Source: ForexYard

The US dollar had a particularly strong day today following negative news out of both Japan and the euro-zone. News that Japan has logged in a trade deficit for the first time since 1980 caused the USD/JPY pair to jump more than 100 pips throughout the day. Meanwhile, fresh concerns regarding Greece’s sovereign debt drove EUR/USD down, virtually erasing gains made at the beginning of the week.

Meanwhile, investors largely shrugged off news that the US Federal Reserve is unlikely to hike interest rates until the beginning of 2014. The dollar has found significant support as of late, largely because of negative international indicators. Investors continue to view the USD as a safe-haven asset. With the euro-zone still in extremely fragile position, traders can expect the dollar to remain at its current level for the near future.

Turning to tomorrow, a batch of news out of the US may generate significant market volatility. Traders will want to pay attention to this week’s Unemployment Claims figure and the most recent New Home Sales report for clues as to the state of the US economic recovery. With both indicators predicted to come in positive, the greenback may be able to extend its current bullish run as we begin to close out the week.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Here’s something to think about: How come you never see a headline like ‘Psychic Wins Lottery’? ~ Jay Leno  Good morning. Euro recovered some ground after sliding to as low as $1.2945 two days ago, but the move is likely corrective and there’s more room for it to move higher. USD Index As seen below Read More

© 2011 FX Trading Blog – innerfx.com |
Article Source | Post tags: AUDJPY, AUDNZD, Australian Dollar, breakout trading, British Pound, EURJPY, Euro, EURUSD, GBPAUD, Japanese Yen, New Zealand Dollar, usd index

Mining Companies Driving Bullish Sentiment in Australia

by Justin Dove, Investment U Research
Thursday, September 15, 2011

As precious metal and rare earth prices remain high, so do the margins for mining companies. Thus, companies such as BHP Billiton (NYSE: BHP) and Lynas Corp. (OTC: LYSCF.PK) stand to spend plenty on increasing mining production.

Australia is a huge benefactor to this recent trend. Its rich natural resources and close proximity to China and other emerging economies helped it avoid the worst of the financial crisis. Mount Weld was even billed as the savior to China’s rare earths monopoly.

According to the latest Australian Bureau of Statistics Survey of Capital Expenditures, Australian Chief Financial Officers expected major growth in corporate expenditures in June. The numbers indicate fiscal 2012 capital expenditures should increase 24 percent more than the record investments made last year. That would equate to an infusion of AU$148.8 billion, or about US$155 billion, into the Australian economy over the next year.

Not Just Mining

The mining industry’s planned AU$82.1 billion capital expenditure (capex) makes up the majority at 55 percent. But while there wasn’t much growth over the past year in that sector, spending is starting to catch up in other areas. The manufacturing sector is expected to increase its capex by 10.5 percent.

Across all industries, spending on building and structures is expected to take the largest jump. Building and structures will reportedly increase almost 50 percent to AU$98.6 billion. If these expectations are accurate, the added investments in construction should help drive the broad economy.

So if all this increased money does come to fruition, who stands to benefit?

The Largest Australian Bank

The most immediate benefactor for U.S. investors to a rising Australian economy may be Westpac Banking Corporation (NYSE: WBK). As companies pump money into capital expenditures, parts of these investments will be through debt instruments.

Also, increased employment and a better economy stand to benefit Australian banks. Even if the numbers from June don’t hold up, Westpac may be at a low point, anyway. Greek and Eurozone fears have suppressed its stock despite low direct exposure to Greek debt.

But check out the fundamentals…

• Westpac has a P/E ratio of 8. Single-digit P/E ratios are usually standard with large banks, such as Barclays PLC (NYSE: BCS) and UBS (NYSE: UBS), these days. But once all the Eurozone fears die down, these P/E ratios should eventually return to the double digits.
• EPS is high for a bank at $12.42. Compare that with paltry figures from Barclays at $1.32 and UBS at $1.81. Goldman Sachs (NYSE: GS), which has a similar market cap to Westpac, is at $10.20, with a double-digit P/E.
• Westpac offers great dividends. The dividend yield is a whopping 8.10 percent. Since 2006, its biannual dividend has never been below $2. In May, it paid out $4.089 per share. Its second annual dividend is due in early November. There’s no telling if it’ll be able to match such a high dividend with all the economic troubles since May. But not many investments are paying out four percent annually right now, much less up to eight.

Forward-Looking Statements

These numbers from the ABS are merely projections based on a survey of CFOs. With all the changes in the global economy lately, things may have changed, as the statistics represent sentiment in June.

Considering gold and rare earths are continuing to boom, it’s likely miners haven’t slowed pace. But it’s probably wise to hold off on companies benefitting from a rise in Australian construction, such as James Hardie (NYSE: JHX), until further notice.

However, for contrarians not scared off by the Eurocrisis, Westpac may present a decent opportunity with the upside of a possible surge in the Australian economy.

Good Investing,

Justin Dove

Article by Investment U

The EUR/USD has been forming a nice bullish flag over the past couple of months (since its highs back in May 2011 around 1.4900). While it didn’t quite “pop” through resistance at 1.5000 (a nice round number and an old peaking friend back in December 2009), it may indeed revisit in the medium term according to its formation since coming off of its highs.

The distance of the flag pole for this consolidation pattern (the “bullish flag”), has the potential of movement of some 2000 pips (calculating from an approximate low of 1.2900 there in January 2011)!

However, while it’s great to be tickled pink with the idea of making 2000 pips, we need to know when this view is broken.

One of the fantastic things that I like about bullish flags is that we can generally determine if the flag is broken when there is either a failed break from the upside (generally a pop out, but then a pop back in) or a pop out from the underside (the lower part of the bullish flag – and sometimes this can turn it into a shorting strategy where price tends to fall rapidly back down to the base of the bullish flag). SO, a break of the lower sloping trend line of the flag which currently sits around 1.3800 would see a break of view and could see a new view 900 pip fall in the medium-term back down to the base of the starting pole (a contrary-view).

So what would the strategy be in a nutshell?

Well, in addition to the bullish view I have on the EURO to the USD I note that there has been much support bouncing off of 1.4000 so I would look to buy around the 1.3900-1.4000 price holding stops below 1.3800. So my accumulation zone would be around this “reversal” area.

Secondly, if price doesn’t revisit 1.4000 I’d be waiting in the bushes to pounce on any breakout above 1.4500, holding wide stops mid-way into the flag around 1.4100.

“Sticky” areas which could cause problems on any upside move would generally be found at previous peaks, such as those found in the last few months at 1.4600, 1.4700 & 1.4900, and any longer-term ones, last few years, such as those found at 1.5000 & 1.6000.

As the flag pole took approximately 5 months to form, you would be looking for something similar in any subsequent break.

If we use a conservative target this means that we measure from the last trough formed before the break. If this ends up being 1.3800, this means we will have a conservative target of 1.3800 + 2000 pips = 1.5800 achieved by July + 5 months = December (end of the year).

If we use a liberal target this means we measure from the break. As the break hasn’t occurred yet this means we cannot establish a time target, or a price target, but if we used the current high of the flag of 1.4500 + 2000 pips = 1.6500.

So what will it be? Either or none?

U.S. trade gap narrowed in April, and many will see that as a bullish sign

By Elliott Wave International

“The Dow rose nearly 1 percent Thursday… Investors were encouraged by a report that the United States trade deficit had narrowed, one positive point in a recent string of weak economic data.” (June 9, 2011, Reuters)

Before you join the crowd in thinking that shrinking trade gap is bullish for stocks, read this excerpt from the 2011 edition of our popular free Club EWI resource, The Independent Investor eBook.

*****

Over the past 30 years, hundreds of articles — you can find them on the web — have featured comments from economists about the worrisome nature of the U.S. trade deficit. It seems to be a reasonable thing to worry about. But has it been correct to assume throughout this time that an expanding trade deficit impacts the economy negatively? Figure 8 answers this question in the negative.

In fact, had these economists reversed their statements and expressed relief whenever the trade deficit began to expand and concern whenever it began to shrink, they would have accurately negotiated the ups and downs of the stock market and the economy over the past 35 years. The relationship, if there is one, is precisely the opposite of the one they believe is there. Over the span of these data, there in fact has been a positive — not negative — correlation between the stock market and the trade deficit.

It is no good saying, “Well, it will bring on a problem eventually.” Anyone who can see the relationship shown in the data would be far more successful saying that once the trade deficit starts shrinking, it will bring on a problem. Whether or not you assume that these data indicate a causal relationship between economic health and the trade deficit, it is clear that the “reasonable” assumption upon which most economists have relied throughout this time is 100% wrong.

Around 1998, articles began quoting a minority of economists who — probably after looking at a graph such as Figure 8 — started arguing the opposite claim. Fitting all our examples so far, they were easily able to reverse the exogenous-cause argument and have it still sound sensible. It goes like this: In the past 30 years, when the U.S. economy has expanded, consumers have used their money and debt to purchase goods from overseas in greater quantity than foreigners were purchasing goods from U.S. producers. Prosperity brings more spending, and recession brings less. So a rising U.S. economy coincides with a rising trade deficit, and vice versa. Sounds reasonable!

But once again there is a subtle problem. If you examine the graph closely, you will see that peaks in the trade deficit preceded recessions in every case, sometimes by years, so one cannot blame recessions for a decline in the deficit. Something is still wrong with the conventional style of reasoning.

*****

A lot of issues have made some great moves yesterday. Don’t fret, though, if you missed yesterday’s ride since the one of Ayala Corporation or AC in the Philippine Stock Exchange will be coming to town soon.

As you can see from the chart above, AC looks to be very much positioned for a journey up north. AC has been on an uptrend since the start of March before it temporarily peaked at PHP 400.00 on April 4. After reaching the said high, it then consolidated into a small descending channel. At present, AC is trading right at the uptrend support. What’s nice about AC’s set-up is that its price action for the last couple of weeks (descending channel) looks to be a part of a bullish flag formation. If this is so and I think it is then AC could aim for its previous high at PHP 424.00 or even more once a breakout happens.

More on LaidTrades.com …

Price action on AUD/USD (a 4-hour chart of which is shown) as of Wednesday (4/13/2011) has tentatively resumed its bullish trend bias after pulling back to the 1.0400 price region, which is around the 61.8% Fibonacci retracement of the last major bullish trend run (from the recent 1.0287 low to the 1.0579 record high). This occurs within the context of a sharp and steep bullish trend. For more technical analysis on this currency pair, please click here for Wednesday’s (4/13/2011) Chart of the Day.

James Chen, CTA, CMT

* For information on my DVD set, High-Probability Trend Following in the Forex Market, please click here.
* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.
* For information on my new book, Essentials of Technical Analysis for Financial Markets (Wiley), please click here.

Price action on USD/JPY (a daily chart of which is shown) as of Tuesday (4/05/2011) has risen above the key 84.50 price region once again after a slight pullback on Monday. This occurs within the context of more than two weeks of bullishness that followed on the heels of hitting a new all-time low around 76.28 and then G7 intervention. For more technical analysis on this currency pair, please click here for Tuesday’s (4/05/2011) Chart of the Day.

James Chen, CTA, CMT

* For information on my DVD set, High-Probability Trend Following in the Forex Market, please click here.
* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.
* For information on my new book, Essentials of Technical Analysis for Financial Markets (Wiley), please click here.

Price action on EUR/CHF (a daily chart of which is shown) as of Tuesday (3/29/2011) has been making a bullish correction rally after approaching a re-test of the all-time low just above 1.2400 around a week and a half ago. This occurs within the context of a long-term downtrend that has been in place since late 2007. For more technical analysis on this currency pair, please click here for Tuesday’s (3/29/2011) Chart of the Day.

James Chen, CTA, CMT

* For information on my DVD set, High-Probability Trend Following in the Forex Market, please click here.
* For information on my book, Essentials of Foreign Exchange Trading (Wiley), please click here.
* For information on my new book, Essentials of Technical Analysis for Financial Markets (Wiley), please click here.