Month: March 2012

Source: ForexYard

Riskier assets, like the euro and AUD, tumbled on Thursday following the release of a string of negative global data. Worse than expected German news confirmed fears that the euro-zone has gone back into recession. Meanwhile, a decline in Chinese manufacturing caused the aussie to slip against its main currency rivals. Turning to today, traders will want to pay attention to the US New Home Sales figure, scheduled to be released at 14:00 GMT. Analysts are forecasting the figure to increase slightly over last month. If true, the US dollar may see gains against the JPY to close out the week.

Economic News

USD – Risk Aversion Leads to Major USD Gains

The safe-haven US dollar saw significant gains on Thursday, as negative Chinese and euro-zone data led to fears regarding the pace of the global economic recovery. Meanwhile, a better than expected US Unemployment Claims figure yesterday, boosted confidence in the US economy which gave the dollar additional momentum. The EUR/USD tumbled around 120 pips throughout European trading before staging a mild recovery during the afternoon session. The AUD/USD fell close to 150 pips, reaching as low as 1.0334, before stabilizing around 1.0365.

As we close out the week, traders will want to pay attention to the US New Home Sales figure, set to be released at 14:00 GMT. As seen earlier this week, the US housing market has been slow to recover from the global economic crisis. That being said, analysts are forecasting today’s news to show improvement over last month’s. If true, the US dollar may see gains against other safe haven currencies, like the JPY. Additionally, traders will want to pay attention to any announcements out of the euro-zone. Additional negative news may cause the dollar to extend its bullish run against riskier currencies.

EUR – Euro-Zone Recession Fears Cause EUR to Slide

A batch of negative euro-zone manufacturing data released yesterday caused the common currency to tumble throughout the day. Analysts had been forecasting an increase in the German Flash Manufacturing PMI. After it came in well below expectations, fears that the euro-zone has slipped back into recession were confirmed. As a result, the EUR/USD fell over 100 pips, reaching as low as 1.3133. Against the Japanese yen, the euro fell around 180 pips, reaching as low as 108.63.

Turning to today, euro traders will want to pay attention to any announcements out of the euro-zone regarding yesterday’s news. Any additional negative data may weigh down on the common currency. Additionally, US housing news is forecasted to show positive growth in the American economy. If true, the euro could see further losses against the greenback to close out the week. Taking a brief look at next week, traders will want to remember that on Monday, Germany will release its Ifo Buisness Climate figure. Should it come in below expectations, the euro could continue its bearish trend.

JPY – JPY Moves Up vs. USD

Thursday saw the Japanese yen benefitting from safe- haven trading against the USD. Negative global data caused the JPY to make gains virtually across the board. Euro-zone manufacturing data confirmed fears that the region has slipped back into recession, while a decrease in Chinese manufacturing caused investors to flock to safer assets, like the yen. The USD/JPY fell over 100 pips yesterday, before stabilizing around the 82.50 level.

Turning to today, yen traders will want to pay attention to the US New Home Sales figure. The JPY may be slowly inching towards the psychologically significant mark of 80.00. That being said, investors will have to see how news from the US plays out in the coming days before deciding if they want to continue going short on the USD/JPY.

Crude Oil – Crude Oil Drops on Thursday

Crude oil made a sharp downward movement on Thursday as an array of news affected currencies and commodities across the board. The biggest factor in crude oil’s drop on Thursday was the poor PMI numbers from China. This follows weeks of indications that China’s manufacturing sector had been shrinking in recent months. Additionally, overall demand from Europe continues to drop, further influencing Thursday’s drop for crude oil.

While the US released numbers on its crude oil inventories that were far below market predictions, the price of oil still dropped considerably and hovered close to 104.64 for most of Thursday afternoon. Heading into Friday, investors will want to keep an eye on whether or not domestic data from the U.S., including the recent drop in unemployment claims, has any influence on prices.

Technical News

EUR/USD

In a sign that this pair could see a price shift in the near future, the Bollinger Bands on the daily chart are beginning to narrow. A bearish cross on the same chart’s Stochastic Slow indicates that downward movement could occur. Traders may want to short their positions ahead of a possible downward breach.

GBP/USD

The Williams Percent Range on the weekly chart is currently at -20, indicating that downward movement could occur in the coming days. A bearish cross on the daily chart’s Slow Stochastic supports this theory. Going short may be a wise choice for traders ahead of a possible downward breach.

USD/JPY

A bearish cross on the weekly chart’s Slow Stochastic indicates that the pair could see downward movement in the coming days. That being said, most other technical indicators are showing that the current bullish trend may continue. Traders may want to take a wait and see approach for this pair.

USD/CHF

The Williams Percent Range on the daily chart is currently right around the -80 level, indicating that this pair could see an upward correction. At the same time, most other technical indicators are not showing a clear direction at this time. Taking a wait and see approach may be the wise choice for this pair.

The Wild Card

AUD/CHF

The Williams Percent Range on the daily chart is currently at -90, indicating that this pair is oversold and may see an upward correction in the near future. This theory is supported by the Relative Strength Index on the same chart, which has crossed below the 30 level. Forex traders may want to go long in their positions ahead of an upward 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

Tradervox (Dublin) – Lower than expected data from China and Europe led to the increase of the yen and dollar as investors searched for safe haven assets. Commodity currencies dropped led by the south pacific dollars; the euro, the pound and the Canadian dollar all declined during the European session and the New York session as well after the release of the European and Chinese Industry data.

The yen was the biggest gainer rising by more than 1 percent against the major currencies. This bullish trend was supported by reports from Japan indicating that the country registered a trade surplus for the month of February. Yen and Dollar demand were boosted by weaker industry data from Europe and China that enhanced concerns over the state of the global economy with analysts saying the global economy is slowing down. This sparked the demand for safe haven currencies.

Omer Esiner, the Chief Market Analyst at Commonwealth Foreign Exchange Inc. in Washington while talking about the concerns about the global economy said that the disappointing data from China and the Europe’s weaker than expected data has raised concerns about the worldwide economy that has led to a “flight to safety” within the market. He also indicated that the dollar is supported by the weakening jobless claims in the US.

The Canadian dollar fell to parity due to the Europe and China report as Australian dollar fell to a two month low. The euro also dropped by 0.5 percent as the British pound slid by 0.36 percent against the US dollar.

The euro was selling at $1.3153 at the start of trading in the European session after dropping 0.5 percent. The 17-nation currency dropped by 1.4 percent against the yen to settle at 108.65 while the Canadian dollar depreciated by 1.9 percent against the Japanese currency to settle at 82.45 yen. The US dollar rose by 0.8 percent against the Canadian dollar to settle at 99.98 Canadian cents per USD.

Against the south pacific currencies, the USD gained by 0.8 percent to sell at $1.0376 as the Yen increased 1.9 percent to sell at 85.57 yen against the Aussie. The yen and the dollar increased by 2 and 0.9 percent to sell at 66.65 yen and 80.82 US cents respectively against the New Zealand dollar.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by 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

Iceland’s Sedlabanki raised its seven-day collateral lending rate 25 basis points to 5.00% from 4.75%.  The Bank said: “The economic outlook is broadly in line with the Central Bank’s February forecast. The króna is weaker than in February, however, and the short-term inflation outlook has deteriorated somewhat from the forecast prepared at that time. Further ahead, there is the risk that inflation will remain above the Bank’s inflation target for a longer period than projected unless the króna appreciates in coming months. The extent to which closing the loopholes in the Foreign Exchange Act affects the exchange rate will emerge in the near future.”

Iceland’s central bank last increased the rate 25 basis points at its November monetary policy meeting, after increasing the lending rate by 25 basis points to 4.50% in August.  Iceland reported headline inflation of 6.5% in December, up from 5.3% in October, compared to 5.7% in September, 5% in July, 4.2% in June, 3.4% in May, and 2.3% in March; the Bank’s inflation target is 2.5%.  Iceland’s currency, the krona (ISK), last traded around 126.5 against the US dollar.

By TraderVox.com

Tradervox (Dublin) – The Aussie and the Kiwi fell after manufacturing data from China declined unexpectedly. China is New Zealand’s second largest export market and it is Australia’s largest trading partner; as such, decline in the manufacturing data led to panic among investors who went for safe haven currencies such as the dollar and the yen. According to JP Morgan’s G7 Volatility Index, there is implied volatility as the index rose to 10.27 percent after it had fallen to 9.91 percent on March 20 which is the lowest level since February 27.

The Australian dollar slid against most of the major currencies as the market increased its expectation for a change in interest rate by the Reserve bank of Australia. The Kiwi dropped after China PMI slowed and report showing that the gross domestic product increased by half what economists were expecting. Cullum Henderson, who heads Currency Research at Standard Chartered Plc, commented that the momentum in China’s growth is slowing lowering the demand for the Aussie and kiwi.

The Australian dollar declined by 0.9 percent against the dollar to settle at $1.0368 during the New York trading session, but it had earlier touched $1.0336, which is the weakest it has been since January 17. Against the yen, the Aussie dropped by 1.8 percent to sell at 85.69 yen. The New Zealand dollar had its own share of the losses declining by 0.6 percent against the US dollar to trade at 80.84 US cents. It had earlier touched it weakest since January 25 of 80.59 US cents. The kiwi slid by 1.8 percent against the yen to trade at 66.80 yen.

Investors are now keeping a close eye on the efforts of the RBA to lower the interest rate, which is the highest among the developed countries. The declining expansion in the Chinese market is seen as the key factor that will lead to this change in interest rate. Analysts have suggested that the AUDUSD pair is poised for major downturn as China prepares for “a hard landing.” The 200-day SMA of $1.0404 is set to be broken as the Aussie-buck pair continues with the downward trend.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by 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

Nigeria’s finance minister Ngozi Okonjo-Iweala is expected to be nominated to head the World Bank. Rough Cut (No reporter narration)

By MoneyMorning.com.au

“‘Should the inflation outlook deteriorate, we will immediately take preventative action,’ [European Central Bank President, Mario] Draghi told the mass-selling Bild daily.” – Reuters

When a central banker talks about the inflation outlook worsening, we never know on which side of the fence they’re sitting.

Their public stance is to claim they’re keeping a watch on inflation. To make sure it isn’t too high.

But the history of central banking shows that inflation is the bankers’ best friend. They love inflation. In fact, it’s thanks to them that the western world has had almost non-stop inflation for over 40 years.

It ensures rising paycheques for bankers. More money in government coffers. And it forces individuals to work longer and harder. (Whatever happened to the single-income household?)

So, what’s the best way to beat inflation? Gold? Maybe not…

Gold should be in every investor’s portfolio.

It’s criminal that so few Aussies own gold.

But we see gold as an insurance policy rather than a millionaire-maker. That’s why we suggest you don’t put your entire wealth in it. 10-50% is enough. Depending on your view of the markets and global economy.

Because as we see it, if central bankers unleash another decade or more of steady inflation, the best way to beat them may not be gold at all. It could be stocks.

Look at this chart…

The green line is the Dow Jones Industrial Average from 1970 until the end of 2012. The red line is the gold price.

Now, as we’ve pointed out before, our view is you won’t see a repeat of the 1970s and 1980s credit-fuelled boom. That instead, the market will repeat the volatility of 2000-2011.

But what if we’re wrong?

What if bankers and pen pushers mess with the market so much that they do repeat the boom?

Well, if the past 40 years is a guide, then it’s not just gold you’ll want in your portfolio. You’ll want stocks too…

The biggest problem is that most diversified portfolios aren’t diversified. At the ‘After America’ investment symposium, we showed a balanced portfolio from a well-known firm.

It had 60% in shares. Thirty per cent in debt investments. Five per cent in property. And five per cent in other stuff.

In short, if shares fell by 20% or 40% there’s no way the other investments would rise by enough to cover the losses from shares. That’s not diversifying.

That’s why we urge you to adopt the 80/20 approach. Put 80% of your assets in safe investments – cash, term deposits, gold and steady dividend stocks.

The rest of your portfolio can go into riskier stuff – growth shares. (Whether that’s small-caps for explosive medium-term gains or blue-chips for explosive short-term gains is up to you.)

The point is, we’re convinced central bankers and pen pushers are leading western economies down the toilet. But you must also prepare for the chance they can keep going with their deadly experiment in central banking and unsound money.

Think about it. They’ve strung things out this long. Who’s to say they can’t string things out another 80 years?

But assuming they will is dangerous to your and your family’s wealth.

Betting on the stock market has proven to beat inflation over 40 years. And as the modus operandi of central bankers is to create inflation, it makes sense to own stocks.

You should buy stocks on down days like today. But you have to do it sensibly. Make sure you have plenty of ‘safe’ money set aside. And what remains, invest carefully in the market.

Because if inflation takes off again, you can be almost certain stocks will follow suit. And you don’t want to be left behind if that happens.

Cheers.
Kris.

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A Better Inflation Bet Than Gold?

By MoneyMorning.com.au

The final stage of the crisis of the global monetary system is near. It’s the stage where investors realise the finances of the US government are worse than Greece and Italy and the UK. It’s the stage where investors and the public realise the only way for the US government to keep running large deficits is for the Federal Reserve to “monetise” them.

This is massively inflationary.

By “monestise them” I mean that if no one else can or is willing to buy US government debt, the Federal Reserve will. The important point for Australian investors to realise is that no matter what happens to the value of the Aussie dollar relative to the US (the exchange rate), the decline of the US dollar is hugely bullish for tangible assets.

The Fed Won’t Have a Choice

The cost of refinancing America’s short-term debt is going to rise. Eventually, it will rise in the same way that Italian and Greek interest rates have risen. The private market will turn on the Fed and demand much higher interest rates. To prevent US bond auctions from failing, and the US government from running out of money, the Fed will have to print.

I expect this year to be the year where professional and individual investors begin to seriously look at adding gold to their portfolio for the first time. The magnitude of the US debt problem will be impossible to ignore. The ratings agencies will make sure of that, if they aren’t shut down by the government, that is.

But there is one thing we should all keep in mind: the Fed can theoretically play this game for a long time. A coordinated, worldwide intervention by central banks in financial markets (including capital controls) would limit the ability of investors to move money freely from one asset class to another.

The nationalisation of banks could also conceivably lead to a mandated appetite for government debt, with banks forced to own a portion of their assets in liquid (if not high credit quality) government bonds.

No Time to Waste for Private Investors

10-year US interest rates stayed around 2% for nearly a full decade in the 1940s. The US financed its war spending at cheap rates. As the economy shifted from a war footing to full industrial capacity in the 1950s—and inflation became embedded in US monetary policy— rates moved up.

They are now back down at historic lows. For them to stay there, the Fed will likely have to intervene heavily in markets and purchase trillions in debt issued by the Treasury. Since the US is broke, the Fed will have to contrive this money electronically. This will lead to the great destruction of the US middle class and the death of financial assets as a way to retirement wealth. That’s why it’s critical that you have a plan ahead of time.

Dan Denning
Editor, Australian Wealth Gameplan

The “After America” Archives…

‘After America’: The World Reset
2012-03-17 – Callum Newman

‘After America’: Threats and Opportunities
2012-03-16 – Callum Newman

China and The Revolution
2012-03-15 – Callum Newman

Cocktails and Central Banks
2012-03-14 – Callum Newman

Prelude to ‘After America’

2012-03-13 – Callum Newman

Why Private Investors Will Abandon the Fed

By MoneyMorning.com.au

Most investors are feeling cheerful. Bullish bonhomie abounds.

But beware: consensus thinking among investors tends to be wrong. When sentiment changes, the impact on markets can be nasty. And the higher stocks have climbed, the bigger the potential damage to prices.

What might be the catalyst for such a change in trend? Often the biggest threats to markets stem from unexpected events, or from something that had been discounted as a risk factor.

There’s one such risk that everyone was worried about a year ago. Since then, it’s dropped right off the radar screen.

But it could be about to come back and bite us again.

Don’t Forget the Risks of Rising Food Prices

This time last year, one statistic was freaking out politicians and markets alike: global food prices had risen by more than a third within a year.

Demand was growing faster than supply; bad weather had caused poor harvests; soaring feed costs made animals more expensive to rear. So farmers had to push up selling prices to make ends meet.

Speculation almost certainly played its part too. Central banks had decided that QE – quantitative easing, ie printing money – was the answer to all the world’s ills.

But this extra cash ended up in the hands of bankers and traders. And true to form, it started to burn a hole in their pockets, so they punted big chunks of it on the commodity markets.

That made matters worse. Then the surge in the cost of basic foodstuffs filtered into supermarket prices. This drove up overall inflation.

Here in the well-fed West, we put up with it, and accepted we’d have less to spend on other things. But elsewhere, soaring food prices caused riots, and were a major factor in the Arab Spring uprisings. The 2007-2008 world food price crisis was repeating itself.

The Beauty of Markets

But the beauty of markets is that they’re largely self-correcting. That’s another way of saying that rising prices make the production of those basic foodstuffs more appealing. Farmers see rising prices, so they plant more crops and rear more animals. As a result, supply picks up, and prices fall.

And market forces did kick in: last year saw a record wheat crop; other cereals also saw better harvests; strong demand for culled cows and higher milk prices boosted dairy livestock markets; and so on.

So the last 12 months have been much better for food consumers. Wheat prices in particular fell by 18% in 2011. Between last February and the end of last year, the Food and Agriculture Organisation (FAO) Food Price Index – the UN’s main food price measure – dropped by around 11.5%.

But global food costs are on the rise again. The FAO index rose by 1% in February alone. This is the second month running that global prices have gone up. And while that still leaves the index 10% down on a year ago, it’s a worrying sign.

What is causing the price rises this time round? Adverse climatic conditions are still affecting key growing regions such as South America and Europe, according to the FAO.

Wheat prices are up 9% from this year’s low on 18 January. Soybean prices are 20% higher than they were in November on concerns that hot, dry weather would hurt South American crops. Unhelpful conditions in Brazil, the leading exporter of sugar, have driven up its cost too.

For the moment, the FAO reckons there’s no great cause for alarm: the world won’t see a repeat of the 2007-2008 and 2010 food cost explosions. But that may be too sanguine a view.

That’s because global inventories of wheat and soybeans are falling more rapidly than expected. This could drive supply and demand out of kilter again, which would drive prices higher once more.

The US Department of Agriculture (USDA) has just cut its forecasts for world wheat stockpiles on 31 May by 1.7%. That would reduce them to a level lower than expected by all 21 analysts surveyed by Bloomberg.

Soybean reserves will hit a three-year low by 31 August this year, says the USDA. Even more dramatic, levels of corn inventory held in the US – the world’s top grower and exporter – are now forecast to drop to their lowest levels since at least 1996. Farmers aren’t keeping up with rising demand for food, livestock feed and biofuel.

What’s more, the USDA lowered its outlook for Brazil’s wheat crop by 4.9% compared with last month and Argentina’s by 3.1%. Again, that is likely to lead to higher prices than were earlier expected.

And if food costs do start to rise more rapidly, there’s a high chance those bankers will want to get involved again with their QE cash. If central banks print even more money – and there’s every chance of that – commodity speculators will be given further ammo to drive prices up.

David Stevenson
Associate Editor, MoneyWeek (UK)

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

The “After America” Archives…

‘After America’: The World Reset
2012-03-17 – Callum Newman

‘After America’: Threats and Opportunities
2012-03-16 – Callum Newman

China and The Revolution
2012-03-15 – Callum Newman

Cocktails and Central Banks
2012-03-14 – Callum Newman

Prelude to ‘After America’

2012-03-13 – Callum Newman

The Big Risk That Everyone’s Forgotten: Rising Food Prices

Goldman Sachs (NYSE:GS) issued a not to clients advising them to Buy Google (NASDAQ:GOOG) April $635 straddles before earnings estimated to be on April 13th, and CarMax (NYSE:KMX) April $35 calls before its earnings report on April 5th.Goldman equity derivatives Catherine Fogertey and John Marshall said they see unusually high profitability patterns from buying options before earnings for list of names that include Google (NASDAQ:GOOG), Nike (NYSE:NKE) and IBM (NYSE:IBM) according to the note.They said CarMax could report positive comp this quarter after used car sales improved faster than most expected.