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The Eurozone Wags the Gold & Silver Dog

JW Jones – www.OptionsTradingSignals.com

If Greece defaults and the European situation begins to spin out of control where will money flow? It would not make sense for market participants to buy Euro’s during a default regardless of whether the default it structured or not. In fact, it is more likely that European central banks and businesses would be looking to either hedge their Euro exposure or convert their cash positions to another currency all together.

Some market pundits would argue that gold and silver would likely benefit and I would not necessarily argue with that logic. However, the physical gold and silver markets are not that large and depending on the breadth of the situation, vast sums of money would be looking for a home. The two most logical places for hot money to target in search of safety would be the U.S. Dollar and U.S. Treasury’s.

The U.S. Dollar and U.S. Treasury obligations are both large, liquid markets that could facilitate the kind of demand that would be fostered by an economic event taking place in the Eurozone. My contention is that the U.S. Dollar would rally sharply along with U.S. Treasury’s and risk assets would likely selloff as the flight to safety would be in full swing.

To illustrate the point that the U.S. Dollar will likely rally on a European crisis, the chart below illustrates the price performance of the Euro compared to the U.S. Dollar Index. The chart speaks for itself:

Euro Dollar Options

Clearly the chart above supports my thesis that if the Euro begins to falter, the U.S. Dollar Index will rally sharply. In the long run I am not bullish on the U.S. Dollar, however in the case of a major event coming out of the Eurozone the Dollar will be one of the prettiest assets, among the ugly fiat currencies.

The first leg of the rally in the U.S. Dollar occurred back in late August. I alerted members and we took a call ratio spread on UUP that produced an 81% return based on risk. I am starting to see a similar type of situation setting up that could be an early indication that the U.S. Dollar is setting up to rally sharply higher in the weeks ahead. The daily chart of the U.S. Dollar Index is shown below:

US Dollar Index Options

As can be seen from the chart above, the U.S. Dollar Index has tested the key support level where the rally that began in late August transpired. When an underlying asset has a huge breakout it is quite common to see price come back and test the key breakout level in following weeks or months. We are seeing that situation play out during intraday trade on Friday.

We are coming into one of the most important weeks of the year. Several cycle analysts are mentioning the importance of the October 26th – 28th time frame as a possible turning point. I am not a cycle expert, but what I do know is that we should know more about Europe’s situation during that time frame. It would not shock me to see the U.S. Dollar come under pressure and risk assets rally into the October 26th – 28th time frame. However, as long as the U.S. Dollar Index can hold above the key breakout area the bulls will not be in complete control.

If I am right about the U.S. Dollar rallying higher, the impact the rally would have on gold and silver could be extreme. While I think gold would show relative strength during that type of economic scenario, I think both metals would be under pressure if the U.S. Dollar started to surge. In fact, if the Dollar really took off to the upside I think both gold and silver could potentially selloff sharply.

As I am keenly aware, anytime I write something negative about gold and silver my inbox fills up with hate mail. However, if my expectations play out there will be some short term pain in the metals, but the selloff may offer the last buying opportunity before gold goes into its final parabolic stage of this bull market. The weekly chart of gold below illustrates the key support levels that may get tested should the Dollar rally.

Gold Options Trading

For quite some time silver has been showing relative weakness to gold. It is important to consider that should the U.S. Dollar rally, silver will likely underperform gold considerably. The weekly chart of silver is illustrated below with key support areas that may get tested should the Dollar rally:

Silver Options Trading

Clearly there is a significant amount of uncertainty surrounding the future of the Eurozone and the Euro currency. While I do not know for sure when the situation in Europe will come to a head, I think the U.S. Dollar will be a great proxy for traders and investors to monitor regarding the ongoing European debacle.

If the Dollar breaks down below the key support level discussed above, gold and silver will likely start the next leg of the precious metals bull market. However, as long as the U.S. Dollar can hold that key level it is quite possible for gold and silver to probe below recent lows.

Both gold and silver have been rallying for quite some time, but the recent pullback is the most severe drawdown so far. It should not be that difficult to surmise that gold and silver may have more downside ahead of them as a function of working off the long term overbought conditions which occurred during the recent precious metals bull market.

Make no mistake, if the Dollar does rally in coming months risk assets will be under significant selling pressure. While the price action will be painful, those prepared and flush with cash will have an amazing buying opportunity in gold, silver, and the mining complex. Right now, risk remains excruciatingly high as the European bureaucrats wag the market’s dog.

Subscribers of OTS have pocketed more than 150% return in the past two months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at OptionsTradingSignals.com and take advantage of our free occasional trade ideas or a 66% coupon to sign up for daily market analysis, videos and Option Trades each week.

JW Jones

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.

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How to Trade Gold and Oil Prices This Coming Week

By Chris Vermeulen – thegoldandoilguy.com

How To Trade Gold & Oil – The past couple weeks have been tough for most investors. The recent light volume rallies which have taken place in gold, oil and stocks has been generating mixed signals for technical analysts like myself. In order avoid a large draw down on your trading capital you must focus on the long term intraday charts.

What is a long term intraday chart you ask? It is simply a 4 or 8 hour candlestick or bar chart. For example the charts below in this report are 4 hour charts. So each candlestick represents 4 hours.

Why should you use these long term intraday charts instead of say a daily chart? There are four main reasons for this:

  1. If you used a daily chart then this information would be condensed showing you the daily high, low, open and closing prices. While the 4 hour futures chart shows you large multi intraday chart patterns that most traders would never see…  Patterns not seen by the average investor have a higher probability of working in your favour. Also these patterns are much larger than just normal intraday patterns which you see on the 5, 10, or 60 minute charts. Remember the larger the pattern the more potential profit there will be.
  2. These longer time frames allow us to follow gold, silver, oil and stock indexes around the clock 24/7 using futures contracts. Think about it… regular trading hours from 9:30am – 4pm ET only allows you to see 1/3rd of the price action each day. That means you are only seeing parts of larger patterns while the 24/7 contracts show you ALL Price Action.
  3. The last reason you must use futures charts is for the volume readings. Futures show real volume levels which can be used for trading. So the volume you see on ETFs will not have the proper volume levels for that specific commodity or index. More times than not it almost the opposite…
  4. My last reason for trading long term intraday futures charts is because the price of the underlying commodity or index moves true while the ETFs which try to shadow these commodities generate false breakouts and breakdowns on a regular basis. Watch my video about this here: http://www.thetechnicaltraders.com/ETF-trading-videos/TTTOct19Oil/index.html

 

Let’s take a look at the charts…

Gold Futures Contract – 240 Minute (4 Hour) Chart

Gold finally broke down from the bearish rising wedge which it had been forming through late September until mid October. I know the majority of traders, investors, and financial newsletters have already positioned themselves either long or short the metal as they anticipate the next major move.

I will agree that a large move either up or down is just around the corner but what sets me apart from others is the fact that I don’t bet my hard earned money when the odds are 50/50. I don’t pick tops or bottoms; rather I wait for a clean break out or low risk entry point. Only then will I take action. Until the blue box on the chart has been broken with some type of retest I will continue to observe and analyze the chart of gold.

How To Trade Gold

 

Crude Oil Futures Contract – 240 Minute (4 Hour) Chart

The past month crude oil trading has been very profitable for subscribers and me. We shorted crude oil using an inverse etf in September which moved over 20% in our favour within a few trading sessions. And just last week we shorted it again for a 7.5% move in less than 24 hours.

Overall I am still bearish on oil but have moved to cash until I see another high probability setup unfolding. The recent price action in crude oil makes the odds about a 50/50 bet as to which way it will break next. This is why I have moved back to cash and pocketed the quick gain.

How To Trade Oil

 

SP500 Exchange Traded Fund – 240 Minute (4 Hour) Chart

This chart is not the SP500 futures contract. This is just the SPY ETF but what I wanted to show was how the market was showing mixed signals. The past couple weeks price has been broadening and this can be taken two different ways…

More times than not it is seen as a bearish pattern and price generally falls afterwards. But in rare situations which I think we could be experiencing now this broadening price action can be very bullish, meaning much higher prices ahead. So I continue to observe and prepare for a possible trade setup.

How To Trade Indexes

 

Weekend Gold, Oil and Stocks Trend Conclusion:

In short, I feel the market is on the verge of a strong move. The problem is that price action, market sentiment and economic news are all giving mixed signals…

The best position right now is in cash and if something unfolds this week to our favour, then we will get involved but I am not going to take a 50/50 guess on what the next move is until the odds are in favour to one side or the other.

August until now (October 24) the SP500 is down -3.7% and Gold is up 1.1%, Silver is down 20% and oil is down -7.2. Subscribers of my newsletter have pocketed over 38.5% in total gains using my simple low risk ETF trading alerts.

Get My FREE Bi-Weekly Trading Reports and Videos by joining my free newsletter here: thegoldandoilguy.com

Chris Vermeulen

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Gold Climbs, “We’re Not There Yet” say Eurozone Leaders, Final Package “Unlikely to be Bold”

London Gold Market Report
from Ben Traynor
BullionVault
Monday 24 October, 08:00 EDT

THE SPOT MARKET gold price climbed to $1657 an ounce Monday morning London time – a 0.9% gain on last week’s close – as markets digested the news from the first of this week’s two European Union summits.

European stock markets failed to hold onto early gains – with Germany’s DAX down 0.5% by lunchtime – while commodities edged up and US Treasury bond prices rose.

The Silver Price bounced between $31.77 and $31.27 per ounce.

“The main level to watch now [for the gold price] is the $1,627-$1,595 where the market is currently finding some support,” says Reuters technical analyst Phil Smith.

“Gold looks set to benefit from the renewed concerns about inflation and currency debasement that any cure for Europe’s ills will inevitably fuel,” says a research note from Barclays Capital.

Italy’s prime minister Silvio Berlusconi scheduled an emergency cabinet meeting for Monday evening, following the weekend’s European Union summit at which he was reportedly told by fellow Eurozone leaders to draft legislation on fiscal reforms ahead of a second summit this Wednesday.

“Italy has great economic strength,” German chancellor Angela Merkel said on Sunday.
“But Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead.”

Merkel appeared to smirk when asked if she was reassured by her meeting with Berlusconi.

Yields on 10-Year Italian government bonds spiked to 5.97% Monday morning – after breaching 6% last week for the first time since the European Central Bank began buying Italian debt in August.

“Work is going well on the banks,” French president Nicolas Sarkozy said Sunday.

“[As well as] on the [European Financial Stability Facility] fund and the possibilities of using the fund…on the question of Greece, things are moving along. We’re not there yet.”

Sarkozy dropped his proposal that the EFSF be funded by the ECB, a move opposed by Germany.

“Central banks should not be called upon to finance states,” said German finance minister Wolfgang Schaeuble.

It remains undecided how the EFSF will be funded and for what precisely it will be used.

Europe’s banks meantime will need to find €108 billion of new capital within the next nine months, according to the Financial Times. The shortfall was reportedly identified by stress tests carried out by the European Banking Authority, which required a Tier 1 capital ratio of 9% to pass.

Banks have agreed to a voluntary ‘haircut’ of 40% on their Greek bond holdings – while politicians want it to be at least 50% – news agency Reuters reports. Banks agreed a 21% haircut back in July, but this is now seen as insufficient.

The EU said Friday it will pay its €5.8 billion share of Greece’s next bailout installment worth around €8 billion in total.

“Ahead of the Wednesday summit, there remain many open questions,” reckons Juergen Michels, lead Euro area economist at Citigroup in London.

“It seems that progress has been made over the weekend to get to a ‘comprehensive package’, but it is unlikely to be a bold one.”

Over in India – which today celebrates the festival of Dhanteras, the start of the five-day festival of Diwali – the rise in the gold price since last year means gold sales “are lower in volume but higher by value”, according to Prithviraj Kothari, director of the Bombay Bullion Association, adding that sales by volume have reduced by up to 30% in some parts of Mumbai.

“With high inflation there is hardly any money left with people to invest in gold. I fear that this year jewelry sales may be 20-30% lower than last year.”

The United States is expected to experience “at least one credit downgrade in late November or early December,” according to analysts at Bank of America Merrill Lynch. Their report cites a bipartisan “super committee” formed by Congress to address the deficit – and which is due to agree $1.2 trillion worth of deficit reduction measures by November 23.

Ratings agency Standard & Poor’s downgraded the US one notch to AA+ in August. US government debt is still rated triple-A by Fitch and Moody’s, the other two major ratings agencies.

In New York meantime the ‘speculative’ net long position of bullish minus bearish gold futures and options contracts held by noncommercial Comex traders fell 4.8% in the week ended Tuesday 18 October – hitting its lowest level since May 2009 – figures published on Friday show.

“The past week’s deterioration confirms that the speculative market is indeed cautious about gold’s short-term prospects,” says Marc Ground, commodities strategist at Standard Bank.

“However, positioning remains uncommitted either way, so participants don’t seem particularly worried about the gold price falling off a cliff.”

“Despite the two-year low in net spec length,” adds a note from precious metals consultancy VM Group, “the ratio between gross longs and gross shorts remains above this year’s low…and well above lows recorded in 2009 and 2008.”

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

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

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Weekly Forex Market Outlook (October 24-28)

Fundamental Forex Market Outlook for the Upcoming Week

The key fundamental economic events that can strongly influence the forex market this week feature the EU Summit on Sunday, the BOC and RBNZ Rate Decisions on Tuesday and Wednesday respectively, followed by the BOJ Rate Decision tentatively scheduled for Thursday. Additional key economic releases due out this week are detailed further below, with the current market consensus expectations or the last result included in parenthesis whenever available.

The coming week starts on Sunday with the all day EU Economic Summit in Brussels. Monday’s highlights then include Australian PPI (0.6%), Chinese HSBC Flash Manufacturing PMI (51.1) and New Zealand CPI (0.8%). Tuesday will be busier and its key economic events include the UK Current Account (-9.9B) and a speech by BOE Governor King, as well as the BOC Rate Statement, Overnight Rate Decision (1.00%) and U.S. CB Consumer Confidence (46.2)

On Wednesday, the market will closely monitor the New Zealand NBNZ Business Confidence (last 34.4), Australian CPI (0.7%), U.S. Core Durable Goods Orders (0.5%), U.S. New Home Sales (302K), the Canadian BOC Monetary Policy Report and BOC Press Conference, the New Zealand Official Cash Rate Decision (2.50%) and the RBNZ Rate Statement.

Thursday is also busy and will see the release of the tentatively scheduled BOJ Monetary Policy Statement, Overnight Call Rate Decision (<0.10%), and BOJ Press Conference, as well as some closely watched U.S. numbers including: Advance GDP (2.4%), Weekly Initial Jobless Claims (404K) and Pending Home Sales (0.2%, > good for USD).

Friday’s schedule closes out the week featuring the Swiss KOF Economic Barometer (1.01).

Technical Forex Market Outlook for the Upcoming Week

EUR/USD:

Weekly Forecast: Higher

Resistance: 1.3893, 1.3913, 1.3936, 1.3972, 1.4103, 1.4147, 1.4258, 1.4279, 1.4327, 1.4499/1.4503, 1.4548/74, 1.4695 and 1.4939.
Support: 1.3796, 1.3720/43, 1.3652/97,1.3565, 1.3520/24, 1.3450, 1.3360, 1.3333, 1.3241/44, 1.3145, 1.3055, 1.3000, 1.2968, 1.2873, 1.2733, 1.2643 and 1.2586.

200-day MA: 1.4089 and rising.

14-day RSI: 56.9 and rising.

euro usd currency chart

USD/JPY:

Weekly Forecast: Somewhat lower

Resistance: 77.19/47, 77.71, 77.85, 78.02, 78.66, 79.05, 79.40, 80.00, 80.22, 80.82, 81.34, 81.76, 82.01/22, 82.77, 83.09 and 83.77.

Support: 77.04, 76.90, 76.50/69, 76.30/32, 76.25, 76.14, 76.10, 75.94, 75.00 and 70.00.

200-day MA: 80.01 and falling.

14-day RSI: 41.6 and falling.

japanese yen currency chart

GBP/USD:

Weekly Forecast: Higher

Resistance: 1.5960, 1.6000, 1.6037, 1.608, 1.6109, 1.6130, 1.6204/06, 1.6252/59, 1.6332/47, 1.6434/73, 1.6500/98 and 1.6616.

Support: 1.5912/19, 1.5883, 1.5839/67, 1.5630/85, 1.5525/31, 1.5483, 1.5422, 1.5373, 1.5339/55, 1.5326, 1.5293, 1.5270, 1.5123, 1.5000, 1.4947, 1.4872, 1.4785/97, 1.4500, 1.4474, 1.4345 and 1.4229.

200-day MA: 1.6135 and flat.

14-day RSI: 60.7 and rising.

USD/CHF:

Weekly Forecast: Lower

Resistance: 0.8873/83, 0.8916/26, 0.8979, 0.9080, 0.9180, 0.9277/0.9339, 0.9368, 0.9774/83, 0.9971, 0.9997, 1.0000 and 1.0065.

Support: 0.8804, 0.8797, 0.8788, 0.8728, 0.8646, 0.8622, 0.8536, 0.8239 and 0.8000.

200-day MA: 0.8750 and falling mildly.

14-day RSI: 46.6 and falling.

AUD/USD:

Weekly Forecast: Higher

Resistance: 1.0369/96, 1.0473, 1.0481, 1.0511, 1.0564/70, 1.0599, 1.0624, 1.0633, 1.0659, 1.0683/93, 1.0718/26, 1.0763, 1.0784, 1.0909, 1.1000/15 and 1.1064/79.

Support: 1.0229, 1.0116, 1.0100, 1.0012, 0.9983, 0.9925, 0.9863, 0.9732, 0.9689, 0.9667, 0.9651, 0.9620/27, 0.9536/41, 0.9500, 0.9462, 0.9386, 0.9330, 0.9220, 0.9077, 0.9000, 0.8870, 0.8858, 0.8632, 0.8550 and 0.8066/81.

200-day MA: 1.0389 and rising.

14-day RSI: 59.8 and flat.

australian dollar forex chart

USD/CAD:

Weekly Forecast: Lower

Resistance: 1.0132/42, 1.0233, 1.0262/71, 1.0337, 1.0417, 1.0481/90, 1.0500, 1.0506, 1.0646/56, 1.0669, 1.0742, 1.0756, 1.0785, 1.0853, 1.0868, 1.1000, and 1.1101/23.

Support: 1.0042, 0.9939/1.0030, 0.9828/77, 0.9763/96, 0.9734/39, 0.9724, 0.9686, 0.9645, 0.9567, 0.9526, 0.9496, 0.9448/56, 0.9422, 0.9405/09, 0.9056 and 0.9000.

200-day MA: 0.9807 and rising mildly.

14-day RSI: 44.4 and falling.

usd cad forex fx chart

NZD/USD:

Weekly Forecast: Higher

Resistance: 0.8066/93, 0.8109/19, 0.8126/40, 0.8150/90, 0.8269/78, 0.8327/39, 0.8365/86, 0.8423, 0.8469/72, 0.8500, 0.8534/75, 0.8676, 0.8764, 0.8793 and 0.8841.

Support: 0.7955/94, 0.7888, 0.7855/59, 0.7795, 0.7741, 0.7605/72, 0.7549, 0.7523, 0.7504, 0.7500, 0.7453/67, 0.7426, 0.7404, 0.7342, 0.7321, 0.7189, 0.7115, 0.7000 and 0.6945/62.

200-day MA: 0.7971 and rising mildly.

14-day RSI: 55.1 and rising slightly.

kiwi usd fx currency chart

See the full forex economic calender here.

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EUR/USD Meets Technical Resistance at 1.3900

By ForexYard

The EUR/USD rose last week following the completion of a long-term consolidation trend, reaching a 4-day high of 1.3900. This morning, however, the pair bounced off the resistance level and is now trading near 1.3865.

Economic News

USD – US Dollar Jumps Higher at Monday Opening

The US dollar (USD) was seen trading moderately bullish Monday morning as traders saw a small increase in risk aversion following last week’s economic reports. The EUR/USD rose last week following the completion of a long-term consolidation trend, reaching a 4-day high of 1.3900. This morning, however, the pair bounced off the resistance level and is now trading near 1.3865.

Inflation and housing reports from the US and Canada last week portrayed a Western Hemispheric economy somewhat stronger than what many had expected. The mixed results from American housing last week revealed a mildly stagnant market, but inflation appeared to rise as businesses across the United States and Canada begin seasonal hiring for the holidays. Such reports are likely to drive risk aversion into odd swings as the holidays draw near.

With a moderate news day ahead, traders appear anxious for the week’s data which seems to be centered mostly on manufacturing reports. Today’s publications are limited to the euro zone, however, with several figures on manufacturing due this morning. Liquidity will likely be held in moderation making the market unlikely to experience any major swings.

EUR – EUR Trading Lower as Traders Flee Risk

The euro (EUR) was seen trading with largely bearish results this morning following last week’s mildly optimistic assessments from North American inflation and housing reports. Against the US dollar (USD) the euro was trading near a 4-day low, with few signs of halting the bearishness which appears to come on the coattails of a long-term consolidation pattern. Against the Great British pound (GBP), the EUR witnessed a similar, albeit weaker, loss in strength.

Traders appear to be clinging less and less to the 17-nation common currency with lower yielding investments in mind. With inflation rising and employment increasing in the North American continent, it seems likely that more traders will opt for higher yields heading into the 2011 holiday season, but this morning’s downtick was a likely a reverberation of insecurity when the EUR/USD touched the 1.39 resistance line.

Economic sentiment across the euro zone remains negative overall, with many analysts and economists expecting moves towards safety by traders early this week. With a moderate news day ahead, many traders are awaiting more data releases later in the week before buying up further EUR. With today’s low liquidity, not much movement is expected, though European manufacturing statements could roil markets at any time during the European market sessions.

JPY – Japanese Yen Expecting Little Movement

The Japanese yen (JPY) was seen trading significantly higher versus most currencies this morning as its value as an international safe haven begins to get challenged by the prevailing economic conditions. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent.

The latest moves of the JPY are causing some concerns, however, as many speculators were anticipating a downturn following the Bank of Japan’s (BOJ) latest rate statement. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model. The persistence of the yen’s rising strength is causing some furrowed brows in Japan’s economic circles, and this may be a cause of its mixed trading behavior.

Silver – Silver Price Trading in Consolidation Pattern

The price of Silver found modest support over the weekend amid the surging strength of the US dollar, the currency in which such assets are valued. Silver has been trading with wilder price action since early August, but traders have been awaiting a price correction from the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a sudden lift off in dollar values.

As investors seek safety, the value of Silver, which has been seen trading with mixed results since two weeks ago, is expected to rise following its current flat, consolidation channel, bouncing off a recent low near $30.00 an ounce after a selloff in commodity futures pulled down on precious metals two weeks ago. A sudden rise in dollar values due to this week’s uncertain environment is expected to assist the sentiment favoring Silver, however. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value, favoring an upside as Silver holds within its current consolidation pattern.

Technical News

EUR/USD

The EUR/USD has moved above its consolidation pattern from the previous week and has a technical retracement towards 1.4040, the 50% Fibonacci retracement off of the move stemming from the 1.4940 high in May to the October low of 1.3145. Both daily and weekly stochastics are moving higher and as such further resistance is located near 1.4100 where the 100 and 200-day moving averages rest. To the downside support is seen at last week’s low of 1.3650.

GBP/USD

Cable has jumped out to new 6-week high to its 50% Fibonacci retracement at 1.6010 from the move lower covering the April high to the October low. A break of this retracement level would put in play the 1.6110 resistance from the August low followed by the 61% retracement level at 1.6180. 1.5850 can be eyed as the first significant support line followed by 1.5630.

USD/JPY

Last Friday the sleepy USD/JPY awakened from its slumber and quickly set a new all-time low of 75.78, triggering a plethora of stops before moving back above the 76 yen mark. While the range trading environment may continue, a quick move below the 75 yen level could invite an additional round of intervention from the Ministry of Finance which would likely take out the initial resistance levels at 77.85. The post intervention high of 80.25 may find willing sellers of the pair at more attractive levels.

USD/CHF

The one way price move in the USD/CHF has ended with the pair forming what looks to be a falling wedge pattern. The chart pattern typically brings about a breakout to the upside but forex traders should follow the price action. The consolidation pattern has resistance at 0.9025, a level that coincides with the rising trend line from the August low which was broken last week. Additional resistance is located at 0.9340-0.9315. Support is found at 0.8640 and 0.8550.

The Wild Card

AUD/USD

Momentum is rising as the AUD/USD has punched through its initial resistance at 1.0385, a level that has additional significance as the 200-day moving average is also found here. The pair’s next test will come at 1.0440 at the 100-day moving average with a key resistance located off of the September high of 1.0765. Forex traders should note that support is found at 1.0115.

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.

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The Decline of Eastern Values

By The Sizemore Letter

If you browsed the title of this article quickly, your eyes probably played a trick you.  Chances are good you saw “Western” instead of “Eastern.”

It appears that the sentiment of moral decay in the West is a popular one.  Doing a Google search for “Decline of Western values” returned over 30 million hits.  Searching for “Decline of American values” returned over 37 million hits.  It appears that we are all convinced that our culture is going to hell in a hand basket, and the inflammatory rhetoric that comes in a presidential election cycle certainly isn’t helping.

In addition to being the largest generation in history, the Baby Boomers were also one of the most radical.   As young people in the 1960s and 1970s, they shifted the political center of this country to the Left.  Interestingly, now that they are in their 50s and 60s, they are pulling the center massively to the Right.  The Boomers are proving the rule that we all ultimately become our parents.

Certainly, the West has seen its share of social change in the past 50 years.  On the positive side, institutionalized racism such as the forced segregation prevalent in the pre-1960s South has been all but eliminated in America and Europe.  More liberal attitudes toward divorce and remarriage have enabled people to escape unhappy marriages.  There is generally a more accepting attitude towards a person’s privacy and an acceptance that people should be left to manage their own social lives without interference.  Of course, the downside is that with all of this new-found freedom there has been a general breakdown of authority, an increase in broken families and children born out of wedlock, and a sense of anxiety that our society as we know it is in a state of decline.

Still, much of the angst felt by Americans and Europeans is unfounded.  Many of the babies born “out of wedlock” are born to cohabitating couples who are married in all but name.  And even in cases where the father doesn’t live with his children, there is an increased awareness of the need for parental responsibility.  And perhaps most importantly, Americans, Britons, and French are still having children, even if they are forming families later in life.  American births are at their highest levels since the original post-WWII baby boom.

The same cannot be said for much of Asia.  While the concept of “family” is evolving in the West, it is simply evaporating in much of the East.

The Economist ran an article on the decline of marriage in Asia (see “The Flight from Marriage”), but this means something very different than it would in America.  Divorce and non-married cohabitation are still rare on the Asian continent.  No, Asians instead are simply avoiding domestic life altogether or postponing it indefinitely into the future.

The average age of marriage in Japan, Taiwan, South Korea and Hong Kong is now noticeably older than in the United States.  Women in these countries now marry on average at the age of 29-30 and men at the age of 31-33.  As a point of reference, the average age for American women and men is 26 and 28, respectively.  If you include “common law” marriage or cohabitation—which, again, is still rare in Asia—the average age in America drops even further.  And this average age does not take into account people who do not marry at all.

People who do not marry (or do the modern common-law equivalent) are far less likely to have children.  Already, China, Japan, Taiwan, South Korea, and Hong Kong have some of the lowest birthrates in the world, well below the replacement rate of 2.1 children per woman.  We’ve written about the consequences of this trend and of the coming Asian demographic crisis (See “The Land of the Setting Sun“).

A country without children is a country without a future.  This is not moralizing; it is basic economics.  The modern economy is not equipped to deal with aging and shrinking populations.  To whom do you sell your products when your customer base gets smaller every year?

The British economist Sir John Hicks emphasized the role of population growth in the modern economy, remarking that,

 Expectation of a continually expanding market, made possible by increasing population, is a fine thing for keeping up the spirits of entrepreneurs … Perhaps the whole Industrial Revolution of the last two hundred years has been nothing else but a vast secular boom, largely induced by the unparalleled rise in population.

While Hicks might be a bit harsh in his analysis, he is right that a rising demographic tide lifts all boats.  Now that the tide is retreating, the countries of East Asia are entering an uncertain future.  It will be several more years before the full severity of this demographic crisis hits, and in the meantime we expect these countries to enjoy a demographic dividend from the rise of the new emerging market middle class. In fact, we have made investing in this trend a major focus of The Sizemore Investment Letter.

But by the end of this decade, much of Asia will be in the early stages of a Japanese-style malaise from which they may never fully recover.  And by that time, the United States and parts of Western Europe will be on the mend with a new demographic boom led by the Echo Boomers.

Emerging Asia should enjoy its time in the sun today, because its future would appear quite doubtful.

This article originally appeared in the Part II of the October 2011 HS Dent Forecast.

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Fx Trading Platform – Choosing The Best Forex Trading Platform

By Cedric Welsch

The Forex market handles billions of dollars worth of transactions every day, which makes it very appealing for more and more new people who want to invest their money and quickly make big profits. However, in order to accomplish that, a reliable Forex trading platform is needed. Choosing the right one for you is not an easy task. Simply reading a Forex review on the best platforms out there will not help you much, as you need to find the one that best works for you and your specific needs, and not for other traders.

When looking for the best trading platform, you need to know what your options are, and what each of them has to offer. Here are the most essential things that you will need to take into consideration when reading through the various Forex reviews on the internet.

Consistency is the basic property of any professional and reliable platform. There have been several cases of brokers disappearing with traders’ money after a few years in the business. Since the Forex market is extremely volatile every now and then, you have to ensure you use a platform and a broker that will not freeze when the market volatility reaches a high point.

Ease of use is another very important aspect that should be kept in mind when searching for a good Forex trading platform. Check if manuals and instructions are available for beginners, and try to stay away from foreign exchange trading platforms that are too complicated or force you to go through numerous steps in order to achieve a basic task. Metatrader is one of the most popular platforms used by both experienced traders and start-up Forex enthusiasts, and it is one of the most easy-to-use and user-friendly free platforms on the internet.

Statistics say that the average traders spend approximately 7 hours in front of their computer on a daily basis. In order to maximize your efficiency, it is crucial to ensure that the forex trading platform you use provides you with dynamic visualization of charts, and also of related news and relevant economic releases.

Last but not least, it is a wise idea to choose a platform that supports automated trading, even if you are not considering to use this type of trading at the moment. As you will get more experienced and learn more about the patterns, you may want to implement an automatic version of your trading system so that you can spend more time with your other businesses or with your family.

About the Author

It can be annoying to study live forex news that seem to be a bit overhyped, thus bringing fear. Even though forex broker reviews may be available everywhere, it is wise to stick with your trusted.

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A Mistake That Could Cost Millions…

By MoneyMorning.com.au

“So, in our view, the world is in the midst of a dramatic structural shift. This shift is unprecedented in its scale and potential long-term impact, and it is improving the lives of hundreds of millions of people. It did not happen overnight. Over thirty years ago, China embarked on a series of major economic reforms, which have driven strong, consistent, commodities-intensive growth. So, unlike a gold rush, this structural shift will not suddenly disappear. Rather, it will continue to drive long-term demand for minerals and energy; our products.” – Jac Nasser, Chairman, BHP Billiton

Mr. Nasser is a smart man. For two years until 2001 he was the chief executive of the Ford Motor Company [NYSE: F].

He’s also on the board of British Sky Broadcasting plc [LON: BSY]. And was made chairman of BHP Billiton [ASX: BHP] last year.

But that doesn’t mean he can’t get something wrong. Because like all China bulls, he’s made a simple, but key mistake… a mistake that could cost BHP shareholders millions of dollars over the next two years.

Before we go into the details, a quick reminder…

Book Your Seat Now

The Sydney Gold Symposium is only three weeks away. It takes place on 14 and 15 November at Luna Park in Sydney.

If you haven’t registered yet, you can do so by clicking here. One point to mention is we’re not getting paid to publicise the event. Our old pal, Australian Wealth Gameplan editor, Dan Denning has presented at the event for the past two years.

He reckons it’s one of the best financial conferences held in Australia… for that reason we’re prepared to give it a plug… and because your editor is chairing the second day of the symposium.

Besides, with the gold price cooling down after going bonkers in July and August, if you either own gold or you’re thinking about owning gold, you should have this event locked into your diary.

Hopefully you can make it. If so, we’ll see you there. Until then…

“That ‘P’ Looks Like a ‘B’”

One of our biggest problems with the China bulls is the idea that we’re living through something “unprecedented in its scale”.

That China is doing something never done before… that because of its huge population, the China Boom will hast 20… 30… or even 50 years.

Today’s Australian newspaper reports:

“Treasury Wine Estates’ Penfolds brand found this out [China’s habit of copying from the West] last year when a lookalike brand dubbed Benfold’s started to turn up at Chinese wine shows, complete with marketing material featuring Penfold’s chief winemaker Peter Gago.”

Let’s get something straight: producing a wine and calling it “Benfold’s” hardly ranks in the top 10 of entrepreneurial ideas. Perhaps China got the idea from Fawlty Towers.

But we’ll give the China bulls the benefit of the doubt. And say China’s economic growth is “unprecedented in its scale”. Even so, it doesn’t mean the economy will grow in a straight line.

After all, let’s take a period that was arguably more “unprecedented in its scale” – the Industrial Revolution…

We’ve Seen This Before

According to a review of Julian Hoppit’s 1986 book, Financial Crises in Eighteenth-Century England:

“The author counts thirteen crises (1701, 1710, 1715, 1720, 1726, 1745, 1761, 1763, 1772, 1778, 1788, 1793, 1797) based on figures and the opinion of contemporaries.”

In other words, financial crises (banking crises, credit crunches, recessions) happened before the Industrial Revolution… and they happened after it.

Or how about another period in world economic growth. When the United States emerged as the new power.

According to our pals at Wikipedia, the U.S. went through 15 recessions between the end of the U.S. Civil War and the outbreak of World War I. That’s roughly one every four years.

So the idea that because China is using all these raw materials and that people are moving from the country to the city… that somehow this will prevent a recession in China and elsewhere, is well, flying in the face of history.

Nothing grows in a straight line without taking a break. Not inflation, not house prices, not stocks markets, not the gold price.

China’s Huge Credit Bubble

There’s no doubt the Chinese economy has gone through an amazing growth spurt. But translating this growth spurt into a never-ending boom really stretches credibility. Because make no mistake, the China boom (like all booms) is built on rapid credit growth – both within China and outside China.

And history tells us a credit boom will always bust.

For an indication of the size of the bust, it’s worth taking note of a paragraph from last week’s Sydney Morning Herald:

“Investment bank UBS estimates the Chinese bank’s domestic credit is equal to about 145 per cent of the nation’s nearly $US6 trillion annual GDP, with the ratio swelling to 170 per cent when so-called off-balance [sheet] lending is included. By comparison, domestic credit in US institutions totalled just over 100 per cent of GDP in 2010.”

The idea that China is doing something different or better to the rest of the world is false. If we’re prepared to give China some credit, it’s that it’s a quick learner. Trouble it has mostly learnt the West’s bad habits – credit, stimulus and bailouts.

So, one thing is certain: what’s happened in the West is sure to happen in the East. Only it will be bigger than anything you’ve ever seen. Perhaps it won’t be the biggest bust in history… but certainly the biggest bust in your lifetime.

Cheers.
Kris.


A Mistake That Could Cost Millions…