InvestMacro FX

Source: ForexYard

A speech by Fed Chairman Ben Bernanke yesterday resulted in the US dollar tumbling throughout the European trading session. The speech, which hinted that the Fed may initiate another round of quantitative easing in the near future, turned the USD bearish against both the euro and Swiss franc. Turning to today, traders will want to pay attention to the US CB Consumer Confidence report, scheduled to be released at 14:00 GMT. A positive figure may help the dollar recoup some of yesterday’s losses.

Economic News

USD – US Consumer Confidence Set to Impact Dollar

Signs that the Fed may initiate a new round of quantitative easing sent the dollar tumbling against some of its main currency rivals during yesterday’s trading session. Following a speech from Fed Chairman Bernanke, in which he said that the US economy is not growing fast enough, the EUR/USD spiked, eventually reaching a fresh three-week high. The pair eventually stabilized at around the 1.3325 level during afternoon trading. Against the Swiss franc, the dollar fell close to 100 pips during the European session. The USD/CHF eventually stabilized around 0.9045.

Turning to today, USD traders will want to note the results of the CB Consumer Confidence figure, set to be released at 14:00 GMT. Consumer confidence is widely considered an accurate indicator of overall economic health. At the moment, analysts are expecting a slight drop in the figure over last month. If true, the dollar could extend yesterday’s losses against the euro. That being said, should the Consumer Confidence number come in above the forecasted level of 70.3, the dollar could reverse its recent bearish trend.

EUR – Analysts Warn That EUR Gains Could be Temporary

The euro saw significant gains against the USD yesterday, as signs began to emerge that the US economy may not be growing fast enough to sustain an economic recovery. The EUR/USD spiked well over 100 pips as a result, eventually reaching as high as 1.3337 during mid-day trading. The euro also received a significant boost against the Japanese yen yesterday. The EUR/JPY was up approximately 130 pips, eventually reaching as high as 110.54 before staging a slight downward reversal. The pair eventually stabilized at 110.30.

As we take an extended look at the rest of the week, analysts are warning that the euro’s recent bullish trend could be temporary. Signs of economic turmoil in several euro-zone countries, including Portugal, Italy and Spain, may soon dominate the news and could lead to significant euro losses. Traders will want to note the results of bond auctions from both Italy and Spain, scheduled for later in the week. In addition, a meeting of euro-zone finance ministers could offer additional clues as to the current state of the euro-zone economic recovery.

JPY – Safe Haven JPY Falls vs. Riskier Assets

The Japanese yen tumbled vs. some of its more volatile currency rivals throughout yesterday’s trading session. The CHF/JPY was up over 100 pips during the European session before hitting resistance around the 91.60 level. The AUD/JPY was up close to 130 pips, reaching as high as 87.36 before staging a slight downward correction. The pair found support at 87.15. Analysts attributed the yen’s losses to the poor economic situation in Japan, combined with a positive German Ifo Business Climate figure which led to an increase in risk taking.

Turning to today, traders will want to pay attention to any announcements out of the euro-zone, particularly with regards to the current state of the Italian, Spanish and Portuguese economies. Any negative news could lead to risk aversion in the marketplace, which could help the yen reverse its current bearish trend.

Crude Oil – Crude Oil Moves Up amid Risk Taking

The price of crude oil saw significant gains throughout yesterday’s trading session, eventually reaching as high as $107.30 a barrel before staging a downward reversal. Positive news out of Germany led to an increase in risk taking, which helped support the commodity throughout the day. The gains proved to be temporary though, and by the end of the European session oil was once again trading below $107.00.

Turning to today, crude oil traders will want to pay close attention to any announcements out of the euro-zone. Analysts are warning that debt worries in several European countries could lead to risk aversion in the market place. In such a case, riskier commodities like oil could see downward movement.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart appear to be narrowing, indicating that a price shift could occur in the coming days. The Williams Percent Range on the daily chart is in overbought territory, signaling that the shift could be downwards. Traders may want to go short in their positions ahead of a possible bearish correction.

GBP/USD

Most long term technical indicators show this pair in neutral territory, meaning that no major shift in price is expected at this time. That being said, traders will want to keep an eye on the MACD/OsMA on the daily chart. It looks like a bearish cross may be forming. If so, it may be a sign of a possible impending downward correction.

USD/JPY

The weekly chart’s Relative Strength Index is hovering right around the overbought zone, indicating that this pair could see downward movement. This theory is supported by the Williams Percent Range on the same chart, which is currently at -20. Traders may want to go short in their positions ahead of a possible downward correction.

USD/CHF

While the Williams Percent Range on the daily chart is currently in the oversold region, which is typically a sign of impending upward movement, most other technical indicators are in neutral territory at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself later on.

The Wild Card

AUD/CHF

The 8-hour chart’s MACD/OsMA has formed a bullish cross, indicating that upward movement could occur in the near future. This theory is supported by the daily chart’s Williams Percent Range, which is currently in oversold territory. Forex traders may want to go long in their positions ahead of a possible upward correction.

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.

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.

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.

By TraderVox.com

Tradervox (Dublin) – The dollar almost touched its lowest level this month against the euro after the Fed chairman Ben S. Bernanke indicated that the low interest rate was still necessary despite the positive reports that have been coming from the US. The Fed chairman looked like he was not yet convinced of the economic growth despite many analysts and leaders indicating that the Federal Reserve might change its monetary policy as early as next year. His remarks reduced the demand for the US assets hence sending the greenback to almost its lowest against the euro.

The greenback has been weak against 15 of the 16 major currencies this year and the comments by the Fed Chairman have rekindled speculations that the Fed might make another round of quantitative easing. The yen was also weaker due to concerns on the Asian equities. The euro has been strong since the start of the week as traders speculate that the region’s finance ministers’ meeting will lead to the creation of a stronger firewall. The meeting is scheduled to be held at the end of the week.

Some analysts are predicting hard times ahead for the dollar as traders have taken Bernanke’s comment to mean that there are still chances that a third round of QE will be made. In Tokyo, the euro traded at $1.3362 from yesterday’s close of 1.3359. The euro had touched $1.3368 which is the strongest it has been against the dollar since February 29.

The dollar was strong on the yen trading at 82.89 yen from yesterday close 82.82 yen. The euro rose by 0.1 percent against the yen to trade at 110.75. The euro had gained 1.3 percent yesterday to trade at 110.65 yen. The euro is showing volatility as German Chancellor Angela Merkel and Finland’s prime Minister indicated that they would support efforts to increase the firewall kitty and the merger of the European Stability Mechanism and the European Financial Stability Facility to make a total of 750 billion Euros in firewall kitty.

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

Article provided by TraderVox.com
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Arena Pharmaceuticals (NASDAQ:ARNA) shares rose 24% on Monday.The company announced that E.U. regulators have accepted its marketing application for weight loss drug, lorcaserin.In 2010, the FDA rejected the drug because it didn’t think it was effective and was concerned about links to tumors when the drug was studied on rats.Arena Pharmaceuticals is currently above its 50-day moving average (MA) of $1.82 and above its 200-day of $1.57.

The Bank of Israel kept its benchmark interest on hold at 2.50%.  The Bank said “The decision to leave the interest rate for April 2012 unchanged at 2.5 percent is consistent with an interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability. The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, monetary policies of major central banks, and developments in the exchange rate of the shekel.”

Previously the bank cut its monetary policy interest rate 25 basis points in January, November and September, leaving it unchanged at its June, July, and August meetings, and increasing the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 2.2% in December, 2.6% in November, 2.7% in October, 2.9% in September, 3.4% in August and July, 4.2% in June, 4.1% in May, and 4.0% in April and just inside the Bank’s inflation target range of 1-3%.

The Bank expects the Israeli economy to grow about 3.1 percent this year and 3.5 percent next year.  The Israeli Shekel (ILS) has weakened about 6% against the US dollar over the past year, while the USDILS exchange rate last traded around 3.71.  The Bank next meets on the 23rd of April 2012.

By MoneyMorning.com.au

Even if the Fed doesn’t move ’til the third quarter, the market is already rallying in anticipation.

But don’t forget this is a US election year. Obama wants to get re-elected in November. If the Fed wants to see this happen, it will be motivated to start pulling the levers in an attempt to bring down unemployment. This takes many months, so the Fed would need to act sooner rather than later, which probably means at least announcing QE3 early in the second quarter.

Precious metal markets didn’t miss the news last night.

Gold jumped 1.8%, and is now sitting above the 200-day moving average again (red line). I must admit, I think these lines are all a bit hocus pocus. But you would do well to watch them because so many others follow them religiously.

Gold Back in the Zone

Some good mates in the markets have been calling me recently doubting their bullish views on gold. My reply has been the fundamentals haven’t changed, just the market’s conviction; and historically that combination has been a good time to buy.

Now we have Uncle Ben talking about more QE. The last few doses of his medicine started big rallies in the gold price, and I think we are about to see a repeat of history.

So gold stocks broke out of their funk last night too. The prospect of higher gold prices, and the next dose of liquidity, pushed them higher. The gold producer index, GDX, climbed 1.7%. The gold junior index, GDXJ, which represents the riskier variety of gold stock, jumped 4.13%.

But silver was the best performing commodity on last night’s news, gaining 2.1%. The silver miners ETF, SIL, gained 1.9%. Things have been quite boring on the silver front over the last six months. But things suddenly look much more interesting. The chart certainly looks better.

Silver Coming Back to Life

So I think the second quarter of 2012 looks good for gold and silver stocks. I also think oil and gas stocks should keep up the great run they have had so far this year, as I wrote yesterday.

But let’s not get carried away. There are plenty of risks out there still.

How about the risk of war between Israel and Iran?

This is a very real proposition, particularly since Israel’s ministers recently voted in favour of attacking Iran. This is probably the biggest risk hanging over the market right now, and yet there is very little talk about it. I’m keeping a close watch on this for readers.

However, if conflict between these two nations breaks out, gold, silver and oil are exactly where you want to be sitting. These could be the only parts of the entire stock market to benefit. Precious metals will soar on fear, and oil will soar on falling exports as the world’s biggest exporters in the region waste time dodging bullets.

Investing in actual bullion is the most direct way to protect yourself from this. As for oil, you can invest in the ‘black gold’ directly on the ASX. This is via an exchange traded fund with the easy to remember code, OOO. Investing in precious metals or oil stocks is a higher risk, but possibly higher return option.

The other big risk we can see in the second quarter is that the markets will be busy watching for more signs of a slowdown from China. The market had kittens a few weeks ago when China announced its new growth target is 7.5%, instead of 8.0%.

Where to Start?

Firstly China told us about this last year in its five-year plan, so why the market had a nervous breakdown on the news a few weeks ago is hard to fathom. And besides, 7.5% is still an incredibly fast rate of growth.

Then consider that when your economy has grown 30% in the last few years, 7.5% is the same amount of growth in absolute terms that 10% growth used to represent. So it would need a comparable amount of raw materials.

And finally, this is a chart I sent D&D readers a few weeks ago. It shows how the old target of 8% was realistically a floor for the growth rate, not a ceiling. With a target of 8%, the last reported rate was 9.8%.

So if the new target is 7.5%, then perhaps expect this year to be in the 9-9 .5% range. And that is supersonic by any measure.

Bullish On China

I know. My bullish take on China puts me at odds with your regular editors! But different opinions are what makes a market. And this brings me to a prediction that would really clash with your regular editors:

The copper price is about to start rallying again.

After dropping over the last 12 months, and flat-lining for the last few months, I think copper is getting ready to start climbing again.

I tipped a copper stock two years ago the last time I felt like this. I raised a few eyebrows in the office, but that stock is now up 150% since then.

The markets missed it recently, but China is planning to seriously increase its stock of public housing. And if there is one thing that drives copper demand it is Chinese construction. Plumbing and wiring take up tonnes of the stuff. China is the world’s biggest copper consumer, so this new policy will have a big effect on the market.

You can see this in the spare copper inventory on the London Metals exchange, which has plummeted by 30% in the last few months. This is often a sign to get ready for a rally. Global copper supply has not improved in the last few years. There just aren’t any new big projects coming on line! The copper chart looks pretty good too:

Copper Steadying For its Next Leg Up?

So, precious metals stocks are always on the menu, and I will be adding oil stocks too. But the surprise is that I may well be trawling around for more copper stocks for Diggers and Drillers in the second quarter.

But of course, we still have to navigate our way through whatever other unexpected twists and turns are in store.

I’ve listed a few ‘known risks’ to watch for. But we also have to dodge the ‘known unknowns’!

As long as we also price in the ‘unknown unknowns’, we’ll be safe as houses!

Dr. Alex Cowie
Editor, Diggers & Drillers

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By MoneyMorning.com.au

Good news for millions of AFL supporters:

After six months of tediously long, footy-free weekends, the 2012 footy season has finally arrived.

This tells us something else as well: the first quarter of the year is nearly gone.

In amongst all those school holidays, public holidays, and long weekends, the market actually put in a solid three months of trading.

In yesterday’s Money Morning, we wrote to you about the ground the market has covered so far in this first quarter. And what a quarter it has been!

Markets rallied. Even though the ASX lagged the rest of the world with a modest 6% gain, the stocks I tipped to Diggers and Drillers readers have gained 19.2% so far this year.

This good start to the year has been in no small part thanks to the central banks’ love of the printing press as the ultimate solution.

This quarter, an extra trillion euros hit the European banking sector thanks to Mario Draghi, the new president of the European Central Bank (ECB). This quenched the raging flames of fear in the market, and risk taking came back into the market, manifesting as the ‘Draghi Rally’.

But money printing doesn’t solve anything. Ask Zimbabwe. It was starting to look like the sugar rush from this lazy trill’ would start fading in the coming months.

Firstly, as the market cheered the fall in the bond rates of Italian, French and Spanish bond yields, Portugal’s bond yields – stubbornly stuck above a terrifying 12% – stood out like a canine’s proverbials. This fly in the ointment could have quickly spoiled the fun.

Now the all-important Italian bond yields have started to creep up as well to reach above 5% again. Italy is one of the core three Euro countries of Germany, France and Italy. If the cancer regrows in Italy then the fun times in the market will stop pretty quickly.

But what a difference a day makes. Now we have liquidity flooding in from other quarters to keep these yields under control for another quarter or two.

Yesterday I thought today’s Money Morning would be bearish.

But now it looks like it’ll be a case of ‘another quarter and another trillion bucks’. The head of the Fed, Ben Bernanke, spoke last night. If I knew he was going to do that, I would have bought gold yesterday.

After hinting for months that the Fed would use QE3, it pretended to go cold on the idea a few months ago. Was Bernanke bluffing? Probably. Because when the whole market is already salivating at the prospect of money flooding in, the money has much less effect. But after leaving it out of his speeches recently, he now seems to be readying us for it. Last night he said:

‘Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies‘

We don’t know what exactly this means yet. Keeping rates low for years, buying bonds, or another dose of ‘Operation Twist’ – please sir, can I have some more?

You would do well to ask Bill Gross, the head of PIMCO, a $252 billion bond fund. He started his career as a professional blackjack player, making a living off the casinos in Vegas.

These days he makes a fairly comfortable living off the biggest casino in the land – the Fed.

He now has half his chips riding on QE3.

By this I mean he is betting $131 billion on the chance of QE3. Specifically, he has bought that amount of Mortgage Backed Securities, as he thinks the Fed will execute QE3 by buying these securities.

And I’d trust the instinct of an ex-blackjack professional over most market commentators any day.

Besides – It makes sense.

Because, like the legend he is, Bernanke has painted himself into a corner. After talking up QE3 late last year, more QE is now priced into the bond markets, and to a degree, the stock markets. If he didn’t now follow through, the markets would fall, and the economy would stumble. He has to follow through on QE now to avoid going backwards.

This is the kind of schoolboy error you get when you put someone with no market experience in the top job. Recall the ‘Brown Bottom’? This was when Gordon Brown, the Chancellor of the Exchequer in Britain, signalled to the gold market that the Bank of England wanted to sell hundreds of tonnes of gold. So the gold market licked its lips and managed to suck the price down by 10% to get the bargain of the century.

Brown then sold nearly 400 tonnes of gold at the absolute bottom of the gold market, raising the sterling equivalent of $3.5 billion. That gold would have been worth over $20 billion today. And what did the boy genius buy with it?

Euros!

Dr. Alex Cowie
Editor, Diggers & Drillers

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By MoneyMorning.com.au

Have a good look at the charts below.

Stock A)

Click here to enlarge

Stock B)

Click here to enlarge

Both are technology stocks listed on the NASDAQ in the 1980s. And both companies saw their stock price dive more than a third in the dot-com crash.

If you owned these stocks, would you have thought about selling your shares during the 1990s, when the price doubled in value? You might have just been grateful to make some money back on a risky technology stock…

Imagine you decided to hold out for bigger gains. And finally, as a new century approached, the stock doubled… then tripled in value.

What do you do?

Cash in, or hang out a little longer?

If you had been holding stock A since 1991, the shares you bought would now be worth 402% more. Not bad too for decades of patiently sitting and waiting…

But if you’d hung onto stock B for the same amount of time, your stocks would be worth 5065% more today!

If you guessed that Stock B was Apple, you were right! You’re also probably one of the people The Age decided to write about yesterday.

As Apple shares went beyond $600 per share last week, the online rag interviewed some of America’s newest millionaires.

Oddly enough, most of the people interviewed didn’t buy the stock because of the business strategy, the fundamentals of the business, the industry, or even on technical analysis.

Nope, most people interviewed claimed they bought the company because they simply loved the product.

‘It had this little, tiny four by six screen and it was the coolest art tool I had ever seen,’ said one reader about her love affair with ‘Macs’. And it was her primary reason she bought shares in the company.

Another Apple lover bought shares only a few years after his dad came home with Apple’s first computer. ‘I just remember using Mac Paint and being really blown away,’ he said. To prove his loyalty, he held the Apple shares all the through the dot-com bust, too.

But the boom time could be over for these Apple devotees.

Just because the stock is up a gazillion per cent, doesn’t mean it always will be…

Google shareholders experienced the same sort of joy that Apple shareholders are now going through.

The chart above shows the Apple (red line) share price is seeing a similar trend to Google (blue line). In 2004, Google shares rose from their initial public offering price of USD$85, peaking at USD$747 three years later. Those holding Google shares would’ve been celebrating their impending financial freedom…

But the music stopped. The financial crisis saw 67% wiped from Google’s price by April 2009.

The thing is, Apple’s run up in share price has a striking resemblance to the one Google experienced. In roughly the same three-year period as Google, Apple’s share price has skyrocketed to all time high for the company. But most importantly, it’s the last three months of trading activity that Apple investors should be wary of.

Right now, Apple is enjoying an almost exact copy of Google’s 2007 straight-line rise…

For all the Apple fans hanging onto their $600 Apple shares, the question is… is it time to cash in, or hang out a little longer?

However, as an Aussie investor, chances are you don’t have any Apple stock to brag about. But you can learn a lesson from those Apple loyalists.

You see, Slipstream Trader editor, Murray Dawes, has a theory. If your trade has made some cash, perhaps it’s time to take some money off the table.

If you can, take off your original stake, so the rest of the trade is entirely risk free. That means, what’s left is just pure profit and your initial capital is safe. Or you can reinvest it into another stock.

Right now, Apple shareholders would be mad not to cash in… at least a little of their portfolio.

Huge triple-digit paper gains can disappear quicker than you can blink.

As an investor, you don’t want to see your paper gains erased just because you wanted to hold out for something bigger.

Because if you get greedy, you might be left with nothing.

Shae Smith
Editor, Money Morning

From the Archives…

A Better Inflation Bet Than Gold?
2012-03-23 – Kris Sayce

3D Printing: How “Desktop Factories” Will Create the Next $1 Trillion Industry
2012-03-22 – Michael Robinson

How to Invest in the Fastest-Growing Energy Business of the 21st Century
2012-03-21 – Aaron Tyrrell

Why You Should Build Your Wealth Using the Biggest BRICS Possible
2012-03-20 – David Thomas

Oil Getting Ready For Its Next Rally
2012-03-19 – Dr. Alex Cowie

Your Shares Made Triple Digit Gains… Do You Cash In or Wait a Little Longer?

Target (NYSE:TGT) announced the completion of its $10 billion share repurchase program authorized in November of 2007.The company purchased 193.5 million shares or about 23% of the late 2007 float, at an average price of $51.68. The company’s shares closed at $58.41 on Friday.The company will proceed with a $5 billion share repurchase plan initiated this January and projects an annual dividend of $3 per share by 2017.