InvestMacro FX

The world’s foremost Elliott wave expert goes “behind the scenes” on the Federal Reserve

By Elliott Wave International

The ongoing financial crisis has made the central bank’s decisions — interest rates, quantitative easing (QE2), monetary stimulus, etc. — a permanent fixture on six-o’clock news.

Yet many of us don’t truly understand the role of the Federal Reserve.

For answers, let’s turn to someone who has spent a considerable amount of time studying the Fed and its functions: EWI president Robert Prechter. Today we begin a 3-part series that we believe will help you understand the Fed as well as he does. (Excerpted from Prechter’s Conquer the Crash and the free Club EWI report, “Understanding the Federal Reserve System.“) Here is Part I.

Money, Credit and the Federal Reserve Banking System
Conquer the Crash, Chapter 10
By Robert Prechter

An argument for deflation is not to be offered lightly because, given the nature of today’s money, certain aspects of money and credit creation cannot be forecast, only surmised. Before we can discuss these issues, we have to understand how money and credit come into being. This is a difficult chapter, but if you can assimilate what it says, you will have knowledge of the banking system that not one person in 10,000 has.

The Origin of Intangible Money

Originally, money was a tangible good freely chosen by society. For millennia, gold or silver provided this function, although sometimes other tangible goods (such as copper, brass and seashells) did. Originally, credit was the right to access that tangible money, whether by an ownership certificate or by borrowing.

Today, almost all money is intangible. It is not, nor does it even represent, a physical good. How it got that way is a long, complicated, disturbing story, which would take a full book to relate properly. It began about 300 years ago, when an English financier conceived the idea of a national central bank. Governments have often outlawed free-market determinations of what constitutes money and imposed their own versions upon society by law, but earlier schemes usually involved coinage. Under central banking, a government forces its citizens to accept its debt as the only form of legal tender. The Federal Reserve System assumed this monopoly role in the United States in 1913.

What Is a Dollar?

Originally, a dollar was defined as a certain amount of gold. Dollar bills and notes were promises to pay lawful money, which was gold. Anyone could present dollars to a bank and receive gold in exchange, and banks could get gold from the U.S. Treasury for dollar bills.

In 1933, President Roosevelt and Congress outlawed U.S. gold ownership and nullified and prohibited all domestic contracts denoted in gold, making Federal Reserve notes the legal tender of the land. In 1971, President Nixon halted gold payments from the U.S. Treasury to foreigners in exchange for dollars. Today, the Treasury will not give anyone anything tangible in exchange for a dollar. Even though Federal Reserve notes are defined as “obligations of the United States,” they are not obligations to do anything. Although a dollar is labeled a “note,” which means a debt contract, it is not a note for anything.

Congress claims that the dollar is “legally” 1/42.22 of an ounce of gold. Can you buy gold for $42.22 an ounce? No. This definition is bogus, and everyone knows it. If you bring a dollar to the U.S. Treasury, you will not collect any tangible good, much less 1/42.22 of an ounce of gold. You will be sent home.

Some authorities were quietly amazed that when the government progressively removed the tangible backing for the dollar, the currency continued to function. If you bring a dollar to the marketplace, you can still buy goods with it because the government says (by “fiat”) that it is money and because its long history of use has lulled people into accepting it as such. The volume of goods you can buy with it fluctuates according to the total volume of dollars — in both cash and credit — and their holders’ level of confidence that those values will remain intact.

Exactly what a dollar is and what backs it are difficult questions to answer because no official entity will provide a satisfying answer. It has no simultaneous actuality and definition. It may be defined as 1/42.22 of an ounce of gold, but it is not actually that. Whatever it actually is (if anything) may not be definable. To the extent that its physical backing, if any, may be officially definable in actuality, no one is talking. …

Do you want to really understand the Fed? Then keep reading this free eBook, “Understanding the Fed”, as soon as you become a free member of Club EWI.

By Michael Robinson, Editor, American Wealth Underground, TaipanPublishingGroup.com

I’m sure you remember the story. Just a few weeks ago the mainstream media was riveted by revelations that 10 seemingly average suburbanites were actually Russian secret agents.

I’m sure you’ve heard the news. For the big-time reporters the stories had all the high drama of a novel by Ian Fleming, creator of the James Bond series. The infiltrators are alleged to have used forged passports, short-wave radio transmissions and messages written in invisible ink.

Indeed, some reporters even referred to the Russian-born Anna Chapman, described as the attractive 28-year-old redhead at the center of the scandal, as a real-life “Bond Girl.”

Then again, on Wednesdays, Chapman would go to a Manhattan Starbucks with her laptop to engage in high-tech espionage. There, federal officials allege, she would pass information over a wireless network to a minivan circling the block.

And yet indictments in the case indicate the agents operating under “deep cover” never did any real spying and never had access to classified American information.

Does anything strike you as a little odd here?

To me, the story just sounds too good to be true.

So, consider this: If Anna Chapman posed an honest threat to U.S. security, would she have had her own Facebook page using her real name?

The U.S. government seemed to bring a swift close to the scandal by swapping spies with Russia. End of story.

Or was it?

Not when you consider that while you are reading this document real dedicated spies are hard at work trying to obtain access to sensitive American military and high-tech secrets.

And when they’re not trying to steal information, their cohorts are using malicious software code designed to damage computer networks operated
by federal agencies and major corporations.

They are believed to be behind the attacks last January on the computer networks operated by Internet giant Google, Inc. and nearly 150 other companies. It’s not our Cold War adversaries the Russians.

It’s the Chinese.

And they have been spying on the U.S. for years.

Consider that in 1999 the Cox Report submitted to Congress blew the lid off China’s persistent attempts to obtain information about America’s thermonuclearweapons and its most advanced computer technology.

The Cox Report was supposed to be a wake-up call.

And yet China continues to spy on the U.S. on a daily basis — often with great success.

Experts suggest the Chinese have several hundred to several thousand agents posing as tourists, students, teachers, visiting scientists and high-tech employees.

(By the way, investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let editors Sara Nunnally and Jared Levy simplify the market with their easy-to-understand articles.)

In the Land of Mao Big Brother Is Always Watching

Given the hundreds of billions of dollars the U.S. owes China one has to wonder if our government sleuths will work as hard to expose and expunge the Chinese agents the way they did the Russian ring.

Remember how Google got in hot water because the online search firm didn’t want to help Chinese authorities track how their citizens used the Internet?

And that’s not all, not by a long shot. During the 2008 Summer Olympics in Beijing, the government had miniature microphones installed in thousands of taxicabs to monitor conversations, according to an account in the Times of London.

The newspaper cited a 44-page “restricted” report from Scotland Yard as its source. The newspaper also said the Chinese government monitored crowds throughout the city using some 300,000 video cameras.

This year, the city of Shanghai hosted the World’s Fair. Roughly 100 million people are expected to have attended what is touted as the largest such event to date.

Local and national government agencies are estimated to have spent $6 billion to $12 billion on surveillance technology.

Meanwhile, under the government’s pervasive “safe city” initiative, China will spend roughly $25 billion over the next decade to provide comprehensive surveillance in about 660 cities.

That’s on top of an overall security market estimated at $30 billion.

The bottom line: spies are everywhere… not just in science fiction.

P.S. Not only do I believe that spies are among us… I also believe that we can make a lot of money off of them! I just found a Chinese company that has a heavy hand in the “spy situation”… and is perfectly positioned with exclusive contracts that could help them see a 400% spike in stock price in the coming months. You can read my latest exposé here.

About the Author

Michael Robinson is the Editor of Taipan Publishing Group’s American Wealth Underground, an investment research service that focuses on long-term, low-risk investment opportunities in the technology and government-contracting sectors. Michael is a 30-year media veteran who has worked as a staff writer for news outlets including Investors’ Business Daily, National Real Estate Investor, and The Wall Street Journal.

He is a two-time Pulitzer Prize nominee for investigative reporting and produced an award-winning five-part series on a controversial biotech drug while writing for the Oakland Tribune. Michael is also a published author. His book Overdrawn: The Bailout of American Savings uncovered a scandal at Bank of America that led to the dismissal of two executive vice presidents.

By CountingPips.com

German producer inflation increased by more than expected and for a seventh straight month in October, according to data released today by the German Federal Statistical Office. The German producer price index increased by 0.4 percent in October following a rise by 0.3 percent in September as energy prices rose in the eurozone’s largest economy.

The annual rate of producer inflation registered an increase of 4.3 percent over the October 2009 level following September’s annual increase of 3.9 percent and marked the largest annual increase since November 2008 when annual producer prices rose by 4.7 percent.

Energy prices pushed inflation higher with an advance of 0.7 percent in October and with a 7.2 percent year-over-year rise.

The monthly and annual inflation rates were above market forecasts that were expecting a monthly rise of 0.3 percent and an annual rise of 4.1 percent in October.

Core producer prices, excluding energy, increased by 0.2 percent in October and by 3.1 percent on an annual basis.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3730 level and was supported around the $1.3610 level.  The common currency pressed higher for a third consecutive day on optimism a bailout for Ireland would be announced imminently.  Some Irish government officials reported it is “very likely” the country will reach an accord with the European Central Bank and International Monetary Fund.  Many traders believe an Irish bailout will contain peripheral eurozone sovereign jitters while others believe countries like Portugal and Spain may eventually require some bailout assistance.  Dealers are also monitoring Greece to see if that country is fully compliant with terms involved in its bailout earlier this year. Irish central bank Governor Honohan yesterday reported the country may seek “tens of billions” in aid, an indication the country was creeping closer to agreeing on financial assistance terms.  Similarly, Irish finance minister Lenihan added “If these talks were to result in a substantial contingency capital funding” (availability that did not need to be drawn down now), that “would be a very desirable outcome.” He added it is “clear” that Ireland will need aid for its banks.  ECB President Trichet reported he is “so happy” that Fed Chairman Bernanke has an inflation goal similar to the ECB’s goal and added a strong U.S. dollar is “very, very important.”  Data released in the eurozone today saw German October producer prices come in more than expected at +0.4% m/m and +4.3% y/y.  In U.S. news, Fed Chairman Bernanke spoke in Frankfurt again today and again defended the Fed’s latest decision to expand quantitative easing.  Bernanke warned emerging market economies may experience slower growth “if the recovery in the advanced economies falls short.”  Similarly, Bernanke did not refer to China by name but identified “large, systemically important countries with persistent current account surpluses” that have undervalued currencies.  He also added asset purchases “significantly” move asset prices and called on the U.S. savings rate to rise to reduce the current account gap.  Moreover, Bernanke warned exchange rate adjustments cannot fix all problems.  Philadelphia Fed President Plosser warned the benefits of “QE2,” the Fed’s second round of quantitative easing, may not be sufficient to outweigh the costs.  Fed Governor Warsh, who voted for the Fed’s easing plans this month despite expressing some doubts about the program, said there is a “window of opportunity for the economy to find a higher gear” in 2011. Minneapolis Fed President Kocherlakota said criticism that the Fed’s easing policies will cause a surge in inflation “isn’t valid in current circumstances.”  Euro bids are cited around the US$ 1.3555 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥83.15 level and was capped around the ¥83.65 level. Technically, today’s intraday low was right around the 50% retracement of the ¥85.95 – 80.25 range.  Bank of Japan Policy Board Moriomoto said monetary policy requires a year or more to have an impact and added he is concerned about how the yen’s strength could make share prices unstable and affect sentiment.  BoJ Governor Shirakawa said it is important for Group of Twenty members to keep discussing the global currency system.  Prime Minister Kan reported the BoJ is taking “bold action” over monetary policy.  Kyodo yesterday Bank of Japan may seek to boost its capital before it purchases riskier assets.  The Cabinet’s monthly economic report was released this week in which the government reported “The economic movements appear to be pausing recently. It is also in a difficult situation such as a high unemployment rate.”  Bank of Japan Deputy Governor Yamaguchi this week warned the “drivers” of Japanese economic growth are slowing along with the deceleration in the global economic expansion.  Data released in Japan last night saw the September all-industry activity index decline 0.8% m/m, down from the revised prior level of -0.2%. Earlier this week, it was reported that Q3 gross domestic product was up 0.9% q/q, up from the 0.4% prior level, and was up 3.9% on an annualized basis from the revised prior reading of 1.8%.  This represented the fourth consecutive quarter of expansion and was better than expected.  On a negative note, however, export growth decelerated to +2.4% q/q, down from a revised 5.6% in the previous quarter.  The Nikkei 225 stock index climbed 0.09% to close at ¥10,022.39.  U.S. dollar offers are cited around the ¥84.60 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥114.30 level and was supported around the ¥113.50 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥133.35 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥83.65 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.6393 in the over-the-counter market, up from CNY 6.6334.  People’s Bank of China overnight lifted banks’ reserve requirements for the fifth time this year as monetary authorities continue to drain cash from the financial system to reduce inflation and the risks of asset bubbles. The hike was 50bps and will be implemented from 29 November to “appropriately  control” credit and loans.  The benchmark Shanghai Composite Index fell 3.2% this week on speculation an interest rate hike from PBoC is imminent.  There is increasing speculation China may impose temporary price controls on account of the recent run-up in inflation.  Chinese Premier Wen Jiabao this week reported his cabinet is drafting anti-inflation policies to combat the fastest inflation the country has seen in two years.  Many economists believe People’s Bank of China will be forced to raise interest rates within weeks following a sharp acceleration in inflation last month to its fastest pace in 25 months.  The benchmark one-year lending rate could hit 5.81% by the end of the year according to some economists, a move that would represent a 25bps tightening.

£

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5960 level and was capped around the US$ 1.6095 level.  Technically, today’s intraday low was just below the 50.0% retracement level of the $1.5650 – 1.6300 range.  Bank of England Deputy Governor Tucker said the BoE’s new Financial Policy Committee “will not dilute our commitment to price stability.” Bank of England MPC member Posen yesterday reported the central bank should expand its current £200 billion asset purchase program by £50 billion, citing a “risk of deflation.” Prime Minister Cameron warned against speculating about Ireland’s financial situation and added his government is ready to provide Ireland with financial aid if required.  Data released in the U.K. this week saw October retail sales up 0.5% m/m and off 0.1% y/y while the October ex-auto and fuel component was up 0.3% m/m and 1.2% y/y.  Also, the October public sector net cash requirement fell sharply to £2.4 billion and October public sector net borrowing slipped to £9.8 billion.  Additionally, November CBI total orders improved to -15 from the previous reading of -28.  Minutes from BoE’s Monetary Policy Committee meeting earlier this month were released this week in which rate-setters voted 1-7-1 to keep the Bank rate unchanged at 0.5% and its asset purchase plan unchanged at £200 billion.  Bank of England Governor King this week reiterated the central bank “could do further quantitative easing if that turned out to be necessary,” adding “there are significant risks to inflation undershooting.”  Cable bids are cited around the US$ 1.5795 level.  The euro appreciated vis-à-vis the British pound as the single currency tested offers around the £0.8560 level and was supported around the £0.8495 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 0.9875 level and was capped around the CHF 0.9970 level.   Technically, today’s intraday low was right around the 50.0% retracement of the CHF 1.0275 – 0.9460 range.  Swiss National Bank Chairman Hildebrand yesterday said price stability remains the central bank’s key objective, adding the SNB should have a financial stability regulation role.  Data released in Switzerland this week saw the October trade surplus expand to CHF 2.1 billion from the revised prior reading of CHF 1.68 billion as exports climbed 6.2%.  Also, the November Credit Suisse ZEW expectations index weakened to -30.9 from the prior reading of -27.5.  Swiss National Bank is expected to keep monetary policy unchanged when its quarterly interest rate decision is announced next month.  Notably, Swiss core inflation was negative in October for the first time in at least sixteen years.  This renders it likely SNB may be forced to keep interest rates relatively low for quite some time.  In September, SNB kept its main interest rate unchanged at 0.25% and reduced its inflation projections through early 2013.  U.S. dollar offers are cited around the CHF 1.0045 level.  The euro appreciated vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.3625 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.5870 level.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Russell Glaser – The euro continues to be bolstered by talks of Ireland’s willingness to accept aid in order to save its faltering banking system while Fed Chairman Ben Bernanke came out swinging against critics of QE II and Asian countries weak currency policy.

Traders continue to bid the euro higher in morning trading of the European session. Fueling the euro buying are prospects of Ireland’s acceptance of a bailout from a joint EU/IMF fund. It remains unclear if Ireland will tap the European mechanism for nations struggling to pay their sovereign debts. Details of the proposed agreement have yet to be finalized.

Ben Bernanke came out swinging in a speech today in Frankfurt Germany. In his sharpest criticism of Asian nations that are artificially holding their currencies low to increase exports, Bernanke claimed that China and Singapore were the worst offenders. These nations are fueling uneven economic recoveries in the varying economies of the world. The Fed Chairman’s speech also addressed the criticism the Fed has encountered over the second round of quantitative easing.

Currently the EUR/USD is trading at 1.3690, up from an opening day price of 1.3586. The GBP/USD is trading at its opening day price of 1.6029 after trading as high as 1.6093. The USD/JPY is even for the day at 83.40.

The euro is trading with a high amount of volatility today and should continue to do so going into the US trading session. Traders should be following the Irish and EU/IMF negotiations as the economic calendar is absent of any noteworthy news events remaining for the day.

Support and resistance for the EUR/USD come in at 1.3660 on the hourly chart and last Friday’s high of 1.3770.

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.

Source: ForexYard

The EUR appears to be gaining traction against most of its currency rivals as concerns over Ireland’s debt begins to ease. However, the euro zone does not appear to be out of the woods just yet. Analysts have stated that Ireland’s debt still looms large over the region and continues to have the potential to spill over into other peripheral countries struggling with debt.

Economic News

USD – USD Gives Up Gains Made in Last Two Days

The US dollar traded largely flat yesterday amid a change in dynamics from Europe. As Ireland inches closer to accepting an aid package, the EUR appears to be on the rise against most of its counterparts. However, the USD was one of the more stable currencies in the market despite this news.

Against the EUR, the greenback did indeed give up some ground to currently trade just above 1.3630. The USD/JPY remained bullish with a closing price just above 83.45, representing a minute change throughout the day. Against the GBP and CHF the dollar appears to have erased all of its gains made over the last two trading days.

With very little news emerging from the major global economies today, US dollar trading should remain relatively calm. With Fed Chairman Ben Bernanke set to deliver a speech at the European Central Bank (ECB) today on the financial crisis there remains the possibility for news volatility. But traders should also note that there is no expected impact from his speech, only potential hints at future monetary policies. It will be a speech worth paying attention to for any indication at future directions.

EUR – EUR Gains as Irish Debt Concerns Diminish

The euro rose against the majority of its currency counterparts yesterday as concerns about Ireland showed signs of easing. Analysts now appear steadier in their forecasts for a strengthening euro and a somewhat more stable region, financially. However, the euro zone does not appear to be out of the woods just yet. Ireland’s debt still looms large over the region and continues to have the potential to spill over into other peripheral countries struggling with debt.

For now, it seems, the euro is indeed gaining ground against most of its currency rivals. The EUR/USD rebounded back above the 1.36 price mark while the EUR/JPY was boosted upwards in the direction of 114.10 from its recent lows near 112.40. The subsequent rise in the EUR was also met with a concurrent rise in commodity prices, which appears to confirm a boost in risk appetite and profit-taking on the USD.

Today’s news will be lacking in impactful events. Germany will be publishing its monthly PPI figures, with an expectation of 0.4% growth in production prices. If the figures come in line with forecasts or higher we could see the EUR’s rebound gain some traction as the week draws to an end. Traders should also pay close attention to Ben Bernanke’s speech at the European Central Bank (ECB) today as it could cause volatility among the USD- and EUR-based pairs.

JPY – EUR/JPY Rebounding; Japanese Stocks on the Rise

As concerns regarding Ireland begin to ease throughout Europe, currencies are set to experience rebounds from the peaks induced by the short-term panic. The euro appears likely to gain against the Japanese yen over the next few trading days. The pair rose from the 112.50 level yesterday up towards 114.10 before settling the day at 113.77.

Japanese stocks and indices appear to be rising as well, which has boosted economic growth in Japan and confirmed a weakening yen. If Europe can continue to dampen concerns regarding sovereign debt, then the euro should continue to rebound against the yen, which may be favorable for both.

Crude Oil – Oil Prices Rising as Winter Approaches Northern Hemisphere

After dropping to a 3-week low price of $80.63 a barrel, Crude Oil has seen a mild rebound since Wednesday. The bounce back in the EUR/USD seen yesterday brought about a shift in trading for the black gold these past two days, with a current trading price just under $83 a barrel.

Wednesday’s surprise plunge in US oil inventories also helped support oil prices. Traders are pricing in the expected increase in fuel consumption among the northern hemisphere countries approaching winter. The drop in supplies confirms the notion that usage has been increasing. If the USD continues to weaken, and inventories continue to decline, the price of Crude Oil may very well continue to climb upwards of $87-88 a barrel in the weeks ahead.

Technical News

EUR/USD

After bouncing off the 1.35 support line, this pair now appears poised for a downward correction following yesterday’s move. The daily RSI shows the price as over-sold, while there also seems to be a recent bullish cross on the daily Stochastic (slow). It appears going short may turn out to be a wise tactic today.

GBP/USD

After retracing Wednesday’s bearishness, this pair now appears flat with most indicators floating in neutral territory. Momentum appears only slightly in favor of bullishness, so traders may want to wait for a clearer signal before entering on this pair today.

USD/JPY

It appears the daily RSI has this pair floating deep within the over-bought region and has just turned downward, indicating growing bearish momentum. The daily Stochastic (slow) also reveals a fresh bearish cross, which supports this notion. Going short with tight stops appears to be preferable today.

USD/CHF

This pair seems to be providing mixed signals. The weekly RSI and Stochastic (slow) show an upward moving price, climbing back towards parity at 1.000. However, the daily chart’s Stochastic (slow) reveals a recent bearish cross and the RSI is approaching the over-bought region. Short-term traders may want to short this pair with tight stops to capture what may be a minor downward blip while long-term traders hold their long positions as the pair continues with its latest trend.

The Wild Card

Gold

After dropping below $1340 and finding heavy support, Gold now appears to be on the rise. The daily Stochastic (slow) reveals a fresh bullish cross, suggesting additional bullishness. Additionally, the daily chart appears to be developing a head-and-shoulders candlestick formation with a second-shoulder target near $1380. Forex traders have a great opportunity to make significant gains while the price reaches for the second shoulder, and then by shorting this commodity for potentially significant profits.

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.

The traders who entered the long transaction suggested on yesterday’s trading session reached the 1^st level to “Take Profit”.

USD/CAD

Daily graph: http://www.real-forex.com/charts-daily/November2010/CAD_DAILY_191110.JPG

As stated in the last daily analysis, the pair is making its way to the resistance 1.0341. We still keep our position about it. A great opportunity to go “Long” on a daily trade which may be launched on today’s trading session was created.

On a daily graph, we can see an increasing process started about 5 sessions ago and one daily (Last session) correction of about 33%. Our analyses suggest the end of the correction and a restoration of the previous uptrend. In order to confirm the intuition, the identification of an increasing configuration on 1H graph is required.

Potential trade

1H graph: http://www.real-forex.com/charts-daily/November2010/CAD_1H_191110.JPG

The required configuration should appear when the resistance of 1.0193 will be crossed upward. Once crossed, the mentioned opportunity should be open and an adapted market order entered.

1. “Limit” order on a “Long” position 10 pips above the mentioned 1H resistance, meaning: 1.0203.
2. “Stop Loss” order on the last dip occurred: 1.055
3. 1^st degree to “Take Profit” should be placed on the following resistance at 1.0232.

EUR/JPY

Daily graph: http://www.real-forex.com/charts-daily/November2010/EUR_JPY_DAILY_191110.JPG

For the last two month, the pair is navigating between the support of 115.2 and the resistance 116.64. It doesn’t follow any specific trend. Currently the pair is making its way to the upper level of the navigation. The graph doesn’t show any potential resistance on the way.

Once the mentioned resistance will be reached, 2 outcomes are possible:

1. The resistance is crossed upward and the pair is closing above it. In this case, it should be better waiting for a technical correction, looking for an increasing configuration on 1H graph, and enter your order accordingly.
2. If the pair is stopped on the resistance, a “parking” for about a session and a half should confirm the fact the pair is based on the level and will not cross it. A reversing trend could be the result of such a stop; creating an opportunity to go “Short”, after the identification of a decreasing configuration on 1H graph.

Have a profitable day!

Real-Forex team.

By CountingPips.com

Today’s Important News Releases – November 19, 2010

• New Zealand, credit card spending
• United States, Ben Bernanke speech
• Japan, all industry index
• Eurozone, German producer prices
• Eurozone, Trichet speech

See Full Economic Calendar here

By Jared Levy, Editor, Smart Investing Daily, TaipanPublishingGroup.com

Option expiration is this Friday and it’s not only option traders who need to be extra observant. Even if you’re an average stock investor, there are a couple things you need to know about option expiration week that affect you as well… and your broker isn’t telling you.

Volatility is most likely the first word that comes to mind when you think about option expiration week. Several “experts” on CNBC have begun to stir the “volatility” buzz. Most media outlets tend to exacerbate this misnomer. More accurately, using the word volatile or unstable as the main descriptors for option expiration would not be my choice. Especially not in the last six months.

Of course, in the early days of options trading, option expiration played a larger role because options markets and stock markets for that matter were not as liquid, efficient or easily traded as they are today. Back in the ’70s, ’80s and even ’90s, lower options and stock volume — coupled with fewer market participants — caused weird movements in certain stocks and indexes during expiration… making it a “feared” event.

Being that the mechanics and technology of the markets have changed quite a bit in recent years and options volume has been growing exponentially over the past decade, the behavioral characteristics of options expiration and its volatile past have, in my opinion, greatly dissipated.

In fact, they may now offer you a great opportunity.

What Is Option Expiration?

Every option, by nature, will expire some day. All options that have a “November” expiration date will cease to exist after Friday’s stock market close. This means that option traders have some serious decisions to make this week, whether they are going to buy, sell or hold.

When you think about it though, option expiration is really a wakeup call for traders and investors to assess and adjust their risk… possibly by selling or buying options and/or stock to mitigate their risk.

It creates a sense of urgency for some option traders, in a way forcing them to become a bit more active and bring orders to market, thus increasing volumes and, in turn, adding massive amountsofliquidity. This is especially true for expiration Friday, which is the last day many options can be bought or sold.

(Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Sara Nunnally simplify the market with our easy-to-understand articles.)

Option Expiration Is NOT Overly Volatile!

What’s interesting is that if you look at the past eight expiration Fridays in the S&P 500, the average high-low variance for Friday was less than 1.5%. That’s not terribly volatile. If you back out the crazy months of April and May, that average drops to about 1.07%.

To put volatility in perspective, let’s use some quick and dirty math. A VIX at 21% basically means that the market expects SPY will move about 1.31% per day about two out of every three days.

Even if we forget the VIX and just focus on the daily average true range (ATR) in the SPY over the past month, it falls right around 1.4%, which is about the same as the past eight months’ average expiration day. In case you’re wondering, ATR is the average greatest movement of a stock over a given period of time.

Why You Should Embrace Option Expiration

So instead of fearing the specter of option expiration volatility, maybe we should embrace the added liquidity of the event and possibly use the other market participants as a means to get more efficient pricing and maybe even more aggressive fills in our stock and options trades due to the fact that most are scrambling to exit as well.

Besides, more buyers and sellers together, generally means more fair and stable prices!

So don’t panic and don’t let the media fool you into thinking expiration Friday is bringing volatility; it’s probably something else.

And Here’s an Option Expiration Tip…

Some stocks, such as Google (GOOG:NASDAQ) in particular, tend to gravitate or “pin” to the option strike that has the most options “open interest” — and that is where it will tend to trade at 4 p.m. Eastern Time on Friday.

Open interest can be thought of as the number of open options contracts held of a particular strike price and month. This information is public, and if you are trading a stock with options, give your broker a call and ask them which November strike price has the most open interest — that might be a price that the stock “sticks” to on expiration Friday.

It’s not a guarantee, but in some stocks you would be amazed at this phenomenon.

Watch the 590 and 600 price points in Google going into Friday. They might be “sticky.”

P.S. When I joined the ranks of the Taipan Publishing Group editors, I quickly learned that my colleague Zach was quite an options guru… albeit a humble one. In the past month alone, Zach has taken option gains of 115%… 42%… 127%… 48%… 38%… and a whopping 210%! Learn more about Zach’s latest options pick here.

About the Author

Jared Levy is Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to successfully trade and invest while keeping risk low.

Jared has spent the past 15 years of his career in the finance and options industry, working as a retail money manager, a floor specialist for Fortune 1000 companies, and most recently a senior derivatives strategist. He was one of the Philadelphia Stock Exchange’s youngest-ever members to become a market maker on three major U.S. exchanges.

He has been featured in several industry publications and won an Emmy for his daily video “Trader Cast.” Jared serves as a CNBC Fast Money contributor and has appeared on Bloomberg, Fox Business, CNN Radio, Wall Street Journal radio and is regularly quoted by Reuters, The Wall Street Journal and Yahoo! Finance, among other publications.

By Sara Nunnally, Editor, Smart Investing Daily, taipanpublishinggroup.com

Yesterday, General Motors was resurrected in a more than $20.1 billion IPO.

In its 100 years of existence, General Motors has been at one point the most successful company in the world, and the biggest bankruptcy in the auto industry. Now it could have the distinction of being the biggest IPO in U.S. history…

As a result, General Motors priced at the top of its range at $33 a share, and was six times oversubscribed. This is great news for the company, as government ownership will drop from 61% to 26%.

Does this mean you should buy General Motors, which will have the same ticker symbol — GM — as before the bankruptcy?

Maybe not…

The government is still taking a hit on this deal. Consider this from Bloomberg:

The offering brings Chief Executive Officer Dan Akerson closer to his goal of returning the $49.5 billion GM received in a taxpayer bailout last year. The Treasury, which is taking a loss on its portion of the sale, will break even only if the shares climb more than 60 percent.

In fact, the U.S. Treasury Department needed General Motor shares to IPO at $43.67 to break even from the get-go. But here’s the thing: The government agreed to a six-month lock-up on what’s left of its stake, which means it won’t be able to sell its shares until then.

Tim Leuliette, a director at Visteon Corp., at the Reuters Autos Summit said, “You’re not in GM for a three-month investment. You’re into GM because a critical element, a critical building block of the U.S. economy, has significantly repositioned itself to be competitive.”

General Motor’s success this year — the first year that the company’s expected to show a full-year profit since 2004 — will mostly be due to cutting costs and growth in China.

GM may have restructured, but it still needs a robust U.S. economy to gain real traction.

Perhaps a better way to play the GM IPO is not to play GM at all, but to play GM’s new trend of efficiency and alternative vehicles. Indeed, GM’s partner in China, SAIC Motor Corp., might invest between $500 million and $1 billion in GM and talk about electric car programs.

And here in the States, GM is releasing the new Chevy Volt.

The new Chevy Volt will have a line of lithium-ion batteries running down the middle of the car… Very much like a heart pumping power. These batteries will be made by South Korean company LG Chem.

(By the way, investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the market with our easy-to-understand articles.)

According to GM, it would cost about $1.50 to “fill up” the new Chevy Volt every night. The Volt can run on battery power for up to 40 miles. Now that may sound really short, but here’s the thing — the Volt has a small gasoline engine that can recharge the battery so that you can get another 300 miles before you need to recharge and refill your tank.

The way to play the GM IPO could actually be to play the hybrid car market.

EV World and Freedonia Group estimate that battery demand will jump to $22.8 billion a year by 2012. The main components of batteries are metals, chemicals and polymers. And while nickel metal hydride batteries currently hold the lion’s share of the market, lithium ion batteries are proving to be the more efficient and powerful type of battery, and they are gaining in popularity as we’ve seen with the Chevy Volt and other electric vehicles like the Nissan Leaf.

You can access this market three ways:

• Battery makers like Energy Conversion Devices (ENER:NASDAQ)
• Automotive efficiency solutions like Johnson Controls, Inc. (JCI:NYSE)
• “Green power metals” miners like FMC Corp. (FMC:NYSE)

Green power metals are metals like lithium, nickel and platinum, and they play key roles in power generation and efficiency. As the automotive market trends toward higher fuel efficiency standards and new power options, like plug-in hybrid technology, these metals applications are going to be in high demand.

We’ve put together a free video of just how these green power metals are going to help reform the auto industry — GM included. You can view the Green Power Metals: How to Cash In on the Clean Energy Future video here.

After the video, you’ll get access to our free report highlighting two green power metal solutions.

With GM IPOing and on its way to its first profitable year in six years, this report is a must-read for access to the world of hybrid technology and electric vehicles market.

About the Author

Sara is Co-Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country.

As Senior Research Director, global correspondent and co-editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.