Euro Declines at Technical Level after Current Account Data

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EU current account data combined with the EUR/USD reaching a key technical level led to the euro being sold during Friday’s European trading session.

The euro pulled back from its highest level this week across the board after headline current account numbers for the month of March were above expectations, coming in at -4.7B. Data for the month of February was revised higher to -6.5B from -7.2B. Economists had forecasted the current account to be reported at -5.7B. While the headline value was better than expectations, a troubling sign is the drop-off in net portfolio inflows, falling to 77B from 97.3B. Rising sovereign debt yields for the peripheral nations may have deterred new investors from purchasing higher amounts of European assets.

This week’s rebound in the euro came to a halt and should not come as a surprise given the rise in tensions over the European debt crisis. The selling that occurred today may be an attempt by traders to sell this week’s rally combined with a technical level for euro longs to reduce exposure.

EU current account data combined with the EUR/USD reaching a key technical level led to the euro being sold during Friday’s European trading session. The EUR/USD reached as high as 1.4255 a level that coincides with the 50-day moving average as well as the May 12th high. The pair fell as low as 1.4210 before rebounding to 1.4230. Support for the EUR/USD is found in a range between 1.4020 from the March 28th low and 1.4050 from last week’s low.

The euro was also lower in the crosses with the EUR/GBP and the EUR/CHF moving through short term support levels. Support for the EUR/GBP is located at 0.8690, the bottom of the short term consolidation pattern off of the May lows. EUR/CHF has support at 1.2480. A breach here could take the pair lower to 1.2400.

Read more forex trading news on our forex blog.

Did President Obama’s Mideast Policy Speech Chill USD Values?

Source: ForexYard

A speech delivered by President Barack Obama yesterday regarding US policy in the Middle East caused a stir in late-session trading. Though his position appeared moderate, even standoffish in its approach to the ‘Arab Spring,’ many have criticized Obama for his missed opportunity in addressing other major concerns. It is difficult to state whether this had a chilling effect on the US dollar in today’s trading or not, but spectator sentiment appears to have viewed the speech with doubt and consternation.

Economic News

USD – US Dollar Mixed as Traders Eye Manufacturing and Housing Data

Poor economic data out of the United States continued to weigh on the US dollar yesterday as investors continued to eye the interest rate differentials between the US and Europe. The soft data has convinced traders that the Federal Reserve will not likely elect to lift interest rates in the near future and the result has been consecutive bearish sessions for the greenback.

Yesterday’s manufacturing data out of Philadelphia highlighted a stark downturn in the manufacturing sector of the American northeast over the past month. The data comes on the coattails of similar downturns across Europe seen earlier this month. A lift in British industrial order expectations yesterday may translate over to its American counterpart next month, but for now the data remains weak and this weighed on the value of the dollar in recent trading.

A speech delivered by President Barack Obama yesterday regarding US policy in the Middle East also caused a stir in late-session trading. Though his position was moderate in its approach to the Arab Spring, many have criticized Obama for his missed opportunity in addressing other major concerns. It is difficult to state whether this had a chilling effect on the US dollar in today’s trading or not, but spectator sentiment appears to have viewed the speech with doubt and consternation.

With today’s US absence from the economic calendar, USD values could continue to bear the weight of this week’s gloom. Many traders have begun to seek higher yielding assets under the impression that the Fed will fail to lift interest rates in 2011.

EUR – EUR Makes Mid-Day Gains as US Data Falters

The euro rose in yesterday’s late-trading sessions as economic news, mixed with some political drama and policy speech-giving, has had investors balancing between debt concerns and interest rate differentials. Soft data out of the American economy, however, has held many traders leery of seeking safety in the greenback. After yesterday’s severe downturn in the Philly Fed Manufacturing Index, investors appear to have shifted their gaze on interest rate differentials which have favored the EUR’s recent jump.

Many forex traders had assumed this week’s ECOFIN meetings would provide perspective into the region’s debt woes, but the distraction of the Strauss-Kahn affair and the punditry over Obama’s Mid-East policy speech has begun to assist in the attention focus being switched over to interest rate differentials. This sentiment has so far helped the 17-nation common currency begin to make gains against the greenback.

As for today, the euro zone turns its economic data engine back on with the publication of two significant reports. At 7:00 GMT, Germany will publish its producer price index (PPI). The figure is expected to reveal solid, stable growth in German inflation. A report in line with these expectations should help add fuel to the interest rate speculation.

Following Germany’s data release will be a 9:00 GMT publication of the region’s Current Account. This report is the region’s trade balance (albeit by a different name) which measures the change in value for imported and exported goods. Expectations are for a shrinking deficit which should also help lift the EUR ahead of the week’s close.

JPY – JPY Sees Minor Headway after Interest Rate Decision Published

The Japanese yen (JPY) began trading in a bearish direction against most of its currency rivals this week after the Bank of Japan (BOJ) released data which showed the Japanese economy contracting by 0.9% so far this quarter. After a week of ups and downs, the Japanese yen now appears to be in a stronger position and is making gains after this morning’s interest rate decision. The dominant stance of risk aversion overarching this week and last had many traders moving in and out of the yen until yesterday evening.

Yesterday, the yen moved down over 100 pips against the US dollar by mid-day as traders fled the shrinking Japanese economy. As of this morning, however, the sentiment appears to have shifted in favor of the JPY. Soft American economic data supported this move and today’s rate statement by the BOJ assisted in another rise for the island currency ahead of the week’s closing. Should sentiment continue to favor the yen over its counterparts, traders could see further bullishness, particularly against the USD if investors remain bearish on the American economy.

Crude Oil – Solid Natural Gas Stock Sends Oil Lower as Commodities See Sell-Off

Oil prices jumped above $100 a barrel yesterday morning following a report out of the United States on Wednesday which revealed zero growth in their weekly oil stockpile data. These US oil stockpile reports had shown growth of over 3 million barrels a week for the past two consecutive weeks. The sudden halt of this inventory growth had a sharp effect on the value of Crude Oil as its price jumped above $100 a barrel shortly after the report was published.

Thursday’s publication of natural gas storage in the United States, however, was enough to send commodity prices back down. After peaking near $101 a barrel, the price of oil fell back to $98 on moves by commodity investors to sell commodities amid an expectation for decreased demand following soft manufacturing data in the US. President Barack Obama’s endorsement of the democratic uprisings, known as the ‘Arab Spring,’ in the Middle East has also caused enough of a stir to expect some shifts in oil prices as reforms are anticipated. Whether this buzz will persist through the end of the trading day is yet to be seen.

Technical News

EUR/USD

The EUR/USD pair gained about 300 pips over the past week, and seems to be in the midst of a bullish move. The pair is currently testing the 1.4350 resistance level. If it will cross the resistance level it has potential to reach as high as the 1.4500 level.

GBP/USD

There is a very distinct bearish channel formed on the 4-hour chart, and the cable is floating in the middle of it. However, as a bullish cross takes place on the 4-hour chart’s MACD, it seems that a bullish correction might be impending. Going long with tight stops might be the right strategy today.

USD/JPY

Ever since the USD/JPY pair bottomed at the 79.50 level, it is steadily correcting upwards and is currently trading near the 81.70 level. In addition, both the Slow Stochastic and the MACD on the daily chart are providing bullish signals, suggesting that another bullish move could take place today. Going long might be the right choice today.

USD/CHF

The USD/CHF pair has been range-trading between the 0.8760 and the 0.8950 levels for the past week. Currently, the pair seems on its way towards the lower border of the range. If the pair will manage to cross the 0.8760 level, it might trigger a bearish move, with a key-target level of 0.8600.

The Wild Card

Gold

After several days of mixed trading, it seems that gold has stabilized near the $1,500 an ounce range. Nevertheless, as the daily chart’s RSI has crossed the 30-line and continues to point upwards, it seems that a bullish session might be expected today. This could be a good opportunity for forex traders to catch the trend at its beginning.

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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Bank of Japan Interest Rate Decision

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The dollar traded lower during the New York trading session but still within defined price ranges as markets look for a new catalyst to continue the bullish run in the dollar. Later this evening the Bank of Japan will release their interest rate decision that could include additional monetary policy easing measures.

Forex rates for the dollar were mixed but overall weakness was seen after US economic data releases. Weekly unemployment claims were better than forecasted and initially the dollar benefited from the surprising jobs data. However, dollar sentiment was thwarted after the release of weaker than expected existing home sales and a significantly lower Philly Fed Manufacturing Index.

The EUR/USD traded as high as 1.4322 after rising from a low of 1.4194 during the European session. Cable held its gains after strong retail sales numbers and looks to end the day near its high at 1.6229 from 1.6179. The USD/JPY fell back from a high of 82.22 to trade at its opening day price of 81.55 following the disappointing US manufacturing data. US equities were flat with the S&P 500 up only 0.07% and crude oil traded back below the $100 mark.

Forex macro news will be out later tonight with the release of the Japanese overnight call rate. No change is due to the interest rate but calls have been made for the BoJ to introduce new easing measures to assist both the recovery from the earthquake and tsunami as well as the decline in growth rates. Yesterday’s Japanese GDP numbers showed the economy is currently in a recessionary mode. While the disaster did little to help the economy, the data shows the decline in growth rates had its beginnings prior to the earthquake and tsunami. New easing measures by the Bank of Japan could send the USD/JPY higher to the retracement levels from the April to May move at 82.50 followed by 83.25.

Read more forex trading news on our forex blog.

But What’s Next?

By Early To Rise

How many geniuses have you met?

I met Charlie Chaplin (very briefly) in 1966 while working on publicity for the film Fahrenheit 451. Then I was lucky enough to work with David Ogilvy for eight years.

Ogilvy still exerts enormous influence in the marketing business, and if you haven’t read Ogilvy on Advertising, you should have your wrist slapped.

But there is one remarkable person I never met but wish I had. I surely would have learned a lot from him. That’s because he started not one but two groundbreaking businesses – the Franklin Mint and QVC.

That man is Joe Segel. With the Franklin Mint, he pretty much invented the mail-order collectibles business. It was for years pre-eminent in the field, though it has since been bought, sold, screwed up, and run into the ground.

I worked for the Franklin Mint in London in 1976. At the time, many people thought I was the bee’s knees at direct-response copy. But I learned a valuable lesson – one you should bear in mind whenever you write or review copy.

A Near-Impossible Task

My first job at The Mint was a letter to sell some medallions celebrating the achievements of the Kings of Belgium. This was quite a challenge. At least one of them – Leopold II – was a mass murderer and slave trader, and few of the others were that impressive.

After laboring on it for a week, I placed the carefully typed product of my consummate genius in front of my client.

He started reading it out loud in sonorous tones. After the heading and first paragraph, he paused, gazed at me over his bifocals, and asked:

“What do you suppose the reader would like to know next?”

Well, you know what? I was flummoxed. I had been writing copy for, oh, nearly 20 years. I had been creative director of a big London agency. My copy had sold a bodybuilding machine called the Bullworker all over the world.

Yet I had never given thought to one simple fact: The minute you have written something, you must ask yourself what is going through the reader’s mind.

Good Copy Is Like a Conversation

The great novelist Evelyn Waugh put it very well. He was writing to his wife, complaining that her letters were dull. (Hardly surprising. Unlike him, she was not a literary genius.)

“A good letter,” he told her, “should be like a conversation.”

Same goes for a good sales letter.

When you write good copy, you “say” something. Then you imagine the reaction in the reader’s mind – and respond appropriately.

That was what I failed to understand until my client at the Franklin Mint pointed it out to me.

As my friend Joe Sugarman has said, the only purpose of each line of copy is to make the reader read the next one.

This is immensely important, particularly when it comes to the MOST important sentence in your copy. That sentence is the first one. The headline in an ad. The teaser on an envelope. The start of the sales letter. The opening line in a commercial.

Too many get the reader’s attention – but they are “stoppers,” not “starters.”

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Five Good Examples

What sort of lines force you to read on? Take a look at these:

  • “Have you ever seen a bald sheep?” (Charlie Kasher’s opening to a 30-minute radio spot for a hair-growth product)
  • “Do you lock the bathroom door behind you – when there’s nobody else home?” (Bill Jayme’s envelope line for Psychology Today)
  • “Cash if you die. Cash if you don’t.” (WWAV agency’s line to sell an insurance product)
  • “Do you believe in life after death?” (About the only decent envelope line I ever wrote – for Save the Children)
  • “If the list upon which I found your name is anything to go by, this is not the first, nor will it be the last, invitation you will receive to subscribe to a magazine…” (Ed McLean’s opening for Business Week – the first direct-mail letter he ever wrote)

All of the above compel further readership. But you must have that same desire to keep people reading with every line you write.

Two Old Tricks

Your copy must flow logically. Mine doesn’t always.

I’ve found that it helps to sum up each paragraph with a few words in the margin, and then see if they make sense in sequence.

Another thing that helps has to do with verbal technique. “Carrier” words and phrases – like And, Also, Moreover, What is more, In addition to – at the start of sentences keep people reading. So do questions at the end of paragraphs.

Why is this?

Because you have to keep reading to get the answer.

(The above two sentences just demonstrated what I mean.)

Your Homework

While I was drafting this essay, I spent some time watching QVC. I suggest you do the same. And take notes. Pay attention and write down all the techniques they use. Then see if you are using those techniques in your sales copy.

Here are some things I noticed in just the first few minutes:

  1. They demonstrate – and nothing makes a stronger sales pitch than a good demonstration.
  2. They’re friendly and helpful – not loud, aggressive, or in your face.
  3. The whole deal is on the screen throughout the spot.
  4. There’s tons of information. They’re not afraid to talk at length or repeat themselves.
  5. They use persuasive references – e.g., the fact that a Diamonique designer had created something for Hillary Clinton.

Success does not come from one big idea, but from relentless application to detail. You see this on QVC.

One last thought…

David Ogilvy once told me that the secret of success in the marketing business is charm. And what makes you think someone is charming? They seem interested in you. They listen to what you say. They pay attention.

You must be genuinely interested enough in your readers to try and imagine what is going through their minds – and respond to it.

Then you will charm them all the way to the order form.

Bad copy does not do that. It is written from the writer’s point of view, not the reader’s.

[Ed. Note: Veteran copywriter and direct-marketing strategist Drayton Bird has worked with American Express, Ford, Microsoft, Visa, Procter & Gamble, and scores of other clients during his five-decade career, which included a stint as international vice-chairman and creative director of Ogilvy & Mather. In 2003, he was named by the Chartered Institute of Marketing as one of 50 living individuals who have shaped today’s marketing.

Ready for more marketing insights from Drayton Bird? For 101 ideas, free case studies, and articles on topics like the one you just read – and a 28-day free trial of Drayton’s Commonsense Marketing Series, go here.]

 

This article appears courtesy of Early To Rise, a free newsletter dedicated to creating wealth and success through inspiration and practical, proven advice. For a complimentary subscription, visit http://www.earlytorise.com.

ECB Resists Greek Debt Restructuring

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Lines are being drawn in the fight over how to handle the Greek fiscal crisis. The ECB and Greece are wrangling over a potential restructuring of Greek debt or an increase of financial aid to the country in return for further spending cuts and asset sales. Following comments from ECB executive board member Jürgen Stark, the ECB has chosen its side against a haircut.

An article from the FT Alphaville highlights Stark’s comments as the ECB would cease to accept Greek bonds as collateral for loans to Greek banks should Greece choose to restructure its sovereign debt. Stark was quoted as saying, “Sovereign-debt restructuring would undermine the eligibility of Greek government bonds.” Earlier comments in the week from EU officials warned a restructuring would be detrimental to the Greek banking system. Greek banks receive roughly 90B euros from the ECB in liquidity provisions.

Following these comments the ECB is intensifying its fight against a restructuring of Greek sovereign debt. It is no surprise that the ECB does not support a haircut for Greek bonds as the ECB is rumored to have 40-50B euros worth of Greek debentures on its books that it purchased when the markets for European sovereign debt income markets locked up and there was no counterparty left to take the other side of trades.

Thus a haircut on Greek sovereigns would be detrimental to the balance sheet of the ECB and consequentially impact European banking liquidity. It is also not in the interest of Greece to shut off this source of liquidity as this would force Greek banks to turn to the central bank of Greece for liquidity, an ultimately less efficient and more expensive source of funding.

The threat of the ECB to withdraw its support for the Greek banking system should Greece decide to restructure its sovereign debt is a threat that should be taken seriously and throws the ECB and all its clout behind other alternatives to solve the Greek fiscal crisis.

Read more forex trading news on our forex blog.

Believe It or Not, Warren Buffett Might Not Be Right

jared_levy150x150Many investors look to “gurus” like Warren Buffett for advice and try to mimic their style of investing. I do believe that Buffett offers some excellent core methods, but there are many reasons why “the Buffett Way” may not work for most of us.

In my book Your Options Handbook, I detail several styles and methods of investing. I take you through several scenarios and help you find the most appropriate methods to fit your personality and ability to manage risk.

In today’s complex marketplace, certain methods, like Buffett’s, may look simple, but prove hard and maybe even downright frustrating for the average investor to follow. Here is an excerpt from Chapter 4 in my book:

The Oracle of Omaha Did It, Why Can’t I?

Historically, a large group of stocks (in major companies) have been shown to appreciate over time. Investors like Warren Buffett buy quality companies when they feel they are valuable and hold them indefinitely.

Even though some of the holdings may never appreciate in value in a big way, on average, major market indices have shown positive returns if held for at least 10 years. (Of course, there are many exceptions.)

Mr. Buffett also invests in companies in ways that most of us cannot. A perfect example was his monetary injection into Goldman Sachs in late 2008 where he got $5 billion in senior preferred stock paying 10% (Warren also forced Goldman Sachs to make the preferred shares callable at a 10% premium, where most preferred shares are callable at par). In addition to that, Buffett got $5 billion worth of stock (warrants) at $115 per share for a “sweetener.” Think of getting 435,000 Goldman Sachs $115 call options for free, just for buying a stock.

There are several flaws in this investment technique. The first is time, which many of us do not have the patience for or the luxury of “waiting it out.” Some investors just throw in the towel before their stocks finally return to profitability and obviously there are some stocks that never do. The other issue is stop losses, which might boot you out of a trade early and end your long holding game. Then if you hold on and forgo the stop loss, dealing with potentially losing more than 40% of your account value can have effects not only you wallet, but also on your mental well-being.

It’s all about your timing and tolerance. Take a look at Figure 4.1.

DJIA QuarterlyChart
View larger chart

Figure 4.1 is a quarterly chart of the Dow Jones from 1978 to mid-2010; each line represents a year. There are periods of extreme growth (mid-1990s until 2000) and again from 2003 until 2007. But what if you bought in 2003 and waited until 2009?

Looking at the chart in Figure 4.1, it’s fairly safe to say that if you bought the Dow Jones index and held it for 10 years, you would have some sort of profit in your account. The question is not only how much, but also the amount of anxiety you may have had to endure to get to the end of that 10 years.

Again, this is why trading stocks can be difficult and frustrating for many of us. At what point do you “cut the cord” on an investment you are in? How long is too long to stay in an investment? Long spans of time tend to be hard for the average mind to comprehend.

Think about how many things in your life will change in 10 years — your career, your likes and dislikes, music, possessions, weather, location . . . and more. The average person stays in a home for seven years, but you should be expected to hold the same stock investment for longer? Holding a stock long term is not always a bad thing, especially when things are going well, but what happens when they are not? Can you afford to hold on?

And besides, if it’s that easy, then why isn’t everyone rich beyond their wildest dreams from investing?

Why don’t all long term buy and hold investors succeed?

One reason may be that stocks really have an unlimited horizon and most traders fail to place time horizons on their investments, along with profit goals and stop-losses. I feel personally that this ability to “hold forever” is a detriment, not a benefit, to most investors.

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

Change the Way You Invest!

The last paragraph is the key here. Instead of just buying a stock that you think will go up and simply holding it, try forming a complete strategy with a beginning, a middle and an end. Make sure that your strategy has a time horizon. In other words, set checkpoints and an ultimate goal for the stock to reach by a chosen week or month.

Learn the option markets!

Options, unlike stocks, can allow you to really set up their time horizons, reduce risk, and make investments with odds better than stocks and your chance at gains better than 50/50.

What if I told you that certain option strategies have an 80%+ statistical probability of winning and those same strategies can reduce your risk to 10% of what you could lose if you invested just in the stock? Would you be interested? I think so!

The reality is that there is a learning curve and of course there is still risk, though I can show you how those risks can be much lower than stock investing. Trading options offers a world of possibility and in the right hands, with some practice, options can give the investor returns that even Mr. Buffett would envy!

Editor’s Note: If you’re interested, you should check out my trading research service WaveStrength Options Weekly. I offer my readers straightforward, low-risk opportunities with options. You can learn more about WaveStrength Options Weekly here.

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