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June 30, 2011

YOU WHAT?

Filed under: Forex Strategies — admin @ 4:43 pm

Its like working in a nightclub.

“RISK ON”!
– YER WHAT?
I SAID ITS “RISK ON”!!
-WHAT?? I CANT HEAR YOU
I SAID “RISK IS ON, IT ROCKS”!!
– WHISKY ON ROCKS? YES PLEASE MAKE MINE A DOUBLE!!
NONONO – OH FORGET IT

Turn that bloody month end down, I can’t hear a damn thing in here. Seriously, the risk on “choon” in the club is so banging, it appears do have dragged everyone out of the VIP onto the floor. TMM’s inboxes are full this morning of “why we have to buy risk” pieces and from a gamut of very respectable sources. Which includes those that have been claiming to have been holding back whilst Greece played out and are now emerging from under their stones, those that have suddenly found their “risk” measure models turning higher (self-fulfilling because the prices they look at have moved up), those that are extrapolationistas and have seen 3 days of bounce and finally those that have been cut from their shorts and have swung long through desperation.

But TMM are firmly covering their ears as, to them, this is far from a risk on anthem but just that month end noise turned up to 11. The Modified Newtonian Dynamics of finance it may not be but we feel our MEN (Month End Noise) theory sufficiently explains most of the phenomena listed in the current spate of “risk on” arguments, even if some purists disagree. Models have been chasing prices higher again too, though one particular bank’s new model is taking the buy side by storm, resulting in a lot of people looking at the CHF/RUB cross (Bloomberg figures confirm this)!

Basically, the last 24 hours have, in TMM’s mind, killed enough bears to leave it safe for us to go and sell again.

YOUR CLUB’S ON FIRE
– YOU WHAT?
I SAID “YOUR HOUSE’S ON FIRE”
– “EURO CROSSES GONE HIGHER? – GREAT I’M LONG!!
NONONO. Oh Forget it, lets get out of here

Loonie and Aussie Share Downward Bond

Filed under: Canadian Dollar — Tags: , , , , — admin @ 3:17 pm

In yesterday’s post (Tide is Turning for the Aussie), I explained how a prevailing sense of uncertainty in the markets has manifested itself in the form of a declining Australian Dollar. With today’s post, I’d like to carry that argument forward to the Canadian Dollar.


As it turns out, the forex markets are currently treating the Loonie and the Aussie as inseparable. According to Mataf.net, the AUD/USD and CAD/USD are trading with a 92.5% correlation, the second highest in forex (behind only the CHFUSD and AUDUSD). The fact that the two have been numerically correlated (see chart below) for the better part of 2011 can also be discerned with a cursory glance at the charts above.


Why is this the case? As it turns out, there are a handful of reasons. First of all, both have earned the dubious characterization of “commodity currency,” which basically means that a rise in commodity prices is matched by a proportionate appreciation in the Aussie and Loonie, relative to the US dollar. You can see from the chart above that the year-long commodities boom and sudden drop corresponded with similar movement in commodity currencies. Likewise, yesterday’s rally coincided with the biggest one-day rise in the Canadian Dollar in the year-to-date.

Beyond this, both currencies are seen as attractive proxies for risk. Even though the chaos in the eurozone has very little actual connection to the Loonie and Aussie (which are fiscally sound, geographically distinct, and economically insulated from the crisis), the two currencies have recently taken their cues from political developments in Greece, of all things. Given the heightened sensitivity to risk that has arisen both from the sovereign debt crisis and global economic slowdown, it’s no surprise that investors have responded cautiously by unwinding bets on the Canadian dollar.


Finally, the Bank of Canada is in a very similar position to the Reserve Bank of Australia (RBA). Both central banks embarked on a cycle of monetary tightening in 2010, only to suspend rate hikes in 2011, due to uncertainty over near-term growth prospects. While GDP growth has indeed moderated in both countries, price inflation has not. In fact, the most recent reading of Canadian CPI was 3.7%, which is well above the BOC’s comfort zone. Further complicating the picture is the fact that the Loonie is near a record high, and the BOC remains wary of further stoking the fires of appreciation by making it more attractive to carry traders.

In the near-term, then, the prospects for further appreciation are not good. The currency’s rise was so solid in 2009-2010 that it now seems the forex markets may have gotten ahead of themselves. A pullback towards parity – and beyond – seems like the only realistic possibility. If/when the global economy stabilizes, central banks resume heightening, and risk appetite increases, you can be sure that the Loonie (and the Aussie) will pick up where they left off.

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Michael Robinson Used This Strategy to Make 250% Gains

Filed under: Forex News — Tags: , , , , , , — admin @ 3:12 am

By TaipanPublishingGroup.com

Michael RobinsonOver the past few weeks, we’ve seen just how volatile the financial market can be… Huge swings, like when the Dow dropped more than 672 points in 2 1/2 weeks, can throw a wrench in even the best-laid investment plans.

You’ve heard us time and time again tell you to prepare an exit strategy before you even jump into an investment.

But I’d like to share with you an investment strategy that helps you stay in a trade, while protecting your gains at the same time.

This strategy comes from Michael Robinson, editor of American Wealth Underground and 180 Trader.

Recently, Michael helped his American Wealth Underground readers lock in 250% gains with this specific strategy.

I asked him about his methods. He said:

I’m a long-term bull who is reluctant to sell shares of really great companies. The winners are hard to find in this field and thus difficult to dump. But we must protect ourselves against the market’s intense volatility. So, using stop-losses on half the stock means you get to book some gains and still take part when the rally occurs. All four rare earth giants listed here rallied back to about the trailing stop-loss level.

Now, this is what that looks like in a real example. I can’t give you the name of the company for obvious reasons, but this will explain how Michael can take such great gains and remain invested in a volatile market.

Michael recommended Company X a year ago, and boy, did it take off, climbing some 300%. That is a substantial gain that you don’t want to lose to a volatile market.

But it’s also got huge momentum, and the potential for even more gains, so any protection that takes you out of the trade also takes you out of that momentum.

So Michael told his AWU readers to set a stop-loss.

Ordinarily when we talk about setting a stop-loss, we talk about a price at which you sell your whole position when share prices start to slide against you.

But what Michael did was tell his readers to only sell 50% of their position if Company X hits the stop-loss.

That allows readers to take huge gains in a crazy market and still be positioned once Company X rebounds. That’s how readers locked in a gain of 250%, with the hope of more to come as Company X is already starting to move higher again.

This stop-loss strategy might be different from the one you use, but it sure is powerful.

Now let me enhance this investment strategy for you. Michael set a specific stop-loss exit price for Company X. That certainly locked in gains for his readers. But what if Company X climbed another 5% or 10% before dropping back to that stop-loss price?

His readers could have lost out on those gains.

Now, don’t get me wrong — that 250% readers saw from Company X is nothing to quibble over, particularly in this market.

But making one small change to this investment strategy can help you eke out a few more percentage points and give you the same protection.

I’m talking about using a trailing stop. Trailing stop-losses are slightly different from specific stop-losses. Specific stop-losses set an exit price. So let’s say Company X is trading for $10 a share, and you set a stop-loss at $8 a share. No matter what Company X does, your exit price is $8 — a loss of 20%. If Company X trades as high as $15 a share, you’re not protecting any of your gain by keeping a stop-loss at $8.

Of course, you can move that stop-loss up as you make gains. This is, in essence, what a trailing stop-loss is.

A trailing stop follows the price of the stock higher. So let’s take that same figure and use a 20% trailing stop. At your initial buy price of $10 for Company X, a 20% trailing stop will still give you an exit price of $8.

But if Company X climbs to $15 a share, your 20% trailing stop gives you an exit price of $12… That protects a 20% gain from your initial buy price.

Trailing stops have a lot of power when it comes to protecting your gains — more so than the traditional trailing stop. If you combine that with Michael’s super-smart investment strategy to take gains on only 50% of your position and you’ve got a highly adaptive tool for volatile markets.

Editor’s Note: Last Thursday, Michael wrote his readers and told them to buy shares of a tiny company poised for a big rebound. He said his Triple Cross system flashed a buy signal. By the next day, shares of the stock surged by double-digit proportions. He nailed it.

There is a reason our newest service is quickly becoming one of our most popular. Michael’s advice works. Follow the link to read his latest work.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

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  • GBPUSD is facing trend line resistance

    Filed under: Forex News — Tags: , , , , — admin @ 3:10 am

    GBPUSD is facing the resistance of the downtrend line from 1.6441 to 1.6261, a clear break above the trend line resistance will indicate that a cycle bottom had been formed at 1.5912, then lengthier consolidation of downtrend from 1.6546 could be seen. On the other side, downtrend could be expected to resume after touching the trend line resistance, and another fall towards 1.5500 could be seen after breaking below 1.6000 level.

    gbpusd

    Daily Forex Analysis

    How I trade (Part 1)

    Filed under: Technical Analysis — Tags: , — admin @ 3:05 am

    Throughout the years, I received numerous questions about what strategies I use, what charting setups I prefer, what I look at before entering/exiting a trade and so on. As many of you who are regular readers know, I am sharing some of my trading actions on regular basis. However, I guess it’s pretty obvious that I don’t share all of them and the reasons are many.
    Just to be clear from the beginning, I’ve been into FX trading since 8 years ago, I’ve seen a lot of it – traders come and traders go – and I am only talking from Read More


    © 2011 FX Trading Blog – innerfx.com |
    Article Source | Post tags: fibonacci, games, Moving Averages, support and resistance trading, swing trading, time frames, trends, twitter, World of Warcraft

    If China Saves Europe, then Who Saves China?

    Filed under: Currency — Tags: , , — admin @ 2:27 am

    Quotable

    “Democracy is a form of worship. It is the worship of jackals by jackasses.”

                                        H.L. Mencken

    Commentary & Analysis

    If China Saves Europe, then Who Saves China?

    China’s real debt level appears to me much larger than anyone seems to know — even the Chinese. This kind of thing happens when you provide stimulus to your economy ranging from 50% to 75% of your entire GDP and allow your banking system to create even more leverage with a multitude of so called “off-balance-sheet vehicles.” Sound familiar to anyone? This movie ended badly during its first run.

    But of course, it is only the Westerners who are careless with debt and leverage according to the harangues from Windbag Wen Jiabao, China’s globetrotting premiere who has learned the sublime art of Western political success: see camera, pose for camera, say sound bite to camera. Of course, Wen’s sound bites have about 500% more thought embedded in them than those emanating from Western pols, sadly.

    Despite Wen’s recent attempt to tell the world, via op-ed in the Financial Times, “It is all good,” keen and un-keen observers alike have a sneaky suspicion Wen is playing one of his dutiful dual roles as Minister of Misinformation Information Dissemination—a highly valued practitioner of this art he has proven to be.

    Commies have certain advantages in the disinformation role beside the fact it is part and parcel to their DNA. If said Commie can produce wealth, he is protected by friends like Henry Kissinger (yes I am reading his new book, Kissinger On China, and have not been disappointed) and a host of other international elites from both ends of the ideological spectrum reaping huge gains on Chinese real asset investment and had an added advantage in the art of deception. Think tanks in Western countries take up the cause and pretend that what we do with China represents “free trade,” and anyone that dare see the emperor is naked must be of the most horrible sort imaginable—an “isolationist.” The worst slur in Western economics indeed! But I digress, as real people with independent minds know this game all too well … as they watch jobs evaporate across every community.

    From Wen in his Financial Times piece published on June 24th, “How China is winning the fight against inflation,” and my English skepticism translation in red:

    “The world must cooperate to meet the challenges.” In other words, the West needs to keep its markets open and tariff free, while China continues to tax imports at 25-40% and require training of domestic partner (so technology can be transferred).

    “China has moved swiftly to fight financial crisis, adjusting macroeconomic policy to expand domestic demand, and introducing a stimulus package to maintain growth, advance reform and improve people’s lives.” China has drained more savings from consumers, lowering the consumer penetration as a percentage of its total economy, thus making massive new investments and providing exporters all types of government incentives to push more final goods out on its trading partners, and cracking down hard on foreign competitors inside China instead of accepting the domestic adjustment and making real change to its consumer market. And just ask Chinese artist Ai Weiwei how that “reform and improving people’s lives” is turning out.

    “There is concern as to whether China rein in inflation and sustain its rapid development. My response is an emphatic yes.” My response is an emphatic no that both can be achieved at the same time. Inflation can be reined in, but given the treadmill of required government stimulus to keep the vicious treadmill turning [see chart depiction below] growth will have to slow below the pace of its “recent development.” I read a quote from a hedge fund manager recently regarding this topic, he said, “China has two speeds, flame thrower and fire extinguisher.” They may now be applying the latter.

    “Our budget deficits and debt balances are respectively below 3 and 20 percent of GDP.” Yeah…sure they are.

    This from Radio Australia [my emphasis]: China’s local debt higher than expected…

    For the first time in China, the debt levels of local governments have been published.

    The National Audit Office says local government debts total 1-point-6-trillion dollars — or about a quarter of China’s national income or GDP.

    It confirms for most analysts that the true extent of government debt is much higher than officially stated.

    Correspondent: Karon Snowdon

    Speakers: Stephen Joskie, director, Economist Intelligence Unit in Beijing; Shane Oliver, chief economist, AMP Capital

    SNOWDON: Even with the official figures published no-one seems able to agree just how high the level of government debt goes in China. And therefore, if it’s a problem or not. Stephen Joske, is a Director with the Economist Intelligence Unit in Beijing.

    JOSKE: It’s certainly a big number and it’s possible we’re only looking at estimates of its true size. It’s not clear it’s the absolute limit on it. There are some suggestions there might have been further items in there that we aren’t truly taken into account.

    SHANE OLIVER (chief economist, AMP Capital): I think always there’s a possibility the Chinese government is fudging the numbers. Don’t forget China is still an emerging country so there’s a lack of precision in the numbers that might apply to Australia or the US. My take on it though is that in the greater scheme of things its likely to be relatively low.

    SNOWDON: Shane Oliver is the Chief Economist with AMP Capital. It’s a constant problem with Chinese statistics — how accurate are they and just what’s been included in the calculation. Among the pessimists is Professor Victor Shih from Northwestern University in the US. He’s widely quoted as estimating local government debt is almost twice the official figure — that’s 2.6 trillion dollars or more than 40 per cent of GDP.

    The consultancy, Dragonomics in Beijing agrees and says when adding central government debt the total is 80 per cent of GDP. Germany’s is put at 75 per cent and the US 93 per cent. Whatever the figure — does it matter?

    Not yet, says Stephen Joske.

    JOSKE: At the moment it’s probably fair to say that at 27 per cent of GDP it sounds like a big number but it’s manageble in the Chinese fiscal context. But it could easily be a lot more. But still we don’t have grave fears for it destabilising the economy largely because the overall fiscal situation in China is actually reasonably strong at the moment.

    SNOWDON: In its favour, are China’s high economic growth, low interest rates and government ownership of assets. But inflation is rising — a big concern for Beijing. Just this week, Premier Wen Jiabao has shifted the inflation target from four to five per cent. But higher interest rates won’t necessarily follow — they might help to rationalise investment spending, but are politically sensitive.

    JOSKE: The whole capital intensive state owned enterprise sector is built around access to fairly cheap loans, large sections of the real estate market are obviously based on interest rates around current levels. And if you start increasing those significantly you probably set off what by Chinese standards would be hard to manage political unrest.

    SNOWDON: A lot of the Beijing’s massive stimulous spending went through local governments into infrastructure, some of it white elephant but much of it productive. A whole lot more was siphoned into real estate and through unknown financial vehicles. It could be a problem in the longer term for the banking system if those loans turn bad.

    OLIVER: I think the odds are, there will be some problems for China’s local governments and as a result for the banking system as a result of the spending binge that occurred through the global financial crisis. It’s inevitable that some of the projects that were undertaken will run into difficulty and have trouble servicing their loans. That in turn could create problems for Chinese banks which have made the loans to local government funding vehicles. So there’s a likelihood we will see a pickup in problems in the years ahead.

    The Chinese economy has been a juggernaut, no doubt. But it is dangerously imbalanced. This from Professor Michael Pettis:

    One thing worth noting in the current environment is that small and medium enterprises (SMEs) are hurting, and last week’s minimum reserve hike – which came out the same day as the CPI number – will undoubtedly make things worse since any withdrawal of credit is unlikely to affect the top customers (SOEs and local governments) and will fall disproportionately on marginal borrowers. In early May I wrote that the very uneven process of rebalancing in China was likely to have adverse consequences on the SME sector.

    Rebalancing in the context of China means, for the most part, a significant increase in the consumption share of GDP from its astonishingly low level of 35% in 2009 (and perhaps lower last year). As regular readers know, I do not believe that China’s high savings and low consumption rates are a function of any remarkable preference on the part of Chinese households for savings over consumption.

    They are simply the automatic consequence of a system in which increases in GDP growth are subsidized by transfers from the household sector, which effectively constrains the relative growth of household income and, with it, household consumption. In that case the only way for China to rebalance would be for Chinese household income to grow faster than GDP.

    There is nothing in the above comments from various analysts that Wen doesn’t know. But making the transition, or rebalancing, to a more level form of growth for China is extremely dangerous in a world where demand is still in hiding, and seems to be heading for a double-dip in the US, not to mention the rising social unrest evidenced by the rising number of riots (sorry, the proper term is “incidents” according to Wen’s Ministry of Disinformation Information Dissemination) throughout China.

    US Consumer Credit Turning Down Again?….Private deleveraging isn’t good for Chinese exports. Thus, they need to rebalance toward more domestic demand sooner, rather than later.

    It keeps coming back to the treadmill we created to depict this dangerous situation for China and the global economy…

    If China slips off the Treadmill, the question is: who saves China? I have a feeling that if China is in need of liquidity, it won’t be holding European paper all that long.

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    Daily Forex Fundamentals – June 29, 2011

    Filed under: Currency Charts — Tags: , , , , — admin @ 1:27 am

    What’s on the Economic Horizon?

    Greek Parliament to vote on austerity package today
    Canadian inflation slated to tick lower
    U.S. pending home sales to increase?
    KOF economic barometer on deck

    U.S. Dollar (USD)

    Risk appetite up, dollar appetite down! Except against the yen, the dollar was sold off against all its major counterparts during yesterday’s trading. Are we witnessing a momentous shift in risk sentiment? Read more…

    Euro (EUR)

    Back to back, baby! For the 2nd day in a row, the euro jumped up the charts, even as the markets wait for the Greek Parliament vote. EUR/USD managed to gain 84 pips on the day, closing at 1.4364. Meanwhile, EUR/JPY tore up the charts, finishing 102 pips higher at 116.52. Read more…

    British Pound (GBP)

    Make that two in a row! The pound ended another day higher than the Greenback as GBP/USD closed 14 pips up from its 1.5980 open price. Guppy also bagged a win as it closed 25 pips below the 130.00 major psychological level. Are these signs of a reversal or are they mere retracements? Read more…

    Japanese Yen (JPY)

    Risk appetite dealt the yen a massive blow, and boy did it fall hard! Even with Japan’s retail sales report coming in better than expected, the yen found no love as it lost to all its major counterparts. How much further can we expect it to fall? Read more…

    Canadian Dollar (CAD)

    No data was released from Canada yesterday, but with risk appetite back in vogue, the Canadian dollar ended up on top. USD/CAD followed up Monday’s non-action by diving 39 pips deep to close at .9827. Read more…

    Australian Dollar (AUD)

    Up, up, and awaaay! The Aussie was one of yesterday’s biggest gainers as risk appetite launched its skyward. Will we get a repeat performance today? Read more…

    New Zealand Dollar (NZD)

    Up, up, here we go! The Kiwi may have been off to a weak start during the Asian session but it managed to stage a strong rally during the U.S. session and end the day 18 pips above the .8100 handle. Will it be able to hold on to its gains today? Read more…

    Swiss Franc (CHF)

    I guess you can’t have ’em all, can you? The Swissy may have ended the day higher against the U.S. dollar but it caved to euro strength. USD/CHF reached a low of .8276 and closed at .8322 while EUR/CHF closed at 1.1953. Read more…

    Batman and Robin, bacon and eggs, Justin Bieber and his hair. Some things just go well together.

    In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

    Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!

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    Amazon drops California associates to avoid sales tax

    Filed under: Business — Tags: , , , , , — admin @ 12:29 am

    What Really Caused the Recent Market ‘Boom’

    Filed under: Investing — Tags: , , , , — admin @ 12:02 am

    June 29, 2011

    Tide is Turning for the Aussie

    Filed under: Australian Dollar — Tags: , , — admin @ 5:31 pm

    “Australia is about to enter a boom that should last decades…The Australian dollar is unlikely to go back to where it was, and manufacturing will shrink in importance to the economy, perhaps even faster than it has been.” This, according to Martin Parkinson, Treasury Minister of Australia. While 30 years from now, Mr. Parkinson’s prognosis might probe to be accurate, I’m not so sure it applies to the period 3 months from now. Here’s why:

    First of all, the putative economic boom that is taking place in Australia is being driven entirely by high commodity prices and surging production and exports. Since peaking at the end of April, commodity prices have fallen mightily. You can see from the chart above that there continues to exist a tight correlation between the AUD/USD and commodities prices. As commodities prices have fallen over the last two months, so has the Australian Dollar.


    In addition, while demand will probably remain strong over the long-term, it may very well slacken over the short-term, due to declining economic growth across the industrialized world.  Consider also that Australia’s largest market for commodity exports – China – may have difficulty sustaining a GDP growth rate of 10%, and at the very least, new fixed-asset investment (which necessitates demand for raw materials) will temporarily peak in the immediate future.

    Finally, the mining sector directly accounts for only 8% of Australia’s economy, which means that only to a limited extent to high commodities prices contribute to the bottom line of Australian GDP. This notion is reinforced by the 1.2% economic contraction in the second quarter – the biggest decline in 20 years – and the fact that GDP is basically flat over the last three quarters. Many non-mining economic indicators are sagging, and the number of corporate bankruptcies is 10% higher than in 2010. In the end, then, the ebb and flow of Australia’s fortune depends less on commodities, and more on other sectors.


    Mr. Parkinson’s optimistic forecasts might also be undermined in the short-term by a looser-than-expected monetary policy. The Reserve Bank of Australia last hiked its benchmark interest rate in November 2010, and may not hike again for a few more months due to moderating economic growth and proportionally moderate inflation. Given that an attractive interest rate differential may be driving some of the speculative activity that has girded the Aussie’s rise, a decline in this differential could likewise propel it downward.

    That’s because anecdotal reports suggest that the Australian Dollar remains a popular long currency for carry traders, funded by shorting the US Dollar, and to a lesser extent, Japanese Yen. Given that many of these carry trades are heavily leveraged, it wouldn’t take much to trigger a short squeeze and a rapid decline in the AUD/USD. For evidence of this phenomenon, one has to look no further back than May 2010, when the Aussie fell 10-15% in only three weeks.


    Ultimately, as one commentator recently pointed out, the Aussie’s 70% rise since 2008 might better be seen as US Dollar weakness (which also catalyzed the rise in commodity prices). The apparent stabilizing of the dollar, then, might let some air out of the currency down under.

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