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Markets Set to Pick Up With US News Today
Source: ForexYard
Following a relatively mild day in the marketplace yesterday, a batch of US news is forecasted to generate volatility today. The US Building Permits figure, set to be released at 12:30 GMT, is forecasted to come in slightly above last month’s figure. If true, the dollar could see gains against its main currency rivals during the afternoon session. In addition, a speech from Fed Chairman Bernanke may give investors some clues as to the current state of the US economy. Any positive signs from the Fed Chairman could help the greenback.
Economic News
USD – USD Takes Losses in Slow Trading Day
The US dollar dropped vs. some of its main currency rivals yesterday, as a low liquidity environment led to some erratic market movements. The EUR/USD broke above the 1.3200 level during the afternoon session, as a poor US CPI figure from last week continued to weigh down on the greenback. Meanwhile, the USD/JPY dropped some 50 pips during the morning session before staging a recovery later in the day. The pair eventually stabilized around the 83.30 level.
Turning to today, the dollar may have an opportunity to recoup some of yesterday’s losses as several pieces of significant US news are set to be released. The US Building Permits figure is forecasted to come in at 0.69M. If true, it would represent a slight improvement over last month’s figure and would be yet another sign of an improvement in the US economy. Additionally, a speech from Fed Chairman Bernanke is expected to give investors clues as to the current state of the US economy. Following the disappointing US data from last week, positive comments from the Fed Chairman could give the dollar a boost during afternoon trading.
EUR – EUR Sees Gains vs. USD, JPY
The euro extended its upward trend vs. the dollar during yesterday’s session. Following very little movement during the morning session, the EUR/USD shot up over 50 pips during afternoon trading, and breached the 1.3200 level. Analysts attributed the spike to last week’s worse than expected US CPI figure, which generated doubts that the Federal Reserve would increase US interest rates earlier than forecasted. Against the safe-haven yen, the euro was able to recover after taking some losses during the Asian session. The EUR/JPY moved up some 75 pips during mid-day trading.
Turning to today, the euro may reverse some of its gains against the dollar if the US Building Permits figure comes in as forecasted. Building permits are considered a key indicator of overall economic health, and a positive figure may help strengthen the dollar after its most recent bearish trend. At the same time, should the US news come in below expectations, the euro may be able to move up further against its safe-haven currency rivals.
JPY – JPY Takes Losses vs. Riskier Currencies
The euro made significant gains against the yen on Monday as the Japanese currency continues to be weighted down by BOJ monetary policy. The EUR/JPY bounced back to the 110.08 mark on Monday evening, marking a five month high for the EUR/JPY pair.
Also gaining on the yen Monday was the Australian dollar. The AUD/JPY dropped as low as 87.84 during morning trading, but was able to stage a recovery later in the day. Following last month’s decision by the Bank of Japan to inject millions of yen into the economy, the yen has been consistently dropping against several currencies. Many analysts had predicted that we would see some resurgence from the yen but so far those predictions have turned up incorrect.
As we move into the end of March, we will see the business year end for Japan. Traditionally, this time of the year sees an increase in foreign investment in the Japanese economy. If the past repeats itself in this regard, we may well see the yen bounce back from its recent slump.
Crude Oil – Crude Oil on the Rise
Crude oil saw significant gains on Monday and closed in on its highest mark since last week, trading near 108.23 for most of the day. Following last week’s lackluster CPI figure from the US, the dollar saw losses against several of its currency rivals. This in turn has led to an increase in oil purchases given the relative affordability for international investors.
Heading into tomorrow, the U.S. will be releasing building permit numbers which could offer a chance for the greenback to redeem itself. Any increase in the value of the dollar could push back crude oil and reverse its current bullish trend.
Technical News
EUR/USD
Most long-term technical indicators show this pair range-trading, meaning that no significant movements are forecasted at this time. That being said, traders may want to take a wait and see approach, as a clearer picture may present itself in the near future. The daily chart’s Williams Percent Range, which is trending upward at the moment, may eventually reach overbought territory. In such a case, a bearish correction could occur.
GBP/USD
The weekly chart’s Williams Percent Range is currently hovering in the overbought zone, indicating that a bearish correction could occur in the coming days. A bearish cross on the daily chart’s MACD/OsMA lends further support to this theory. Traders may want to go short in their positions.
USD/JPY
A bearish cross on the weekly chart’s Slow Stochastic indicates that a downward correction could occur in the near future. Furthermore, in another sign that the pair could move down, the daily chart’s Williams Percent Range is currently at -20. Going short may be the wise choice for this pair.
USD/CHF
A narrowing of the Bollinger Bands on the weekly chart indicates that a price shift could occur in the coming days. That being said, most other technical indicators are not showing a clear picture as to which direction the shift could be. Traders may want to take a wait and see approach for this pair.
The Wild Card
Nasdaq 100
The Relative Strength Index on the daily chart has entered the overbought zone, indicating that downward movement could occur in the near future. The Williams Percent Range on the 8-hour chart is also trading in overbought territory, lending further support to the theory that a downward correction could take place. Forex traders may want to short their positions.
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.
Wendy’s Surpasses Burger King in Sales
Fast food chain, Wendy’s (NYSE:WEN) surpassed Burger King as the number 2 burger chain according to research firm, Technomic.Last year, Wendy’s sales were $8.5 billion while Burger King came to $8.4 billion.McDonald’s came at number 1 with sale of $34.20 billion.The Wendy’s Company finished slightly lower on the day, down 0.2% to $5.03.
Why Silver Could Be the Apple of the Resources Sector
By MoneyMorning.com.au
Sometimes making a great deal of money in the market can all come down to one single good idea.
If that idea is solid – and you are patient enough to see it through – it can be enough to make a fortune.
Just ask Warren Buffett.
He invested in Gillette because, in his own words, ‘It’s pleasant going to bed at night, knowing there are 2.5 billion males in the world who will have to shave in the morning’.
It’s surprising how simple the foundation of an idea can be.
In Buffett’s case, half the world’s population is male, and many are adults that have to shave each day. So, they will need shaving foam and razor blades every day for many years to come.
When Proctor and Gamble bought Gillette a few years later, Buffett made $645 million on the deal. Not bad for a day’s work.
My brother, while not exactly Warren Buffett, has done well following the same simple logic.
He was writing computer code before he could walk, and has worked in IT his whole career.
And he was also using Apple Macintosh computers – back when an Apple was still a type of fruit.
He liked the Apple Mac computers. They were a quirky product in a Microsoft dominated market – yet these ‘Macs’ were stable, a pleasure to use, and looked cool. He reckoned it was just time before they cleaned up the whole market.
So he bet big on Apple.
The result?
He’s made a more – than 4000% gain.
Having the clarity and conviction, and then patience to hang on for seven years in the hope you’re right about a company, is no easy feat.
Apple (NASDAQ:AAPL) may be all over the news right now, but Apple’s investors have been making incredible returns for years. This is the 10-year chart, which follows it from the wreckage of the tech-crash, to present day.
Apple share price – I’m not jealous, honest!
But because my bro is living in the UK, he also has the sweetener that the British pound is down 25% against the US dollar since he bought his shares.
…This means his 4000% gain is actually worth 5000%.
That’s more than a 50-fold increase in his capital.
Jealous … me?
It hasn’t been an easy journey, and seeing this spectacular gain has involved some major thrills and spills on the way. I remember when he was visiting me in Melbourne in January 2008, he saw Apple’s share price fall 80% in a few days. He shrugged it off calmly and went about his day. It then rallied and halved again later that same year. He was remarkably unphased.
Having a great idea is the easy bit. It’s sticking with it that’s the tough part.
Apple is suddenly getting a lot of media attention for a few reasons. For one thing, at US$560 billion it is now America’s biggest stock by market capitalisation.
It is also making a BILLION dollars in cash each week.
The cash pile is now around $100 billion dollars. Let me put that it context. By Christmas, Apple’s cash pile will be bigger than New Zealand’s economy.
So, with so much money rolling in, the company has voted to start paying a 1.8% dividend each year. But even then the company complains that, due to tax issues, it can’t pay out its cash quicker than it is making it. Sounds like a good problem to have!
But with Apple’s share price up 66% this year, it looks to me like the share price has got ahead of itself.
One big problem is that Apple is now the clear favourite among hedge funds, and where the hedge funds invest, volatility follows. At last count, over 200 hedge funds have taken a stake in the cashed-up maker of the iPhone.
And they are there for ‘a good time, not a long time’. So the hedgies will sell all their stock in a heartbeat if the going gets rough, then look around for the next punt.
So far, hedgies only have 4% of the stock but this is increasing. They are like sheep, so we can expect more to follow. When it’s time for them to take profit, we could see the share price drop. This often happens in the lead up to Christmas. This is when hedge funds pull out all the stops to make their calendar-year profits – and their annual bonus – as big as possible. Watch out for a drop later this year.
The Resource Sector’s Version of Apple?
There are some commodities, like silver, palladium and tin that, like Apple, have had spectacular runs, testing the nerves of investors along the way. Silver is up more than 600% in the last 10 years, and along the way has had periods where it has lost more than 60% in a few months, before recovering.
Silver – the commodity sector’s version of Apple
After a terrible 2010, silver is now up over 20% this year. You can see on the chart that it is normally after a slow 12 months that silver often has its next big move up, and it looks to me like this is starting to happen.
The reasons for silver prices to keep rising are still in place.
Part of my talk at our conference in Sydney last week was how to amplify your profits from these kind of commodity moves. I recommend holding physical silver, but it has only returned 15.7%, in Aussie-dollar terms, on average over the last 10 years.
That’s better than a slap in the face, but if you want to increase your gains, one option is to invest in silver stocks. In the time that Aussie-dollar silver has eked out a hard-earned 1% gain, an ASX-listed silver explorer I recommended to Diggers and Drillers readers last November has gained 111.1%. An incredible 15.1% of that was this morning alone.
OK, it’s not quite the 4000% that Apple has made in seven years. But 111.1% is not bad for just three months.
You Don’t Want to Miss This Boat
Just as it takes differing views to make a market, the views of the speakers at our conference differed. But one common message of the conference was that there is trouble brewing in China and we can’t rely on it to pick up the pieces ‘After America’.
I tend to be more bullish on China than my colleagues. But if I’m wrong and China IS going to crash in the coming years … all the more reason to try and profit from these small-cap miners right now and cushion the blow!
We may have missed the boat with Apple. But I still see plenty more opportunities in the oil, precious metals and agricultural small-cap space this year.
Dr. Alex Cowie
Editor, Diggers & Drillers
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Why You Should Build Your Wealth Using the Biggest BRICS Possible
By MoneyMorning.com.au
Ed Note: David Thomas, BRIC expert and entrepreneur, gave a great presentation at ‘After America’, Port Phillip Publishing’s first investing conference. You can order the DVD now to see for yourself. Over the next three days, he will share some of his thoughts on the BRICS…and how you can take advantage.
All over the world, and particularly in the debt-laden economies of the USA and Western Europe, we are now acknowledging the importance of China as the new economic engine of investment, trade and growth. This has happened very quickly, and probably before China was completely ready, but there is little doubt that we are now witnessing a major and historical event.
The passing of the economic baton to a group of large, ambitious and rapidly industrialising countries who have become collectively known as the “BRIC countries” (Brazil, Russia, India and China), the four economies that will dominate the global scene in the 21st century.
The BRIC acronym, first invented in late 2001 by Jim O’Neill, then Head of Economic Research at Goldman Sachs, has proved to be prophetic and been acknowledged as the “call of the century” by leading investment commentators. However, many investors, entrepreneurs and business leaders are still grappling with it as a guide for future investment and business opportunities.
So, in order to understand why BRIC is so important as a guide to future economic growth let’s start by examining the three traditional drivers of economic growth, land, people and capital, and see how each BRIC country ranks against themselves and others under these three criteria:
Firstly, let’s begin with the largest countries in terms of size:
Russia is the largest country in the world (17.1m km²), by a long way followed by China (9.6m km²), Brazil (8.5m km²) and India (3.3m km²) in 4th, 5th & 7th place respectively. If all you needed was land, Russia would be the world’s largest economy.
But it’s more than just land. You also need people to generate growth and productivity. Here follows the ten countries in the world today with the largest populations:
China and India’s combined population of over 2.5 billion dominates this picture.
Whilst the availability of land and people was enough to dominate the global economy prior to the 19th Century, the Industrial Revolution changed everything by introducing machinery, technology and energy as the new drivers of productivity and growth. This all had to be paid for, and the availability of capital became a vital differentiator between booming and lagging economies. So which were the largest economies in 2010?
Whilst the US economy (GDP $14.72 trillion) is still the largest in the world by some margin, the rapid growth in the emerging economies means that this position will be challenged and overtaken within the next decade.
In fact, the Chinese economy (now $5.89 trillion and growing at an average of 8.5% p.a.) is predicted to overtake the US as the largest in the world by 2025, or sooner. The graph below forecasts the size of the world’s largest economies in 2050. As can be seen, the picture is dominated by China ($70.7tr) which is predicted to be almost double the size of the US ($38.5tr)
When you combine the three economic drivers of land, people and capital, and plot some of the world’s leading countries against each of these measures, an interesting picture emerges (see below). The defining characteristics that set the BRIC countries (and the US) apart from the rest of the world is just that – the abundance of land, people and capital.
So, where are the opportunities for you, your clients and your business networks?
David Thomas
Contributing Writer, Money Morning
Ed Note: David will look at China specifically tomorrow…Stay tuned.
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 You Should Build Your Wealth Using the Biggest BRICS Possible
A Surprising Way to Offset Your Electricity Bill Thanks to the Mining Tax
By MoneyMorning.com.au
Yes, the new Mining Tax is here. And yes, your power bills are about to increase. But there’s a somewhat sneaky way you – as an investor – can offset your rising electricity bills.
At least that’s the way it looks after this statement from Victoria’s Energy Minister, Michael O’Brien.
It seems O’Brien has a plan… A plan that will create new jobs… Drag some revenue to the state government’s purse… And, surprisingly, create new investing opportunities for you…
News.com.au reports this morning:
‘Energy Minister Michael O’Brien yesterday confirmed the coalition was seeking expressions of interest for new allocations of coal that were hoped to deliver hundreds of millions of dollars in royalties, as well as billions of dollars of investment in mines, processing and infrastructure.’
You see, Victoria has one of the world’s largest deposits of brown coal at 37 billion tonnes. But it’s never exported it.
NSW coal exports net the state $8.1 billion last year.
Both brown and coking (black) coal generate 29% of the world’s electricity. But unlike coking coal, there’s no tradeable international market for brown coal.
And that’s mostly because brown coal tends to explode…
Wikipedia says – brown coal, or Lignite, ‘… [has a] high moisture content and susceptibility to spontaneous combustion can cause problems in transportation and storage.’
And because brown coal can blow up for no reason, most power stations are located within a very short transporting distance from the coal.
However, technology has changed over the years. And some companies have developed ways to press out brown coal’s high moisture content – the main reason behind the spontaneous combustion. This process, called ‘dewatering’ turns brown coal into a pressed, dry brick-like form.
But most importantly, it makes coal safe to transport.
It has other benefits as well. Like reduced emissions at the power station. And even a reduction in the amount of coal used.
This technology isn’t new, but the difference now is it’s now more economical.
The problem, for you as an investor, is these changes to the coal industry will take some time. And the two brown coal ‘dewatering’ companies aren’t tradable…
Which means you can’t jump on this new technology just yet.
There is also no futures market for brown coal.
Simply look for energy companies with interests in power stations. Even better, look for companies that are in Victoria. This way, as the change filters through the industry, those stocks will also benefit.
The three biggest electricity plants in Victoria all have publically listed companies…
AGL Energy Ltd [ASX: AGK] has a nice 32.5% share in the Loy Yang power station. Loy Yang, produces a third of Victoria’s energy needs. And it’s attached mine is the largest in the Southern Hemisphere.
Then there’s Hazelwood. Once called the world’s dirtiest power plant, it develops roughly 25% of electricity for Victorians. The 92% majority owner of Hazelwood is International Power [LON: IPR].
And Yallourn is owned by TRU energy, a subsidiary of CLP Holdings [HK: 0002]. It pumps out about 22% of Victoria’s energy needs.
So, your energy bill might be going higher.
But what better way to offset rising costs than to look for companies that will be able to cash in on the changing brown coal market.
Shae Smith
Editor, Money Morning
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
A Surprising Way to Offset Your Electricity Bill Thanks to the Mining Tax
GBPUSD’s rise from 1.5602 extends to 1.5913
GBPUSD’s rise from 1.5602 extends to as high as 1.5913. Further rise to test 1.5991 previous high resistance would likely be seen later today, a break above this level will signal resumption of the uptrend from 1.5236 (Jan 13 low), then next target would be at 1.6100 area. On the downside, as long as 1.5991 key resistance holds, the rise from 1.5602 could be treated as correction of the downtrend from 1.5991, another fall towards 1.5000 is still possible.
Analyst Moves: ABT, ETFC
Abbott Laboratories (ABT) was upgraded today by Deutsche Bank (DB) from hold to buy with a price target of $70, as the firm believes that the recent split will be beneficial to the share price. Shares are higher by about 1.4 percent.
Daily Market Wrap: UPS, FDX, SBUX, TIF, ORCL
After a flat open, the markets managed to make some impressive gains, continuing last week’s rally. The Nasdaq got a boost from Apple (AAPL), after the company announced plans for a quarterly dividend and also said it would buy back $10 billion of its own shares over 3 years.
Greece’s Finance Minister steps down
Newly elected Socialist party leader Evangelos Venizelos steps down as finance minister to focus on national elections.