Month: March 2012

I guess not much has changed in the land of actively managed funds over the last several years.

In 2006, former Investment U Chairman, Mark Skousen wrote, “80% of actively managed funds fail to beat the market.”

Fast-forward to last year, and TIME Magazine reports, “Among large-cap fund managers, 79% trailed the return of the S&P 500.”

Yet this is only the beginning… In 2011, TIME adds, “57% of global funds, 65% of international funds, and 81% of emerging market funds trailed their benchmarks.”

You’d think investors would get tired of paying excessive fees for funds managed by experts who, more than half the time, don’t even beat the market they’re looking to in any given year.

Well, although the majority of investors still invest in actively managed funds today, it appears more and more are switching to passively managed index funds in the hopes of better returns.

Index Funds At a Glance

Index funds are simply investments that try to replicate the index of a specific market.

Unlike actively managed funds, index funds are passively managed. That means instead of having a fund manager choose which stocks are likely to head higher in any given index, an index fund would simply own all of the stocks in the index.

At the end of the year, this allows index funds to charge less in fees as opposed to actively managed funds. And it minimizes the taxes investors would incur had they gone with an actively managed fund.

There are two ways to invest in index funds, through a mutual fund or an ETF.

The Vanguard 500 Index Fund (Nasdaq: VFINX) is an example of an index mutual fund that seeks to track the performance of the S&P 500.

Over the past five years, and as you’d hope, this fund’s chart looks strikingly similar to the S&P 500.

Yet, digging even deeper, traditional index funds like the Vanguard 500 Index may also have a major flaw…

They are cap weighted.

This means the companies with the biggest market caps in the indices they track make up the majority of the fund. Put simply, these funds invest in companies based on Wall Street “popularity,” not necessarily based on their fundamentals.

As Reuters recently reported, “Cap weighting tends to load up on the most expensive companies and shuns the big companies trading at deep discounts.”

So, what can you do?

The answer may lie in alternative index funds.

Alternative Index Funds

There are two alternative index funds to consider that can increase return with less volatility than their traditional cousin…

• Equal-weighted index fund
• Fundamental index fund

Equal-weighted index funds simply invest the same percentage into each of the stocks in it the index it’s tracking. An example of this is the Rydex S&P Equal Weight (NYSE: RSP), which was the first ETF to use equal weighting.

This index fund holds all the stocks that you’d see in a traditional S&P 500 index fund. But instead of making the S&P a “popularity contest,” it simply allocates 0.2% of the portfolio to each company in the S&P 500.

On the other hand, index funds weighted by their fundamentals, like the Powershares FTSE RAFI US 100 (NYSE: PRF), weights its index based on a company’s book value, free cash flow, revenue and dividends.

Both of these alternatives funds are technically passively managed, so they won’t cost as much as an actively managed ETF or mutual fund. But you’ll probably pay higher annual fees than simply investing in a traditional index fund. This is simply because fundamental and equal weight index funds require more maintenance throughout the year to maintain.

But at the end of the day, these alternative index funds also give you the opportunity to increase your returns with less volatility than a traditional index fund.

Good Investing,

Mike Kapsch

Article by Investment U

If you aren’t familiar with Tata Motors (NYSE: TTM), allow me to introduce them to you.

Founded in 1945, today Tata Motors is India’s biggest automobile manufacturer.

The company was originally created to manufacture locomotives, but in 1954, working with Daimler-Benz AG (a relationship that ended in1969), it created its first commercial vehicle and has been doing so ever since.

Since the first car rolled off the line in 1954, Tata has produced and sold over 6.5 million vehicles in India.

Headquartered in Mumbai, India’s most populated city, the company is ranked as eighteenth-largest motor vehicle manufacturer in the world according to volume, producing trucks, passenger cars, coach buses and vans.

While they have five assembly and manufacturing plants in India, they also have plants in the United Kingdom, Argentina, Thailand and South Africa.

And Tata is in the process of expanding production into other areas of the world.

An Eye on China

In the last decade Tata pushed its acquisition peddle to the floor. The company took over Daewoo’s truck manufacturing unit in 2004 and gained controlling rights of bus and coach manufacturer Hispano Carrocera in 2005.

But its most renowned acquisition was of Jaguar Land Rover in 2008, purchased from Ford Motor Company (NYSE: F) for $2.3 billion during the heart of the financial crises.

This acquisition has been a homerun for the company as of late, as Jaguar Land Rover is seeing strong sales volume growth due to increasing acceptance of its vehicles in developing countries like Russia, Brazil, India and China.

At the end of February, India equity research group Avendus estimated that Jaguar Land Rover’s sales volume will grow at a compounded annual growth rate of 15% from 2012-2014.

Seeing the potential for strong sales growth in emerging markets, it’s no surprise that on February 21, 2011, Tata announced that its Jaguar Land Rover unit had chosen a partner to assemble cars in China, the world’s largest auto market.

China levies higher taxes on imported vehicles to support domestic production, pushing automakers like Tata to manufacture vehicles locally.

Creating a plant in China will likely enable Tata to sell Jaguar Land Rover vehicles at competitive prices in area that has become the company’s largest market outside of Europe.

Tata announced that it will double its investments in is Jaguar Land Rover division to $2.37 billion a year to develop new technologies and products, and plans to spend up to $158 million on the proposed facility in China.

The move makes sense as demand has started to falter in the long-established strongholds of Europe and the United States, where recent economic conditions have slowed consumer demand.

Jaguar Land Rover sales make up a whopping 57% of Tata’s revenue if you look at it 2011 numbers. And Jaguar Land Rover sales were $15.4 billion in 2011, a 48% increase compared to 2010.

It’s no surprise that the company is also considering building a plant in Brazil, another emerging market.

A Diverse Automobile Portfolio

What makes Tata a truly interesting story is its diverse range of vehicle products.

From top luxury brands like Jaguars and Land Rovers, you’ll also find that Tata is the producer of the world’s cheapest car, the Tata Nano.

In January 2008, Tata unveiled the “People’s Car,” and it hit the streets in India in March 2009, priced around $2,100.

The idea was to provide the world’s cheapest car to India’s growing urban consumers.

Tata Motors and many analysts had big expectations for the Nano, but it has yet to live up to its hype.

The idea was that emerging urban consumers breaking out of poverty would look to the Nano as their first car to prosperity. But as noted above, the taste for the cheapest car on the market isn’t what emerging consumers want; the trend has been to purchase second hand or more expensive cars.

While Nano sales haven’t been stellar, I still applaud Tata’s visionary approach in trying to provide millions of families a car they can actually afford, which brings a great segue to Tata’s next potentially revolutionary product… air powered cars.

Is This a Bunch of Hot Air?

It might seem like something out of a sci-fi novel, but I kid you not. Tata is gearing up to introduce the MiniCat, a car that runs completely on compressed air.

The MiniCat is lightweight, fiberglass bodied, six-seat mini-van. The car uses compressed air stored in fibre tanks to push the engine’s pistons and create movement.

And its designers state that it costs less than a tenth to operate the vehicle compared to cars that run on gasoline.

Guy Negre is an ex-Formula One engineer who is the brains behind the air car. Using a development by Luxembourg-based MDI, once Tata takes the MiniCat commercial, it will be the world’s cleanest car, with zero emissions.

It’s quite compelling, considering it will have a 125-mile range (almost double of the most advanced electric cars), and a top speed of 68 mph. The cost to refill the onboard air tanks would only be around $2.

And the vehicle will have to ability to recover up to 13% of the power it uses through a pneumatic brake power recovery system.

The recharging of the MiniCat air tank requires a connection to a 220-volt power source for about four hours. But if the market picks up momentum, a recharge could take place at new or modified petrol stations. With a compressed air pump it would take about two to three minutes to fill the cars tank.

And here’s my favorite detail about the MiniCat: Since the engine doesn’t use combustion to power the motor there is less residue, which means you only have to change the oil every 30,000 miles, and it only requires one quart of vegetable oil.

Sounds Good, But What About Infrastructure?

Of course, you have to be skeptical of a market for cars that don’t operate on gasoline.

Electric, hydrogen and natural gas powered cars aren’t exactly driving all over U.S. roads right now. So why would the air powered MiniCat be any different?

For that answer you have to look at the difference between developed and developing countries, and their infrastructures.

Let’s just look at compressed natural gas (CNG). Currently the countries with the highest number of CNG vehicles are:

• Pakistan: 2.74 million CNG vehicles
• Iran: 1.95 million CNG vehicles
• Argentina: 1.90 million CNG vehicles
• Brazil: 1.66 million CNG vehicles
• India: 1.08 million CNG vehicles

If you look at the list above, you can see that all of these are developing countries and have over a million natural gas vehicles on their roads. While in a developed country like the United States, there are only about 112,000 natural gas vehicles.

It’s simple… build as you grow. And the emerging markets have the advantage.

Developing countries that are just starting to build up their infrastructures don’t have to worry about the costly transition of a complete overhaul of their automobile refueling stations.

Countries like India could build air compressed fueling stations as they create their transportation infrastructure, making the development of a strong air compressed vehicle system possible.

In the next decade, you might see air powered cars out-number gasoline powered cars in developing urban areas all over the world.

Toyota (NYSE: TM) is already on board with the idea. The world’s largest auto manufacturer recently broke the compressed air-powered vehicle speed record, getting its Ku Rin all the way up to 80.3 mph.

With prices starting around $12,700, Tata hopes to launch the MiniCat near the end of 2012. From that point forward, we’ll see if Tata Motors can make history and change the face of automobile market in India and the rest of the world.

But lets put MiniCat story aside and take a look at some of Tata’s key metrics.

Always Looking for a Deal

When you look at Tata’s financials, you see a lot of indicators that it’s currently a good “Buy.”

First its price-to-earnings is a low 8.72 compared to the industry average of 14.41.

The company’s return-on-equity is over 67%, destroying the industry average of 21%. And it sports strong operating margins of 9.89%; the industry’s is only 6.92%.

Recent quarterly revenue growth was 43.5% compared to the same quarter last year, and quarterly earnings were up 40.5% over that same period of time.

Tata’s annual revenue has grown at a vigorous pace, from $1.9 billion in 2002 to over $27 billion in 2011.

If you’re looking for a big dividend payer, Tata’s 1.58% dividend yield (slightly below the industry average) is nothing to get excited about. But we aren’t looking at Tata to collect income; we’re looking for strong earnings growth.

Forbes magazine is on the same page here. The magazine listed Tata in their “Top Value Picks in The BRICs” (Brazil, Russia, India and China), giving the company their strongest buy rating of five.

And if you want another sign to tell you Tata is something worth looking at, you’ll be glad to find names like Morgan Stanley, Blackrock Group, Citibank and Credit Suisse on the list of its top 10 holders.

Good investing,

Ryan Fitzwater

Article by Investment U

The Wendy’s Company (NASDAQ:WEN) reported Q4 EPS of $0.04, ex-items, topping consensus estimates by $0.02. The results are the same as what Wendy’s preannounced on January 30th.Revenues in the quarter rose 5.6% year-over-year to $615 million, beating estimates by $6 million.The company raised its 2012 CapEx forecast to $255 million from $225 million and reaffirmed its 2012 adjusted EBITDA forecast of $335 million – $345 million, vs. estimates of $343 million.

At a conference here at The Ritz-Carlton in Naples, Florida, I heard an increasingly common question. An attendee asked me how anyone could feel good about investing in stocks with economic and political prospects so bleak.

I reminded him that men and women have been saying that the world is going to hell in a hand basket for, oh, the last 5,000 years or so. (As the old proverb says, the dogs bark but the caravan moves on.) It’s important to remember that so much pessimism exists today because the national media delivers a terribly skewed view of the world we live in.

As I have written in this column before, there are plenty of reasons to be bullish on equities, including low inflation, zero interest rates, rapidly developing overseas markets, cheap valuations and all-time record corporate profits.

But that’s just in the short term. There are even better reasons to be bullish longer term. Understanding this will make you a better investor.

Consider, for example, Matt Ridley’s book The Rational Optimist. Ridley, a scientist, journalist and professor at Cold Spring Harbor Laboratory in New York, points out that the world is actually improving dramatically and the pace is quickening, thanks to rising personal and economic freedom and evolving technologies, medicine and trade practices. Yes, the world is far from perfect, but it is getting better.

Peter Diamandis and Steven Kotler strike a similar note in their new book Abundance: Why the Future Will Be Much Better Than You Think. In an adaptation published in the February 13 issue of Forbes, they point out that the trend isn’t nearly as dire as many seem to believe. Quite the opposite, in fact:

“During the past century child mortality decreased by 90% while the average human life span increased by 100%. Food is cheaper and more plentiful than ever (groceries cost 13 times less today than in 1870). Poverty has declined more in the past 50 years than the previous 500. In fact, adjusted for inflation, incomes have tripled in the past 50 years. Even Americans living under the poverty line today have access to a telephone, toilet, television, running water, air-conditioning, and a car. Go back 150 years and the richest robber barons could have never dreamed of such wealth.

“Nor are these changes restricted to the developed world. In Africa today a Masai warrior on a cellphone has better mobile communications than the President of the United States did 25 years ago; if he’s on a smart phone with Google, he has access to more information than the President did just15 years ago, with a feast of standard features: watch, stereo, camera, video camera, voice recorder, GPS tracker, video teleconferencing equipment, a vast library of books, films, games, music. Just 20 years ago these same goods and services would have cost over $1 million …

“Right now all information-based technologies are on exponential growth curves: They’re doubling in power for the same price every 12 to 24 months. This is why an $8 million supercomputer from two decades ago now sits in your pocket and costs less than $200. This same rate of change is also showing up in networks, sensors, cloud computing, 3-D printing, genetics, artificial intelligence, robotics and dozens more industries.”

Investors everywhere should familiarize themselves with these points of view. After all, you’ve heard the doomsayers (again and again). You owe it to yourself to hear the other side of the story.

Looking at broad trends and exciting new developments provides a powerful antidote to the fear generated by relentless media negativity. Plus, it gives you the knowledge and confidence necessary to capitalize on the hundreds of great investment opportunities that exist in today’s fast-moving financial markets.

The world truly is your oyster … but only if you have the optimism to see it that way.

Good Investing,

Alexander Green

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Friday 2 March 2012, 08:45 EST

THE U.S.DOLLAR gold price fell to $1708 an ounce Friday lunchtime in London – a 0.9% drop on Friday’s Asian session high – as stock and commodity markets also fell slightly amid ongoing uncertainty over the Greek bailout deal.

“Another move below $1690 will have the market refocusing back toward $1500,” says the latest note from gold bullion dealing bank Scotia Mocatta’s technical analysis team, referring to the low hit after Wednesday’s $100 per ounce drop.

The gold price has not fallen so hard “since the days of Lehman’s collapse” adds Scotia.

“The broader macro backdrop,” adds Barclays Capital, “remains gold-favorable, given the negative interest rate environment, longer-term inflationary concerns and lingering sovereign debt uncertainties.”

“At these price levels we’ve seen interest in the physical market pick up, particularly from Asian buyers,” says Marc Ground, commodities strategist at Standard Bank.

The silver price meantime fell to $34.88 – a 1.7% weekly drop, but a 3.4% gain on where it ended the first Friday in February.

Heading into the weekend, the gold price was looking at a 3.6% weekly loss, and 1.1% down on the Feb. 3 close.

European leaders meeting in Brussels have signed off the Greek bailout deal. However, more than half the €130 billion rescue package will be held back until the Greek government provides a “detailed assessment” next week of how it will implement 38 required measures.

The funds being released will facilitate Greece’s ongoing debt restructuring with its private creditors. Yesterday, the International Swaps and Derivatives Association’s Decisions Committee ruled that the Greek government’s retroactive insertion of collective action clauses (CACs) – which could force private sector bondholders to accept the agreed deal with haircuts estimated around 70% – does not constitute a credit event.

ISDA’s decision that the existence of CACs does not constitute default means credit-default swaps, held by many investors to hedge their Greek debt positions, will not pay out. However, ISDA could still be asked to adjudicate on the related question of whether enforcing those CACs should trigger CDS payments.

“They will have to enforce CACS,” says Alessandro Giansanti, senior rates strategist at ING Groep in Amsterdam.

“At that point the exchange will become coercive and that will be a restructuring event for CDS.”

“The sovereign CDS market is crying out for an injection of confidence,” adds Nicholas Spiro, managing director of Spiro Sovereign Strategy, a London-based consultancy specializing in sovereign credit risk.

“It’s very important, particularly in much larger bond markets like Italy and Spain, that investors’ hedges are perceived to be credible.”

“If I were a buyer of protection on Greece…I would be upset [by ISDA’s decision],” Bill Gross, co-founder of world’s largest bond fund Pimco, told CNBC Thursday.

Pimco however was one of the fifteen financial institutions on the Decisions Committee that voted ‘No’ to the question of whether inserting the CACs should trigger CDS payments.

German opposition to increasing the size of the Eurozone’s so-called firewall meantime appears to be diminishing, German newspaper Der Spiegel reports.

“Madame Merkel and I agreed that we would take a decision at the end of this month on this subject,” French president Nicolas Sarkozy told reporters in Brussels.

Germany has so far opposed taking unused funds in the temporary bailout mechanism, the European Financial Stability Facility, and adding them to the €500 billion European Stability Mechanism when the latter becomes operational in July.

European leaders however were told by their G20 counterparts that they could not expect more International Monetary Fund aid unless the firewall was built higher.

European banks meantime deposited a record €776.9 billion with the European Central Bank on Thursday, one day after the ECB’s second longer term refinancing operation saw banks borrow nearly €530 billion.

Bundesbank chairman Jens Weidmann has “squared up” to ECB president Mario Draghi in a letter leaked on Wednesday, today’s Financial Times reports.

In the letter, the FT says, Wedimann tells Draghi the ECB should reconsider its December decision to extend the eligibility criteria for collateral banks can post against their ECB borrowing.

“The letter was only written so that it could be made public,” the FT quotes one Eurozone official.
“It’s no accident that it came just after the LTRO.”

Over in the US, Federal reserve chairman Ben Bernanke spent a second day testifying to Congress Thursday, a day after his comments to the House Financial Services Committee were widely blamed for Wednesday’s gold price plunge.

“We don’t see at this point that the very severe recession has permanently affected the growth potential of the US economy,” Bernanke told the Senate Banking Committee, in a session that finished ahead of schedule.

In Beijing meantime the Bank of China has partnered with the world’s largest derivatives exchange operator CME Group – which runs the New York Comex – to explore Yuan-denominated futures contract settlement, China Daily reports.

Yuan-denominated gold futures will reportedly be one of the ideas investigated.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Methode Electronics (NYSE:MEI) reported Q3 EPS of $0.11, beating analyst estimates of $0.02 per share. Revenues for the quarter rose 9.7% year-over-year to $112.00 million, better than consensus estimates of $108.61 million.Methode Electronics should find initial resistance at its 200-day moving average (MA) of $9.44 and further resistance at its 50-day MA of $9.48.In the last five trading sessions, the 50-day MA has climbed 0.86% while the 200-day MA has slid 0.41%.

By TraderVox.com

Tradervox.com (Dublin) – The US dollar has shown some strength after weakening over the week. The currency increased to a nine-month high against the yen prior to a US report next week expected to show that the economy grew over the month of January. The depreciating Yen is as a result of the Bank of Japan’s effort to deflate the currency which had impacted negatively on export earnings. These efforts are working as the yen declined against 14 major currencies. Further, government data showed consumer prices declined which has also reduced speculation that the government will make another intervention.

The dollar has had a fairly good week as the Dollar Index is headed to its biggest weekly gain in two months. Morgan Stanley has also revised its forecast for the greenback upward. Yesterday the dollar increased fairly against the euro and this trend has continued today as reports from Germany showed that retail sales fell.

According to Adam Cole who is Head of Currency Strategy at RBC Capital Markets in London, the move in the USDJPY seems to be pushing the dollar higher even against other currencies as well as keeping the dollar well-bid across the board. He also added that the EURUSD move is a reflection of the general trend for the dollar.

The dollar gained 0.5 percent against the yen to settle at 81.53 yen. It had earlier climbed to its highest of 81.71 yen which is the highest since May 31. The JPY dropped against the euro by 0.1 percent to settle at 108.08 yen per euro. Dollar climbed by 0.5 percent against the dollar to settle at $1.3250.

The Dollar Index used by the Intercontinental Exchange Inc. to track the performance of the dollar against six other major currencies rose by 0.4 percent to give a total weekly gain of 0.9 percent. This is the largest weekly gain since January 6.

Japan consumer prices dropped for the fourth month running in January. The index declined by 0.1 percent according to the statistic bureau. The Bank of Japan set an inflation target of one percent and doubled its asset-purchase kitty. Investors are now looking for the next policy makers’ meeting in March 12-13. There are some economists who are forecasting another government easing efforts might be announced in the next meeting.

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 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

Tradervox.com (Dublin) – The ECB has indicated that its overnight deposits have increased to a record high after it offered the second allocation of three-year loans. The European Central Bank indicated that banks in the euro zone deposited 776.9 billion Euros. This is the most amounts deposited since the Euro became a legal tender in 1999. This amount was from 475.2 billion Euros a day before. The financial institutions are getting 0.25 percent on the deposits.

The increase in overnight deposits is as a result of the 529.5 billion Euros it has lent to financial institutions in the area. This is the biggest refinancing operation the bank has done in its history, bringing its total long-term lending to more than 1 trillion Euros. The banks received this money yesterday and they are supposed to pay the average of the ECB’s benchmark rate that is currently held at one percent. This is supposed to proceed over the entire period of the loan. There are 800 banks that have participated in this operation out of the 2,267 financial institutions registered to borrow from the ECB.

According to Laurent Fransolet, the Head of Fixed Income Strategy at Barclays Capital in London, the deposits will stay at around 800 billion over the next one year. Economists have indicated that around 230 billion Euros of the money was accounted for by the existing European Central Banks loans that have been rolled into the new facility. This means that the new cash from the banks operation is about 300 billion Euros.

Mario Draghi indicated yesterday that policy makers were satisfied with the reception and number of participants in the operation. This operation is aimed at unlocking credit for households and companies by allowing small and medium sized financial institutions to access the funding. However, the ECB President Mario Draghi had indicated in his Feb. 21 letter to a member of the European Parliament that the increase in overnight deposits does not reflect the impact of the loan on the economy, but reflects a balance sheet identity with the increase in refinancing operation.

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 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

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

The euro took further losses against its main currency rivals in trading yesterday, as pessimism in the euro-zone economic recovery caused investors to revert their funds back to the US dollar. The EUR/USD fell as low as 1.3281, while against the GBP, the common currency dropped close to 50 pips. Turning to today, traders will want to continue monitoring any announcements out of the euro-zone for clues regarding risk appetite in the marketplace. Negative news could continue to weigh down on the euro.

Economic News

USD – USD Extends Bullish Trend amid Positive US News

The US dollar largely maintained its bullish trend throughout yesterday’s trading session, as signs of an improving US economy sent investors to the greenback. A positive US Unemployment Claims figure, along with recent comments from Fed Chairman Bernanke have helped the dollar against its main rivals, including the euro and Japanese yen. The EUR/USD dropped below the 1.3300 level during the afternoon session before staging a minor recovery. Against the yen, the buck reached as high as 81.25 following the release of the unemployment figure.

Turning to today, a lack of significant US news means that any announcements out of the euro-zone are likely to determine risk appetite in the marketplace. With confidence in the euro-zone economic recovery relatively low at the moment, any additional negative news out of the EU Economic Summit today is likely to boost the greenback further. Furthermore, traders can look forward to a hectic trading week next week, as a batch of significant US data is set to be released.

EUR – EUR Remains Bearish Going into Today’s Session

After tumbling against virtually all of its main counterparts on Wednesday, the euro remained bearish throughout the day yesterday. Fears regarding the ongoing euro-zone debt crisis, despite the European Central Bank’s latest round of refinancing, led to investors reverting back to the common currency’s main rivals. The EUR/USD dropped below the 1.3300 level during the European session. Against the Australian dollar, the euro dropped close to 80 pips, dropping as low as 1.2340

As we close out the week, euro traders will want to monitor the second day of the EU Economic Summit for any announcements regarding the current state of euro-zone economies. Any negative news may result in the common-currency extending its recent bearish trend. Traders will also want to note that next week, a number of potentially significant economic indicators are set to be released. Chief among these is the US Non-Farm Employment Change, which is largely considered the most important event on the forex calendar. The figure consistently results in heavy market volatility, and the euro could see large movements as a result.

JPY – JPY Levels Out After Losses

The USD/JPY stabilized around 81.16 Thursday afternoon after the dollar made a huge jump on the Japanese currency the previous day, following positive comments from US Fed Chairman Bernanke. The greenback is also bouncing off of the Bank of Japan’s monetary easing move that, since being implemented weeks ago, has set off a downward trend for the yen. While the USD/JPY does seem to be stable for now, analysts have not yet expressed confidence that the yen has fully bottomed out following the measures taken by the BOJ.
Traders should note that heavy fluctuations are predicated next week as a batch of significant U.S. news is forecasted to be released. Positive US news may cause the yen to extend its recent bearish trend. That being said, should any of the news come in below expectations, investors may revert back to safe-haven assets and boost the yen.

Crude Oil – Crude Oil Stabilizing

Crude oil values leveled out on Thursday as overall demand for the commodity is still relatively high. Earlier in the week, oil turned bearish as concerns that high prices have negatively impacted the global economic recovery. That being said, ongoing concerns regarding tensions with Iran led to a rebound during yesterday’s session. Crude traded as high as $107.64 a barrel during the European session, after hitting as low as $106.51 during morning trading.
As we close out the week, traders will want to continue monitoring the situation in Iran, as well as the current state of the euro-zone economic recovery. Any increase in risk aversion due to the euro-zone debt crisis may cause oil to drop today.

Technical News

EUR/USD

The daily chart’s Slow Stochastic has formed a bearish cross, indicating that downward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which has moved into overbought territory. Going short may be the wise choice.

GBP/USD

The Williams Percent Rang on the daily chart is currently at -10 and angling downward, indicating that bearish movement could occur in the near future. The Slow Stochastic on the same chart appears to be forming a bearish cross. Traders will want to keep an eye on this indicator. If a cross forms, downward movement may occur.

USD/JPY

Most long term technical indicators are showing this pair trading in neutral territory, meaning that no significant movements are forecasted at this time. Traders will want to keep an eye on the weekly chart’s Relative Strength Index, as it is currently close to the overbought zone. If it crosses into overbought territory, it may be a sign of impending downward movement.

USD/CHF

The weekly chart’s Slow Stochastic has formed a bullish cross, indicating that upward movement could occur in the coming days. Furthermore, the Relative Strength Index on the daily chart has crossed into oversold territory. Going long may be a wise choice for this pair.

The Wild Card

CAD/JPY

A bearish cross on the 8-hour chart can be taken as a sign that downward movement could occur in the near future. In addition, The Williams Percent Range on the daily chart has crossed into the overbought zone. Forex traders may want to go short in their positions today 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.