Thursday, September 3, 2009

Forecast on JPY Crosses (EURJPY, GBPJPY, AUDJPY)


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Daily Reports (Trends, Precise Entry & Exit levels and Strategies) on 9 Crosses- USD Majors, USD Minors & JPY Crosses.

EURJPY

EURJPY closed @ 13160 which was BELOW the open and breached the previous day's low. The High was PRECISELY at Precise Trader's Res Zone 1 and the Low was 10 pips from Precise Trader's Sup Zone 5 (U Turn Zone). The Hourly Oscillators are MIXED and the price is Converging towards the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 13045 holds and Daily Trend is Sideways Down while 13620 holds, so expect the price to be Choppy and Downside may be limited. The Price is trading Below Monthly, Weekly open and closed just below the Sup Zone 1. The Price on the Hourly is in a Range trading and expect a Choppy session a head with an Upside bias, on the 5 min is Choppy but 13110-13030 is a critical level to watch for the bulls. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders look to do the same or LONG Cautiously near 13110-13030 with a tight Stop for a quick profit.

GBPJPY

GBPJPY closed @ 15010 which was UNCHANGED from the open and was within prior day's trading range. The High was 10 pips from Precise Trader's Res Zone 1 and the Low was PRECISELY at Precise Trader's Sup Tgt 1. The Hourly Oscillators are MIXED and the price is Within the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 15135 holds and Daily Trend is Sideways Down while 15545 holds, so expect the price to be Choppy until the breakout happens. The Price is trading Below the Monthly, Weekly open and closed within Zone 1. The Price on the Hourly is in a Range trading and expect a Choppy session a head , on the 5 min is also Choppy but 14945-14785 are the critical levels to pay attention. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders look to do the same until there is a clear signal.

AUDJPY

AUDJPY closed @ 7690 which was ABOVE the open and was within prior day's trading range. The High was 5 pips from Precise Trader's Res Tgt 1 and the Low was 15 pips from Precise Trader's Sup Tgt 1. The Hourly Oscillators are MIXED and the price is Within the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 7590 holds and Daily Trend is Sideways Down while 8025 holds, so expect the price to be Choppy and Downside may be limited. The Price is trading Below Monthly,Weekly open and closed within Zone 1.The Price on the Hourly is in a Range Trading and expect a choppy session a head, on the 5 min is also Choppy but 7650-7590 are the critical levels to watch . Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders look to do the same or LONG near 7650-7590 with a tight Stop for a quick profit.


Forecast on USD Minors (USDCHF, AUDUSD, USDCAD)


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Daily Reports (Trends, Precise Entry & Exit levels and Strategies) on 9 Crosses- USD Majors, USD Minors & JPY Crosses.

USDCHF

USDCHF closed @ 10610 which was BELOW the open and was within prior day's trading range. The High was 5 pips from Precise Trader's Res Zone 1 and the Low was 20 pips from Precise Trader's Sup Tgt 1. The Hourly Oscillators are Bearish but Weak and the price is Within the MA, so CAUTIOUS approach is needed for the Bears. Hourly Trend is Sideways Up while 10525 holds and Daily Trend is Sideways while 10845 holds, so expect the price to be Choppy and Downside may be limited. The Price is trading marginally Above Monthly, Weekly open and closed just below Sup Zone 1. The Price on the Hourly time is within Range Trading expect the price to turn up soon, on the 5 min is Choppy but 10560-25 levels should not be seen to maintain the bullish outlook. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders should do the same , Cautiously LONG near 10560-25 level or the break of 10640 level with 10720-10785 as price targets.

AUDUSD

AUDUSD closed @ 8340 which was ABOVE the open and was within prior day's trading range. The High was PRECISELY at Precise Trader's Res Zone 5 (U Turn Zone) and the Low was PRECISELY at Precise Trader's Sup Zone 1. The Hourly Oscillators are MIXED and the price is Within the MA, so CAUTIOUS approach is needed. Hourly Trend is Turning Down while 8455 holds and Daily Trend is Sideways while 8140 holds, so expect the price to be Choppy and Upside may be limited. The Price is trading Below Monthly, Weekly open and closed well above the Res Zone 1. The Price on the Hourly is in a Range Trading but the Upside is limited , on the 5 min is Choppy and expect the pullback to be limited to 8420-55 levels. The price should not exceed 8455-85 level to maintain the bearish outlook. Conservative traders should look to SHORT near 8420-55 levels or strictly trade only at Precise Traders Report levels.Aggressive traders should look to do the same with 8290-40 levels as price targets.

USDCAD

USDCAD closed @ 11055 which was ABOVE the open and was within prior day's trading range. The High was 10 pips from Precise Trader's Res Tgt 1 and the Low was 5 pips from Precise Trader's Sup Zone 1. The Hourly Oscillators are MIXED and the price is Converging towards the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 10910 holds and Daily Trend is also Sideways while 10660 holds, so expect the price to be Choppy with a Upside bias. The Price is trading Above Monthly,Weekly open and closed within Zone 1.The Price on the Hourly is in a Range Trading but it is rather weak so expect some consolidation to take place , on the 5 min is also Choppy but 10970-10 are the levels to watch for the bulls. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders should look do the same or Cautiously LONG near 10970-10 levels for quick profit with a tight Stop.


EUR/USD Daily Outlook


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INTRADAY TRADING SIGNAL BY ACETRADER.COM: EUR/USD

EUR/USD:1.4275

Last Update 03 Sep 2009 05:41 GMT

Euro's retreat after y'day's rally to 1.4295 sug
gests sideways trading wud be seen n pullback to
1.4243/47 can't be ruled out b4 prospect of another
rise, however, abv said lvl is needed to extend nr
term upmove fm 1.4177 to 1.4344.

Buy on dips with stop as indicated, break wud
defer n risk weakness to 1.4200....

Range Forecast
1.4252 / 1.4295

Resistance/Support

R: 1.4295/1.4344/1.4379
S: 1.4247/1.4192/1.4177


EUR: Attempt small longs at 1.4275; stop below 1.4085


EUR

Comment: Messy, random small moves at the upper edge of a ‘triangle’ consolidation pattern, though note that one-month at-the-money implied volatility has picked up a little. The Euro is no longer overbought though momentum is nil. We feel that the long term trend to US dollar weakness will resume, if not this month then in October.

Strategy: Attempt small longs at 1.4275; stop below 1.4085. Short term target 1.4350.


EUR/JPY

Comment: Dropping again, trading below a thin Ichimoku ‘cloud’, and Yen crosses are looking increasingly top-heavy. A drop below 131.00 should add to downside pressure, a move which might accelerate causing another sudden slide to the 127.00 area, increasing at-the-money implied volatility.

Strategy: Sell at 132.00, adding to 132.50; stop well above 133.55. Short term target 131.00, re-selling below 131.00 for 127.00 (and probably a lot more further out).


GBP

Comment: Trading within a thinning Ichimoku ‘cloud’ and there is a small chance that Cable may try and hold above the top of the formation.

Strategy: Attempt small longs at 1.6315; stop well below 1.6100. First target 1.6380, then 1.6600.


JPY

Comment: Dropping towards July’s low at 91.73, the nine-day moving average limiting highs and putting the US dollar into oversold territory. A break below 91.50 should see implied at-the-money volatility increase significantly and increasing bearish momentum.

Strategy: Sell at 92.40, adding to 93.00; stop above 93.55. Short term target 92.00/91.75 with moves below here likely to becoming increasingly erratic.

US ADP private payrolls falls 298k in Aug


News and views

Risk markets settled back to a more neutral mood from the previous day’s sombre tone. The S&P500 closed down 0.3% in a lacklustre session, although the banks’ index lost another 1.9%. Oil and copper were largely unchanged, but gold took centre stage (probably lagging the previous day’s bout of risk aversion), gaining 2.8% from the Sydney close. US 10yr treasuries rallied by 10bp, paying more attention to the consensus-disappointing ADP payrolls report and the FOMC minutes. Fed members increased their confidence the US economy is bottoming, but added the recovery would be slow and beset by uncertainty, and the Fed Funds rate would stay low for an extended period. Signs are the G20 meeting tomorrow will be conducted in a similar spirit and reinforce the globe’s expansionary policies.

The US dollar lost ground after midday London, partially clawing back the previous day’s gains. EUR gained a cent to 1.4294. GBP outperformed from 1.6115 to 1.6300. JPY rallied from 93 to 92.11, talk of a strong option barrier at 92.00 halting the move.

AUD gained 1% to 0.8374, unsurprising following the positive GDP surprise yesterday. Influential columnist Terry McCrann last night wrote the figures support any RBA intention to hike, but won’t accelerate the timing of the first move.

NZD remained aloof from the soft US dollar theme, bouncing only modestly from its 0.6686 low to 0.6756, and consolidating around 0.6740. AUD/NZD recorded an impressive bounce off the bottom of the four month-long channel to the middle, to 1.2417.

US ADP private payrolls falls 298k in Aug. That is the fifth straight month of improvement. ADP has a recent tendency to understate the monthly change in (i.e. has not improved as much as) the official estimate of private payrolls, by as much as 169k back in May, so we see no need to change our forecast that total payrolls falls by 150k in August (–160k private, +10k govt), due out this Friday night. Still on the labour market, corporate layoff announcements were fewer last month, and indeed less than in August last year – more evidence that job market conditions are improving.

US factory goods orders were constrained to a 1.3% rise in July, reflecting upwardly revised durables (previously reported as up 4.9%) but a near 2% fall in non-durables, mostly due to lower energy prices pulling down the value of orders. Factory inventories fell by 0.7% at the start of Q3, down from Q2’s monthly average pace of decline of just over 1.0%.

US productivity growth was revised up slightly from 6.4% to 6.6% annualised in Q2, and so unit labour costs were revised to a slightly steeper fall of –5.9% annualised compared to –5.8% previously. All very minor stuff, following the very slight tweaks to the data in the second estimate of Q2 GDP growth.

The FOMC minutes for the 11-12 August meeting revealed growing confidence among committee members that the downturn is ending, although the recovery is expected to be gradual and vulnerable to any further shocks. The committee discussed slowing down the pace of their $1.45tn RMBS and agency debt purchase program, which is currently scheduled to run until year-end, but ultimately agreed that it wasn’t necessary to make a decision yet.

Euroland GDP growth was unrevised at –0.1% in Q2. The breakdown showed that household spending, supported by car scrappage schemes, turned modestly positive for the first quarter since early 2008.

UK construction PMI rises from 47.0 to 47.7 in Aug. The pace of contraction of the construction sector continues to diminish in the UK. With the factory PMI dipping back below 50 in yesterday’s August reading, all eyes are now on the services PMI for August, out tomorrow.


Outlook

AUD and NZD outlook today: These currencies have not technically confirmed either a readiness to move higher or the beginning of a post-March correction. The technicals (pointing lower) and fundamentals (pointing higher) are at odds, and leave us in a neutral stance until price action adds directional clues. Major support and resistance levels to watch are 0.8150 and 0.8500 for AUD, and 0.6630 and 0.6900 for NZD. Today’s data is second-tier – trade balance and services PMI in Australia, and ANZ’s commodity index update in NZ.

Daily FX Forecast


EURUSD


USDJPY

Technical Major Currencies Morning Report


EUR/USD
EUR/USD
The Euro versus Dollar pair was able to maintain trading above 1.4250 yesterday, where it is currently attempting to gather enough bullish momentum to incline towards breaching 1.4375. This breakout will open the way for the pair to target 1.4650 initially. This incline requires 1.4145 to remain intact.

The trading range for today is among the key support at 1.3975 and the key resistance at 1.4650

The general trend is to the downside as far as 1.4720 remains intact with targets at 1.2120

Support : 1.4250 1.4170 1.4145 1.4100 1.4070
Resistance : 1.4300 1.4375 1.4430 1.4475 1.4550


Recommendation : Based on the charts and explanations above, our opinion is buying the pair from 1.4250 to 1.4375 and stop loss below 1.4145 might be appropriate.

GBP/USD
GBP/USD
The Cable continues to fluctuate near the previously breached support currently at 1.6395, where our bullish scenario remains after slightly correcting to the downside to build a solid base at 1.6180 and then rebound to the upside on the intraday basis, in an attempt to breach the 1.6330 resistance level to target 1.6560. This scenario remains as far as 1.6180 remains intact; whereas the stochastic indicator supports the slight downside correction.

The trading range for today is among the key support at 1.5870 and the key resistance at 1.6555

The general trend is to the upside as far as 1.4840 remains intact with targets at 1.7100


Support : 1.6240 1.6180 1.6155 1.6095 1.6050
Resistance : 1.6295 1.6330 2.6380 1.6455 1.6505


Recommendation : Based on the charts and explanations above, our opinion is buying the pair with the breach of 1.6330 to 1.6560 and stop loss below 1.6240 might be appropriate.



USD/JPY
USD/JPY
The USD/JPY pair was able to reach our first downside target at 91.90, yet momentum indicators have reached an oversold area, which may result in a slight upside correction to 92.80 before reversing to the downside on the intraday basis targeting 91.00. The decline for today remains as far as trading is below 93.15 on the four hour charts.

The trading range for today is among the key support at 90.00 and the key resistance at 95.10

The general trend is to the downside as far as 102.60 remains intact with targets at 84.95 and 82.60

Support : 91.90 91.40 90.95 90.40 90.00
Resistance : 92.80 93.15 93.80 94.05 94.45


Recommendation : Based on the charts and explanations above, our opinion is selling the pair from 92.80 to 91.45 and stop loss above 93.55 might be appropriate.

USD/CHF
USD/CHF
The Dollar versus Swissy pair declined yesterday, as expected, yet fluctuated between the 38.2% and 50% corrections as it neared the pivot support at 1.0550, where we wait to witness a breach to the downside. From here we expect the pair to decline on the intraday basis confirmed by the breach of the above mentioned support, with a four hour close below it to target 1.0400 initially before heading towards 1.0000. The stochastic indicator may affect trading today, as it may result in mixed trading until the pair is able to gather the momentum it needs to decline. Trading below 1.0700 is needed to decline today.

The trading range for today is among the key support at 1.0300 and the key resistance at 1.0915

The general trend so far is to the upside as far as 1.0550 remains intact with targets at 1.2245

Support : 1.0550 1.0480 1.0450 1.0400 1.0375
Resistance : 1.0635 1.0700 1.0765 1.0800 1.0890


Recommendation : Based on the charts and explanations above, our opinion is selling the pair with the breach of 1.0550 to 1.0400 and stop loss above 1.0635 might be appropriate.


USD/CAD
USD/CAD
The Dollar versus Loonie pair touched the key resistance for the upside channel that it is currently trading within, and reversed to the downside towards the pivot support at 1.0945. The resistance level, colored in red in the above image, should reverse the pair to the downside to enter the key downside channel, yet a weekly close below 1.0945 is needed. We expect the pair to decline on the intraday basis to reach 1.0880 as far as 1.1130 is intact.

The trading range for today is among the key support at 1.0625 and the key resistance at 1.1320

The general trend is o the downside as far as 1.1870 remains intact with targets at 1.0300

Support : 1.1020 1.0945 1.0900 1.0880 1.0825
Resistance : 1.1060 1.1130 1.1160 1.1200 1.1255


Recommendation : Based on the charts and explanations above, our opinion is selling the pair with the breach of 1.1020 to 1.0880 and stop loss above 1.1130 might be appropriate.

EURUSD


EURUSD bulls did manage to push back prices above 1.4220 level which was a significant level for both sides. At current situation, this pair is neutral without any trend. A gap between support at 1.4204 and resistance at 1.4366 is deep, however this pair still has a chance to move down while resistance line holds.

eurusd



EURUSDTrendSupportResistance
Long TermNeutral1.42041.4366

GBPNZD


GBPNZD

Market Insight

The Hourly Trend is Sideways Up while 23900 level holds. NZD is the Strongest Cross and is GBP is one of the Weakest Cross now during Asian Session .The Hourly Oscillators are bullish but Overbought ADX falling with the price and the price is approaching the MA. GBPUSD is trading at Res Zone 1 but we believe the upside may be limited and NZDUSD is trading above Res Zone 1. GBPNZD is breached the Sup Zone 1. We believe it is due for some correction and should have some pullback downside.

Patterns

We believe the Hourly Price has topped for some pullback and to support our statement the price should not trade above 24225-60 levels. As we are trading on the assumption of the pullback for correction Cautious approach is needed.

Today’s Strategies

We prefer to SHORT near 24140-24200 with a STOP @ 24265 with a profit target of 24030-23990 levels. This has to be a fast trade as we are trading on pullback.

Daily technical outlook


EURUSD

The euro recovered half of the recent losses on yesterday, being supported by 1.4200. The European fx trading session will probably be quiet ahead of ECB Interest Rate decision and Trichet’s speech later today. As stated on my yesterday’s report, while 1.4200 holds – short term sentiment remains positive therefore expecting rallies towards (or maybe above) the top side into the 1.4400-1.4450 region. First intra-day resistance is formed by 1.4300 followed by 1.4360 then 1.4400 higher. Intra-day sentiment is also bullish. Upside is favored for now. Current quote is 1.4275 @06:00 GMT

Support: 1.4200, 1.4150 and 1.4050
Resistance: 1.4300, 1.4360 and 1.4400

EURUSD 4 hrs chart

GBPUSD

1.6300 is on focus as the Pound recovered from 1.6115, trading around 1.6270 at the time of writing this. Short term bearish sentiment is contracting and a potential break above 1.6380 would signal at least the beginning of a corrective cycle if not a full trend reversal. Gains above 1.6300 are possible as the odds seem to favor the upside while above the 1.6200 handle. Keep an eye on 1.6380 as it is an important short term barrier. Current quote is 1.6284 @06:00 GMT

Support: 1.6200, 1.6100/15 and 1.6000
Resistance: 1.6300, 1.6375/80 and 1.6450

GBPUSD 4 hrs chart

USDCAD

The rising trend line coming around 1.1120 has provided a minor reversal point on yesterday as it survived yet another test. However, short term sentiment remains positive as price action suggests further gains on the US dollar side. Intra-day sentiment is slightly negative, though, and a potential break below 1.1000 may open 1.0880/00 where the first important support level is seen. Current quote is 1.1028 @06:00 GMT

Support: 1.1000, 1.0950 and 1.0850/60
Resistance: 1.1100/20, 1.1150 and 1.1200

USDCAD 4 hrs chart

Asia Session


Today's Asia session got off to a bumpy start. As the risk aversion mentality continued around the global, JPY crosses once again felt the brunt. After initially maintaining short term support several times around 92.10, USDJPY eventually gave way briefly dipping below the figure. The move appeared to be a false break, as the pair traded back near opening levels. Other crosses were victims of fear as well.
EURJPY saw a 60+ pip move to the downside off session highs and despite of rate hike speculation AUDJPY fared no better, giving up 50+ pips at one point.
Most crosses witnessed a bit of a bounce later in the Tokyo morning.

On the economic front, Aussie Trade Balance was the only game in town in terms of market moving economic data. The numbers were worse than had been anticipated and after a quick move to the upside pre data, AUDUSD quickly fell back to earth.

Ahead in the upcoming London session, a slew of data is expected. UK Services PMI will be the first out of the gate, however the European Central Bank's rate decision, and even more importantly the rate statement, will be the main focus for most Forex traders.

Upcoming Economic Data Releases (London Session)


9/3/20097:50FR PMI Services AUG F 48.948.9
9/3/20097:55GE PMI Services AUG F 54.154.1
9/3/20098:00EC PMI Services AUG F 49.549.5
9/3/20098:00EC PMI Composite AUG F 5050
9/3/20098:30UK PMI Services AUG 53.254
9/3/20099:00EC Euro-Zone Retail Sales (MoM) JUL -0.20%0.10%
9/3/20099:00EC Euro-Zone Retail Sales (YoY) JUL -2.40%-2.20%
9/3/200911:45EC ECB Announces Interest Rates 3-Sep1.00%1.00%

Forecast on JPY Crosses (EURJPY, GBPJPY, AUDJPY)


EURJPY

EURJPY closed @ 13160 which was BELOW the open and breached the previous day's low. The High was PRECISELY at Precise Trader's Res Zone 1 and the Low was 10 pips from Precise Trader's Sup Zone 5 (U Turn Zone). The Hourly Oscillators are MIXED and the price is Converging towards the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 13045 holds and Daily Trend is Sideways Down while 13620 holds, so expect the price to be Choppy and Downside may be limited. The Price is trading Below Monthly, Weekly open and closed just below the Sup Zone 1. The Price on the Hourly is in a Range trading and expect a Choppy session a head with an Upside bias, on the 5 min is Choppy but 13110-13030 is a critical level to watch for the bulls. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders look to do the same or LONG Cautiously near 13110-13030 with a tight Stop for a quick profit.

GBPJPY

GBPJPY closed @ 15010 which was UNCHANGED from the open and was within prior day's trading range. The High was 10 pips from Precise Trader's Res Zone 1 and the Low was PRECISELY at Precise Trader's Sup Tgt 1. The Hourly Oscillators are MIXED and the price is Within the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 15135 holds and Daily Trend is Sideways Down while 15545 holds, so expect the price to be Choppy until the breakout happens. The Price is trading Below the Monthly, Weekly open and closed within Zone 1. The Price on the Hourly is in a Range trading and expect a Choppy session a head , on the 5 min is also Choppy but 14945-14785 are the critical levels to pay attention. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders look to do the same until there is a clear signal.

AUDJPY

AUDJPY closed @ 7690 which was ABOVE the open and was within prior day's trading range. The High was 5 pips from Precise Trader's Res Tgt 1 and the Low was 15 pips from Precise Trader's Sup Tgt 1. The Hourly Oscillators are MIXED and the price is Within the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 7590 holds and Daily Trend is Sideways Down while 8025 holds, so expect the price to be Choppy and Downside may be limited. The Price is trading Below Monthly,Weekly open and closed within Zone 1.The Price on the Hourly is in a Range Trading and expect a choppy session a head, on the 5 min is also Choppy but 7650-7590 are the critical levels to watch . Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders look to do the same or LONG near 7650-7590 with a tight Stop for a quick profit.

Forecast on USD Minors (USDCHF, AUDUSD, USDCAD)


USDCHF

USDCHF closed @ 10610 which was BELOW the open and was within prior day's trading range. The High was 5 pips from Precise Trader's Res Zone 1 and the Low was 20 pips from Precise Trader's Sup Tgt 1. The Hourly Oscillators are Bearish but Weak and the price is Within the MA, so CAUTIOUS approach is needed for the Bears. Hourly Trend is Sideways Up while 10525 holds and Daily Trend is Sideways while 10845 holds, so expect the price to be Choppy and Downside may be limited. The Price is trading marginally Above Monthly, Weekly open and closed just below Sup Zone 1. The Price on the Hourly time is within Range Trading expect the price to turn up soon, on the 5 min is Choppy but 10560-25 levels should not be seen to maintain the bullish outlook. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders should do the same , Cautiously LONG near 10560-25 level or the break of 10640 level with 10720-10785 as price targets.

AUDUSD

AUDUSD closed @ 8340 which was ABOVE the open and was within prior day's trading range. The High was PRECISELY at Precise Trader's Res Zone 5 (U Turn Zone) and the Low was PRECISELY at Precise Trader's Sup Zone 1. The Hourly Oscillators are MIXED and the price is Within the MA, so CAUTIOUS approach is needed. Hourly Trend is Turning Down while 8455 holds and Daily Trend is Sideways while 8140 holds, so expect the price to be Choppy and Upside may be limited. The Price is trading Below Monthly, Weekly open and closed well above the Res Zone 1. The Price on the Hourly is in a Range Trading but the Upside is limited , on the 5 min is Choppy and expect the pullback to be limited to 8420-55 levels. The price should not exceed 8455-85 level to maintain the bearish outlook. Conservative traders should look to SHORT near 8420-55 levels or strictly trade only at Precise Traders Report levels.Aggressive traders should look to do the same with 8290-40 levels as price targets.

USDCAD

USDCAD closed @ 11055 which was ABOVE the open and was within prior day's trading range. The High was 10 pips from Precise Trader's Res Tgt 1 and the Low was 5 pips from Precise Trader's Sup Zone 1. The Hourly Oscillators are MIXED and the price is Converging towards the MA, so CAUTIOUS approach is needed. Hourly Trend is Sideways while 10910 holds and Daily Trend is also Sideways while 10660 holds, so expect the price to be Choppy with a Upside bias. The Price is trading Above Monthly,Weekly open and closed within Zone 1.The Price on the Hourly is in a Range Trading but it is rather weak so expect some consolidation to take place , on the 5 min is also Choppy but 10970-10 are the levels to watch for the bulls. Conservative traders should look to be Sidelined or strictly trade only at Precise Traders Report levels. Aggressive traders should look do the same or Cautiously LONG near 10970-10 levels for quick profit with a tight Stop.

Spain: The Hole In Europe's Balance Sheet


Today's offering for this week's Outside the Box starts off with a quote from Titus Maccius Plautus: "I am a rich man as long as I don't pay my creditors." Even 2200 years ago, it seems that problems of credit were an issue.

I talked last Friday about the US being faced with a number of bad choices. But it is not just the US. Today we look at a piece from my friends at Variant Perception based on London. They are a relatively new institutional research house. I have been reading their material for some time and have begun to look very much forward to it. They do some very good in-depth analysis. I asked then to shorten a piece they did on Spain and Spanish banks for this week's Outside the Box. Spain will soon be faced with a number of very uncomfortable choices, but for now they appear in denial.

Dives sum, si non reddo eis quibus debeo.
I am a rich man as long as I don't pay my creditors.

Titus Maccius Plautus (c. 254-184 BCE), "Curculio"

Themes

  • Spain = Japan 2.0? - We argue that 1) the real estate crash in Spain is worse than is widely believed, 2) Spanish banks are hiding their losses, and 3) investors are smoking crack if they believe that Spanish banks are among the strongest in Europe, (see Forbes latest Spanish Banks In Top Form). If all these are true, Spain will soon have zombie banks like Japan.

  • Banks are hiding losses - We believe that Spanish banks are not marking their real estate loans to market and are extending credit to zombie construction companies. They do this by 1) Getting a boost from accounting changes, 2) Not marking loans to market, 3) Continued lending to zombie companies, 4) Extending 40 year and 100% loan-to-value loans, and other bubble-like lending practices. We look at each of these in turn.

  • Spain is in deflation - In a deflationary environment, servicing debt becomes even harder. Even when rates go to zero the real burden of debt goes up. That is why deflation is such a terrible thing. Eastern Europe, Spain and Ireland are now all experiencing the beginning of deflation. We believe that we will see much more deflation to come, which will have broad ramifications across the European banking sector.

  • Who's holding the bag? - The periphery countries are net debtors, and the rest of Europe is the net creditor. When a debtor can't pay, the creditor suffers. Germany, France and others will need to cope with recapitalizing the periphery and Spain.

Strategies

We recommend shorting or being underweight Spanish government bonds vs German bonds and short equities, particularly banks, builders and anything related to the consumer.


Spain = Japan 2.0?

We hate to bang on about Spain like an old Salvation Army drum, but we believe that Spain is a disaster waiting to happen. Misunderstanding the severity of the crisis will prove costly to investors as it will have profound implications to the European banking system.

Spain is set for a long, painful deflation that will manifest itself via a very high unemployment level for an industrialized economy, a real estate collapse and general banking insolvencies.

Spain had the mother of all housing bubbles. To put things in perspective, Spain now has as many unsold homes as the US, even though the US is about six times bigger. Spain is roughly 10% of the EU GDP, yet it accounted for 30% of all new homes built since 2000 in the EU. Most of the new homes were financed with capital from abroad, so Spain's housing crisis is closely tied in with a financing crisis.

The impact on the banking sector will be severe. Consider this: the value of outstanding loans to Spanish developers has gone from just €33.5 billion in 2000 to €318 billion in 2008, a rise of 850% in 8 years. If you add in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to €470 billion.
That's almost 50% of Spanish GDP. Most of these loans will go bad.

Spanish banks, in our view, are now facing a very bleak outlook. Spain's unemployment rate reached over 17%; there are now four million unemployed Spaniards and over one million families with not a single person employed in the family.

We argue and will document anecdotally in this report that:

  • The real estate crash in Spain is worse than is widely believed, much as the subprime problem was much worse than people believed

  • Spanish banks are hiding their losses and rolling over debt to zombie companies, much as Japan did in the last decade

  • Investors are deluding themselves if they believe that Spanish banks are among the strongest in the world. (This is a new theme. See Forbes's latest "Spanish Banks In Top Form" for an example of the new fawning articles on Spanish banks.)

If we are right, Spain will soon have zombie banks like Japan and it will face a prolonged period of deflation. However, Spain will be much worse. As Edward Hugh, the doyen of clear-headed analysts of Spain, points out, "Japan in 1992 could leverage its own savings, it had a current account surplus of 3% of GDP. Spain has massive external debt - in 2007 the current account deficit was 10% of GDP - and little in the way of major export industries."


Putting Together A Mosaic

At Variant Perception, we try to stay away from writing too many words. Anything that cannot be explained with a few charts is most likely not worth explaining. In the case of Spanish banking's subterfuge and hiding of bad loans, we have had to assemble a mosaic of news pieces, interviews with banking insiders and others to piece together what is in fact happening. This reminds us very much of the early days of subprime where all the banking results looked good, until they didn't. We believe it will be the same with Spanish real estate.


The Situation In Spanish Housing Is Much Worse Than People Think

The standard line that most analysts buy about Spanish banks is the following:

  • Dynamic provisioning - In 2000, Spain's central bank introduced a system of "dynamic provisioning" that forced banks to build up reserves against future losses. Spanish banks reserved three to four times as much as most of their international competitors. In a sense, the Bank of Spain was building countercyclical buffers to prepare for an eventual credit crisis.

  • Prudent lending - The large private Spanish banks claim that their risk management led them to concentrate mortgage lending on primary residences in the cities at reasonable loan-to-value ratios, leaving lending to developers and buyers of second homes to the Cajas.

However, despite dynamic provisioning, in the recent rally, Spanish banks have been rushing left, right and centre to shore up their capital. They have mainly done so by tapping their clueless retail customers for investment in preferred shares. It is a good start, but we believe they still have not done enough.

The magnitude of the Spanish problem is staggering, and will overwhelm all the benefits of dynamic provisioning.
Conservatively, Spain has over 1,000,000 unsold homes. Unfortunately, many of the homes are on the coast, and without a return of overleveraged British tourists, they are likely to remain unsold. Spain's homes are all in the wrong places.

Spain's building stocks bubble looks very much like the US bubble and other classic bubbles. It went up 10x and then went down 90%. The math is very simple.

S & P

Given this woeful state of affairs, you might assume Spanish house prices had suffered like US house prices. This is not the case.

As the following chart shows, according to official statistics, Spanish house prices are down little more than 10% from their peaks.

Spain House Price

Why have Spanish banks not experienced the same fate as American, Irish and UK banks? We've often wondered how it is that our thesis for Spanish real estate and industrial collapse has not created more victims.

We believe that Spanish banks are hiding their problems. We explore how they are doing this through:

1. Getting a boost from accounting changes

2. Not marking loans to market

3. Continued lending to zombie companies

4. Making 40 year and 100% loan-to-value loans

Let's look at them in turn.

1) Getting a boost from accounting changes

The Bank of Spain is thought of as a very conservative, prudent institution. That is true, but it is now changing its tune. It must now be very concerned for the fate of some Spanish banks and some analysts estimate it will help them avoid posting losses this year.

In July the Bank of Spain changed its provisioning rules on risky mortgages. Previously, banks have made provision for the full value of loans above 80% of a loan to value ratio after two years of payment arrears.
Following the new directives from the Bank of Spain, banks now only need to reserve for the difference between the value of the loan and 70% of the property's market value. For many Spanish banks, this has allowed them not to lose money this year.

2) Not marking loans to market

We also believe that Spanish banks are not marking their books to market. According to an article from the 19th of April in Expansión, the Spanish equivalent of the Financial Times, entitled 'Spanish banks control half of all real estate appraisals.' , Spanish banks control 25% of appraisals directly and another 25% indirectly through their shareholdings.

In the words of Expansión:

The valuation of the guarantees of the mortgage book of the cajas and banks and of its real estate gains importance. The thirteen companies tied to financial entities represented 47% of all real estate appraisals in 2007.

The valuation of these real estate assets has taken on new importance for banks in the context of the current economic recession. The valuation of the mortgage guarantees and of the real estate assets they are taking on through the courts and debt for equity swaps is key to calibrate the solvency of the financial system. This situation has placed the focus once again on the links between banks and the real estate appraisers that goes beyond in many cases a mere commercial relationship.

Official housing statistics are not corroborated by anecdotal evidence, web searches and the real estate sales by the banks themselves. According to a study by El Mundo, housing prices in many areas of the coasts have already dropped 30-50%.

Spain also confronts to problems of banks essentially taking on defaulted assets onto their books at the stated value of the mortgage. The following comes from a highly regarded foreign surveyor in Spain, describing what happened to a client who had run into problems:

On the banking side, he stated that one development had already been taken back by the bank. However, the bank had 'bought' the development from the developer for the price of the mortgage. Thus they had converted a non-performing mortgage into a property asset. However, the bank is now the owner of a development it cannot sell and is unlikely to for a number of years and has a debt of its own in the purchase price 'paid'. The banks are not experienced developers/property marketers and thus are building up problems for themselves, which must come to light at sometime, depending upon accounting practices. Alternatively, there is the potential that they are then bundling these discounted properties on to friends or holding property companies with notional loans and interest being rolled up until the property is sold.

3) Rolling over loans to zombie construction companies

In the last few weeks we've seen many Spanish property companies announce that they had refinanced their debt, which will postpone bankruptcy for a time. The latest to announce debt refinancing has been Realia, and before that Aisa, Afirma, Reyal Urbis, and Renta Corporacion. After the debacle of having to seize Colonial and Martinsa-Fadesa in 2008, Spanish banking stocks tanked and few Spanish bank executives want to see a repeat.

This lending to zombie developers will merely postpone the day of reckoning.

Banks have realized that instigating a bankruptcy process when builders can't roll their loans or sell houses isn't good for builders or for them. They now try to give as much rope to the builders as possible so that they don't have to report large defaults. In the words of a banking insider:

As soon as a small business becomes delinquent, even if it is a longstanding client, it is "everyman for himself" and everyone runs away as if he has the plague. But in the case of the big builders, the bank is fed up with taking on more assets and gives them a line of credit so that they can at least pay interests on their existing debts and give them room for two years to see if things fix themselves and if they can pay the loan back.

The willingness of banks to play ball with developers shouldn't come as a surprise. As they say in banking, "If you owe me a million, it is your problem. If you owe me a billion, it is my problem."

4) Offering 100% Loan to Value loans, 40 year mortgages and other bubble-like practices.

Spanish banks are now the largest real estate holders in Spain. They have come to own properties through many different avenues. In order to hide from the effects of the real estate crash, Spanish banks have been buying properties before the loans on them go bad and trying to dispose of them through their own real estate companies. They have also come to own dozens of thousands of homes through debt for equity swaps.
Estimates put the value of property repossessed or swapped for debt by Spanish banks at about €16 billion.

Spanish banks have websites set up to move their stock. Among selling points are: pricing discounts of 25-50%, financial terms of Euribor plus 0% over 40 years, and guarantees to re-purchase the property in the future.

The lending to Spanish developers has been institutionalized in agreements between the banks and the main developer's body, the Asociación de Promotores Constructores de España (APCE). Spanish banks will provide 40 year, 100% loan to value mortgages for any home that is discounted by 20% by a developer. The buyer has no need for a down payment. Santander signed such a deal with the APCE in order to reduce the stock of housing outstanding. This is another way to provide credit indirectly to zombie developers.


What Is The Endgame For Spain?

As we pointed out in the last monthly commentary, Spain's problem is tied in with the problem of the entire European periphery. The boom years following the adoption of the euro provided 1) easy money via negative real interest rates, and 2) overvaluation of prices as measured by real effective exchange rates.

Real Effective Exchange Rates

Spain, and the rest of the European periphery, can solve their problems either through massive productivity gains, which is highly unlikely, or through a reduction in wages and prices in the order of 20-30%, which is what will happen slowly and painfully. You could call such a reduction of wages and prices an "internal devaluation".

Such an internal devaluation will imply large losses to domestic banks and to external creditors. In the case of Eastern European countries, the damage will be bad, but not very large. In the case of Spain, writing off mortgage debt will be massive.We estimate that Spanish real estate losses will be over €250 billion when all is said and done.
Clearly Spanish and foreign banks are unwilling to admit to the size of the problem and write off the debt. That is why the losses are being hidden.

Running large trade deficits is a form of dis-saving. Spain's large growth in consumption has had to be financed by the rest of Europe. Spain's trade deficit was among the highest in the world in absolute and relative terms at around 10% of GDP in late 2007.

Spain Curren Account

Indeed, Spain's current account deficit at one stage was the largest in the world besides the United States in absolute terms. The Spanish economy acted like a giant consumer sucking up savings from the rest of Europe.

The high degree of consumption in Spain has mostly come from external borrowing and has not been financed out of existing savings.

Spain Gross

How bad is that relative to other countries? Spain's external debt is extremely high in relative and absolute terms. It is among the highest in the world, the fifth largest:

Worldwide External Debt


Real Interest Rates: Deflation Is A Bitch

Eastern Europe, Spain and Ireland are now all experiencing the beginning of deflation. We believe that we will see much more deflation to come, which will have broad ramifications across the European banking sector. The periphery countries are net debtors, and the rest of Europe is the net creditor. When a debtor can't pay, the creditor suffers. Germany, France and others will need to cope with recapitalizing the periphery and Spain. In the words of Plautus, "I am a rich man as long as I don't pay my creditors." A deflationary spiral means that most of the debt will need to be written off, and the creditors will have to absorb the losses.

In a deflationary environment, servicing debt becomes even harder. Even when rates go to zero, prices and wages can go down faster and the real burden of debt can still go up. That is why deflation is such a terrible thing.

Spain now has negative CPI and PPI

Spain Deflating

Inflation in Spain has been negative for the last three months in a row. Spain has not experienced a similar decline in inflation like this in over 47 years. However, the Bank of Spain and the government are behaving like ostriches with their heads in the sand.

The problem with deflation is that even low interest rates are extremely high. Despite massive cuts by the ECB, real interest rates in Spain are still elevated due to negative CPI and PPI.

Real Spanish Mortgage

Spain is not the only country facing deflation. It is a problem for the entire European periphery. Ireland, for example, has the highest rate of deflation in the world. Prices in Ireland are falling at an annual rate of 5.9%, well ahead of the drops in other countries - only Thailand, at 4.4%, comes even close.

We believe that Ireland's experience is what Spain will see more of in the months ahead as the economy slowly adjusts to new realities. Almost all of Ireland's banks have been taken over by the government, and Ireland is struggling to decide how best to dispose of its bad assets. We believe Spain will be much more like Ireland than any of its European neighbours.

Oddly, even though inflation is negative, and unemployment is high, unions are still winning pay rises. Most wage agreements in Spain are reached through collective bargaining on an industry level. So far, wage increases are happening above the ECB's 2% target inflation rate. (It should come as no surprise that businesses try to get around wage bargaining. Last year almost five million jobs were temporary in Spain.)

Spain Unemployment Rate

Given how far out of line wages are with unit labor costs and the reality of deflation in Spain, we see Spain's unemployment level heading towards 25%. With a 25% unemployment rate and a debt deflationary dynamic, how exactly do the banks think they'll be paid back? Who will earn the money to pay the mortgage payments, and how will housing be affordable when wages have been deflated? Assuming the worst has passed in Spain does not pass the common sense test.

We believe Spanish politicians and international investors have grossly misjudged Spain, but events will force them to change their mind. In retrospect Spain will be viewed much like subprime where all the banking results looked good, until they didn't. This is typical of bubbles, and Spain will be no different.

Written by

Variant Perception

U.S Session News Summary


US Stock Market

Us stocks fluctuated having on one hand consumer companies leading the decline and raw material companies leading the incline, whereas investor’s found peace and comfort in the Fed’s FOMC minutes as it expected further improvement in overall economical activities thus overshadowing today’s pessimistic news about the labor sector which was provided by the ADP report showing further deterioration in deterioration in the sector throughout the month of August due to companies shedding more employees than expected.

The Dow Jones Industrial Average index shed 29.93 points or 0.32% to close at 9280.67 levels, The Standard & Poor’s 500 Index lost 3.28 points or 0.33% to close at 944.76 levels, The NASDAQ Composite Index declined 1.82 points or 0.09% to close at 1967.07 levels.

FOMC Meeting…

The participants and the Board of Governors that were present within the FOMC meeting that was held on August 11 and 12 discussed many major crucial points concerning the US current economic conjuncture, pointing out present strengths, developments and weaknesses.

On one hand, recent developments in the domestic and foreign financial markets were witnessed and conferred and the Federal Reserve's total assets were nearly unchanged so far to remain around the amount of $2 trillion since the purchase of securities were balanced by a further drop of the exploit of liquidity facilities and system's credit.

Along with discussions once again concerning the virtues of embracing agency MBS backed by adjustable-rate mortgages (ARMs) in the Committee's MBS purchase plan as to try to diminish the large spreads between ARM rates and yields on treasury securities of a similar duration.

On the other hand, the meeting participants updated the ongoing development of different tools that could help the removal of policy accommodation with measures such as executing reverse repurchase agreements and looking forward on tightening the link between the interest rate paid on reserve balances of the Federal Reserve Banks and their federal funds rate.

Furthermore, the Board of Governors approved finally on extending the TALF program (Term Asset-Backed Securities Loan Facility) and expanding the final date for new TALF loans towards the year 2010.

As for the current labor market conjuncture, participants of the meeting believe undoubtedly that the unemployment rate remains high but declared that the pace of job losses had slowed down within the last months, considering this a good sign of a gradual recovery, beside the fact that an economic stability is clearly observed as proclaimed by the participants throughout all the sectors of the economy.

Pfizer Inc largest agreement…

Pfizer Inc, the huge and known worldwide drug-maker, agreed on paying the considerable amount of $2.3 billion to resolve a U.S investigation concerning an illegal selling and promotion of medicines, consisting of $1.3 billion given to seal the criminal part of the investigation, having in mind actually that this is so far the largest amount paid in such a case and that the medical corporation denied all of the civil allegations in the lawsuits except some related to the marketing of Zyvox.

EIA Report Worst than Forecasts…

The US released its EIA report showing that U.S. commercial crude oil inventories decreased by 0.4 million barrels from the previous week. At 343.4 million barrels, U.S. crude oil inventories are above the upper boundary of the average range for this time of year.

Whereas, the total motor gasoline inventories decreased by 3.0 million barrels last week, and are in the upper half of the average range. Both gasoline inventories and gasoline blending components decreased last week. Distillate fuel inventories increased by 1.2 million barrels, and are above the upper boundary of the average range for this time of year.

US Factory Orders Worse Than Forecasts…

US released its Factory Orders for July came in at 1.3%; worse than the forecasted reading of 2.2% but better than the prior revised reading of 0.9% from 0.4%.

US Nonfarm Productivity…

US released its second quarter final reading of its Nonfarm Productivity showing a incline as it came in at 6.6%; better than the forecasted reading of 6.4% and the advanced reading of 6.4% as well, whereas the second-quarter reading of the Unit Labor Costs plunged slightly and came in at -5.9%; which worse is than the forecasted and the advanced readings that are both at -5.8%.

US Nonfarm Productivity…

US released its second quarter final reading of its Nonfarm Productivity showing a incline as it came in at 6.6%; better than the forecasted reading of 6.4% and the advanced reading of 6.4% as well, whereas the second-quarter reading of the Unit Labor Costs plunged slightly and came in at -5.9%; which is worse than the forecasted and the advanced readings that are both at -5.8%.

The British Banking Association LIBOR

The British Banking Association released the LIBOR rate for today, starting with the dollar, the overnight rate rose from 0.229% to 0.230%, and the one week LIBOR fell from 0.251% to 0.248%, while the three months rate fell from 0.334% to 0.330%, and the twelve months LIBOR fell a little from 0.296% to 0.295%.

US MBA Mortgage Applications…

US released its MBA Mortgage Applications showing a decline as it came in at -2.2% from 7.5%.

Worries ahead of the FOMC Minutes…


So far, fears are spread throughout the currencies market ahead of the FOMC Minutes and as the ADP Employment Change for August came in at -298 thousand, which was worse than the forecasted reading of -250 thousand, illustrating that the world's largest economy remains weak, encouraging traders accordingly to target the low-yielding currencies; the dollar and the yen.

As a result, the euro-dollar pair is slightly declining and is forecasted to plunge further according to the one-hour chart stochastic oscillator, having the Union currency so far trading around 1.4286 recording a high of 1.4294 and a low of 1.4255 with a resistance at 1.4289 and a support at 1.4255.

As for the pound-dollar pair, it is plunging as well and shows a strong tendency to fall to a further extent according to the four-hour and one-hour momentum indicators, having the royal pound trading at 1.6260 recording a high of 1.6298 and a low of 1.6112 along with a resistance at 1.6277 and a support at 1.6246.

Now, turning to the dollar-yen pair, it is starting to slightly climb to the upside due to strong technical movements, having the low-yielding Japanese yen trading so far around 92.21 recording a high of 1.6298 and a low of 1.6112, knowing that a resistance level could be witnessed at 92.37 and a support level detected at 91.96

USD lower, factory orders beat expectations


  • USD: Lower, ADP falls more than expected, planned layoffs decline, labor costs decline, productivity rises
  • JPY: Higher, rising risk aversion as global equity markets decline, DPJ supports USD reserve status
  • EUR: Higher, EU producer prices fall at record pace, GDP as expected
  • GBP: Higher, UK construction PMI rises to an 18 month high
  • CAD and AUD: AUD higher & CAD lower, Australian GDP strong, political uncertainty in Canada

Overview

USD traded lower Wednesday with the AUD leading the way supported by stronger than expected Australian Q2 GDP and GBP supported by higher UK construction PMI. JPY traded at seven week high supported by risk aversion sparked by report of worse than expected ADP jobs report, a sharp drop in the Nikkei and weaker equity market trade in Europe. The impact of the ADP report was partly offset by a report that US nonfarm labor costs posted their biggest decline since 2000 and nonfarm labor productivity posted its biggest gain since 2003. EUR traded mixed initially pressured by report that EU producer prices declined at a record pace in June. CAD traded lower pressured by political uncertainty in Canada as Canada's Liberals say they will no longer support the minority government and by report of weak auto sales. Investors are trying to gauge whether recent data which shows the global economy improving is sustainable. Caution about the global economic recovery limits USD downside as risk aversion re-emerges. Equity markets and investor sentiment are approaching a key inflection point. It's unclear whether the re-emergence of risk aversion will be short-lived or begin to trend higher. Economists declared that the US recession ended after Tuesday’s release of ISM manufacturing data which rose above 50, but it's not clear whether there will be solid evidence of economic recovery until later in the year. An uneven US and global economic recovery may lead to more choppy price action and FX markets.

Today’s US data:

August ADP employment falls by 298k, the trade expected a decline of 250k. Q2 productivity rises 6.6% and labor costs declined by 5.9%. July factory orders rise 1.3%, a 0.8% rise was expected. USD drifted lower post release of the factory orders report as stocks stabilized.

Upcoming US data:

On September 3rd initial jobless claims for the week ending 8/29 will be released expected 556k compared to 570k last month along with August services PMI expected 48 compared to 46.4 in July. On September 4th August unemployment rate would be released expected at 9.5% compared to 9.4 last month with nonfarm payrolls -220k compared to -247k in July.

U.S. Update: No way out?


What happened in Asia and Europe

Despite risk aversion/appetite movements, despite falling rising stocks and despite good and bad fundamental data, majors remain trapped in previous three month ranges. Except maybe Japanese yen that looks a bit stronger, yet also approaching to strong midterm support level, still market has not found a way out.

Uncertainty continues ruling forex market, yet from early Asia, a general decline in equity markets helped dollar and mostly yen to post gains against major rivals.

In the U.K., construction activity fell at its slowest pace in 18 months in August after the construction PMI index rose to 47.7 in August from 47.0 in July, giving Pound some aims to recover the 1.6200 level. Euro also regained some ground and test the 1.4250 level, but failed to break above, and fall down to the 1.4200 area.

In the U.S., nonfarm private employment decreased 298,000 from July to August 2009 on a seasonally adjusted basis, according to the ADP National Employment Report. The estimated change of employment from June to July was revised by 11,000, from a decline of 371,000 to a decline of 360,000. Despite this August employment decline was the smallest since September of 2008, the report triggered a risk aversion rally, sending stocks to the downside, with dollar and yen quickly following to the upside. USD/JPY reached a fresh 7 weeks low and remains clearly bearish, aiming for a retest of the key 91.70 midterm support zone.

What to expect

Since Wall Street opening, currencies are just following stocks moving accordingly to DJIA and S&P in the short term. S&P remains under 1000, yet struggling to regain the level, while DJIA is just above 9300 level. No range, any support or resistance level broken, except in Japanese yen crosses that remain pretty bearish, we have FOMC Minutes in a couple of hours. But at this point, seems unlikely the statement could wake up this sideways market.

Gbp/Usd Outlook

Slightly bullish today, pair still looks bearish in the daily chart: capped by a descendant trend line, and with 20 SMA well above current price and turning bearish; current rally has been halted for now, by the strong 1.6250 area after pair rebound from the 1.6110 lows. Immediate resistance above mentioned 1.6250 comes at the 1.6320 area, where we have the trend line, ahead of stronger 1.6375/80 highs. Supports from here, lie at 1.6520, 1.6160 and 1.6110.

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Unlocking Volume Analysis


This article is taken from the YourTradingEdge magazine (MAY/JUNE 2009 issue)

The author, Todd Krueger, is a professional trader, educator and creator of Wyckoff Candle Volume Analysis. He is the founding President of Traders Code, LLC; which provides professional trading tools and education to the retail trader.


  • Todd Krueger explores volume analysis techniques: supercharge your chart-reading skills by combining Wyckoff Volume Analysis with candlestick patterns.

In the beginning

Most traders don’t really know where to begin their educational journey. There are so many avenues that can be pursued that the entire process can seem overwhelming. Many traders who have traded for several years can remember the confusion surrounding the choice of which trading methods they would learn. Through my 24 years of trading, I have learned that one of the keys to successful trading comes from being able to read a chart accurately to determine imbalances of supply and demand.

Forex Market Outlook on Majors


INTRA-DAY GBP/USD:

Last Update At 24 Aug 2009 08:05 GMT

Rate : +1.6460+

Although cable's intra-day breach of 1.6465
signals decline fm last Friday's high at 1.6625 has
resumed, near term o/sold condition is likely to
limit downside n risk has increased for a correct-
ive bounce b4 prospect of another fall later.

Exit short n sell again on recovery. Below 1.64
19 wud bring retrace. of upmove fm 1.6275 to 1.6375

US T−Note breaks above first key resistance level


Markets: Fixed Income

On Wednesday, government bonds extended recent gains and moved (further) above first key resistance levels. Indeed, following the Bund, the US T-Note future trades now also above the neckline of a double bottom formation, which if sustained would improve the technical outlook. Overall, government bonds still benefited from the deterioration in risk appetite after Tuesday’s correction on the equity and commodity markets added to the feeling that the recent rally in more risky assets has gone far enough. However, looking cross markets, yesterday price action wasn’t as clear cut as Tuesday’s from the risk appetite/aversion spectre. Indeed, bonds gained as did gold and intra-EMU government spreads widened, but equities moved fairly sideways as did commodities and the euro gained (slightly) on the dollar. The Minutes of the August Fed meeting confirmed the market consensus that the current ultra- accommodative stance will be maintained for an extended period.

In a daily perspective, the US yield curve flattened, as 10- and 30-year yields fell by respectively 5.7 and 7.2 basis points compared to a decline by respectively 0.8 and 5 basis points in 2- and 5-year yields. Consequently, US 30-year yields fell slightly below the neckline of a double top formation at 4.15%, while 10-year yields are approaching a similar neckline at 3.25%. A sustained break below would materially improve the technical outlook for bonds. In the euro zone, the German yield curve steepened slightly ahead of today’s ECB meeting, where no change to the ECB’s monetary policy stance is expected. German 2-year yields declined by 2.1 basis points to their lowest levels since March last year, while 5- and 10-year yields fell by respectively 1.6 and 1.0 basis points and 30-year yields even rose by 2 basis points. The deterioration in risk appetite was also reflected in the intra-EMU sovereign spreads, which widened further to their highest level in a month.


US T-Note breaks above first key resistance level

Today, all eyes are focused on the ECB policy meeting. Despite the recent improvement of the economic outlook, we do expect the ECB governing council to maintain their ultra-accommodative monetary policy stance at today’s policy meeting. As such, no change in interest rates or non-standard monetary policy should be expected. Therefore, the economic recovery looks still too fragile, while the inflation outlook is not expected to threaten price stability. This is likely to be reflected in the new ECB staff projections for growth and inflation, which will show inflation to remain clearly below 2%, despite an upward revision of the growth outlook. Such a continuation of their ultra-accommodative policy stance will put the ECB in line with the other major central banks, which have recently also decided to maintain (Fed) or even to extend (Bank of England) their policy accommodation. During the Q&A, a lot of attention is likely to be focussed on the liquidity operations, as markets will be eager to know whether the next one-year tender at the end of September will also offer unlimited liquidity at a fixed rate of 1% or whether any surcharge will be imposed. Given the marked decline in money market rates in response to the first operation, we don’t expect any surcharge to be imposed. Another issue remains the hoarding of cash by banks, as banks are still parking huge amounts at the ECB deposit facility instead of lending it to customers. Therefore, it will be interesting to see whether Trichet is also considering any further steps to discourage banks from depositing money at the central bank. For example, in Sweden, the Riksbank has already taken an important step by cutting its deposit rate into negative territory at - 0.25%, while Bank of England’s governor King recently indicated the Bank will also consider a further cut in the interest rate they pay on bank reserves. Although we don’t expect a decision on the issue yet, comments with regard to the use of the deposit facility should be closely monitored.

Besides, the ECB meeting, the eco calendar is also attractive today with the euro zone retail sales (July), services PMI (final figure), US claims and non-manufacturing ISM (August). In June, euro zone retail sales dropped by 0.2% M/M, while a slight increase was expected. For this month, the consensus is looking for a slight increase (by 0.1% M/M). We believe that the risks might be on the upside of expectations due to the summer discounts. The final figure of euro zone services PMI is expected to confirm the first estimate which showed an increase from 45.7 to 49.5. After the upward revision in the manufacturing PMI, a higher outcome is not excluded. Last month, the US non-manufacturing ISM unexpectedly deteriorated. For August however, the consensus is looking for an increase from 46.4 to 48 and after the manufacturing ISM, we believe that the risks are still on the upside of expectations. In the week ended August 29, initial claims are expected to have dropped by 5 000 to 565 000. Continuing claims, which are reported with an extra week lag, are forecasted to have dropped by 8 000 to a total number of 6 125 000.

On the supply front, France and Spain will tap the market today. While Spain will tap two shorter-term Bono’s in the 3- and 5-year segment for an amount of €3.5-4.5B, France will tap three longer-term OAT’s in the 6-, 10- and 14-year segment for an amount of €6.5-7.5B. In the US, the Treasury will announce the amounts of next week’s longer-term auctions.

Regarding trading. Over the past two months, government bond markets have performed strongly despite the general improvement in the economic outlook. Indeed, despite the rally on the equity, commodity and credit markets, yields are still well below this year highs set at the beginning of June. The improvement in risk appetite has also led to a significant tightening in the sovereign credit spreads, which has even pushed yields of several EMU member countries to new cycle lows. This suggests that the outlook for central bank policy rates to remain low for extended period of time has succeeded in bringing also longer-term yields lower. This week’s trading however signals rising doubts about whether the recent rally on the equity, commodity and credit markets has gone far enough. A further substantial correction on these markets should continue to support the US and German government bond markets, but may at the same time also lead to a widening of the intra- EMU sovereign spreads.

Yesterday, the technical outlook for bonds further improved, after the US T-Note future moved above the neckline of a double bottom formation at 117-19. A sustained break above would materially improve the technical outlook for bonds, certainly if the break would also be confirmed in yields, where important support is seen at around 3.25% both in German and US 10-year yields.

In the UK, the calendar contains the services PMI. Services PMI is forecasted to extend its rebound in August. The consensus is looking for a figure of 54.0, but the risks might be on the downside of expectations after the deterioration in the manufacturing PMI. On the supply front, the DMO will tap its 30-year Gilt 4.25% 2039 for an amount of £2.25B.

Gold and silver surge as safe−haven demand returns

London, 03 September 2009 - Gold rallied to its best in almost 3-months Wednesday, testing briefly above $980/oz as concerns about the US financial sector and of possible regulatory restrictions in energy trading triggered a surge of safe-haven demand. Silver was also upbeat, rising 2.25% while platinum and palladium reversed earlier weakness to close unchanged. The rest of the commodity sector was less buoyant with the CRB Index rising just 0.25% while NYMEX crude was unchanged closing at $68.05. The rally in gold also triggered a rallying in EUR/USD while the USD Index declined 0.5%. US equities finished with small declines with both the Dow and S&P off 0.3% while markets are mixed overnight with the Nikkei currently down 0.6% and the HSI up 1%. The focus today will be the ECB rate announcement and accompany statement while economic data will show Eurozone, UK and US Services PMI and US Jobless Claims.

Gold saw a relatively flat start to the day trading between $951.75-56.25 across Asia and Europe. The metal rallied initially on the US opening, pushing to $967 as some 5000-lots - rumoured to be Central Bank related - were bought on COMEX, before gold surged again around 2-hours later as short covering was triggered. The metal closed at $976.80 and hit a 3-month high of $980.70 in after-market trade. Some light profit taking has been seen this morning but gold remains supported and could look to extend its gains to challenge the June high of $990.20 as concerns of a possible equity correction prompts fresh diversification into safe-haven assets.

Gold

Silver closed Wednesday at $15.35 shortly after posting a high of $15.48 and has rallied to $15.56 this morning. The metal may now get a further boost after the AU/AG ratio broke 63.02 this morning with momentum indicators suggesting a re-test of June $16.25 high.

Silver

Both platinum and palladium succumbed to long liquidation during European trade before recovering on the back of rallies in gold and silver. Platinum recovered from a low of $1205 to close up $1 at $1230 while palladium settled unchanged at $287 after posting a low of $281. For the moment platinum should hold the current $1218-75 range while increased investment demand for palladium still has the potential to test the $296-305 area. ETF Securities flows were mixed yesterday - platinum holdings declined 1.9Kozs, palladium increased 4.6Kozs to a record 408.8Kozs.

Platinum


Palladium