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Jan. 26 (Bloomberg) — Kwon Young Sun, a Hong Kong-based economist at Nomura Holdings Inc., talks about South Korea’s economy, government measures to support growth, and central bank monetary policy. South Korea’s economy grew at the slowest pace in two years as Europe’s sovereign-debt crisis weighed on exports. Kwon also discusses the South Korean won. He speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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Source: ForexYard

News that Japan logged its first annual trade deficit in over 30 years sent the JPY tumbling during yesterday’s trading session. The USD/JPY shot up well over 100 pips, reaching above the 78.00 level. Meanwhile the EUR/JPY extended its bullish trend before staging a downward correction toward the end of the European session. Today, a batch of US news is forecasted to generate market volatility. Traders will want to pay particular attention to the US Unemployment Claims figure, as it will be an important gauge of the US economic recovery.

Economic News

USD – USD Turns Bullish Following EU News

The US dollar had a particularly strong day yesterday following negative news out of both Japan and the euro-zone. News that Japan has logged in a trade deficit for the first time since 1980 caused the USD/JPY pair to jump more than 100 pips throughout the day. Meanwhile, fresh concerns regarding Greece’s sovereign debt drove EUR/USD down, virtually erasing gains made at the beginning of the week.

Meanwhile, investors largely shrugged off news that the US Federal Reserve is unlikely to hike interest rates until the beginning of 2014. The dollar has found significant support as of late, largely because of negative international indicators. Investors continue to view the USD as a safe-haven asset. With the euro-zone still in extremely fragile position, traders can expect the dollar to remain at its current level for the near future.

Turning to today, a batch of news out of the US may generate significant market volatility. Traders will want to pay attention to this week’s Unemployment Claims figure and the most recent New Home Sales report for clues as to the state of the US economic recovery. With both indicators predicted to come in positive, the greenback may be able to extend its current bullish run as we begin to close out the week.

EUR – EUR Erases Gains vs. USD

The euro gave back most of its recent gains against the US dollar in trading yesterday, as negative news out of Greece once again drove investors to safe-haven assets. Greece’s inability to reach a debt swap agreement with its creditors has overshadowed otherwise positive euro-zone economic indicators. As such, the EUR/USD once again dropped below the 1.3000 level, and analysts are warning that it will be hard for the pair to break the 1.3080 resistance level in the near term.

Today, traders will once again want to pay attention to any announcements out of the euro-zone with regards to the Greek debt situation. Additionally, any news on Portugal, which is now viewed as the most likely to default on its debt after Greece, could impact euro pairs. US news may also generate market volatility, with this week’s Unemployment Claims figure most likely to impact the EUR/USD pair.

JPY – Japanese Trade Deficit Turns JPY Bearish

Investors largely abandoned the JPY in trading yesterday, following news that Japan has logged a trade deficit for the first time in over 30 years. Increased demand for Japanese exports played a large part in the yen selloff. Questions regarding how long the country will be able to maintain its large public debt caused the currency to tumble. While the USD/JPY climbed above the 78.00 level, the EUR/JPY approached 102.00 during European trading before staging a slight reversal.

Today, the yen is not forecasted to stage a meaningful recovery. While Japan’s status as a creditor country is not in danger at the moment, significant policy changes will have to be implemented to address the current situation. In the meantime, a bearish yen appears to be on the horizon.

Crude Oil – Crude Oil Continues To Sink Following Global News

The price of crude oil continued to fall yesterday, following negative European and Japanese news that drove investors to safe-haven assets like the US dollar. Typically, riskier assets like crude oil fall when the USD increases in value and the commodity becomes less affordable for international investors. As a result, crude dropped below the $98 a barrel level during European trading.

Turning to today, traders will want to pay attention to a batch of US data which could impact USD pairs. Should any of the data come in below expectations, the dollar may move down as a result, which would likely support the price of crude oil as we begin to close out the trading week.

Technical News

EUR/USD

Technical indicators are showing that this pair has entered the overbought zone and may see a downward correction. The daily chart’s Williams Percent Range has hit the -20 level, indicating that a downward breach could occur. Traders may want to go short in their positions.

GBP/USD

A bearish cross has formed on the daily chart’s Stochastic Slow, indicating that a downward correction may take place in the near future. In addition, the Williams Percent Range on the same chart is well above the -20 level and pointing down. Going short may be the preferable choice for now.

USD/JPY

Following the spike the pair saw in recent trading, technical indicators are now showing that a downward correction could take place in the near future. The 8-hour chart’s Relative Strength Index is already well into the overbought zone, while the Stochastic Slow has formed a bearish cross. Short positions may be preferable.

USD/CHF

Most technical indicators are showing this pair range trading, meaning that no defined trend is forecasted at the moment. Traders will want to pay attention to the technical indicators on the daily chart, as a better picture is likely to present itself in the near future. Taking a wait and see approach for this pair is advised.

The Wild Card

Nasdaq 100

Following the steady bullish trend the Nasdaq has seen in recent days, technical indicators are now showing that a bearish correction may take place in the near future. The daily chart’s Williams Percent Range and Relative Strength Index have both drifted into overbought territory. Forex Forex traders may want to go short in their positions ahead of any downward correction.

Forex Market Analysis provided by ForexYard.

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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.

Introduction:

As we have seen, in the past weeks, most of the world markets have recovered and recovered well. This was on the back of some strong earnings by some big companies and the corporate news flowing around. On the back of this rally, we have seen that the Dollar index has retreated from its high of about 82 to 80. The Dollar index is now at its crucial support level which if breaks will lead on the downside. We can expect targets of around 77 and 78.

Factors Affecting:

Earnings are playing a major role and they will continue to do so in the coming weeks. The European debt crisis is also slowing down which is helping to lift the stock markets across the world. Dow Jones has climbed to the highest level since 5 months and is continuing to break its way through the top. Interest rate cuts, China’s good growth and some other factors are keeping the market on track. If this continues to be good, we will be seeing the dollar index fall below its crucial support level of ‘80’ and come down to lower levels.

Technical Analysis:

In the picture below, we can see that the Dollar index has retreated from a high of around ‘82’ to ‘80’. We can also see that the Dollar index has broke the level of ‘80’ once. But as the support is fquite strong and that is the reason the dollar index again went back to the ‘80’ mark. Unless and until it falls below the previous low, it is in an uptrend. The uptrend is quite intact and there is no reason for the long term traders to panic. On the long term charts, the Dollar index is quite clearly in an uptrend. In the short term charts one needs to be careful as the index is at the support level. If the trend breaks, then sideways trend comes in to place which always plays with our stop losses.

Forecast:

As the short term and the long term trends are quite intact, one can go long on the Dollar index keeping a strict stop loss of ‘80’. Or one could wait for the level of ‘80’ to break and one can initiate shorts keeping the trade price as a stop loss. The long term traders those who are holding their longs can hold on to their positions or square them off according to their risk levels. If the index breaks the ‘80’ mark, the trend becomes sideways which becomes difficult to make money.

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Disclaimer:

DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.  VISIT US FOR MORE INFORMATION AS WELL AS UP TO DATE FOREX ANALYSIS AND FOREX NEWS.

Americans are the most confident they have been in the economy since May. U.S. economic confidence is at -25 in the week ending Jan. 22. This is improved from -29 the prior week and is the best since May 2011, according to a Gallup report released today. The Gallup Economic Confidence Index is an average of two components: Americans’ ratings of current economic conditions and their outlook for the economy. Gallup says Americans have grown steadily more positive about current economic conditions in the past few weeks. They are also now more positive about the future direction of the economy than they were three weeks ago.

The US Federal Open Market Committee (FOMC) kept the fed funds rate steady at 0 to 0.25 percent. The Fed said: “To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy.  In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

The Fed previously announced the commencement of “operation twist” at its September meeting (and maintained that program, and the policy of reinvesting during today’s meeting), after it held monetary policy settings unchanged at its August meeting, where it previously committed to low rates until 2013.  The US reported inflation of 3% in December, down from 3.9% in September, compared to 3.8% in August, and 3.6% in both July, June and May, up from 3.2% in April.  Meanwhile the US economy grew 1.8% in Q3, up from 1.3% in Q2, and 0.4% in Q1 this year.  

Way back in early 2011, members of the U.N. Security Council had no problem getting a resolution through that authorized military force in Libya ostensibly to protect civilians from attacks by forces loyal to strongman Moammar Gadhafi. The year before, lawmakers on both sides of the Atlantic were bickering over who did what and why in terms of the cancer-stricken Lockerbie bomber. This Scottish decision to release him, depending on which U.S. lawmaker you spoke with, was tied to a BP deal to drill for oil in Libya. Despite fractures in the new interim government in Tripoli and reports of renewed protests, a decision by the Italian government to quietly discuss trade relations suggests something isn’t quite right in the way Western allies pick their fights.

OPEC last year refused to budge when economic doomsayers were predicting the end of days because the war in Libya was pushing oil prices to highs that threatened some mythical economic recovery somewhere in the world. The International Energy Agency stepped in, but by January, oil majors in Libya were saying production levels had more or less returned to normal, all things considered. Italian energy company Eni, which had pretty nice contracts with Gadhafi’s government, is happily churning out oil from fields in Libya that were left, for all intents and purposes, unscathed by the best NATO had to offer. Even the most pessimistic oil analysts are surprised at how fast Libyan oil production is back online.

In October, rebel forces presumably said to hell with it and figured they’d save everyone a lot of time by killing Gadhafi themselves. The ICC didn’t seem to mind much and a now-fractured interim government did little to worry the Italian government enough to decide during the weekend that business was booming in post-Gadhafi Libya.

Before the conflict began, a group of Democratic lawmakers in Washington issued a 123-page report claiming the 2009 decision to release Lockerbie bomber Abdelbaset al-Megrahi was tied to commercial oil interests with Tripoli. A British inquiry into the case found BP was involved to some extent in the 2009 decision because, according to New York’s Sen. Chuck Schumer, London wanted an oil deal to go through with the Gadhafi government.

So where were these same senators when it was announced in November that Abdulrahman Ben Yezza was appointed as the new Libyan oil minister? He’s the former chairman of Eni Oil Co., a joint venture between the Italian energy company and Libya’s National Oil Corp. Why no furor when Eni Chief Executive Officer Paulo Scaroni became the first executive from an oil major to visit when he went to Tripoli in September? For that matter, where are the Democrats in the United States?

It seems rather duplicitous to on one hand sit and debate censuring Syria at the Security Council for 10 months while it took, what, a few weeks to get one through on Libya? Was Gadhafi’s Libya somehow ripe for the picking? Was the Libyan resolution simply too crafty for those pesky Russians?

Italy and Libya during the weekend signed a letter that spells out bilateral coordination for the protection of its borders and oil installations. Makes you wonder who is drawing up what at which European energy company as U.S. battle carriers head to the western Iranian coast.

Source: http://oilprice.com/Energy/Energy-General/Somethings-Fishy-in-Tripoli.html

By. Daniel J. Graeber of Oilprice.com

The Reserve Bank of New Zealand kept the Official Cash Rate (OCR) on hold at 2.50%, noting the impact of global developments.  The Bank Said: “In the domestic economy we continue to see modest growth. Over recent months there have been signs of a limited recovery in household spending and the housing market. Further ahead, repairs and reconstruction in Canterbury will also provide a significant boost for an extended period, though there may be further delays resulting from the aftershocks. Given ongoing uncertainty around global conditions and the moderate pace of domestic demand, it remains prudent to keep the OCR on hold at 2.5 percent”

Previously the Bank also held the OCR unchanged at 2.50%, while the Bank cut the rate by 50 basis points in March this year, following the Canterbury earthquake.  New Zealand reported consumer price inflation of 1.8% in Q4 2011, down from 4.6% in Q3, compared to 5.3% in Q2, 4.5% in Q1, and 4.0% in Q4 of 2010, and within the official inflation target of 1-3%.  

Netflix (NASDAQ:NFLX) is expected to report Q4 earnings after the market close on Wednesday with a conference call scheduled for 6:00 pm ET.According to First Call, analysts are looking for EPS of $0.55 on revenue of $857.60 million. The consensus range is $0.40-$0.70 for EPS, and $816.8 million-$894.63 million.Last October, Netfilx guided Q4 EPS of $0.36-$0.70 and said Q4 DVD subscriptions would fall sharply due to price changes.NetFlix is currently above its 50-day moving average (MA) of $78.13 and should find resistance at its 200-day MA of $179.17.

By MoneyMorning.com.au

The next 1,000 points on the Dow Jones Industrial Average in either direction are going to be determined by what happens in two cities thousands of miles from our own shores…

Athens and Berlin.

What’s more, the risks associated with Europe’s redemption, or its failure, are more concentrated now than they were before the crisis began.

There are two reasons: a) Europe won’t help itself and b) Wall Street may still have $1 trillion or more in exposure to European problems.

What makes me crazy right now is that European chatter is what’s driving the markets.

Every sound bite from Europe is critical these days. Not because there is anything relevant in the political babbling from financial ministers tasked with fixing this mess, but rather that there is a cascade of events that could take us in either direction.

Fix this mess and the markets will take off for a 1,000 point gain that will leave anybody who is on the sidelines hopelessly behind.

Fail and the markets could tank.

It certainly fits the pattern established in recent months. News leaks suggesting solutions have brought on rallies, while negative leaks have caused a ripple effect that has quickly dumped stocks into the hopper.

Yet, it’s not really the numbers that matter at the moment – even with the Fed rumored to be considering another $1 trillion stimulus and reports that the European Central Bank (ECB) and International Monetary Fund (IMF) may be seeking as much as $600 billion each.

No. The market swings we are seeing are all about confidence or, more specifically, the near complete lack thereof.

A recent report from TrimTabs shows that [US] checking and savings accounts attracted eight-times the money that stock, bond and mutual funds did from January to November 2011.

That is a whopping $889 billion that went under “the mattresses” versus only $109 billion that went into the markets.

In fact, CNBC is reporting that the pace of money headed for plain-Jane savings and checking accounts from September to November accelerated to nearly 13-times the average monthly flow rate of the preceding nine months from September to November.

What’s significant about this is that the money has headed for the sidelines when the markets have rallied. Usually it’s the other way around. Normally money floods into the markets when they move higher.

The other notable thing here is that, generally speaking, up days this year have had thinner volume than down days. This means that most investors just can’t handle the swings. In other words, every time the markets dip, they’re packing it in.

Bottom line: Investors are making a gigantic mistake – especially those with a longer-term perspective.

Periods of maximum pessimism – when everybody “knows” something – usually make for a variety of great buying opportunities.

For instance, do you remember the following quote?

“The economy is staggering under many “structural’ burdens, as opposed to familiar problems.

The structural faults … will take years to work out. Among them the job drought; the debt hangover; the banking collapse; the real estate depression; the healthcare cost explosion and the runaway federal deficit.”

I remember it like it was yesterday.

It’s from TIME magazine in September 1992 – right before the markets took off on a breathtaking 16-year run.

To be clear here, I am not suggesting that the markets are about to go on a triple percentage point bender, only that investors would be foolish to ignore the possibility.

In fact, the very notion that Wall Street remains in denial about Europe and Europe itself still refuses to confront the seriousness of its situation bodes well for almost anybody willing to go against the grain.

That’s been the case throughout history.

Take the Panic of 1873. It was the world’s first truly international financial crisis and, by many measures, actually far worse than what we’re dealing with now.

Things were so bad that more than 18,000 businesses closed, sending unemployment soaring to 14%. The NYSE even closed for ten days.

The depression that started in 1873 lasted until 1879 here in the United States and another 20 years in Britain — where it’s known as the “Long Depression” in history books.

Yet through it all, the market’s dips, twists and turns turned out to be extraordinary buying opportunities.

The same thing ultimately will be true today, especially if you’re building long-term investment positions in “glocal” stocks with experienced management and fortress-like balance sheets that produce high dividends.

I feel the same way about energy, commodities and very specific microcap companies with promising inventions, medical technology or some other catalyst that can create game-changing returns.

It takes a lot of nerve, but that’s how the markets work.

Keith Fitz-Gerald
Chief Investment Strategist, Money Morning (USA)

Publisher’s Note: This article originally appeared in Money Morning USA

From the Archives…

Are ASX Energy Index Stocks Worth The Risk?
2012-01-20 – Aaron Tyrrell

Why the World Bank Wants Your Money
2012-01-19 – Kris Sayce

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2012-01-18 – Aaron Tyrrell

The US-China Power Struggle… and What it Could Mean For Oil and Australian Energy Stocks
2012-01-17 – Dr. Alex Cowie

How Global Oil Supplies Could Fall 40% Overnight
2012-01-16 – Dr. Alex Cowie

In the Market Or Under the Mattress?