. But the world will still fall into the needed economic recession… And the outcome will be much worse, due to the growth of an even larger credit bubble.

How much longer is anyone’s guess.

One thing’s for certain. China is not an economic miracle. The truth is – as we’ve shown you before – China is built on the same fraudulent rules as indebted and bankrupt Western economies.

As time goes on, more truth about China’s economy comes out.

As BBC News also reports…

“China has uncovered 531bn yuan [AUD$81.5bn] of irregularities in local government debts…

“There are growing concerns about the amount of bad loans being held by local governments.”

We’ve covered this before. The odds are $100 billion of bad loans is just the start. This makes it hard to see how China can be an economic saviour when it can’t even keep its own house in order.

This is important because when things go bad in China, they’ll sure as heck go bad in Australia.

Last year the Australian stock market fell 14.5%. That’s despite the Australian economy benefiting (by most accounts) from being “tied to” Asia, rather than Europe and the U.S.

If the ties that bind us to Asia are such a benefit, why did the stock markets of New World economies, such as China and India, fall more than 20% last year? Why did stock markets in the “broken” economy of Europe fell less than 20%? And why did the U.S. stock market closed the year flat?

Here is the answer… China and India are not really self-sufficient economies.

There’s a lot of talk that China and India will save Australia’s economic bacon. The fact is they can only boom if the rest of the world booms. And for the rest of the world to boom, credit has to expand… which isn’t likely… seeing how the West struggles to pay off old debts without taking on new debts.

So, without global credit expansion, China’s economy is in trouble too. Already Chinese firms are looking to increase margins by cutting costs rather than banking on credit growth. As the Financial Times headlines…

“China factories eye cheaper labour overseas”.

Already?

The story explains how a Chinese shoe maker has cut his workforce from 8,000 to 3,000 over the past three years.

And not only that…

“Mr Liu [owner of a Chinese handbag manufacturing firm] says his profit margins have dropped from as high as 10 per cent to as low as 3 per cent…”

It just goes to show, doesn’t it? Even a centrally planned economy can’t control everything. In this case, the central planners can’t control profit margins… And they can’t control competition in Turkey, Mexico and India.

You could argue, when the British economy sent jobs offshore in the 19th and 20th centuries, it signalled the decline for Britain. . Higher costs, higher taxation, trade tariffs and new rules pushed production offshore.

That China is offshoring jobs so soon is a clear warning the China bubble is set to pop. That’s bad news for the Australian economy that has staked its future on the false belief that the boom will be stronger for longer.

Could 2012 be the year the Chinese economy finally crashes?

It’s not certain. As an Aussie investor, it’s a question that should be at the forefront of your mind. We’ll cover some of the strategies you can use to insure your investments against the China Crash over the coming weeks.

Cheers.
Kris.

Related Articles

The Chinese Economy and Australia: the Last of the Bubbles
2011-12-20 – Kris Sayce

What the Next Wave of Expansion in China Means For You
2011-12-19 – Dr. Alex Cowie

China, the US and the Scramble for Commodities
2011-12-6 – Dr. Alex Cowie

China’s Economy: Soft Landing, Hard Landing or Crash Landing?
2011-11-26 – Shae Smith

Why China’s Quicksand Economy Will Sink Australia
2011-11-24 – Kris Sayce

From the Archives…

2011: What We Got Right. What We Got Wrong.
2012-01-01 – Kris Sayce

Speculators v Spectators
2011-12-31 – Kris Sayce

Three Reasons to Buy Gold Before 2012
2011-12-24 – Dr. Alex Cowie

Speculative Stocks and the Art of Stock Speculation
2011-12-23 – Kris Sayce

The Great Australian Housing Shortage?
2011-12-22 – Kris Sayce

For editorial enquiries and feedback, email [email protected]

The Sun Starts to Set on China’s Economy

Jan. 4 (Bloomberg) — Kashya Hildebrand, the wife of Swiss National Bank President Philipp Hildebrand, defended currency trades she carried out in 2011, transactions which led local media to allege that the central banker may have used insider knowledge to his advantage. In a statement published yesterday, Kashya Hildebrand said she purchased the dollar because “it was at a record low and almost ridiculously cheap” at the time. Philipp Hildebrand is due to comment on the transactions at a news conference tomorrow in Zurich. Andrea Catherwood reports on Bloomberg Television’s “Last Word.” (Source: Bloomberg)

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.

UniFirst (UNF), a supplier of uniforms, announced that first-quarter net income rose 9 percent, beating expectations. The company also raised 2012 guidance.

Jan. 4 (Bloomberg) — Geoffrey Kendrick, head of European currency strategy at Nomura International Plc in London, talks about the European debt crisis and his forecast for the euro. He speaks with Caroline Hyde on Bloomberg Television’s “First Look.”

Jan. 4 (Bloomberg) — Adam Myers, a senior foreign-exchange strategist at Credit Agricole Corporate & Investment Bank, discusses the prospects for currency-market intervention by central banks in 2012. He speaks with Andrea Catherwood on Bloomberg Television’s “Last Word.”

Bargain hunters are wise to pay careful attention to insider buying, because although there are many various reasons for an insider to sell a stock, presumably the only reason they would use their hard-earned dollars to make a purchase, is that they expect to make money. Today we look at two noteworthy recent insider buys.