22‏/09‏/2012 ~ Forex Trading

السبت، 22 سبتمبر 2012

Dollar Index Headed for Rapid Collapse: Chart

2:44 م

Unknown

Quantitative easing is really another word for currency wars. A weak U.S. currency puts continued pressure on the Japanese Yen, the Chinese Yuan, the South Korean Won, the Australian dollar and other currencies.

Cheap money also fuels speculation and this money quickly drifts into commodity markets and the ETFs that help propel commodity market speculation. This is inflationary for food prices.

The lower the U.S. dollar the greater the intensity of currency wars. The break below the key uptrend line on the Dollar Index chart was an early warning of the third round of quantitative easing (QE3). The most important question now is to use the chart to examine the potential downside limits of a QE3 weakened U.S. dollar.

The U.S. Dollar Index [.DXY 79.38 -0.03 (-0.04%) ] is a basket of currencies. They are the Euro, yen, British Pound, Canadian dollar, Swiss Franc and Swedish Krona. The Dollar Index is used as a measure of the strength or weakness of the U.S. dollar.
There are three significant features on the weekly Dollar Index chart. The first feature is the uptrend line that started in September 2011.

One year later, in September 2012, the Dollar Index fell below this uptrend line. The weekly close below this uptrend line was the first signal of a major change in the trend direction. It came before the announcement of QE3, last week. Traders had good warning to move to the correct side of the new market trend by closing long side trades.

This advance warning was also delivered by commodity markets, as discussed last week in our column on the London Metal Exchange price moves.

The second significant feature is the support level near 79. This provided both support and resistance in 2011 and 2012. Temporary consolidation behavior may develop at this level. There is a low probability this level will provide strong support after the announcement of QE3 so traders will use the consolidation as an opportunity to build short side positions.

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The key trading decision points appear when the price approaches one of the support or resistance levels. In the current rally the key decision point is the narrow resistance band between $98 and $100. Bullish consolidation around this level indicates an increased probability of a breakout towards $110.

Bullish consolidation occurs when the price moves above $100 and then moves sideways using the $100 level as a support level.

Bearish consolidation occurs when the price moves up to the $100 level and then moves sideways using the $100 level as a resistance level. This increases the probability the market will collapse and retest the next support level near $88.

In the next several weeks traders will watch for the nature of the price activity as prices moves towards the $98 to $100 resistance consolidation level. Traders will tighten stops to protect open profits.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com.

2:42 م

Unknown

Media sources reported on Friday that Facebook's founder, Mark Zuckerberg, had held staff meetings, including a company-wide gathering earlier this month, to counter sagging morale caused by the sharp drop in the company's stock.

Emmanuel Dunand | AFP | Getty Images

In the process — and I suspect inadvertently — Mr. Zuckerberg reminded us of the important role that public markets play in today's complex global economy. And we should all be grateful to him given the extent to which some politicians have taken to generalized market bashing. (Related: Facebook Now the Worst Performing Stock in Past 3 Months.)

By going public in a highly-watched IPO last May, Facebook [FB 22.86

0.27 (+1.2%)

] illustrated two important functions of public markets: First, they allow companies to raise capital that is both "permanent" and non-debt creating, thus mobilizing the best funding for productive expansion; and second, they provide a monetization mechanism for founding management and staff, thereby incentivizing and rewarding successful entrepreneurship and risk-taking.

But public markets do much more than that. They also act as an important reality check, supplying management and staff with information that may be critical for sustaining innovation and success.

Prior to going public, there seemed to be no limit to Facebook's mystique and charisma; and no end to its ability to meet needs that many did not even realize they had.

Facebook was the kind of disruptor that does not come around very often.

It singlehandedly pushed out the frontiers of social media, creating and sustaining a phenomenon that many people, in virtually every country around the world, wished to be part of.

Facebook was the hip employer, promising its staff innovation, status, wealth and a sense of mission. And, if all this was not enough, it was also redefining how businesses, governments and individuals interact.

For many, Facebook could do no wrong.

With this amazing aura, Facebook management and staff would have been easily forgiven for growing over-confident eventually and ultimately complacent. Indeed, given the company's rather restricted information-dissemination policy, few on the outside could have credibly challenged its achievements and ambitions.

Mohamed El-Erian CEO of PIMCO

The IPO changed all this. Suddenly, hundreds of analysts and observers were dissecting every bit of company information. Virtually every comment made by Mr. Zuckerberg and his talented colleagues was scrutinized for content and signals. And numerous attempts were made to link his plans and vision to a potential net revenue stream and a range for the company's shares. (Related: Facebook 'Close to Being Extremely Attractive': Pro.)

Facebook's mystique and the related sense that it could do no wrong were replaced by the brutal reality of analyst's calls and downgrades. The stock quickly traded down from its hyped IPO level which, as I noted on the second day of trading, had sucked in too many unsuspecting investors.

In all this, the company's standing and its credibility have taken a material hit that, only a few months ago, would have been deemed not just unlikely but unthinkable. No wonder some suspect that morale at Facebook is low; and no wonder Mr. Zuckerberg felt it necessary, according to media reports, to address his company's stock decline which, according to a Wall Street Journal article, he deemed "painful" for some employees.

Ironically, all this may actually be good for Facebook in the long run.

Every successful company requires periodic reality checks which, in many cases, lead to beneficial course corrections. Indeed, the most successful companies do their utmost to hardwire as many reliable checks and balances as possible.

Yesterday's Facebook mystique has given way to a very public stock market debacle. Yet if the signals involved are well internalized by management and staff, Facebook could well avoid what could have been an even bigger reality shock down the road. (Related: Accel Unloads Facebook on Its Own Investors: Sources.)

In the process, the company will help send a message to all those politicians who are way too eager to broad-brush public markets as a whole with the spectacular failures of a few segments. Well-functioning markets have played, and will continue to play, a critical role in maintaining the entrepreneurship and discipline that are essential to America's traditional vibrancy, its power of invention and innovation, and its global competitiveness.

2:42 م

Unknown

The weekly dollar/yen chart shows two types of technical features. The first group is support and resistance features. The second group is a long term trend reversal fan pattern.

The Japanese central bank’s defense of dollar/yen at 76 as a support level has been successful. Upside resistance is created by two features. The first is the classic resistance level located near 84 yen. The second is around 87 yen. This creates a consolidation band resistance area.

Any breakout above 84 yen has immediate resistance near 87 yen. This limits the probability of a fast breakout above 84 yen and a move towards the long term resistance near 94 yen.

However, there is a second group of features which impose both a new resistance level and also offer the promise of a long term trend reversal. This is the fan pattern that starts from the 2008 August highs near 110 yen.

The fan pattern consists of a series of trend lines, all starting from the same high point. These lines first act as a support level, and then later as a resistance level. The price activity is contained between these trend lines. When a breakout occurs the rally is capped and this creates the location point of a higher trend line.

A fan pattern develops as a trend starts to change direction. It is most commonly seen in a downtrend. The pattern occurs when prices are re-valued upwards, but the direction of the trend does not change. This appears on the chart as a shift sideways. The old resistance level acts as a new support level. The new resistance level does not run parallel to the old support level.

Instead it broadens away in an expanding wedge. As price action moves horizontally in time the price uses the new resistance line as a limit area. A break above this is often decisive, making a new high before pulling back to use the old resistance level as a new support level.

The breakout above the trend line C on the chart in 2011 February quickly moved to resistance near 84 yen before retreating. This peak at 84 yen provides the second anchor point for trend line D. The current value is near 80 yen. A breakout above trend line D is very bullish even though classic resistance is near 84 yen.

It’s very bullish because the fan pattern reversal is typically a very long term pattern. It may take six months to a year to fully develop. Usually it has three to four sections of the fan. The dollar/yen [JPY= 78.14 --- UNCH

]chart shows three fan sections so the balance of probability favors a successful rally towards 85 yen with a breakout above 80 yen.

The key indicator of long term success and a trend change is a retreat following the breakout that uses the upper downtrend line D as a support level. This behavior would confirm the development of a new uptrend in the dollar/yen chart.

In the short term this is a rally and retreat environment moving towards historical resistance. In the longer term this is the late stages of a developing fan pattern trend reversal.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBCAsia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartinAsia@cnbc.com. We welcome all questions, comments and requests.

2:41 م

Unknown

Thank you Germany, Italy, Spain and, especially, the European Central Bank (learn more). They all said enough to provide markets and investors with a tranquil August so far. The question now is whether they will be able and willing to pivot - from re-assuring words to the series of actions required to enable this tranquility to grow deep roots.

Let us start with some key facts. By the close on July 25th , Europe finances were at a critical level - again. The yield on 10-year Spanish bonds had surged to 7.3%, rendering the country's debt dynamics highly unstable; and it was probably only a matter of days before it would have lost market access. (Read More: Spain in Talks With Euro Zone Over Bailout: Sources)

With Spain tottering, there were concerns that Italy could not be that far behind. Accordingly, the 10-year yield there had risen to 6.4 percent, fueling concerns that it too would eventually need a bailout.

Such recourse to European funding packages by two of the eurozone's largest economies would have probably overwhelmed creditors' willingness to lend. It would have also undermined the economic and financial fabric of Europe's historic economic integration initiative.

Mario Draghi, the president of the ECB, suddenly (and dramatically) pressed a pause button on all these concerns. In an historic speech in London on July 26th, he reassured the world that "the ECB is ready to do whatever it takes to preserve the euro;" and to be crystal clear, he added "believe me, it will be enough." At his ECB press conference a week later, he wrapped these remarks with partially-defined promises of both financing and conditionality.

Mr. Draghi's words struck that delicate balance between creditors and debtors. The conditionality element opened the door for supportive comments out of German officials; and the financing component was music to the ears of Italian and Spanish officials. With that, hedge funds rushed to cover their shorts (reflecting both perceived changes in risk and high maintenance costs of these positions).

Mohamed El-Erian CEO of PIMCO

The result was a tumble in yields — to around 6.2% for Spain and 5.6% for Italy as of August 21st. Front-end bonds experienced an even greater yield compression, providing more reasons for other risk markets to rally. And they did, with the S&P gaining almost 6% in the four week period after Draghi's speech.

The critical challenge now for Europe (and beyond) is to build on these gains, not only to spread financial stability but also to counter the notable weakening of global economic prospects at a time of high unemployment on both sides of the Atlantic (with the notable exception of Germany).

Words alone will not be enough for that. A series of mutually-reinforcing actions are needed, focusing on six key areas:

First, Italy and Spain would need to strike, and implement in a consistently credible fashion, a better balance between immediate austerity and measures to promote competitiveness, growth and jobs.
Second, these efforts would need to be supported by more comprehensive and ample provision of financing from the ECB and other European facilities.
Third, in order to crowd-in private flows that are critical to economic sustainability (instead of continuing to finance their exit), the ECB and European governments would need to limit the subordination of private creditors.
Fourth, politicians in both surplus and creditor countries would need to do a much better job in conveying this multi-faceted, multi-year initiative to domestic constituencies, and convincing them of its necessity and viability.
Fifth, the time has come to take a more decisive and courageous approach towards Greece's membership as continuous flip-flopping serves only to undermine the credibility of the eurozone as a whole.
Sixth, all this would need to be underpinned by a meaningful structural and institutional revamp of the eurozone, including immediate progress towards greater fiscal integration and a region-wide banking union.

This is a challenging list, especially for the next few weeks; and it requires the type of political leadership and coordination that, hitherto, has tended to elude the eurozone. (Read More: Merkel, Hollande Unite on Tough Message to Greece)

Slippage on any single issue would risk a renewal of financial market turmoil and, with that, a further slide into recession for Europe (accentuated by high youth unemployment, explosive debt dynamics and social unrest).

August was indeed tranquil, and thankfully so. While hoping that this tranquility extends to September and beyond, policymakers and investors would unfortunately be well advised to guard against the return of heightened financial volatility.

2:40 م

Unknown

While gold prices have been on the rise on expectations of further monetary stimulus from both the U.S. Federal Reserve and the European Central Bank, the recent uptrend could be limited.

The breakout in gold has gold bugs in a frenzy but gold has significant resistance features that cap any rapid change in the trend. Before traders get too excited they should note the small up sloping triangle which has formed in the downtrend.

The price consolidation near $1,620 an ounce is the base for the current breakout. The base of the triangle is small, and gives an upside target near $1,730. This is not the type of pattern breakout that signals a major change in the trend because the target projection is limited.

We look at the resistance barriers that limit the potential rise in the gold [GCCV1 1775.60 7.80 (+0.44%) ] price.

There are three resistance barriers that limit the potential rise in the gold price. The first resistance barrier is the value of trend line A which is now acting as a resistance level. The current value is near $1,730. This is the lower edge of a long term uptrend channel so there is a high probability this will act as a strong resistance feature.

The second resistance barrier is the value of the resistance level near $1,800. Currently this is about the middle of the up sloping trend channel defined by trend lines A and B.

This trend channel acts like an airbag and drags on the momentum of any rally when the price enters the channel. The combination of a resistance near $1,800 adds more drag to the momentum and reduces the probability of a faster price rise.

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After the iPhone 4 sold around 113,000 units a day in each country and the 4S 191,000, Horace Dediu, independent analyst at Asymco, estimates that Apple's latest smartphone could reach 220,000, totalling 6m units in the launch weekend.

The addition of Hong Kong and Singapore to the iPhone 5’s first launch regions is particularly significant, said Mr Dediu, because they are lively retail markets that are also popular spots for people to buy iPhones for sale in China’s grey market.

However, Apple has not yet revealed when the new smartphone will go on sale in China, its largest market after the US.

According to IDC, a market research firm, Apple’s share of the Chinese market almost halved to 10 per cent in the three months to the end of June, leaving it ranked fourth behind Samsung, Lenovo and ZTE in the region.

Some analysts are concerned that without China, a huge spike in demand in the run-up to Christmas will leave Apple with a New Year hangover. In July, Apple missed Wall Street forecasts with its third-quarter iPhone sales, as buyers waited for the new model or switched to rivals such as Samsung’s Galaxy SIII.

“Product cycles are becoming more compressed with greater number of sales up front and a quicker subsequent drop off,” said Walter Piecyk, analyst at BTIG.

2:21 م

Unknown

The markets are undergoing a major reversal this morning as equities were higher to start the morning in Europe and in the US but that has now turned negative and looks like risk-aversion is back on the table.

The focus has shifted back to the European banks this morning and the ECB monthly report came out earlier this morning and said that downside growth risks may have intensified and economic uncertainty is “particularly high”. This obviously does not bode well for the European economy in light of the attacks the European banks are facing.

While French bank Soc Gen has repeatedly denied it is in trouble and facing liquidity problems, the markets have a short memory as Lehman issued denials as well right up until the day it collapsed. I have no knowledge of this situation but must treat it as a “where there’s smoke, there’s fire scenario” as it could become a self-fulfilling prophesy if there is a run on the bank.

Today’s early forex action has been interesting from the safe-havens, as SNB officials are floating rumors that they may attempt to peg the Swiss franc to the Euro in an effort to keep it from appreciating any further. In Japan, a curious move at the European open of Yen crosses may have been the BOJ actively selling Yen in the market, though not a formal intervention. A Japanese MOF official declined comment when asked about it. (See chart of the day below).

Overnight, the unemployment rate in Australia was higher to 5.1% from 4.9% as there was an unexpected net loss of jobs when 10K jobs were expected to be added. Nevertheless, the Aussie traded higher in early action.

US initial jobless claims are due out later this morning, with the usual 400K expected to lose jobs.

Market volatility has been intense over the past week as the ranges have been expanded and the moves somewhat violent. This can at times throw the technicals for a loop and the market can behave irrationally for some time. Case in point; yesterday gold traded briefly above $1800, an all-time nominal high. The CME just imposed higher margin requirements to stem the rapid appreciation of the precious metals by speculative buyers.

There is still great risk in the marketplace so the individual fundamentals are largely meaningless. This means we are in a constant risk-on/risk-off environment where the markets can be easily spooked by rumors or announcements.

So trade cautiously and always use proper risk management techniques

1:56 م

Unknown

This morning the markets are responding reasonably well after Friday’s S&P downgrade of the US. The beleaguered ratings agency, who some say was largely responsibly for the banking crisis of 2008 dropped the US from AAA to AA as they forewarned if serious deficit reduction wasn’t agreed to in the debt ceiling debate.

While stocks and oil are much lower to start the day, gold has surged to new nominal all-time highs at $1715. The currency market sees this as “much ado about nothing” as it is trading orderly and looks like just another volatile day.

Because indeed, this much ado about nothing. There is a 0% chance that the US will default on its obligations as the Fed has the ability to turn on the printing press and print money to satisfy our creditors. However, this could be a question of valuation as the Dollar would be worth far less in that situation.

And that is one of the issues that some aren’t taking into consideration, that not only is it important that we are able to repay our debts, but that we are able to do so with something of value. Currency risk and political risk are all factors that need to be considered, and I think this is a great wake-up call for those in Washington DC who wish to continue to do business as usual.

Meanwhile in the Euro zone, the ECB has agreed to step up its purchases of Italian and Spanish debt, essentially trying to keep yields low so that debt can be repaid. While there is still risk in the marketplace, the global slowdown is a far bigger risk than the US potentially defaulting.

With no other news on the docket today, all eyes will be looking toward the FOMC meeting tomorrow which is bound to address this new development. Many in the market believe that this will lead to another round of quantitative easing (QE3), though its effectiveness at this juncture is uncertain. Some argue that the temporary kick we got from Fed easing was ineffective as the markets right now are back to pre-QE2 levels.

So there is risk aversion in the markets today, with the Dollar strengthening in what some might see as a counter-intuitive move. However this could become a case of sell the rumor, buy the news as this really is nothing more than egg on the face of Washington DC politicians who are conveniently on vacation until the end of the month. Get it together people!

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السبت، 22 سبتمبر 2012

Dollar Index Headed for Rapid Collapse: Chart

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