Month: February 2012

USD/CHF entered into a perfect volatile sideways mode between 0.9115 and 0.9250. The support came by the approaching psychological support range of 0.9000 as well as above Fibonacci 50% retracement of the upward move during October 27th to October 27th, 2011 to January 8th, 2012.

For the next week we expect to see some more sideways move and will have to watch for a strong break of the current sideways tunnel to expect any directional move. On the upside, a firm break over 0.9250 is important and on the downside a firm break below 0.9115 and then 0.9100 is important.

Overall on both sides we expect frequent resistance and supports and hence a slow movement. On the upside a break over 0.9250 should bring a resistance near 0.9295/0.9300. This represents Fibonacci 38.2% retracement of the downward move during January 8th to January 29th. Above 0.9300 another resistance should come near 0.9340. 0.9340/0.9345 would represent the coinciding resistance of the lower edge as well as Kijun-sen resistance of daily Ichimoku cloud. On the upside only with a firm break above 0.9345, we would expect any convincing upward move first towards the resistance near 0.9515 and with a break of that further towards the psychological resistance of 0.9500 but before that some resistance should come near 0.9475 or the upper edge of the daily Ichimoku cloud.

On the downside any firm break below the recent 0.9115 will start bringing in the psychological support of 0.9000 ranges. Any firm break below 0.9000 may take USDCHF towards 0.8950 or the Fibonacci 61.2% retracement level of the above mentioned upward move. Our mid-term outlook will start changing to bearish only with a firm break of this and then 0.8800 support to expect any move towards the low of 0.8567.

You may also check the weekly usd chf forecast and daily usd/chf analysis at ForexAbode.

By TraderVox.com

Fed Chairman Ben Bernanke said on Thursday February 2^nd that the economic recovery in the US remained “frustratingly slow” and the Europe’s debt crisis has complicated the recovery process even further. He lamented that there is risk that the developments in Europe may result to unfavorable outcome which could worsen the economic prospects in the US. He also made it clear to the house Budget Committee that Federal Reserve was committed to economic recovery and it is doing everything possible to avoid economic delay.

Bernanke insisted that the Fed was in close communication with the European authorities as part of its efforts to keep a close eye on the developments in Europe. He assured Americans that every measure is being taken to protect the Financial System in the Unite State. Bernanke was also categorical in insisting that while cutting the national debt is still a priority in the long term; the matter should be handled with a lot of caution to avoid impeding on the current economic recovery.

On questions about the Fed’s interest in the Housing market, Bernanke insisted that housing market was of interest to the Federal Reserve since it is an important aspect of the economy and may eventually determine the success of the recovery process. He also reiterated the importance of housing market to the monetary policy which is the core business of the Federal Reserve.

Bernanke defended the report released by the Fed during the month of January claiming that the report gave an analysis of the situation giving pros and cons of the measures taken in the housing sector. The hearing that came barely a week after the announcement that the Fed would extend the low interest rates periods up to 2014. This move has been interpreted by investor as showing the central bank’s lack of confidence in the current recovery measure and economic status. The report indicated that the intention of the Federal Reserve to keep inflation rate at around 2% and reduce the unemployment rate.

The Feds forecast indicates that the unemployment rate will remain high for 2012 at below 8.5% and the GDP is expected to increase to 2.7%.

Article provided by TraderVox.com

EUR/USD could not break above the 1.3233 level and went into sideways mode between 1.3233 and 1.3026. Please note that 1.3233 is approximately the Fibonacci 38.2% retracement of the downward move from October 27th to the recent bottom of January 15th.

Initially for the coming week we will stay neutral till a break over 1.3233 and then 1.3260 does not take place, as we had also mentioned during last weekend.

On the upside a firm break above over the 38.2% Fibonacci retracement, as mentioned above and then 1.3260 should take the currency pair towards the resistance zone of 1.3430 to 1.3485 resistance zone. Please note that 1.3434 represents the Fibonacci 50% retracement of the above mentioned move. Not only that but the range of 1.3430 to 1.3550 had proved to be a very strong resistance zone during November 30th to December 9th, 2011. The psychological resistance of 1.3500 would also come into picture at those levels. However a break above this will bring up the possibilities of a test to 1.3620.

On the downside we need to watch for a break first below the last week’s low of 1.3026 but more importantly 1.3020 and 1.3000. The break of 1.3000 psychological support should bring further downward moves. Below 1.3000 some support should come near 1.2960. A firm break of these support levels and then 1.2930 should take the euro-dollar pair to retest the recent 1.2626/1.2624 bottom. Some of the support levels are EURUSD daily Ichimoku cloud’s Kijun-sen 1.2932 and then the support of the lower edge of the cloud i.e. 1.2803.

Please check weekly eur usd forecast and daily eur/usd analysis at ForexAbode.

AUD/JPY downward move from 82.85 continued till 80.52. The currency pair found strong support there. This support came little above the 80.45 support mentioned by us during the last weekend. This support level was near daily Ichimoku cloud’s Kijun-sen support level as well as 22-day EMA support level. AUD/JPY jumped up from there and went as high as 82.62 before closing for the week at 81.51.

Considering the price action and the recent support levels, we expect some more upward gains, once a break over 82.85 takes place. On the upside, a break over the recent 82.85 (also Sep 1st, 2011’s resistance level as mentioned above), should bring further gains towards the recent high of 83.95 (October 30th, 2011). This level should bring a strong resistance and a break over that will open the door for a move towards the resistance of psychological 85.00 level first. Any firm break over 85.00 should target for 86.20.

The above outlook will stay good if there is no downward break below 81.30/81.25 and the support over this level holds. Any strong break of this support will start making us neutral for AUD/JPY for the coming days. This kind of break will indicate the break below the recent support as well as the support of 22-day EMA. In such case we can expect some more downward correction towards 80.30/80.25 of the 55-day EMA and also the upper edge support of daily Ichimoku cloud.

You may also check the weekly aud jpy forecast and daily aud/jpy analysis at ForexAbode.

Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com

There are a host of factors affecting crude oil prices. Lately, though, it boils down to the value of the dollar. The way things are going… that’s not good news.

Oil prices have held up surprisingly well these past three months. We’ve seen geopolitical threats from Iran push prices well above $100 a barrel, while slumping demand from the U.S. and Europe has dragged prices as low as $95 a barrel.

This $5 trading range has been frustrating for investors. Indeed, I’ve watch a Macro Trader recommendation swing from red to green to red.

The factors surrounding the price of oil are getting much more attention, it seems.

Currencies have played a big part in the price of oil. When the euro tumbled so swiftly, the value of the dollar jumped… and oil prices fell.

And the inventory reports have had a bigger impact, too, when coupled with these price fluctuations.

Let me give you an example using the past two weeks of oil reports.

This week, on Feb. 1, the Energy Information Administration reported that oil inventories climbed by 4.2 million barrels. At the same time this report was released, the euro started falling against the dollar.

As a result, oil prices fell 77 cents.

Last week, Jan. 25, the EIA’s report showed a 3.6 million-barrel climb in inventories. But oil prices closed up 20 cents. Why the difference? The U.S. dollar was falling in value to the euro.

In other words, currency volatility really affects the price of this commodity, negatively when coupled with climbing supply.

And that’s why we’re seeing oil prices in this slump.

From a technical perspective, oil prices could drop as far as $95 before finding support, and the volume action indicates heavy selling for the past week.

I wouldn’t count oil down and out for long, though. But traders and investors might have to take a wider look at what’s going on. Take a look at this one-year chart of March oil futures.

View larger chart

A quick look at this chart and it’s easy to see the resistance to higher movement. The downtrend from last spring and summer has given oil prices a couple of test points. As of yet, oil has failed to beat them…

But prices also haven’t given up yet.

If oil prices can stay above $95 — and the greater factors like a still-weak dollar despite the euro mess say this is a strong level of support — then we could see prices jump easily to $100, and then to $105, if gaining momentum.

There are bigger issues keeping oil prices high. Exxon Mobil (XOM:NYSE) missed estimates on declining production. Its oil operations in Africa produced 24% less in the fourth quarter of 2011. Production in Europe dropped 23%.

Overall, crude production fell 11% for the company.

At the same time, North Sea oil exports to Asia are at an eight-year high. North Sea producers, such as British Petroleum (BP:NYSE), have shipped 8 million barrels to the region since mid-December. Bloomberg says that’s the most for any month since 2004.

The major importers are China, South Korea and Australia. China’s oil demand is expected to jump 4.3% to 9.9 million barrels a day. Developing Asia’s supposed to get a 3.8% boost in demand this year. That more than offsets the drop in demand expected in Europe.

In other words, China’s sopping up all the excess oil from developed nations. Taking extra supply off the market is putting in a floor for oil prices.

This might be a good buying opportunity for traders, though the next couple days will be rocky as oil prices test out that support between $95 and $96.

I still like the long-term picture for oil, too. And with OPEC maintaining that $100 a barrel is a reasonable price for oil, prices don’t seem to have a lot of room to move lower.

The one factor that we need to keep a super close eye on, though, is the dollar and euro. And this is what we’re up against:

View larger chart

The overall trend of the euro for the past year has been down… This boosts the relative value of the dollar, and commodities take a beating when the dollar climbs. But I said “relative.” The real value of the dollar is not climbing. Our interest rates are stuck near zero for the next two years.

But this comparison does have its effects on oil prices, so it needs to be paid attention to.

Editor’s Note: There has been some major movement in the natural gas markets over the past week. On Tuesday, the company Andy Snyder says will lead the way forward was up over 10%. He is working on a one-of-a-kind presentation to give you the inside scoop. Mark your calendar for Feb. 9 at 7:00 p.m. That’s when he’ll go public with the details.

Chart of the Day

By Adam English, Associate Editor, Inside Investing Daily

It is impossible to avoid Apple (AAPL:NASDAQ) in the news these days. If it isn’t a record-breaking quarter, it’s renewed attention on its Chinese manufacturing woes.

Ryan Cole, our Small Cap Insider editor, got me thinking about how the company will weather the steadily worsening trickle of news about Foxconn and other suppliers. One thing is for sure though…

Apple has enough cash to handle whatever comes its way.

The company has so much cash just lying around that investors are wondering if management intends to actually spend it any time soon.

Over $97 billion in cash and securities. About half of that came from the past two years alone. That is almost up to the $108 billion in annual revenue from 2011!

Apple CFO Peter Oppenheimer said the company “was not letting it burn a hole in our pockets” during the recent first quarter conference call after a number of questions about the mountain of cash the company has built.

There are some problems though, and a common culprit is to blame…

About $64 billion of the savings are held offshore. The federal government takes a hefty 35% tax on any money that multinational businesses bring into the USA. Naturally, Apple and a number of other companies are pushing for a tax holiday, but there has not been a lot of interest from Congress on it.

So, what will Apple do? Dividends maybe? Share buyback perhaps? Maybe some giant mergers or acquisitions?

Tons of people are speculating, but one thing is for sure. Apple is looking exactly where Ryan is looking… small caps.

Under Steve Jobs’ mythical tenure, Apple purposely avoided large mergers and acquisitions.

It looks like Apple is continuing that strategy after he passed. The company just picked up a manufacturer of cutting-edge flash memory drives. Israel-based Anobit Technologies cost Apple a paltry $390 million.

Apple has plenty more cash to burn…

By MoneyMorning.com.au

[By Matthew Partridge, Contributing Editor, MoneyWeek (UK)]

What’s been the main driver of the gold bull market?

Low interest rates? Fear of inflation? Currency wars?

Each of the above has certainly played a role in gold’s decade-long winning streak.

But, according to a fascinating new piece of research from US fund manager GMO, the biggest reason for gold’s rise is something that most investors still don’t fully understand.

And it suggests that gold’s bull market could have some way to run…

Who’s Been Buying All the Gold?

Gold bears often argue that the gold market is now at the mercy of demand from speculative investors, who have piled into exchange-traded funds (ETFs), chasing gold higher. The danger is that if the market turns sour, they could pull their money out en masse and send the price plunging.

But according to a study by Amit Bhartia and Matt Seto of US investment firm GMO, the majority of physical gold purchases in the past decade have not come from speculators in ETFs. Indeed, ETFs only account for a tiny fraction (around 7.5%) of the near-30,000 tons of gold purchased between 2000 and 2010.

The demand didn’t come from developed market investors or central banks either – in fact, central banks have been net sellers.

Instead, nearly 80% of the total demand for physical gold has come from retail purchases in developing markets. China and India’s combined demand alone amounts to more than that of the entire developed world.

In other words, “the main driver for gold’s dramatic rise has been the emerging markets consumer”, say Bhartia and Seto.

Why? It’s pretty straightforward. While trade liberalisation and the commodity boom enabled emerging markets to prosper, their financial systems have not kept up with the pace of modernisation. Combined with a tendency to save – rather than spend – money, this has led to a large build-up of savings. (Or, as economists call it, a “savings glut”).

Now, what can all these savers in emerging markets do with their savings?

One solution is to invest it abroad. Some argue this led to the low interest rates that drove the credit boom in the US and Europe (as money from Asia flooded into US Treasuries and the like, driving down bond yields). However, capital controls mean that investing savings abroad directly is not really an option for retail investors. And the domestic stock markets – particularly in China – are far too volatile to be trusted with your life savings.

There are of course domestic savings accounts. Unfortunately, in many countries the banking system is either corrupt or state-run. Negative real interest rates (i.e. adjusted for inflation) making saving money little better than burning it.

The final course left is to invest savings in hard assets. Property has proven popular. But with prices – in China at least – at record levels, and now starting to fall, this has become less attractive. That leaves gold.

“Combined gross savings in China and India increased from $557bn in 2000 to $3.4 trillion in 2010,” say Bhartia and Seto. In short, there was a huge rise in the amount of money available to invest, “and given the lack of good alternatives, gold was a preferred choice.”

What Does this Mean for Gold Prices?

You might assume that the tough patch that the Indian and Chinese economies have seen would therefore hit the price of gold. Not necessarily. Economic problems in these countries could in fact encourage people to double down on gold, especially if the banking systems and the property markets bear the brunt of the damage.

Indeed, there is already evidence that far from reducing demand for gold, the collapse of informal lending networks and the end of the property bubble in China have pushed investors further towards precious metals. Year-on-year sales of gold in China increased by nearly 50% in the holiday period from 22 to 28 January.

Gold sales in India also rose strongly last month. Meanwhile, there have been unconfirmed reports that its central bank will pay for its energy supplies from Iran in gold, in order to sidestep sanctions.

That raises the prospect of other potential threats to the gold price. Beijing seems to be becoming increasingly uneasy about domestic money going into gold purchases rather than low-yielding bank accounts. At the end of last year, the Chinese government closed down all but two of the myriad of domestic financial exchanges where gold was traded. Although this doesn’t directly affect individuals, it could be a first step toward restrictions on retail investors.

On the other hand, a more open financial system could also impact on emerging-market demand for gold. If capital controls are reduced and Indian and Chinese citizens had more freedom to invest abroad, their demand for gold could drop. And if emerging-market consumers start spending more and saving less in general, then this could hit demand for all savings products.

The Gold Bull Market Looks Set to Continue

However, no significant reforms are anticipated, while capital controls are likely to get tighter – not looser – in the near future. Therefore the short-term prospects for gold are excellent.

Plus, as Bhartia and Seto point out, the importance of the emerging-market consumer means that those who argue that gold has become a hugely crowded trade among investors in the developed world are simply wrong.

“This analysis indicates that ‘conventional wisdom’ demand is far from saturated.” Both central banks and developed world portfolios have a lot of catching up to do, suggesting that “gold prices may very well experience another leg up.”

We’ve long been fans of gold, and the GMO paper does nothing to change our minds on that.

Matthew Partridge

Contributing Editor, MoneyWeek (UK)

Publisher’s Note: This article originally appeared in MoneyWeek (UK).

The Secret Driver Behind Gold’s Rampant Bull Market

By MoneyMorning.com.au

Sick of all the jabber about the Facebook IPO?

How can a company that makes $1 billion a year be worth $80–100 billion to the market? And who cares? You’ll have to go through a whole lot of rigmarole to invest in it even if you want to.

So rather than join the hype and speculation, we thought it might be more valuable for you if we looked back at what happened when a similar stock went public in Australia…

You know what we’re talking about…

Telstra Corporation Limited

It might seem like a stretch to compare Facebook with Telstra. But when you think about it, it’s really not…

You see, in its heyday, Telstra offered the latest in communication technology…

In fact, it gave you a way to keep in touch with your friends, your family, your business acquaintances via your home phone, mobile and email… It gave you a way to say hi, share news and photos, invite them to your birthday party, or tell them about your lousy day at work – pretty much what Facebook does.

And like Facebook, Telstra makes a fair chunk of its money selling ad space in the Yellow Pages. (Sensis, ‘Telstra’s wholly owned advertising and directories arm’ produces it). And of course it makes money selling phones, line rental and calls, too.

Do you remember what happened when Telstra first offered its shares to the public in 1997?

This chart (below) of Telstra Corp [ASX:TLS] only goes back to 1999. That’s when the second round of share buying opened to the public. The IPO was in 1997 – and shares were $3.30…

At its height in 1999, Telstra had an average price-to-earnings (P/E) ratio of 30. And cashflow of 51 cents per share.

Telstra Corporation Limited Share Price History

Source: Google Finance

As you can see in this chart, after opening at $8.41 (and treading water for 6 months) Telstra shares began a steady descent that now sees the shares trade for $3.36 each. It’s lost 59.98% of its price in 12 years.

Today, Telstra has an average P/E ratio of around 13… And cashflow of 21 cents per share. And the shares currently trade just above the IPO price of $3.30.

The problem is investors overpaid. And why did they overpay? Because of the euphoria of being the first to buy ‘the next big thing’… The fear of missing out… The promise of blue-sky projections…

And it pushed the share price up 154% on the $3.30 IPO in 1997… Only to see it come crashing down to earth once the euphoria wore off.

Will it be the same story for Facebook shareholders?

Aaron Tyrrell
Editor, Money Morning

Is Facebook The New Telstra?

By MoneyMorning.com.au

The Aussie market has started the week on a good note today, up over 1% after the US markets had a strong finish last week.

The S&P500 index is now just 1.8% away from its highest level since 2008. The Dow Jones index is now at a 3 ½-year high.
It seems like just five minutes ago the markets were on their knees. Sentiment was rock bottom as recently as Christmas. So what’s going on?

Data out of the US has been getting steadily better, and the latest instalment on Friday included the US employment numbers. The Bureau of Labor Statistics (BLS) announced 243,000 new jobs. This was the best result for nearly a year, and continues a steadily growing trend.

The chart below shows these monthly employment numbers for the last 8 years to put it in context. I’ve marked the last few months in red to highlight them.

US employment numbers getting better

Source: forexfactory

On the back of this, the unemployment rate fell from 8.5% to 8.3%.

8.3% is a good improvement from 9.0% just three months ago. A lower US unemployment rate is a sign of improving economic conditions in the world’s biggest economy. If it continues, it will boost stock markets in the US and Australia alike.

The 8.3% figure shows it has been making good progress down from its peak of 10.2%. It is accelerating towards the 5% level that means close to full employment.

But the only problem about government statistics is … well … THEY ARE CALCULATED BY THE GOVERNMENT.

Like lampposts to a drunk, statistics are better for providing support than illumination.

At best, you have to read deep between the lines to draw anything meaningful out of them with analysis. And at worst, you might as well use them to pick your lotto numbers. Statistics can be easily sliced, diced, refried and repackaged to suit a government’s purpose.

Let Me Show You What I Mean…

Imagine, say, a certain American president was keen to serve a second term. His chances would look much better if that stubbornly high unemployment number came down a bit after spending the last 3 years above 8%. Don’t you think?

And doesn’t it seem convenient that the unemployment figure is suddenly heading down in an election year?

A quick bit of digging shows there was one main reason for the big drop in the US unemployment rate. And it had little to do with 243,000 new jobs. Rather it was the record drop in the number of people counted as ‘looking for work’.

The BLS stopped counting 1.2 million people as being in the labour force.

This is the biggest drop on record. It’s very quick and easy to improve the unemployment number when a population the size of Dallas is wiped off the list.

How can the statisticians get away with this?

It’s all in the fine print. When their benefits run out after two years, job seekers drop off the list of those considered to be in the labour force. Hey presto! The labour force gets smaller, and the percentage of those within this that are working, magically gets bigger overnight. Nice one Uncle Sam.

You get a very different picture if you include those that have dropped off in this way. The unemployment rate would be over 11%.

If you also add those that just plain gave up (after three years of rejection letters), as well as those wanting full-time work but making do with part-time jobs, the figure would be 15.1%.

But 8.3% sounds much better in an election year, so that’s what we saw in the mainstream media over the weekend.

The US lost over 8 million jobs in 2008 and 2009.

In the two years since then, just 3.2 million of these jobs have been ‘recovered’. Just another 4.8 million jobs needed then! Even if the unemployment figure kept dropping at its current rate, it would still take more than 20 months for all those people to find employment.

But even then that wouldn’t be enough. The US is a huge country with over 300 million citizens. Its population is growing by around 3 million a year, about half of whom want work. So you can add another 6 million new job seekers on the market since the start of 2008.

About 130,000 new jobs are needed each month to keep the unemployment rate steady.

So I have some trouble swallowing that 8.3% unemployment figure, which is a very slippery statistic.

It’s not all bad news.

The number of new jobs is improving. Also looking better is the number of unemployment claims. This is the number of people that have lost their job for the first time. This has been falling and is now closer to the natural rate of turnover that we saw before the crisis.

New entrants to the job market back to a manageable pace

Source: forexfactory

This lower number means there are fewer new job seekers coming into the market, giving it at least a fighting chance of recovering.
It has been a long slow road for the US job market, and there are some rays of light appearing.

Less people are losing their jobs and more jobs are being created. But the US job market needs this to continue for years for the true unemployment rate to improve.

The headline numbers might give the markets a boost in the short term, but no one should be cheering about a ‘US jobs recovery’ just yet.

Dr. Alex Cowie
Editor, Diggers & Drillers

Why the US Unemployment Rate is a Slippery Statistic

Citigroup (NYSE:C) announced today Veritable has awarded it a mandate to provide a comprehensive suite of hedge fund services including middle office, fund accounting, and investor services.Veritable is among the largest independently owned Registered Investment Advisors in the United States providing unbiased, tax efficient, integrated investment solutions for families of substantial wealth.Citigroup (NYSE:C) has potential upside of 30.6% based on a current price of $31.57 and an average consensus analyst price target of $41.22.

This is what’s in the news for Wednesday February 2, 2012. The Wall Street Journal reports U.S. auto sales in January jumped 11% over a year ago to their fastest pace in almost four years. A number of auto makers, showing new confidence in the U.S. economy, revealed billion-dollar expansions of their American factories. The Wall Street Journal also reports Senator Herb Kohl (D-WI), chairman of the Senate Antitrust Subcommittee, said he would hold a hearing on the marketing alliance between Verizon Wireless (VZ, VOD) and Comcast (CMCSA) over concerns that together they could blunt competition in the telecommunications market, leading to higher prices. Bloomberg reports oil fell to its lowest level in six weeks as U.S. crude stockpiles increased more than expected and gasoline usage dropped to a 10-year low. Finally, Bloomberg also reports U.S. auto insurer Allstate (ALL) is investing in energy and real estate as near record-low interest rates squeeze income from bonds, said Chairman and CEO Thomas Wilson.