Month: September 2011

Sept. 5 (Bloomberg) — Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce, talks about the outlook for the U.S. dollar and Asia-Pacific currencies. Bennett speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Sept. 5 (Bloomberg) — Jim Walker, managing director at Asianomics Ltd., talks about the outlook for the global economy. Walker speaks to Susan Li, Angie Lau and John Dawson on Bloomberg’s “Asia Edge.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Monday 5 September, 08:00 EDT

THE U.S. DOLLAR gold price stuck its nose above $1900 an ounce Monday morning London time – its first breach of that level in nearly two weeks – before easing back towards lunchtime.

The silver price, by contrast, fell to a low of $42.42 per ounce – 1.9% off Friday’s close – while stocks and major commodities were also down following news of US legal action against banks and yet another election defeat for Germany’s ruling party.

The FTSE was down 2.2% by lunchtime, while Germany’s DAX had lost 3.7%. Shares of European banks hit a 29-month low.

“As European woes reclaim center stage…these factors will support gold in the coming weeks,” reckons Edel Tully, precious metals strategist at UBS.

Service sector growth meantime slowed in Germany, the UK and the Eurozone last month, according to data published this morning.

“Fears of recession [are] back on the table,” says a note from Swiss precious metals group MKS. On the currency markets the Euro slid below $1.42 before rallying, while the Euro gold price set a new all-time high of €1344 per ounce – 1% above last month’s previous high.

Over in Germany, Chancellor Merkel’s CDU Party lost its sixth regional election of 2011 on Sunday.

“[Merkel’s defeat] simply adds to the sense that saving the Euro is going to be made more difficult by opposition from within Germany,” says Sebastien Galy, senior foreign exchange strategist at Societe Generale in London.

Germany’s highest court is due to issue a verdict Wednesday on whether or not Eurozone bailouts have breached the country’s constitution.

“Countries that need help are getting tired of reforms,” reckons Kimihiko Tomita, foreign exchange manager at State Street.

“Countries that are paying money are getting tired of helping…the outlook of the Eurozone bailout scheme is becoming a bit shaky.”

“There is a growing expectation in the market that we will have to get some policy response from the ECB at some stage,” says Standard Bank’s de Wet.

“Either they will have to cut rates, or they will have to be more accommodating…whatever that will be, it is more likely to be positive for gold than not.”

Over in the US, the Federal Housing Finance Agency – which oversees government-backed mortgage firms Fannie Mae and Freddie Mac – filed 17 lawsuits on Friday against major investment banks.

The FHFA is suing the banks over the alleged mis-selling of $196 billion in residential mortgage back securities.

Here in the UK – where the Sterling gold price also hit a new record high at £1178 per ounce – there is a “strong case” for the Bank of England to focus a second round of quantitative easing on lowering banks’ high funding costs, according to a note from Kevin Daly, economist at investment bank Goldman Sachs.

“However, the Bank is unlikely to choose this option, as it believes that credit market intervention of this type should be the responsibility of the fiscal authorities.”

In China meantime the Shanghai Gold Exchange announced plans on Monday to raise its margin requirement on gold forward contracts for the third time in a month. The new higher margin requirements will take effect this Friday, 9 September – the day before the start of the mid-Autumn festival, which sees the SGE closed on Monday 12 September.

“Given that the last margin hike sparked a $100 liquidation in gold, this could be a rare bearish issue in an environment that remains otherwise bullish for gold,” reckons a gold bullion analyst here in London.

“It’s not going to have a major effect,” counters Standard Bank commodity strategist Walter de Wet interviewed by news agency Reuters.

“A lot of demand we see out of Asia is physical rather than speculative.”

“Margin and trading limit will revert back to normal after people come back from long holiday on 14 September,” adds a dealer in Hong Kong.

Ben Traynor
BullionVault

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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
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should you choose to act on it.

Sept. 5 (Bloomberg) — Patrick Odier, chairman of the Swiss Bankers Association, talks about financial industry regulation and the Swiss National Bank’s efforts to contain the Swiss franc’s gain. Odier, speaking from Zurich with Francine Lacqua on Bloomberg Television’s “The Pulse,” also discusses Switzerland’s agreements with Germany and the U.K. over taxation of undeclared bank accounts.

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.

The US dollar is higher with European equities trading deep in the red following a loss at the polls by Angela Merkel’s Christian Democrat party and continued negative news stemming from the Greek/Italian debt crises. The Europeans are in need of a policy response but with Merkel reeling from the recent loss at the polls the most likely candidate to support the EUR will be the ECB.

The losses in the local election in Mecklenburg-Vorpommern appear to be the fallout from the recent euro zone crisis and public opinion on Merkel’s handling of the situation. What is most troubling is the defeat comes on Angela Merkel’s home turf. While Merkel has been a staunch proponent of fiscal conservatism both in Germany and in peripheral Europe her ability to win points at the polls has suffered with the intensifying euro zone debt crisis. This has pressured European equities which have begun the week with sharp losses. The German DAX is down 3.79% while the London FTSE 100 is off 2.33%. French bank stocks are also taking a hit.

Also driving European markets lower is the continued pressure on both Greek and Italian debt. The Troika abruptly ended their review of Greek finances early but pledged to return to continue the review on September 14th. Bank of Greece Governor George Provopoulos said in an interview with the Kathimerini newspaper, “In my assessment, the recession would be shallower if the reforms progressed quicker, if fiscal deficits were reduced more drastically and if competitiveness were improved.” Though the increased austerity measures may be deepening the recession with reduced government spending negatively impacting GDP which could contract by -5.5% from a forecasted -4.5%. The two-year Greek note is trading at an all-time high of 49.69% and highlights the pressure in Europe.

Italian 10-year yields have also risen for the 11th consecutive day as a general strike in Italy is set to take place tomorrow with Prime Minister Silvio Berlusconi pushing a EUR 45.5 billion austerity package through parliament. The ECB was rumored to be in the market today buying Italian and Spanish debt in an attempt to keep the 10-year yields stable near the 5% level. Later today the ECB will announce its sovereign bond purchases made in the previous week.

The Europeans are in need of someone to step up with a policy response to support the EUR and stop the equity losses. Given Merkel’s defeat at the polls the Chancellor has been weakened slightly. Thus the next likely candidate at this stage is the ECB, though market participants will have to wait until Thursday for the ECB press conference.

Given the stresses in the European financial system the EUR has also come under pressure across the board with the EUR/USD dropping as low as 1.4120 just off of the 61% retracement from the July to August move. The next support to the downside is 1.4050 and a break here could have scope to the long term trend line at 1.3975. The EUR/GBP is quickly encroaching on its support at 0.8640 from the August 5th low while the EUR/JPY has broken below the 109 yen support and its next test comes at 108. A close below this support could open the door to the post tsunami low of 106.27.

Read more forex trading news on our forex blog.

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What Others Are Saying…
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Jyske Banks Senior Strategist, Ib Fredslund Madsen, looks at the week ahead.

He expects the eurodebt crisis to be the main topic and driver on the markets.

Legal information

Video courtesy of en.jyskebank.tv

By ForexYard

With both the US and Canada away on holiday liquidity will be tight in the North American trading session which may allow for a brief pause in the decline of the EUR versus the USD and CHF.

Economic News

USD – Slowing but Not Stalling Growth

The disappointing data from the US economy continues to roll in. Friday’s NFP report showed the US failed to add new jobs in the month of August. Average hourly earnings fell to -0.1% from a gain of 0.5% which takes a bit of the bite out of last week’s strong personal spending data. The number of aggregate hours worked also declined.

In contrast to Europe the US economy is stalling but not contacting. This will likely bring policy responses from both the fiscal side as well as the monetary policy side. With pressure from Republicans, President Obama has moved his economic speech to September 7th where the ideas being kicked around range from extending US unemployment benefits, an extension of the payroll tax break, and a potential jobs program that may fall short of such previous ambitious programs of the Works Progress Administration from the mid-1930s.

A monetary policy response may come from the2-day Fed meeting in September. The potential exists for the Fed to increase the length of maturities of the debt it holds on its balance sheet or perhaps a pledge to target inflation at a particular rate, similar to the Fed’s commitment to hold interest rates until mid-2013. Additional bond buying seems unlikely at this time given the uptick in US inflationary pressures.

EUR – Stalling Economic Growth

After a stellar Q1 where the German economy grew by 1.5%, Q2 stands in stark contrast with growth sputtering to 0.1%. Expectations are not rising with euro zone manufacturing PMIs falling below the 50 boom/bust level in August. The French economy has also stalled with zero growth in Q2. Additional pressures are being felt in both Italy and Spain with PMIs falling to new lows.

Europe has been engulfed in a debt crisis and in contrast to the US will not allow for a fiscal policy response. The opposite approach has been taken to implement additional austerity measures in Italy and Spain which may intensify the stagnant growth just as the global economy begins to slow. The options for the ECB remain limited in its upcoming policy meeting. Last week Trichet hinted at a slowing of inflationary pressures and a reduced inflation forecast will likely be formally made on Thursday. It is unlikely the ECB will back away from its two interest rate increases earlier this year as to do this would be the admission of a failure to correctly implement monetary policy. Note that in 2008 the ECB continued to raise interest rates as the world crept towards the financial crisis, only to backtrack in light of the Lehman Brothers collapse.

Additional pressures are being felt in Greece. The Troika has packed up and left Athens early after failing to complete their review of Greece’s finances. The Greek government has admitted that GDP will likely contract further than expected and therefore the country will likely fail to reach its previously outlined budget deficit reductions. Greek 2-year yields have been trading at their highest levels prior to the July 21st agreement.

As such the EUR/USD has fallen from 1.45 to below 1.42 this morning in Asian trading. The pair has broken its rising trend line from the July low and is moving towards the 1.4100 level where the August 11th low coincides with the 61% Fib retracement from the July to August move. The EUR/USD could remain range bound unless the pair moves below the 1.4050 level. The EUR/CHF also looks vulnerable after closing the August 15th gap. The EUR/CHF dropped a dramatic 1000 pips in only a week.

AUD – RBA Set to Meet Tomorrow

The Reserve Bank of Australia will be meeting tomorrow and the forex trading blogs have been widely speculating of an impending RBA rate cut, similar to that of Turkey and Brazil. However, growth in Australia is not slowing as it is in other parts of the global economy. Retail sales continue to post strong returns and commodity prices remain well supported. The speculation of an RBA rate cut may be premature and could leave some upside potential for the Aussie dollar.

This morning the AUD/USD gapped lower and this level of 1.0625 followed by 1.0800 should serve as the first two resistance levels. To the downside, movement may be capped at 1.0310. The AUD/NZD is showing a bullish head and shoulders reversal pattern with the neckline providing resistance at 1.2750 with a measured move of roughly 400 pips.

Crude Oil – $90 Seen as Near Term Resistance

Spot crude oil prices continue to struggle to maintain their gains. Last Friday’s disappointing NFP report did little to bolster expectations for increased global economic growth or demand for the commodity. Stagnant US unemployment continues to weigh on the US economic recovery but hopes of additional policy easing by the Fed may allow a test of the $90 resistance level. Support may be found at $84.50, $83.00, and $79.40.

Technical News

EUR/USD

Last week’s candlestick highlights two key points; the inability of the EUR to maintain a bid above the 1.4500 level and the formation of an outside day down candlestick pattern on the close. As such the key support levels for the pair are found the 1.4100 level where the August 11th low coincides with the 61% Fib retracement from the July to August move. The other key level is the rising trend line from the May2010 low which comes into play at 1.3975. To the upside resistance is found at this week’s opening gap of 1.4180 followed by 1.4325 and last week’s high of 1.4550.

GBP/USD

The GBP/USD has the monthly, weekly, and daily stochastics falling while the price is encroaching upon significant support where the 200-day moving average and the August 11th low coincide at 1.6110. A break here could open the door to 1.6000 with additional support way down at 1.5780. To the upside the high from last Thursday/Friday at 1.6250 stands as initial resistance followed by 1.6450 and 1.6615.

USD/JPY

The JPY has formed a base at 76.40 while failing to move below the all-time low of 75.94 set earlier in August. Weekly and daily stochastics have turned up but monthly stochastics remain firmly to the downside. Initial resistance is found at 77.70 followed by the post intervention high of 80.20 and finally at 81.30 off of the 2007 falling trend line.

USD/CHF

The appreciation of the pair failed at the 0.8275 resistance and the long term downtrend continued with a vengeance, falling as low as 0.7710 before recovering slightly. There are two levels that stand out from the August move higher; 0.7650 at the 50% Fibonacci retracement and the 0.7510 at the 61% retracement.

The Wild Card

Crude Oil

Since last weekend crude oil has switched directions and slid about 470 pips. Currently as the Slow Stochastic on both the 4-hour and the 1-day charts are rolling lower, it seems that the bearish trend has potential pick up speed. Crude has support at $84.00 a barrel. This could be a great chance for forex traders to join in a very popular trend.

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.

EUR/USD

Last week’s candlestick highlights two key points; the inability of the EUR to maintain a bid above the 1.4500 level and the formation of an outside day down candlestick pattern on the close. As such the key support levels for the pair are found the 1.4100 level where the August 11th low coincides with the 61% Fib retracement from the July to August move. The other key level is the rising trend line from the May2010 low which comes into play at 1.3975. To the upside resistance is found at this week’s opening gap of 1.4180 followed by 1.4325 and last week’s high of 1.4550.

GBP/USD

The GBP/USD has the monthly, weekly, and daily stochastics falling while the price is encroaching upon significant support where the 200-day moving average and the August 11th low coincide at 1.6110. A break here could open the door to 1.6000 with additional support way down at 1.5780. To the upside the high from last Thursday/Friday at 1.6250 stands as initial resistance followed by 1.6450 and 1.6615.

USD/JPY

The JPY has formed a base at 76.40 while failing to move below the all-time low of 75.94 set earlier in August. Weekly and daily stochastics have turned up but monthly stochastics remain firmly to the downside. Initial resistance is found at 77.70 followed by the post intervention high of 80.20 and finally at 81.30 off of the 2007 falling trend line.

USD/CHF

The appreciation of the pair failed at the 0.8275 resistance and the long term downtrend continued with a vengeance, falling as low as 0.7710 before recovering slightly. There are two levels that stand out from the August move higher; 0.7650 at the 50% Fibonacci retracement and the 0.7510 at the 61% retracement.

Read more forex trading news on our forex blog.