FOREXYARD: Forex News Blog | |
- Fed Under Fire while Gold Surges to New Highs
- Gold Set To Reach $1,500 an Ounce before the End of the Year
- Bullish Correction Expected for the EUR
- EUR Plummets on Peripheral Debt Concerns
| Fed Under Fire while Gold Surges to New Highs Posted: 09 Nov 2010 04:35 AM PST
With growing criticism from home and particularly abroad, the Federal Reserve's decision to pump additional $600 Billion to the U.S economy remains a center of controversy. The EUR/USD pair has seen fluctuations averaging 100 – 150 pips a day since the Fed's announcement. This trend is likely to continue as investors continue to battle long term negative Dollar sentiment and short term economic data publications. A major burden to global recovery these days is the frequent and sharp movement in exchange rates, especially between the euro and dollar. This creates unnecessary market uncertainty and hinders investment. The additional $600 Billion only exacerbated that problem. The recent release of the Non-Farm Employment data as well as several of this week's upcoming economic indicators raise the question of whether or not it was a premature move or indeed completely unnecessary. The Fed's main reason for the additional stimulus is the persistently high unemployment rate that has been hovering near 10% for the past year. However, last week's Non-Farm data showed a surprising increase in employment levels that beat investors' expectations; this followed a revision upward of Septembers' job loss figures, meaning, the economy lost less jobs than previously published. Though the unemployment rate remained unchanged this can be attributed to previously discouraged workers returning to the job market. While it is clear the job market is still struggling as evident by the first time Unemployment Claims numbers, which refuse to decline, some optimism may be in place. An indicator that may support this assumption may be Friday's Prelim UoM Consumer Sentiment report which is expected to show improvement, rising to 69.2 from 67.7 the previous month. While it is still well below the 89 averaged prior to the recession, this level will be the highest since June. One aspect that will undoubtedly benefit from the weak dollar is the deficit. The Trade Deficit likely narrowed in September, a report is expected to show Wednesday. A weak domestic currency helps exports by making the goods cheaper overseas. Increased exports mean increased production levels and a boost to economic recovery and growth. The problem is that a weak currency also makes oil and other commodities and products more expensive. Over supply of currency also increases inflation in the long run which will further erode the value of goods. Meanwhile the main beneficiary of the currency wars has been Gold which surged to record levels this week, currently trading at $1420 an ounce. |
| Gold Set To Reach $1,500 an Ounce before the End of the Year Posted: 09 Nov 2010 04:22 AM PST
The most discussed topic among many traders over the past few days revolves around gold. And there is a good reason for it. Gold has recently gone above $1,414 an ounce, marking an all-time record high. In addition, traders that opened a long position on gold at the beginning of the year (without using leverage) saw almost 30% return till now; and 2010 isn't over yet. First of all, let's understand what triggers gold's bullishness. Below is gold's weekly chart.
The horizontal line divides the chart into two. The line is drawn at September 15, 2008. What is so special about that specific date you ask? Very simple, this is the date that Lehman Brothers filed for Chapter 11 bankruptcy protection, and by many economists is considered to be the first official day of the global crisis that we're still trying to recovery from. It was merely half a year after gold rose to an all-time high of $1,032 an ounce. However gold was then in the midst of a bearish move, which took the commodity below $750 an ounce. There were speculations that gold had become an overlapping excess, and that exceeding over $1,000 an ounce was a rare phenomenon, which won't repeat twice. Lehman Brothers filed for Chapter 11 shortly therefter. After a month of mayhem (which took place at every financial market in the world) gold began what is now known as a unique trend, which was very unlikely to take place before then. In about two years gold has doubled its value (doubled!). This is not one of those over-sophisticated financial instruments that Wall Street keeps inventing; this is one of the most ancient commodities in world history. So how can we explain it? It appears that gold has become the new official haven for investors. This has more psychological logic than economic, but the strength of this trend is abnormal to say the least. Over the past few months you heard many stories on why gold prices are advancing. One time it was the debt crisis among several nations of the Euro-Zone. Another time it was the continuous negative employment data from the U.S., and now it is the European state-funding difficulties. The main understanding here isn't the specific reason, but rather the common reason of them all – fears from deteriorating economies, which will lead to sharp drops in global stock markets. So how can you reduce the risk in your portfolio? Open long positions on an agreeable haven – Gold. Now, what does that mean for the future? It means that as long as the uncertainty remains, fears will continue to prevail, and haven investments will continue to climb. |
| Bullish Correction Expected for the EUR Posted: 08 Nov 2010 11:19 PM PST
Following a sharp decline over the past few days, the EUR seems to be headed for a bullish correction. Forex traders are advised to take advantage of this knowledge by going long on EUR/CAD now, and at a great entry price! Below is the daily chart for the EUR/CAD pair. The technical indicators are the RSI, Slow Stochastic and Williams Percent Range. - A breach of the lower Bollinger Band is evident on the chart (1), indicating an imminent upward correction may be expected. - An impending bullish cross can be seen on the Slow Stochastic (2), signaling the next move may be an upward correction. - The RSI (3) signals that the price of this pair currently floats in the over-sold territory, suggesting upward pressure. - Williams Percent Range (4) further supportds the upward direction.
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| EUR Plummets on Peripheral Debt Concerns Posted: 08 Nov 2010 06:38 PM PST
Debt concerns across the euro zone have pushed the EUR back down against its primary rival, the US dollar. Falling from its recent high of 1.4271, the EUR/USD pair now trades below the 1.3900 mark. Irish debt concerns, and other peripheral problems in the region, weighed heavily on the euro in yesterday's trading. With the euro zone largely absent from the economic calendar today, it's likely the 16-nation single currency will continue to face pressure. Here is a roundup of today's leading news events: 9:30 GMT: GBP – Manufacturing Production This report measures the month-to-month percentage change in manufacturing output by the United Kingdom. The number is controlled for inflation and therefore reflects real changes in output. Since manufacturing comprises roughly 80% of the UK's industrial output, this indicator carries a heavy impact for growth forecasts, thereby affecting the GBP quite heavily in the moments after its release. 20:00 GMT: NZD – RBNZ Financial Stability Report The Reserve Bank of New Zealand (RBNZ) will be releasing a statement regarding its outlook on New Zealand's economy. It will be providing insights on inflation, economic growth and stability, as well as forecasts towards its next rate statement. This report has the potential to drive the NZD into a volatile frenzy if it comes out hawkish. Traders will want to keep an eye on the kiwi in today's late trading hours. |
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