InvestMacro FX

London Gold Market Report
from Adrian Ash
BullionVault
Tues 17 Jan., 08:45 EST

The WHOLESALE MARKET gold price reached new 5-week highs as Asian trade ended and London opened on Tuesday, while global stock markets and commodity prices also rose after stronger-than-expected growth data from China.

The world’s second-largest economy, China reported annual growth of 8.9% for the end of 2011 – the weakest level since mid-2009 but stronger than analysts forecast and almost 5 times the pace of US growth at last count.

The Shanghai Composite stock index jumped 4.2%. Copper led base metal prices by rising 2.6%.

Silver bullion re-touched last week’s 2-month high above $30.50 per ounce, despite news of a sharp hike in Indian import duty which also affects gold.

The gold price peaked on Tuesday mornng at $1667 per ounce, more than 9.4% above the 5-month low touched in late December.

US crude oil contracts jumped back to $100 per barrel after Saudi oil minister Ali al-Naimi said the Opec-cartel member is now targeting that level – “a new line in the sand” substantially above the previous “fair price” of $75 according to Standard Bank today.

“Gold price action is becoming increasingly indifferent to physical trade and far more susceptible to broader market headwinds,” says a note from Japanese conglomerate Mitsui’s London team today.

“Everything is rising because of China,” says one commodities analyst in Frankfurt to Bloomberg. “It’s general market sentiment.”

“Simply put,” reckons China economist Ting Lu at Bank of America/Merrill Lynch in Hong Kong, “Beijing will continue its policy easing which was started in mid-October, though we should not expect a big-bang stimulus.”

Beijing cut the required reserve ratio which banks must keep back from lending for the first time in three years last November, easing it back half-a-percentage point from a record 21.5%.

Analysts now expect a further two percentage-point cut in 2012, reports Reuters, “with many banking on one in the run-up to next week’s Lunar New Year holiday.”

“In terms of calendar year 2011, [gold demand from] India was ahead,” says Philip Newman, research director at Thomson Reuters GFMS, presenting the consultancy’s latest global data in London today but it does seem as though China, in terms of our data for the first half [of 2012], may just tip it.”

GFMS now forecasts a gold price peak of $2000 per ounce, sometime in 2012.

China’s domestic gold mining output – the world’s No.1, and currently subject to an export ban – rose sharply in December to end 2011 some 19% higher than 2010 at 731 tonnes, according to the National Bureau of Statistics today.

Across in India – the world’s hungriest gold consumer – the government today raised import duties on silver to 6% by value, and raised the duty on gold from 300 Rupees per 10 grams to a value tax of 2%.

That doubles the effective tax rate on gold, first deregulated as India moved away from a command economy in the early 1990s.

The gold price on the Multi Commodity Exchange (MCX) today rose almost 1% to INR27,760 per 10 grams, while shares in leading jewelry chains shed some 3%.

Over the last 12 months, the plunge in the Indian Rupee’s forex value has made the gold price rise over 10% higher than it otherwise would. Annual imports to India – which has no domestic gold mining output – declined by 9% from 2010’s record level, according to the Bombay Bullion Association.

Meantime in Europe on Tuesday, several governments including Greece and also the cross-border Stability Fund – downgraded from its “triple-A” credit rating on Monday by Standard & Poor’s – raised almost €11 billion in short-term bills, and at lower interest rates than last time of asking.

The Euro rallied 1.5¢ from last week’s 17-month low near $1.26.

The gold price rose faster, however, nudging cost of gold to Eurozone buyers above €1300 for only the second time since 8th December.

“Spot gold in Euros is about to touch the November peak at €1316.48 [per ounce],” reckons Axel Rudolph, technical analyst at Commerzbank.

“Should this level be surpassed a swift acceleration higher towards last year’s all-time high at €1359 should be seen.”

New data released Tuesday showed the pace of consumer-price inflation slowing last month across the European Union – the largest single export market for China.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

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

Can Intel Finally Penetrate This Elusive Market?

by Mike Kapsch, Investment U Research

Tuesday, January 17, 2012

For years now, ARM Holdings (Nasdaq: ARMH) has captured 100% of the smartphone and tablet semiconductor market.

But chip rival, Intel (NYSE: INTC) is on a mission to soon change that… At last week’s International Consumer Electronics Show, the company announced it had just finalized deals with Lenovo (OTC: LNVGY.PK), Motorola (NYSE: MMI) and China Unicom (NYSE: CHU) to begin providing processors for their mobile devices this year.

Intel also recently announced that it reached a deal with INSIDE Secure to license its near-field communications (NFC) technology. This is a strong signal that Intel is serious about moving into the mobile arena.

Neil Garner, CEO of NFC-technology firm Proxama, tells us that there are some interesting applications for NFC tech in PCs, such as being able to “share information with other NFC-devices by simply tapping them against a touch-point.”

That means instead of using cables to transfer any pictures, videos, or other data from a mobile device, you could simply tap it to your PC and everything you want would transfer.

But the main application for this technology appears to be for mobile wallets, such as Google’s (Nasdaq: GOOG) Wallet. Thus, Intel is most likely licensing this technology in order to compete in the mobile arena.

And for Intel, these deals couldn’t have come at a better time…

As The Guardian reports, “Many on Wall Street deem Intel at a crossroads, where it either has to carve out a share of the mobile market or risk becoming irrelevant in the long run as PC sales slow…”

Slowing PC Sales Threaten Intel’s Future Growth

According to market research firm IDC, 2011 was the second-worst year for U.S. PC sales in history. Gartner, another research company, expects this number to dip an additional 3.8% in 2012.

Intel relies heavily on PC sales to make money. Despite a bad year for the U.S. PC market, the tech firm still managed to grow its 2011 PC chip sales roughly 16%. It also earned a record high $54 billion in revenue for the year.

In fact, Intel’s shares climbed 17% as a result…

And although the company has been strong in enterprise IT, management knows Intel won’t be able to rely on just that and PC sales to grow its bottom line much longer…

Smartphones and Tablets Replacing PCs

Last year, for the first time ever, tablet and smartphone sales outpaced total PC sales. Smartphone sales were up an estimated 50% for the year. Tablets were up 207%.

Over the next 12 months, smartphone and tablet sales growth is set to slow… to 32% and 60% respectively. But revenue from these two devices alone are still expected to hit an astounding $1 trillion this year.

The bottom line is: Smartphones and tablets have put the future of the PC in jeopardy. That’s why Intel’s move into the mobile market can’t be overstated. It’s important to note that Intel hasn’t had much success in recent attempts to penetrate this market, but with some impressive products featuring its new chips set for release in 2012, it could finally make this jump.

Intel may find it slow going as it works to prove to investors it can adapt to a new tech landscape fueled by tablets and smartphones…

But with $15 billion sitting in its cash reserves and a mobile chip that already challenges ARM’s processors, Intel has plenty of capital and know-how to finally muscle its way into the soon-to-be $1 trillion smartphone and tablet market.

Good investing,

Mike Kapsch

Article by Investment U

“Powering” the Future of Transportation

by David Fessler, Investment U Senior Analyst
Tuesday, January 17, 2012: Issue #1688

If you poll 100 people and ask them, “What fuel did the first cars run on?” An overwhelming percentage of them would naturally pick gasoline.

But they’d be wrong.

Over 100 years ago, most cars ran on electricity. It’s a little-known fact. Alas, drivers quickly wanted more range than the electric vehicle (EV) batteries could deliver. Thomas Edison, actively involved in the nascent EV industry, began working on improved battery designs.

But out in Detroit, Michigan’s Henry Ford had other ideas.

In 1908, his Ford Motor Company drove the nail into the EV coffin, when it introduced the $250 Model T. All of a sudden, gasoline-powered cars were available to the masses. But the real killer was they could travel 10 times farther than their electric counterparts.

Ford ultimately sold over 15 million “Tin Lizzie’s,” as the car was colloquially known. At the time, that was more cars than all other manufacturers combined. And the world has been running on gasoline and diesel ever since.

But that simply can’t continue.

The Automotive Industry Comes Full Circle

Crude oil is a finite resource, and some industry experts believe we may have already reached the peak of world production. I’m not going to debate that here. Much sooner than anyone is anticipating, another means to power automobiles will have to be found.

The automotive industry is doing just that. It’s come full circle, and it’s reintroducing EVs.

Let’s face it, if you could buy a car that:

• Had no engine, gas tank, or tailpipe…

• Never had to visit a gas station…

• Cost the equivalent of $1.20 a gallon to fill the “tank”…

• Could go 100,000 miles between brake jobs…

• Never required an oil and filter change…

• Never needed a tune-up…

You’d buy one in a heartbeat, wouldn’t you? Of course you would. So would a lot of other Americans, Chinese, Indians and just about anyone else who’s experienced “pain at the pump.” Not to mention the endless auto repair bills and maintenance costs.

Well, you can purchase EVs today that meets those specs. So why aren’t people rushing out and buying them in droves?

Range Bound: The EV Show Stopper

There’s just one glaring problem: Most EVs travel 100 miles or less between charges. That’s fine for errand running, but forget long-distance commuting and weekend outings.

That’s the state of EVs today. It’s led to “range anxiety” among potential customers, who fear they might be left in the lurch somewhere without a really long extension cord. It’s the biggest stumbling block in the way of widespread adoption of electric vehicles.

I’ve decided to purchase a Nissan Leaf. Since I work mainly from home, most of my driving is local. Some days, I don’t drive at all. I’m not getting rid of my other vehicle, though. It’s a truck, and I’ll just use that for when I really need the utility of it.

But for millions of Americans, especially long-distance commuters, 100 miles on a charge just won’t cut it. A recent survey done by the U.S. Census Bureau estimates that of the 231 counties with populations greater than 250,000, the average commuter spends between 30 and 40 minutes driving each way to work.

Almost 6% of Americans who live near Baltimore and New York City spend 90 minutes or more getting to the office. EVs have been a non-starter for this group. But what if EVs could go 500 miles between charges?

Battery Technology Marches On

In a few years, if the research IBM (NYSE: IBM) has been conducting pans out, they’ll be doing just that. After three years of research, IBM’s developed what it thinks will make EV range anxiety evaporate: lithium-air batteries.

In theory, lithium-air batteries can store 1,000 times more energy than batteries made using current lithium-ion battery technology.

Checkout IBM’s diagram below, and you can get an idea as to how it works:

That three orders-of-magnitude jump in energy density could quintuple my LEAF’s range to 500 miles. Or if you’re lucky enough to have a Tesla Roadster, imagine being able to go 125 MPH for over 600 miles.

Now we’re talking. Who needs gasoline and gas stations when you’ve got that kind of range?

The reason these batteries aren’t in the LEAF I’m taking delivery of next month is that they’re chemically unstable. Right now, frequent charges destroy the battery in short order.

But IBM scientists believe they’ve found solutions that will fix both of those problems. They think they can have a working prototype by next year and commercial versions by 2020 or earlier.

Talk about a black-swan event. If IBM can pull this technology off, it could turn the automotive world upside down, and ultimately have gasoline and diesel vehicles headed the way of the Dodo bird.

And who wouldn’t enjoy the longer battery life in their cellphone and laptop computer, too?

Good investing,

David Fessler

Article by Investment U

By JW Jones: www.OptionsTradingSignals.com

A wise man proportions his belief to the evidence.
~ David Hume ~

Earnings season is now upon us and so far the only major earnings component that has been released is the J.P. Morgan earnings report that came in Friday before the market opened. After the report was digested by the marketplace, prices fell dramatically.

While the charlatans in Washington try to sell the American public into believing that the U.S economy is starting to firm up, the underlying truth is that the recovery has been relatively week. If it were not for the massive liquidity injections provided by the Federal Reserve through multiple quantitative easing adjustments, risk assets would likely be priced significantly lower.

Inquiring minds combed through the data provided in the J.P. Morgan earnings release and a few major outcomes were placed front and center. Earnings disappointed overall due to a massive decline in investment banking activity. Investment banking profits represent a large portion of all of the major banks’ earnings.

On Friday, www.zerohedge.com provided the following chart in its article titled, “Charting Disappearing Investment Banking Revenues And Profits, JPM Edition.” The chart below illustrates the massive decline in investment banking revenue:

To make the chart a bit easier to follow, the blue bars represent investment banking revenue. It is rather obvious that investment banking revenue is in free fall having dropped nearly 50% since the first quarter of 2011. In addition, I would point out the sharp declines in total net income (purple) and the massive decline in equity market revenue (green).

It is without question that the other major banks that have a large investment banking presence are likely to experience similar revenue losses. A significant reduction in investment banking gross revenue puts tremendous pressure on total bank revenues in this quarter and looking ahead.

I am of the opinion that major money-center banks like Bank of America and Citigroup are likely to experience similar revenue reductions. We will know for sure in the coming weeks as most of the large banks are set to report earnings in the near term. Clearly this expected reduction in overall revenue will likely have a major impact on the financial sector of the economy.

The financial complex is absolutely critical when looking at broad index returns. It is common knowledge that broad indexes such as the S&P 500 and the Dow Jones Industrial Average struggle to rally when the financial complex lags. The same can be said for the semiconductor sector as well.

Recently financials (XLF) and the semiconductor (SMH) sectors have worked considerably higher on relatively light volume. Both XLF and SMH are trading into major resistance and both are starting to show signs that they are nearing a potential top  The daily charts of XLF and SMH are shown below:

XLF Daily Chart

SMH Daily Chart

Both the XLF and SMH daily charts illustrate that a major top may be forming in both sectors. It is widely noted that if the financials and semiconductors are not showing strength in a rising market, a correction or major reversal may not be far away.

I have been writing about the potential for a major top to be forming for several weeks now and I find that I am not in the majority in this viewpoint. Recent sentiment and momentum in U.S. equities demonstrate that we are very overbought at this time. Retail investors are extremely bullish and the Volatility Index (VIX) is trading near recent lows.

I am unsure whether this is a major top that leads to strong selling pressure or whether a correction is a more likely outcome. What I do know is that tops are a process, not a singular event and at this point more and more evidence is supporting the viewpoint that equities may be getting tired and some profit taking is likely.

In addition to the lackluster price action in the charts above, earnings releases have been revised lower in the 4^th quarter of 2011. In fact almost 3.5 companies have announced earnings revisions to the downside for every company that has indicated a stable to rising earnings announcements. This type of scenario has not been present since the first quarter of 2008 which as we know was not exactly a great time frame to be looking to put cash into risk assets.

Furthermore, Goldman Sachs analysts came out with the following commentary, “While the 4^th Quarter is typically the strongest quarter for earnings, estimates have fallen 9% since the summer and are now below both realized 2^nd and 3^rd Quarter results.” Goldman Sachs is also expecting significant price pressure coming from a weak U.S. economy and the fears of a European recession in 2012. Overall, the estimates are far from bullish and are in fact quite concerning when looking at the current valuation of U.S. equities.

The impact that a stronger U.S. Dollar will have on domestic companies which are used to having a competitive advantage when looking at earnings due to currency adjustments could produce negative surprises. Typically positive earnings adjustments are likely to be revised to the downside as the U.S. Dollar has rallied sharply higher in light of the weakening Euro currency. The weekly chart of the U.S. Dollar Index is shown below:

The U.S. Dollar Index is consolidating directly beneath resistance which is generally seen as a bullish development. I expect a breakout over new highs is only a matter of time. It is unlikely that in the long term the U.S. Dollar can rally while stocks trade flat or work their way higher. While this is always possible, the likelihood of that scenario is unlikely due to earnings pressures that would occur if the Dollar pushes higher in the intermediate term.

In addition to the variety of above mentioned factors which could have a major impact on equity valuations, the S&P 500 Index is trading into major resistance. Unless the S&P 500 Index can work above the 1,325 area it is unlikely that a new bull market has begun.

If the S&P 500 Index manages to work above the 1,325 level then my analysis may be proven completely incorrect. However, right now the S&P 500 Index has a lot of overhead resistance at the 1,292, 1,300, and 1,310 price levels. The daily chart of the S&P 500 Index is shown below’

Ultimately we are coming into the final week for the January options contracts which are set to expire at the close of business this coming Friday. I would not be shocked to see some volatility late this week and potentially even higher prices for equities.

However, my expectation is that once the January expiration hangover is behind us, increased volatility and lower prices are likely ahead for U.S. equities. The earnings announcements this week will likely have a large impact on the price action. Heads up, risk is exceptionally high!

To learn more about Options Trading Signals visit J.W. Jones Options Newsletter website.

This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

Friday’s sovereign credit rating downgrade by Standard & Poor’s brings a new sense of urgency to the European debt crisis. The move also shines a spotlight on the region’s abysmal adherence to the Eurozone’s fiscal management rules as leaders prepare for yet another European summit on the debt crisis slated for January 30^th.

Greek officials will actually get a head start on the summit as they are schedule to meet on January 18^th following a series of unsuccessful discussions last week to reach an agreement with the country’s largest creditors. Last fall it appeared that a deal had been arranged that would see Greece’s largest creditors receive 50 percent of the face value on Greek debt. This arrangement was expected to reduce Greece’s deficit to 120 percent of GDP by the end of the next decade, but the deal now appears to be in question. Talks between the banks and the Greek government are scheduled to resume on January 18^th.

Failure to come to terms on the debt discount places the release of the next tranche of emergency funding to Greece at risk. Greece has more than 14 billion euros ($17.8 billion) in debt due to mature over the next two months and if unable to meet the obligation, Greece would have no option but to enter into a full and uncontrolled default. Few expect it to come to this, however, as a calamitous default of this nature would spread debt contagion throughout much of the Eurozone at a rate beyond the region’s capacity to maintain.

Europe’s Largest Economies Suffer Credit Downgrade

In actual fact, few were surprised when Standard & Poor’s slashed credit ratings for a total of nine Eurozone countries late last Friday. Of the region’s top five economies, France and Austria both lost their coveted triple-A ratings leaving only Germany at the top tier. Italy and Spain were further downgraded to below investment grade status.

Citing deteriorating economic prospects and the anemic attempts so far to meet austerity targets and reduce deficits, S&P also placed the countries on a “negative” credit outlook leaving the door open to additional downgrades.

Following the official notice of the demotion, European officials rushed to minimize the impact of the historic downgrade. German Chancellor Angela Merkel said she believed the credit action would prove to be positive as it would urge member states to agree to a “financial compact” to help salvage the union and the euro.

Markets were less optimistic and the first full day of trading following the downgrade was mixed. European stocks were up slightly near the end of the day, while markets were off by the mid-way point in the North American trading day. Still, the real test is expected to come tomorrow when Spain will attempt to raise about 6 billion euros ($7.6 billion) in short and mid-term bonds, with another 4 billion euros ($7.6 billion) in long bonds.

“The rating downgrade is definitely going to create headwind for the Spanish bond auction,” Christian Lenk, analyst at DZ Bank, told the Financial Times Deutschland. He said he didn’t believe that the country could “repeat last Thursday’s auction result,” in which it was able to sell twice as many bonds as envisaged at lower interest rates than before.

http://forexblog.oanda.com/

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

Source: ForexYard

The euro started off the week by extending its bearish run, as traders continued to short the currency after last Friday’s credit downgrade of several euro-zone countries. News that talks regarding a Greek debt swap deal broke down only increased fears regarding the prospects of a solution to the euro-zone crisis.

Economic News

USD – USD Approaches 17-Month High vs. Euro in Slow Trading Day

Traders continued to short the euro in favour of the US dollar on Monday, as fresh euro-zone worries boosted safe-haven assets. Trading was somewhat light yesterday, as US markets were closed for a bank holiday. Still, the EUR/USD extended its bearish run throughout the day, and came within reach of a fresh 17-month low. Against its other main currency rivals, the dollar was decidedly bearish throughout the day. Losses were reported against the Japanese yen and Canadian dollar, while against the British pound the USD traded flat throughout the day.

Turning to today, USD traders will want to pay attention to any news or announcements out of the euro-zone. The crisis there continues to dominate the headlines and analysts maintain that without some kind of positive news, the EUR/USD has the potential to fall significantly further. The German ZEW Economic Sentiment, set to be released at 10:00 GMT, is likely to create some market volatility. A positive figure may cause the euro to stage a slight correction vs. the greenback in mid-day trading.

Additionally, the Canadian Overnight Rate and Bank of Canada Rate Statement are likely to impact the USD/CAD pair. A positive statement may drive the USD lower against its Canadian counterpart.

EUR – Breakdown in Greek Debt Talks Causes EUR to Slide

Friday’s news that several euro-zone countries were being downgraded by a leading credit agency caused the euro to slip throughout the day yesterday. Additionally, news that talks regarding a Greek debt swap have broken down have only increased investor pessimism in the long term prospects for a euro-zone recovery. Yesterday, the euro reversed virtually all of last week’s minor gains and has reached a fresh 11-year low against the Japanese yen. Against the dollar, the common currency approached a 17-month low before staging a slight correction.

Today, traders will want to pay attention to any news out of the euro-zone, particularly the German ZEW Economic Sentiment figure at 10:00 GMT. As the biggest euro-zone economy, German news tends to have a substantial impact on the euro. While a positive figure may give the euro a slight boost in trading today, analysts are quick to warn that any bullish movement is likely to be temporary. With little in the way of a solution to the euro-zone crisis, the euro is unlikely to stage a meaningful recovery in the near future.

CAD – Canadian Rate Statement May Boost Loonie

The Canadian dollar saw a very bullish day yesterday, as gains were recorded against the euro and US dollar. The closure of US markets yesterday, combined with continued negative news out of the euro-zone, fuelled the loonie’s upward trend. With significant Canadian news set to be released today, the CAD will likely see another volatile day.

While analysts are not predicting the Bank of Canada to change the national interest rate, traders will want to pay close attention to the Bank of Canada’s rate statement. The statement will be a good indication of the current state of the Canadian economy. Positive news should help the loonie extend its gains going into the rest of the week.

Gold – Gold Stabilizes Following Last Week’s Bearish Fall

Gold

Gold Stabilizes Following Last Week’s Bearish Fall

The price of gold steadily increased yesterday as European stocks saw slight gains following the downgrade of several euro-zone countries last week. Gold, which has had a mixed reaction to the European debt crisis, moved above the $1640 level during yesterday’s trading.

Today, the price of gold will likely be determined by euro movements. In the event that any negative euro-zone news is released, gold may give back yesterday’s gains as investors revert back to the safe-haven dollar. At the same time, should the German ZEW Economic Sentiment come in above expectations, there may be some room for further bullish movement.

Technical News

EUR/USD

Most long term technical indicators place this pair in oversold territory, meaning an upward correction is possible in the near future. The daily chart’s Williams Percent Range is around the -95 level, while the weekly chart’s Relative Strength Index has drifted below 30. Going long this week may be a wise choice.

GBP/USD

Following last week’s bearish trend, technical indicators are now showing this pair trading in neutral territory. The daily chart’s Relative Strength Index is currently at 40, which typically signifies that no significant movement is expected in the near future. Traders may want to take a wait and see approach for this pair.

USD/JPY

Most long term technical indicators are placing this pair in neutral territory, meaning that it may maintain its current trend for the time being. That being said, the Bollinger Bands on the daily chart appear to be tightening. If this continues, a price shift may take place. Traders will want to take a wait and see approach for this pair.

USD/CHF

Technical indicators on both the daily and weekly charts are placing this pair in overbought territory, meaning a downward correction may take place. A bearish cross appears to be forming on the weekly chart’s Stochastic Slow, while the daily chart’s Williams Percent Range has gone above the -20 level. Traders may want to think about going short in their positions.

The Wild Card

USD/SEK

Following its recent bullish run, technical indicators are now showing this pair may be in overbought territory and could see a downward correction. The Williams Percent Range on the weekly chart is right around the -5 level, while the daily chart’s Relative Strength Index is approaching the overbought zone. Forex traders may want to go short in their positions, as downward movement could occur.

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.

Read the full story: EUR/USD heading Towards 20 Day SMA – Markets Higher On China GDP

EUR/USD has moved strongly higher over the Asia trading session and the earlier hours of the European trading with price potentially heading in the direction of the daily 20 period SMA, which has provided dynamic resistance on many occasions recently – as can be seen on the daily chart below.

European markets had put in gains on Monday, following the successful sale of French T-bills which was a welcome relief following the credit downgrades on Friday.  Upcoming Spanish T-bill auctions will be another testing factor regarding overiding market sentiment.  There is a chance that much of this move higher is coming on short covering as profits are taken.

The following chart shows the recent price action around the 20 day SMA.

Any information or views found in this post are provided for educational reasons and do not in any way represent investment advice. The article author doesn’t guarantee the accuracy or completeness of this or any other information provided. Forex-FX-4X or the post authors will not accept liability for any losses arising directly, indirectly or because of reliance on any of the trading setups or associated analysis in any way.

Source: ForexYard

The EUR saw mild bullish movement during the overnight session, as a better than expected Chinese GDP figure boosted appeal for riskier assets. While the currency is still overwhelmingly down against its main rivals, the Chinese data provided it with a brief respite. The EUR/USD shot up over 100 pips before hitting a significant resistance line at 1.2770. Currently the pair has retreated to the 1.2748 level. The EUR/JPY has come off its recent 11-year low and is currently trading at the 97.70 level.

While analysts are quick to warn that the euro’s bullish behavior is likely temporary, traders will still want to pay attention to a batch of European news set to be released today which may impact the currency. Specifically, the German ZEW Economic Sentiment is likely to generate volatilitly. Should the indicator come in above the predicted level of -49.7, the euro may be able to extend its gains going into mid-day trading.

Later in the day, traders will want to pay attention to the Bank of Canada’s Rate Statement and the Canadian Overnight Rate. The loonie has seen significant bullish movement as of late, particularly against the US dollar. Should today’s BOC Rate Statement illustrate positive Canadian economic growth, the CAD may be able to extend its gains.

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.

By MoneyMorning.com.au

Make no mistake about it: If Iran were to follow through on its threats to close the Strait of Hormuz, oil prices would surge as high as $200 a barrel in a matter of days.

But that’s just the beginning…

A wider Iranian war could throw the entire region into chaos — making $100 oil seem like a bargain.

None of this is hyperbole. In fact, these dangers are likely according to of one of world’s leading energy analysts, Dr Kent Moors.

Dr. Moors is an advisor to six of the world’s top 10 oil companies, including natural gas producers throughout Russia, the Caspian Basin, the Persian Gulf and North Africa. He also consults for high-level officials from the U.S., Russian, Kazakh, Bahamian, Iraqi and Kurdish governments on all things energy related.

In short, Kent’s insights are invaluable.

That’s why we’ve given Dr. Moors a chance to address all of the concerns swirling around the energy market today.

Q) Dr. Moors, how serious are the recent developments in Iran?

Moors: This is the most serious U.S.-Iranian crisis since the fall of the Shah in 1979. There’s a very dangerous situation inside Iran that is only being accentuated by the oil market problems that have resulted from Western sanctions.

First off, on the Strait of Hormuz: this is the most significant oil choke point in the world. Some 35% of the world’s seaborne oil shipments and at least 18% of daily global crude shipments pass through this narrow channel in the Persian Gulf. And while the Iranian Revolutionary Guard Navy is not large enough to blockade the Strait of Hormuz for any length of time, it could disrupt traffic.

Q) What effect would closing the Straits of Hormuz have on oil and gas prices?

Moors: Closing the strait would result in a rise in crude oil prices of between $20 and $40 a barrel in a matter of hours. Any interruption beyond 72 hours would push prices to between $150 and $200 a barrel.

As far as gas prices are concerned, the basic rule of thumb is that each $1.00 rise in a barrel of oil results in a 3.2-cent rise in a gallon of gasoline. So $200 oil would equal $6.00-plus gasoline.

Q) Why is this crisis unfolding right now?

Moors: Three major elements are causing Iran to become belligerent:

1. Massive economic and political problems inside the country.
2. The last round of sanctions that restricted Tehran’s access to international banking.
3. And the European Union’s (EU) decision to boycott Iranian crude imports.

I’ll explain each of these further.

First, Iran is undergoing significant economic and political problems. The rial (the Iranian currency) has inflated almost 80% against the dollar in less than a year. The government has not accounted for almost $120 billion in oil proceeds kept out of the country, resulting in a split between Iranian President Mahmoud Ahmadinejad and some of his former supporters in the Majlis (parliament). Several of the president’s closest advisors are, or shortly will be, under indictment for corruption. That includes a multi-billion dollar case of banking fraud, the largest in the country’s history.

Ahmadinejad is in a flat out political war with both the supreme religious leader Ayatollah Khamenei and major clerics.

Now come the sanctions, which have gotten unbearably strict.

The last round of U.S., EU and United Nations (UN) sanctions began cutting Tehran off from international banking. Since global oil sales are denominated in dollars, access to exchange and clearing banks is essential.

Germany, under pressure from Washington, closed Europäish-Iranische Handelsbank (EIH). This small bank is Hamburg-based but Iranian-owned and registered by the Bundesbank (German Central Bank). American intelligence and Treasury officials are convinced (almost certainly correctly) that EIH had been a primary means through which Tehran accessed the international exchange, acquired equipment for its nuclear program, financed arms deals, and provided subsidies to Hezbollah and Hamas.

That was followed by the end of Asian Clearing Union (ACU) services for Iranian oil sales (despite Iran being one of the ACU members). That resulted in a full-blown crisis in India, where Iranian crude imports are essential. New Delhi had no mechanism to pay for the consignments until it set up a very inefficient system of rupee accounts in Turkish banks to exchange them for rials.

Iran must now resort to inefficient and costly substitutes – such as shadowy exchanges around the Dubai Exchange and barter arrangements (especially with China) via the Singapore Exchange. Since China has a trade surplus with Iran, it can effectively finance its crude purchases with its own exports.

Finally, the EU has decided to stop importing Iranian oil. Europe is the second-largest buyer of Iranian crude after China. Iran cannot find customers to replace such a large volume in short-order. The EU must be careful not to spike the price of crude through such a policy, especially for certain member countries already having problems of their own.

Greece, for example, usually receives a third of its crude oil directly or indirectly from Iran. Spain also would be immediately impacted. There’s also a range of daily swap contracts in Europe involving Iranian oil as an element. These would also be thrown out of balance resulting in a price rise.

Risk is now an exacerbating concern in the oil market. The Iranian situation is rapidly becoming a major crisis.

Q) So what’s the next move? How do you see this crisis playing out over the next several months?

Moors: The crisis will probably intensify. Western intelligence agencies have already concluded Iran will get nuclear weapons at the current rate of development. The attempt now is to destabilise Iran internally – hence the latest round of sanctions. Tehran will not allow this to happen. Threatening to close the Strait of Hormuz is one response; moves to destabilise the region will be another. Iran is a main sponsor of both Hezbollah and Hamas and neither of these will sit idly by and have a financial lifeline cut.

Saudi Arabia will increase its own pressure against Iran, while any genuine attempt to close the Strait will be met with an immediate Saudi response.

Jason Simpkins,
Managing Editor, Money Morning (USA)

Publisher’s Note: This is an edited version of an article that first appeared in Money Morning (USA).

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