Month: February 2012

Source: ForexYard

The euro-zone debt crisis continued to fuel risk aversion in the market place yesterday, as poor news briefly brought the EUR/USD pair below the 1.3100 level. The pair staged a recovery later in the European session, after it was revealed that Greek leaders had begun finalizing a debt swap deal. Today, traders will want to continue monitoring the euro-zone situation, especially as it is becoming clear that Portugal will soon need a bailout to avoid defaulting on its debt.

Economic News

USD – USD/JPY Continues to Make Gains

The US dollar extended its recent bullish run on the Japanese yen yesterday, with the pair reaching as high as 76.85 before staging a slight reversal. In addition to a positive US jobs report from last week, the pair’s ascent was attributed to reports that the Bank of Japan (BOJ) secretly intervened in the marketplace late last year. While the greenback is still fairly close to the lows it hit against the yen last week, it appears that fears of another BOJ intervention have subsided for now.

Turning to today, USD traders will want to continue monitoring the euro-zone to gauge the level of risk taking in the marketplace. While positive news regarding the Greek debt swap talks is likely to boost the EUR/USD, analysts are warning that additional worries in the euro-zone could limit how high the pair moves. The same can be said for the AUD/USD. While the dollar hit a six-month low against the Aussie during yesterday’s trading, any negative euro-zone news could cause the current trend to reverse.

EUR – EUR Moves Up amid Hopes of Greek Deal

The euro staged an upward reversal late in European trading yesterday, after it was revealed that Greek leaders had begun finalizing the details of steps it is willing to take to reach a debt swap deal with its creditors. Both the EUR/USD and EUR/JPY shot up close to 80 pips after the news was released. At the same, analysts were quick to warn that the common currency’s gains may be temporary as other euro-zone news is likely to impact risk taking.

Highlighting Greece’s delicate position in the euro-zone, rumors began circulating yesterday that the country’s chances for exiting the euro-zone have increased. In addition, even if Greece finally succeeds in reaching a debt-swap deal, traders will want to note that Portugal is likely next to need a bailout to avoid defaulting on its debt. Either way, traders should know that the euro crisis is far from over.

AUD – RBA Rates Decision Boosts Aussie

The Australian dollar saw significant gains throughout the trading day yesterday, following news that the Reserve Bank of Australia (RBA) would leave national interest rates at their current level of 4.25% for the time being. Analysts had originally forecasted the RBA to reduce interest rates to 4.00%. The move resulted in the AUD extending its recent gains against most of its main currency rivals, including the USD, EUR and JPY. The AUD/USD hit a six-month high at 1.0823 before staging a reversal, as analysts warned that the pair still had room to move up.

Turning to today, traders will want to continue monitoring news out of the euro-zone, which is likely to determine the level of investor risk-appetite. Positive data is likely to boost currencies like the Aussie. At the same time, fears that Portugal will be the next euro-zone country to require a bailout may limit any gains.

Crude Oil – Crude Oil Drops below $96 amid Risk Aversion

The price of crude oil continued to drop yesterday, as the Greek debt-crisis continued to fuel risk aversion in the markets. The commodity eventually dropped below the $96 a barrel level before staging a slight upward correction late in the European session. Analysts are warning that, if the current trend continues, the price of oil could drop to around the $94 a barrel level before the end of the week. At the same time, there are a number of factors at play that could cause the commodity to unexpectedly spike.

Traders will want to watch out for any escalation in the current situation in the Middle East. Specifically, any increase in tensions between the US and Iran over Iran’s nuclear program will likely cause the price of oil to spike. Additionally, any positive euro-zone developments may lead to an increase in risk taking which could boost the value of oil.

Technical News

EUR/USD

Technical indicators are currently mixed for this pair. While the weekly chart’s Relative Strength Index is right around the 30 level and oversold, a bearish cross has formed on the daily chart’s Stochastic Slow, meaning that downward movement could occur in the near future. Traders may want to take a wait and see approach for this pair until a clearer picture presents itself.

GBP/USD

Most technical indicators show that this pair is currently overbought and may see a downward correction in the near future. The daily chart’s Stochastic Slow has formed a bearish cross, while the Williams Percent Range on the same chart is above the -20 level. Going short may be a wise choice for the near future.

USD/JPY

Technical indicators on the daily chart show this pair in the oversold zone, meaning that upward movement is possible in the near future. A bullish cross is forming on the MACD/OsMA, while the Williams Percent Range is hovering close to the -80 level. Going long may be a wise choice for the pair.

USD/CHF

The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift is likely to occur in the near future. The Relative Strength Index (RSI) on the same chart is hovering close to the 70 level, which typically means that a downward correction is going to take place. Traders will want to pay attention to the RSI. If it crosses the 70 line, a bearish correction may take place.

The Wild Card

GBP/JPY

The daily chart’s technical indicators are showing that this pair could see a downward correction in the near future. A bearish cross is currently forming on the Stochastic Slow, while the Relative Strength Index is close to crossing the 70 line. Forex traders will want to watch the daily indicators for signals ahead of a possible downward breach.

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.

By TraderVox.com

The speculation of progress in the Greece crisis catapulted the Euro to an eight-week high on a day that saw the yen fall against major currency. Investors were looking forward to positive results from Greece in its efforts to meet the requirements required for Greece to get financial aid. The Greek Premier is expected to three political party leaders in Athens to discuss the way forward.

Jane Foley, a senior strategist at Robobank International said that many investors are viewing the situation in Greece from a half-full perspective which has resulted to higher prices for euro any positive news from Greece. Against the dollar, the 17-nation currency gained o.1% to settle at 1.3276 and rose to 102.4 yen which represented an increase of 0.6%.

Greece Prime Minister convened an unscheduled meeting yesterday with the troika members who include European Central Bank, International Monetary Fund, and European Commission to review the terms required for the second bailout. However, yen’s drop was as a result of the surplus in current account which reduced to 44 percent last year. Analysts believe that the data from the current-account balance is a selling point for the Yen.

The Australian Dollar rose against the US dollar to settle at 1.0836 which had earlier catapulted to $1.0844. this is the strongest the Aussie Dollar has been against the US dollar. Further, the New Zealand’s currency increased against the USD by 0.4 percent to settle at 83.89 US cents. This is also another high since September 5.

The ECB had indicated that it is willing to swap its holdings with the government bonds as a way of reducing the country’s debt burden. However, this claim must be made formal by February 13^th for procedures to be completed by 20^th of March. These developments in the Eurozone are expected to continue causing the currency bounce back as investors are waiting on any type of news from the region. Positive news will see the currency grow stronger against major currencies.

Article provided TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

By TraderVox.com

Euro traded in a tight range quietly during the Asian session. During the early European session, the single currency surged on the hopes of Greek deal agreed soon. The pair printed a high of 1.3288. If 1.3300 is taken out, the focus will be on a level of 1.3450. The support may be seen at 1.3250 and 1.3200. The resistance may be seen at 1.3270 and 1.3370. Trade balance data from Germany came below the expectation at 13.9 billion Euros against the expected value of 14 billion Euros.

Like Euro, the sterling pound also traded in a narrow range of 1.5928 and 1.5885. Pair traded above 1.5900 levels to print a high of 1.5928. Since then it has retracted back and currently trading near its opening price of 1.5895. The support may be found at 1.5890/5900 and resistance will be seen at 1.5930 and 1.6000. Now it will be interesting to see if pound takes out an important level of 1.6000 particularly in light of the Bank of England meeting tomorrow. Interest rate and quantitative easing will be the main focus of the meeting.

The USD/CHF pair has also traded in a small range of 0.9139 and 0.9105 for the day. The unemployment data came out today from Switzerland which showed an increase in unemployment to 3.4%. Expected increase in the unemployment was 3.5%. The pair is trading at 0.9125 up about 0.1%. The support may be seen at 0.9110 and below at 0.9080. The resistance may be seen at 0.9150 and 0.9200.

The Australian dollar continued its rise against the US dollar and is now trading comfortably above 1.0800 to form a six month high of 1.0843. It is currently trading at 1.0820, up around 0.10%. The support now may be seen at a psychological level of 1.0800 and below at 1.0780. The resistance lies at 1.0860 and 1.0900.

The USD/JPY pair managed to break a strong resistance of 77 to form a high of 77.18. It is presently trading at 77.01. The resistance lies at 77.10 and above at 77.30. The support lies at 77 and 76.80.

The dollar index is trading at 78.57. Today is a crucial day for Euro as the fate of Greek deal might be decided.

Article provided TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

By TraderVox.com

Yesterday saw the USD fall sharply against the euro amid more speculation about the Greek debt deal. Reports emerged that the Greek government is in the final phase of putting together a final dossier on the actions they shall take in order to avoid a default.

EUR/USD stood firm although more reports emerged that the meeting in which the final decisions are to be taken was postponed to Wednesday.

The USD index which gives us a measure of USD strength against six other major currencies saw a sharp fall yesterday.

Meanwhile as an additional boost to the Euro reports are emerging of China coming to the aid of Greece. The Chinese premier yesterday indicated this as a real possibility but expressed concerns about how difficult it will be to convince the Chinese people..

The EUR/USD jumped to an unprecedented 1.3256 which represents its highest level since mid December.

The new Greek deal, we hear involves numerous sharp wage and spending slashes, as this are necessary to satisfy the EU and International Monetary fund for a second bailout. Without this help from EU and IMF, it is certain that Greece will default come mid-March.

Greece is also trying to conclude a debt-swap deal with private investors against popular opinion in the country.

Despite the euro growing strong yesterday amid speculation the solid data that came out of the euro zone yesterday was generally bad. This just goes to outline the optimism investors have about the Geek deal and how much help the deal will give to the euro.

The German industrial production report yesterday with a 2.9% fall which is much worse than the expected 0.1% fall we expected at first. Under normal circumstances this was supposed to be bad news for the euro but with the Greek problem overshadowing most investors did not follow up on this.

We expect German trade balance to be released today. Analysts expect a figure of 14.1 billion Euros to be the figure which is slightly less than the expected figure. A falling trade balance is usually bearish for the euro.

Article provided TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

By MoneyMorning.com.au

[By Keith Fitz-Gerald, Chief Investment Strategist, Money Morning (USA)]

I hear it everywhere I go. I’ll start investing again…

…when the debt problem is fixed.

…when the markets pull back a little.

…when the EU crisis is over.

…when the elections are over.

Chances are you’ve said some of these same things to yourself.

Yet, waiting is exactly the wrong thing to do. Time is something you never get back.

And when it comes to consistent investment returns, time is the one thing you always have to capitalise on – without fail.

Besides, waiting makes it harder to get back in the game. Ask anybody who missed the S&P 500′s 99.53% run up off March 2009 lows that carried things until April 2011.

Or the 87.26% run up through July 2007 following the low set in 2003. Or the 569.25% move from November 1987 (shortly after Black Monday) through January 2000.

No. The way I see it, the thing to do is to begin investing the moment you decide you want to. That way you pique your imagination, your motivation and your returns.

Five Ways to Get Better Results in 2012

Here are five tips to help you get started:

• Have specific goals. Wall Street traders like to beat the S&P 500 or the Dow Jones Industrial Average and they pay themselves huge bonuses for having beat this index or that benchmark. But that’s crap. Everybody I know invests to meet objectives like paying for college for their children or living the retirement of their dreams. Decide what you want and when. Then, figure out how you’re going to get there. You might be surprised how manageable all of this actually is.

• Know why you want what you want. Many investors spend more time analysing a new washing machine than they do picking their next investment. Or, they count on Uncle Bertie and his sure things. Both are bad ideas. Ask yourself if that new hot stock or exchange-traded fund (ETF) fits the goals you’ve laid out for yourself. If so, great. Buy it. If not, pass. It’s a waste of money to have something in your portfolio that doesn’t help you meet your goals, not to mention it’s more risky, too.

• Be realistic. You’d be surprised how many of the investors I meet want to earn 5,000% by tomorrow at 8:00am and only use $100 to do it. Then again, maybe you wouldn’t. It is possible, just not probable. There’s a big difference.

• Take action. The single biggest impediment to success stares back at you every morning in the mirror. Psychologists say we have built in saboteurs; common wisdom says we are our own worst enemies. Both are true. The “enemy” is standing in the mirror and is so persuasive we can talk ourselves out of anything, including success. That’s why actually taking action can quiet the doubt and help minimize any backsliding. Besides, if you hit a few small winners, you’ll have the confidence needed to take even stronger, more decisive actions down the road.

• Don’t stay down. My grandfather used to tell me that it was not how I handled getting knocked down that mattered but how I got up. That’s why sticking to a disciplined plan is a lot better than making panicky decisions. If you’re simply reacting by the seat of your pants, chances are you’re going to get knocked down a lot. But if you get up, plan ahead and take steps to avoid the next stumbling block, chances are you’ll begin to pull ahead. And stay there.

So what about the risks?

That’s a fair question and an important one, especially now when there are so many fundamental problems to consider – Europe, China, US debt, the lack of adult supervision amongst the world’s central bankers, and more.

That’s what trailing stops are for.

If the fire gets too hot, trailing stops will get you out of the kitchen. The important part is to get back to cooking when things cool down.

Keith Fitz-Gerald

Chief Investment Strategist, Money Morning (USA)

Publisher’s Note: This is an edited version of an article that originally appeared in Money Morning (USA).

From the Archives…

Facebook Shares – Notice for Mad Punters: Buy This Stock

2012-02-03 – Kris Sayce

Why Your Money is Better Off in Stocks Than in the Housing Market in 2012

2012-02-02 – Kris Sayce

Why You Should Pay Attention to the ASEAN Bloc

2012-02-01 – Cris Sholto Heaton

Will Australian Property Prices Keep Falling?

2012-01-31 – Dr. Alex Cowie

Is Ben Bernanke Secretly Buying Gold and Silver Stocks?

2012-01-30 – Dr. Alex Cowie

For editorial enquiries and feedback, email [email protected]

Five Ways to Make 2012 Your Best Investment Year Ever

By MoneyMorning.com.au

[By Don Miller, Contributing Writer, Money Morning (USA)]

The never-ending hunt for higher yield is leading investors to bet record amounts on emerging market debt.

In just the first two weeks of 2012, governments of undeveloped economies from Asia to Africa sold more than $30.6 billion in dollar-denominated bonds according to Bloomberg News.

That’s up from roughly $19.9 billion in the same period last year and the most since 1999, when Bloomberg began collecting data.

Typically, investors shun emerging market bonds during times of uncertainty in favor of “safer” assets like gold and U.S. Treasuries.

But that has started to change.

The Big Move Into Emerging Market Debt

In fact, investor demand is overwhelming supplies as orders have outstripped the amount of bonds being sold.

During a recent auction, the Philippines received $12.5 billion of orders for $1.5 billion of 25-year bonds, pushing the yield down to a record-low 5%. Indonesia sold 30-year bonds at a record-low yield of 5.375% and Colombia sold $1.5 billion of 29-year bonds at 4.964%.

Analysts say the debt crisis in Europe, along with record low yields on U.S Treasuries, has investors on the hunt.

They are now buying the debt of undeveloped nations like Indonesia, Mexico and Brazil, even though credit-rating firms rank them as more risky than their European counterparts

“What we’re seeing is a re-evaluation of sovereign-credit risk, increasingly being driven more by fundamentals than by classifications,” Eric Stein, a portfolio manager at Eaton Vance Corp. (NYSE: EV) told The Wall Street Journal.

According to the J.P. Morgan Emerging Markets Bond Index, investment-grade sovereign emerging-market bonds are yielding an average of 4.7%.

By contrast, Italian 30-year debt yields 7%, while Spanish 30-year debt yields 6.1%.

One reason emerging market bonds are attracting interest is that investors recognise the difference between the debt problems faced by Western economies and healthier emerging markets.

The debt levels plaguing the world’s largest and most developed economies – like the United States, the United Kingdom and France – exceeds 70% of their gross domestic product (GDP) according to the International Monetary Fund.

By comparison, many emerging market economies have debt-to-GDP ratios of less than 40% — including Brazil and Mexico – the two undeveloped economies that have been the biggest sellers.

“The Europeans and the Americans need to borrow a lot more than the Asian countries and they use the money for the wrong thing: to fund somebody’s consumption,” Endre Pedersen, director for fixed-income investments at Manulife Asset Management told Bloomberg.

Emerging Market Upgrades

Indonesia is benefiting from a December promotion to investment-grade status by Fitch Ratings Inc. after losing that status 14 years ago during the Asian financial crisis.

The Indonesia upgrade opens its debt markets to a number of bond funds that had been prohibited from investing in the country. That makes Indonesia an alternative investment opportunity for a whole swath of investors.

Most analysts are speculating that other small economies will soon get the same treatment. Meanwhile, Fitch and Standard and Poor’s earlier this month downgraded the debt outlook for France and 12 other euro countries.

Still, some see emerging market debt as a reasonable alternative to the tiny yields offered by Treasuries and other government-related debt.

U.S. government 10-year notes traded Wednesday at a record low 1.87%. At an auction in early January, Germany sold $4.96 billion of debt that had an average yield of negative 0.0122%, the first time that yields on German debt moved into negative territory.

At those rates it’s not hard to see why many investors are willing to step out of their comfort zones to get a better deal.

Don Miller

Contributing Writer, Money Morning (USA)

Publisher’s Note: This is an edited version of an article that originally appeared in Money Morning (USA).

From the Archives…

Facebook Shares – Notice for Mad Punters: Buy This Stock

2012-02-03 – Kris Sayce

Why Your Money is Better Off in Stocks Than in the Housing Market in 2012

2012-02-02 – Kris Sayce

Why You Should Pay Attention to the ASEAN Bloc

2012-02-01 – Cris Sholto Heaton

Will Australian Property Prices Keep Falling?

2012-01-31 – Dr. Alex Cowie

Is Ben Bernanke Secretly Buying Gold and Silver Stocks?

2012-01-30 – Dr. Alex Cowie

For editorial enquiries and feedback, email [email protected]

Why Emerging Market Debt Yields Are Attractive to Investors

By MoneyMorning.com.au

In yesterday’s Money Morning, David Stevenson showed you the most bearish chart in the world – the Baltic Dry Index (BDI).
Well, we think we’ve found one that’s at least as scary. A chart that’s so bearish it just could be a signal that it’s time to buy. But first a recap…

The BDI charts the strength (and weakness) of commodity shipping rates.
Right now the index is on the weak side… the very weak side. As this story from Bloomberg News shows:

“D/S Norden A/S (DNORD), Europe’s biggest publicly trading commodity shipping company, hired a Supramax vessel at no cost other than fuel charges, its first such transaction in a quarter century.”

Then there’s this story from BusinessWeek yesterday:

“Glencore International Plc hired a commodity ship with the operator of the vessel earning nothing and contributing to some of the fuel costs after freight rates for hauling raw materials had their worst-ever start to a year.”

Free shipping! It’s one thing to get free shipping for a book or pair of pants… But free shipping on a Supramax ship that can carry more than 45,000 tonnes of iron ore or grain? That’s something else.
Especially when these voyages can take weeks or months (it takes the world’s largest iron ore miner, Vale do Rio Doce, 45 days to ship iron ore from Brazil to China). So it tells you something about the state of the shipping industry if a firm is willing to give away cargo space rather than wait for a paying customer.

Super-Charged Buying Signal

But it’s not just the BDI that gives an insight into world shipping. And it’s not just commodity shipping either. As the HARPEX index of container shipping shows, container rates are low too… near 2008/09 financial meltdown levels:

The HARPEX index provides similar data to the BDI. The difference is, rather than monitoring the cost of dry bulk shipping (grains, ore, salt, etc.), the HARPEX monitors shipping costs for container ships.
From the 2008 peak, the BDI is down 86%.
As for the HARPEX, from the peak in 2005 to today, the index is down 78%.
Long term buyers of those indexes have taken a bath. And as recent news reports show, low rates are actually sending some shipping firms bust. Those that haven’t gone bust are only just hanging in there.
Shares in U.S. bulk shipping firm, Frontline Ltd [NYSE: FRO] have fallen 81.7% in 11 months.
But that’s exactly why we see both indexes (BDI and HARPEX) as potentially bullish indicators. Here’s why…
If you look at the HARPEX index and a longer-term chart of the BDI you’ll see something interesting. You’ll see they are a super-charged leading indicator.
That is, when the economy shows signs of promise, these indexes don’t just go up a little bit… they take off.
In fact, they tend to rise so quickly, that in the case of the HARPEX it gained 293% in two years… while the Aussie S&P/ASX 200 index gained just 40%.

Leads the Stock Market Up… and Down

But here’s the thing. When something takes off that quickly, it’s hard to keep up the momentum. So even though the stock indexes continued to go up for another two years, by 2005 the HARPEX began to fall… so that by late 2006 it had halved.
A similar pattern happened in 2009/10… the HARPEX index tripled while most stock indexes gained 50-100%.
But now, with both shipping indexes heading towards rock bottom that tells us it could be a great time for you to look at adding volatile high-growth stocks to your portfolio. For the simple fact that when you give stuff away for free, you can’t go much lower.
Shipping rates can only go up from here. Firms will go bust and excess ships will go to the scrap heap. That will leave surviving firms in a much stronger position. And hopefully allow them to raise their rates again.

That will take time. But remember, this isn’t the only hint we’ve had that the market could be at a turning point.
Other leading indicator indexes are flashing buy signals too. We’ve showed you the energy index and the oil services index. Both are near multi-year lows.
That means we’re approaching the stage when – as Slipstream Trader, Murray Dawes puts it – sellers become exhausted. That’s when you get buyers flooding in looking to pick up bargains.
Naturally, buyers don’t always get the timing right. At any point in time, buyers buy because they think they’ve spotted the bottom of the market. But sometimes the market keeps falling.
Yet a point comes where the upside risk is so much greater than the downside risk that it’s worth taking a punt. And right now the indicators and numbers are stacked up in favour of a rally.
Of course, it’s still a big risk. But right now, the potential for big returns is so great we’re happier being a buyer than a seller. And one of the best places to magnify your returns in a rising market is small-cap stocks.

Time to Buy Stocks

The built-in leverage that small-cap stocks provide means they tend to move fast when a market recovers. Simply because investors are happy to take risks.
The only thing remaining is to figure out which stocks are likely to do best in this rally.
That’s something we’ll discuss with attendees at ‘After America’ – the Port Phillip Publishing investment conference – next month. If you haven’t reserved your place yet, it’s not too late. Click here for details…
Cheers.

Kris.

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