Pepperstone Full Weekly FX Market Forecast – 28th Feb 2011

Pepperstone – Full Weekly Forecast

U.S. Dollar.

Our bias BEARISH, we’ll be looking to sell the Dollar on rallies.

FUNDAMENTALS: Last week, the U.S. Dollar finished lower against almost all of its G10 counterparts, continuing the multi-month downtrend ahead of this week’s critical economic data. The markets focus will be on Fridays NFP jobs number and expectations may force sharp, short term moves ahead of the release as the U.S. Dollar nears significant lows against other major currencies. Forecasts call for a 183k jobs gain for the month of February and market participants will be watching the ISM Manufacturing, ADP Employment Change, Initial Jobless Claims, and ISM Services results to gauge the likelihood that the February print will meet the forecast. Meanwhile, the U.S. Federal Reserve shows little urgency in withdrawing QE2 stimulus amidst generally weak inflation data and lackluster jobs growth. The controversial Quantitative Easing measures have been a major driving force behind Dollar weakness with a number of analysts saying it would take a substantial shift in the Fed’s stance and rhetoric to force a sustained Greenback recovery. Without such a change, the Greenback will likely need a broader shift in the financial markets to drive a major rally and subsequent reversal. The CFTC Commitment of Traders data shows that Non-Commercial traders (typically large speculators) remain heavily net-short the U.S. Dollar on a steady downtrend and as such, trend traders will likely favor continued Greenback weakness into the week ahead. Additionally, FX Options market risk reversals likewise suggest that many traders have continued to bet on and hedge against Greenback weakness. Given that the first week of the month quite often sets the pace for subsequent trading, it will be important to pay special attention to whether the U.S. Dollar can show any real sign of recovery through the month of March.

TECHNICALS: Fridays close saw the Dollar at 77.21 after tumbling from an early week rally to the 78.32 level. Price traded all week below the key psychological 78.00 level which now exposes downside risks to 75.63 support over the coming days and weeks with only a sustained close above 78.50 negating our bearish bias.

Euro Dollar.

Our bias BULLISH, we’ll be looking to buy the Euro on dips.

FUNDAMENTALS: Looking ahead this week, the markets preoccupation with Thursday’s Minimum Bid Rate and Monetary Policy Statement expectation is so intense that it has basically ignored a tentative risk aversion move. With the market pricing in 95 bps of hikes over the coming 12 months, undoubtedly the bar has been set high. With that in mind, there will be great interest in Thursday’s ECB rate decision considering the central bank has held its hand on changing rates for nearly two years now. There seems little doubt that the ECB will hold rates steady yet again and all of the recent hawkish speculation will require some level of confirmation from the ECB to maintain the Euro Dollar’s bullish charge. A boost to growth or inflation expectations, rhetoric that suggests a withdrawal of atypical stimulus measures or even a subtle change in key terminology could quite easily boost Euro bulls’ convictions. Supporting interest rate expectations is particularly important for the Euro Dollar’s performance because without the promise of higher returns down the line, the market will once again have to price in the uncertainties related to the region’s sovereign financial troubles. Fear of another financial crisis overtaking another EU member has cooled off these past week’s thanks largely to policy officials’ open-ended vows to expand their support of the region’s troubled economies. With the upcoming EU summit that is to vote on a range of proposals designed to ensure Euro-Zone financial stability, said policy officials rhetoric is likely to be exposed as meaningful or meaningless. Lastly, this week the German unemployment change figures may steer the economic side of market policy expectations but more pertinent though will be the Euro-Zone CPI estimate due Tuesday. Forecasts for an unchanged 2.4% annual growth may keep a hawkish Euro Dollar outlook in place without further accelerating the markets rate tightening expectations.

TECHNICALS: Friday saw price dip below the 78.6 fib of the Feb 2nd – 14th decline to close at 1.3748. Notably, price failed to close below the 9th Feb resistance level by 1.3730 which suggests price may head higher and test the 2011 high by 1.3860 over the coming sessions and beyond that, the key psychological 1.4000 level. At present, we have an open long position from 1.3775 targeting 1.4000, with only a daily close below 1.3700 negating our early week bullish bias.

Japanese Yen.

Our bias NEUTRAL, we’re on the sidelines until a clearer picture emerges.

FUNDAMENTALS: Last week, the Japanese Yen rallied against all of its major counterparts on the back of a sharp drop in risk appetite amid fears that turmoil in the Middle East will push up oil prices and threaten to derail the global recovery. Typically, the Yen strengthens in times of stress as risk aversion spurs an unwinding of carry trades funded cheaply in the perennially low-yielding Japanese currency. This time around however, the story had more to do with US Treasury yields: rising jitters sent capital out of stocks (as well as other risk-geared assets) and into the safety of – among several favorite havens – US government debt. This drove up bond prices, sending yields sharply lower. A firm inverse correlation between a trade-weighted index of the Yen’s average value and the long end of the US yield curve meant that it also translated into strengthening for the Japanese unit. So with this in mind, the coming week promises to be anything but quiet. While worries about the oil price may have calmed a bit after Saudi Arabia pledged to boost production to offset any Libyan-linked shortages, a packed economic docket of scheduled data promises to keep sentiment trends in flux. The US economic calendar alone is reason enough to expect dramatic price movement, with the ISM Manufacturing Survey, the Fed’s Beige Book and the all-important NFP jobs report along with a hefty dollop of second-tier releases all due to cross the wires. This includes a long list of Federal Reserve speakers – headlined by Chairman Ben Bernanke’s semiannual congressional testimony. Additionally, there is the possibility of renewed sovereign jitters in the Euro Zone as Portugal rolls over a tranche of debt while Spain and Belgium tap the markets threatens to compound market volatility. Taken together, this makes for a complicated landscape, with the likelihood of sharp price moves the only firm conclusion to be made about the Yen’s trajectory over the next five days.

TECHNICALS: Last week, price came under some intense pressure to trade back below 82.00, however, overall price action remains largely consolidative and we would expect to see the market once again well supported in the 81.00’s. For now, 81.00 remains the key level to watch below, and only a close below this figure would negate the current range-bound price action and give reason for concern. As such, we like the idea of buying on dips into the 81.00’s in favor of a bullish reversal and daily close above 82.00.

British Pound.

Our bias NEUTRAL, we’re on the sidelines until a clearer picture emerges.

FUNDAMENTALS: Last week, Sterling lost ground against the U.S. Dollar, falling some 1.08% amid uncertainty surrounding the region’s economic outlook, while risk aversion sentiment regained a footing due to tensions in the Middle East and North Africa. This weeks U.K. economic docket will be fairly muted, however, as technical studies begin to paint a bearish picture for Cable, this weeks price action may see additional loses in the Pound. GBPUSD witnessed whipsaw price action over the past 5 days as fundamental developments failed to provide market participants with a clear bearing towards the chance of a rate hike by the Bank of England in the near term. As of late, consumer prices remain stubbornly above the central bank’s target and are expected to push higher due to the increase in VAT. Moreover, BoE Governor Mervyn King warned that inflation could push somewhere in the area between 4 and 5% over the next few months. As a result, the Bank of England Minutes showed that Spencer Dale joined Andrew Sentance and Martin Weale in pushing for a rate hike. Additionally, 4th quarter economic activity posted a -0.6% contraction (-0.5% forecast) while total business investment slumped 2.5% in the same period. Also concerning for U.K. policy makers was the fact that CBI reported sales posted its lowest reading since June 2010. This week, Sterling traders will looking to the Nationwide and Halifax house price index readings, PMI manufacturing, and M4 money supply prints for a bearing going forward. As the U.K. economic outlook comes into question, dismal releases will not only send the Pound lower against most of its counterparts, and may lead the central bank to take a wait and see approach before tightening monetary policy.

TECHNICALS: Price remains largely locked in consolidation after continuously stalling out ahead of key resistance by 1.6300. From here, it is difficult to establish a clear directional bias and we will need to see a sustained close above 1.6300 or below 1.6100 for additional clarity. We have an open short position from 1.6140; however, expected U.S. Dollar weakness this week may see us cut out of the position early until a clearer picture develops.

Canadian Dollar.

Our bias BULLISH, we’ll be looking to buy the Loonie on dips.

FUNDAMENTALS: The Canadian Dollar finished last week stronger against the U.S. Dollar, rallying on the surge in oil prices amid turmoil in the Middle East and North Africa. Surprisingly, Retail Sales dropped for December, falling 0.2% from the month prior. However, stripped of automobile sales, the Retail Sales print actually increased 0.6%, a figure in line with expectations which sent the Loonie higher for the remainder of the session. With the Loonie falling away from parity against the Greenback, key releases this week could dictate whether or not USDCAD tests similar levels once again. The week ahead is packed with significant market moving data from nearly all of the G-7 economies, and the Bank of Canada rate decision and monetary policy statement on Tuesday will be a driving force behind volatility for the North American session after its release at 13:30 GMT. Credit Suisse Overnight Index Swaps price in a 4.0% chance of a 25 bps move, but the market will be paying close attention to the ensuing commentary to get BoC insight with regard to future monetary policy. With inflationary pressures rising in Canada and CPI increasing by 2.3% year-over-year in January, the markets have priced in a 75 bps increase over the next 12-months. Despite the fact that the key interest rate is suggested to hold at 1.00%, with an implied overnight interest rate of 1.32% for March, BoC Governor Mark Carney’s statement will be particularly important as to learn when the BoC believes an actual rate hike will occur. Accordingly, hawkish commentary by Governor Carney could send the Loonie higher against the Dollar. Before Tuesday’s rate decision, Gross Domestic Product data will hit the newswires on Monday. Growth during the fourth quarter of 2010 is forecasted to increase by 3.0% at an annualized rate, in line with moderate growth expectations. However, should the reading come in higher than expectations, market speculators could drive USDCAD lower amid projected hawkish commentary from BoC policymakers.

TECHNICALS: Technical studies point lower for USDCAD with key support coming in by 0.9709. A daily close below this level exposes downside risks toward the 2007 low at 0.9056. Expected U.S. Dollar weakness over the coming days and weeks suggest the short side with this pair is where price is heading.

Australian Dollar.

Our bias BULLISH, we’ll be looking to buy the Aussie on dips.

FUNDAMENTALS: Last week, the Australian Dollar finished slightly higher than the U.S. Dollar after a week of whipsawing price action, falling on sharp U.S. S&P 500 declines only to recover into the Friday close. The market will now look ahead to a packed week of economic data to drive moves in AUDUSD. Given that the Australian Dollar nears important peaks against the U.S. Dollar, it could very well be a key week for the AUDUSDs’ 10 month impressive uptrend. Friday’s U.S. NFP jobs report headlines a busy week and the usual wave of pre-NFP data releases will shape expectations leading up to the event. The Reserve Bank of Australia may likewise drive volatility through their scheduled interest rate announcement on Tuesday at 03:30 GMT. Credit Suisse Overnight Index Swaps (OIS) price in a 0% chance of any change in interest rates, but it will still be important to monitor the post-announcement statement from RBA Governor Glenn Stevens. Those same OIS show that overall interest rate hike expectations continue to trend lower for the Australian central bank; 12-month interest rate expectations remain near their lowest levels since the second half of 2010. Though the RBA has stated concerns that domestic inflation may hit the top end of their target through 2012, recent rhetoric suggests no sense of urgency in further monetary policy tightening. Any hawkish shifts could further fuel Australian Dollar gains. Some second-tier Australian economic data may spark shorter-term volatility, but broader financial market risk sentiment will likely remain the most significant driver of AUDUSD price action. The key question is whether broader geopolitical turmoil may be enough to force a more sustained shift in ‘risk’ and a commensurate correction in financial market sentiment. An Australian Dollar above parity is hardly a sign of market troubles, and indeed we will have to see a much larger AUDUSD turn lower before claiming that the AUDUSD is in danger of a sharp correction.

TECHNICALS: AUDUSD continues to advance, thus a bullish resolution to the sideways trade since October appears increasingly certain. Only a daily close below 0.9800 would confirm a reversal to the downside. The market appears set on testing the recent 1.0255 high over the coming sessions and expected U.S. Dollar weakness over the coming days and weeks is likely to see AUDUSD probe higher.

New Zealand Dollar.

Our bias NEUTRAL, we’re on the sidelines until a clearer picture emerges.

FUNDAMENTALS: Last weeks devastating earthquake is enough to potentially detract 0.5% of growth from the New Zealand economy, further complicating a recovery that was already shaky given the imbalance of domestic factors and the strains of the global stabilization. In the aftermath of the earthquake, the market has seen expectations for one or two quarter-point rate future hikes turn into a forecast for 10 bps of cuts. The market has fully priced in the possibility of a 25 bps cut at the next meeting on March 9th and there is debate that the move could be as large as 50 basis points. Maintaining rates is one thing; but seeing yield potential drop is another altogether. As interest rate expectations have retreated over the past week, we have seen the Kiwi react in kind and while this slide has clear fundamental roots, we need to be cautious in our expectations of a trend reversal. The Kiwis 3.00% yield will offer a strong reason for investors to keep capital in the market until there is confirmation that a rate cut is on the way. At the same time, the view of market wide risk appetite sentiment will play a more prominent role here. Normally, a high yielding currency would still attract support when short term risk appetite sentiment has a corrective pullback, but the wider market’s bearings will be seen as a added weight to the RBNZ’s’ efforts going forward. Apart from the early week Trade Balance and business confidence reports, the economic calendar is empty for the Kiwi which means price action is likely to be determined by wider market sentiment going forward. All in all, the markets panicked reaction to the earthquake and its implications may be slowly retraced over the coming week as investors acclimatize to the new fundamental reality for the Kiwi Dollar with accompanying U.S. Dollar weakness.

TECHNICALS: NZDUSD has continued lower but found support just ahead of 0.7400. A drop below 0.7342 is needed to confirm our bearish bias. Until then, bullish potential does remain (although looking less certain) and a rebound to 0.7655 cannot be ruled out with a daily close above this level negating our bias. Near term resistance comes in by 0.7520/0.7575. We have two open short positions from 0.7475/0.7512 and with expected U.S. Dollar weakness over the coming day and weeks, confidence is waning to the short side. As such, we’ll be monitoring closely and may look to cut out of these positions early in the week to wait for a clearer picture to emerge.

About Pepperstone

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GBPUSD broke above 1.6277 resistance

GBPUSD broke above 1.6277 resistance, suggesting that a cycle bottom has been formed at 1.6030 level on 4-hour chart, and the longer term uptrend from 1.5344 (Dec 28, 2010 low) has resumed. Further rise towards 1.6500 area would likely be seen in a couple of days. Support is at 1.6215, as long as this level holds, uptrend from 1.6030 could be expected to continue.


Forex Signals

David Rodriguez from DailyFx talks USD, Euro and Jobs Report in latest Forex Commentary

By Zac,

Today, I am pleased to share a forex interview and market commentary on this week’s major events and forex trends with quantitative analyst at, David Rodriguez. David’s specializes in statistical studies in currency trading markets and algorithmic trading systems for the Managed Accounts Programs offered by parent company, FXCM.

Q: The US nonfarm payrolls government job report is due on Friday with the DailyFX calendar showing an early projection of 182,000 jobs to be gained for February. Many analysts concluded that January’s report was lower due to weather conditions in the US. Do you expect a “rebound” in the jobs report and do you feel this would have a positive effect on the US dollar?

We not only expect a rebound, but we must absolutely see a rebound if expectations of US economic growth are to hold steady. January’s dismal NFP result was indeed blamed on seasonal effects due to the weather. But if the weather was David Rodrigueztruly to blame, we should see a strong bounce in February data as workers return to their posts. If we don’t, we could see the US Dollar weaken considerably as pressure mounts on the US Federal Reserve to keep monetary policy exceptionally loose through the foreseeable future.

Q: There are many major data releases and events on the schedule this week, what do you feel may turn out to be the most important event to watch for concerning the forex markets this week?

Nonfarm Payrolls remains the obvious choice for top-billing across global economic calendars. Historically one of the largest market movers across financial markets, this particular release date takes on renewed importance due to January’s dismal jobs report. NFPs matter because they set the tone for subsequent US Federal Reserve monetary policy, and any substantial misses could really hurt the Greenback against major currencies.

Q: The Reserve Bank of Australia’s interest rate decision is due out this week while the Bank of Canada’s interest rate decision is also coming out with the expectations that both bank’s will be holding the interest rates steady. Which do you feel may possibly have more of an impact on their respective currencies?

Both central banks are almost unanimously expected to leave interest rates unchanged, but the Australian Dollar has historically proven far more sensitive to RBA rate expectations than has the Canadian Dollar to BoC expectations. Overnight Index Swaps currently price in fairly limited rate moves from the Reserve Bank of Australia through the coming 12 months. Thus risks arguably remain to the topside, as a surge in hard commodity prices reignite risks for inflation and generally buoyant Australian economic data support the case for higher rates. It will be important to keep a close eye on the post-decision statement from the RBA.

Q: Can you share your analysis on the EUR/USD pair? What do you feel is driving this pair at the moment and where do you think it may be headed?

The Euro/US Dollar is being driven by broader US Dollar weakness and not necessarily Euro strength. In fact the single currency has been a relative under-performer as of late, and we expect USD trends to continue driving the pair through the near term. Given bearish US Dollar momentum, we could expect the EUR/USD continue to test recent peaks until a broader recovery for the beleaguered US currency.

Q: The USD/CAD currency pair has broken out of its fairly tight range to the downside and the price of oil will likely be very sensitive to the political unrest in the Middle East. Do you think this continues to push the Loonie higher versus the dollar? Is USD/CAD at all likely to test the low levels from 2007 near 0.9400?

The Canadian Dollar continues to defy calls for a substantive correction, and oil prices remain one of the most important drivers of further Loonie gains. One troubling sign is nonetheless that CFTC Commitment of Traders data shows large speculators the most net-long the CAD (short USDCAD) since the currency topped through early 2010. Sentiment extremes are incredibly different to time and are only clear in hindsight. Thus we remain cautious with the USDCAD on the risk that it could see a substantive correction through the near term, but the timing of any such move is anything but clear.

Q: On a technical basis, do you have any specific currency pairs in your sights that may warrant watching?

Almost all US Dollar pairs continue to challenge important support and resistance levels, making it a make-or-break week for the US currency. We are watching the Euro/US Dollar, Australian Dollar, British Pound, Japanese Yen, and other key pairs to see if the Greenback holds support. It will be critical to watch whether the downtrodden USD can bounce from important technical levels.

Thank you David for taking the time for participating in this week’s forex interview. To read David’s latest currency analysis and trading strategies you can visit


This “Stock Market Sensitive” Currency Could Tumble Along with Stocks Soon!

If there was every a “stock market sensitive” currency, it’s the Australian dollar.

You see, when traders/investors are willing to stick their necks out enough to get into stocks, they are also willing to go into riskier, higher yielding currencies at the same time.

In fact, you can see how closely the Aussie (AUD/USD) tracks U.S. stocks by checking out the chart below. Click on the chart to enlarge it.

The S&P 500 is Overdue for a Sizable Correction…And So is the Aussie Dollar!

Then when you apply Elliott Wave analysis, you can see that the S&P 500 has already completed its “5 waves up” pattern. Now it’s time for a “3 waves correction” downward against that uptrend. In fact, you can look at the yellow arrow on the chart to see how this may play out.

While the overall, long-term uptrend in stocks is probably not over…a major correction is still “in the cards” for the near-term. As U.S. stocks correct severely in the coming weeks to months…the Aussie dollar will follow suit and do the same.

As investors bail out of riskier assets and scamper off to the sidelines, it will actually benefit the U.S. dollar at the same time.

Oh sure…in the end, the buck is toast, but our dollar does catch some occasional breaks along the way, particularly when stocks fall and investors run towards defensive, risk adverse assets like the greenback.

Both of these dynamics at work at once really “doubly” hammers the AUD/USD pair and causes it to tumble lower.

Long-term, Australia still has great fundamentals and its dollar will do great over time. But anything can get overdone in the near-term and right now the Aussie dollar and the S&P 500 are both poised to tumble very soon.

Then once the dust settles and both of these have had sizable corrections…their long-term uptrends will likely resume. But not until its shaken out the “weak hands” in the market first.

Sean Hyman

Are Asian Currencies Massively Undervalued?

By Justice Litle, Editorial Director, Taipan Publishing Group,

China’s currency is 35% cheaper (if not more) than it was in 1993. Is a protectionist backlash in the cards?

Earlier this month, Tudor Investment Corp. sent an interesting piece of research to clients. The gist — China’s currency is undervalued in a very big way.

According to measures based on productivity and purchasing power parity, or PPP, the Chinese renminbi (RMB) is 35% to 72% cheaper than it was in 1993.

How many things can you think of that have gotten at least a third cheaper, and possibly more than two-thirds cheaper, over the past 18 years? Apart from technology and data storage costs, there isn’t a whole lot.

And yet, if Tudor’s research is sound, that’s how much China’s currency has dropped relative to the buck.

Tudor sees this devaluation as “a major, if not the primary, contributing factor to the nearly 6 million lost jobs suffered in the United States’ manufacturing sector.”

U.S. manufacturing employees, in other words, have been subject to a job-grabbing “currency war” that has gone on for nearly two decades. A cheaper currency means cheaper exports and higher sales, at a cost to higher-priced exporters who can’t compete.

There is further argument that China devaluation has fed America’s debt woes. How? In at least four ways:

  • By keeping its exports cheap, China encouraged Americans to import more “stuff” on credit.
  • By causing millions of U.S. manufacturing jobs to disappear, China caused an invisible reduction in U.S. government revenue — taxes never collected on wages never earned.
  • By recycling U.S. dollars back into Treasury bonds, China encouraged even greater leverage in the borrow-and-spend cycle, their bond buying having kept long-term interest rates low.
  • By acting as lead manipulator, China forced other Asian countries in the region to follow suit, giving them the non-choice of devaluing like the dragon or losing competitiveness.

(This isn’t the first time I’ve talked about China’s currency. Sign up for Taipan Daily to receive all my investment commentary.)

This is the old “Bretton Woods II” story your editor has written about in past years. China, along with other Asian exporters and Middle East oil exporters, created a new vendor finance-type relationship with the West.

The West bought tons of “stuff” (and oil)… the creditors took the flow of dollars and plowed it back into Treasury bonds… and via those Treasury purchases America’s long-term rates were kept low, fueling mortgage leverage and private equity leverage and every other form of cheap money vice.

It had the feel of a giant party while it lasted. China was booming, America was booming, housing and equities were booming. The price of oil was skyrocketing but nobody cared (at least pre-2008 anyway). It was a case of leverage on top of leverage — creditors gone crazy and debtors gone wild.

But whose fault is it all really? The problem with blaming China for America’s spending excesses is that it’s akin to blaming the bartender when a drunk goes on a binge. Was it really the bartender’s fault? Or was it the guy consuming the alcohol? And yet — what if the bartender knew his patron had a problem, and kept slinging out gin and tonics as fast as he could?

Your editor is a fan of free markets and free trade. Protectionist thoughts do not come easily. But currency manipulation is one of those topics where simple answers do not apply.

For example: Can it really be called “free trade” if one country is pushing down its currency at the competitive expense of another? Is it really a “free market” if private sector manufacturers are forced to compete with government-enabled challengers?

These questions are easy to deal with when everything is going well — you just ignore them. Nobody cares much about ramping debt levels when the party’s in full swing. Just make up some stuff about a “global savings glut” and let the leverage roll.

After the party ends, however, things can get messy. When the reality of carpet stains and destroyed furniture comes about — if not worse — that’s when voices rise as blame gets passed around.

As of this writing, there is still an abundance of blind hope that the U.S. economy will recover nicely. So far there has been no forced reckoning, no painful deleveraging, and no need on the part of the authorities to admit how they screwed up. For many, the Federal Reserve’s “extend and pretend” policies are (thus far) seen as a success. To the extent that China copied the West’s easy-money ways, its actions are painted with the same brush.

But for America, the reality of persistent unemployment looms. Tens of millions of Americans remain on food stamps — the hidden underbelly the stock market says nothing of. And the proposed solutions to the problem are laughable.

Just recently knucklehead chatter of “QE3” (quantitative easing 3) has started up, resolving the unemployment problem if deemed that QE2 was not enough.

But QE3 will not work any better than QE2 did — especially if the real jobs problem is a permanent loss of competitiveness through mercantilistic currency policies. At some point the Federal Reserve will be seen as a bunch of ineffectual jokers — once people wake up to the stagflation nightmare Bernanke is creating.

When that bitter realization hits, there will be new demands to deal with America’s unemployment problem — furious demands, more stringent and vocal than before. This will lead back around to the China devaluation issue, and a likely protectionist backlash.

All the more reason, then, to be prepared for a rude shock in the months ahead. If the mercantilist foundations of the Asian miracle are challenged head on — with increasingly harsh words and harsh measures exchanged — the “Bernanke Put” could again become background noise as global growth stalls.

Editor’s Note: China has seized a near total monopoly on supplies of a natural resource treasure that is 100% mission critical to just about every piece of military technology — from satellites to smart bombs. Learn what these materials are… why they are so critical… and how a pending Department of Defense report could make you gains of 950% or more. Get your hands on the exclusive investment report.

About the Author

Justice Litle is the Editorial Director of Taipan Publishing Group, Editor of Justice Litle’s Macro Trader and Managing Editor of the free financial market news e-letter Taipan Daily. Justice began his career by pursuing a Ph.D. in literature and philosophy at Oxford University in England, and continued his education at Pulacki University in Olomouc, Czech Republic, and Macquarie University in Sydney, Australia.

Aside from his career in the financial industry, Justice enjoys playing chess and poker; he enjoys scuba diving, snowboarding, hiking and traveling. The Cliffs of Moher in Ireland and Fox Glacier in New Zealand are two of his favorite places in the world, especially for hiking. What he loves most about traveling is the scenery and the friendly locals.

Schroeder Says Buffett’s Annual Letter Elevated CEO Role

Feb. 28 (Bloomberg) — Alice Schroeder, a Bloomberg columnist and author of “The Snowball: Warren Buffett and the Business of Life,” discusses Buffett’s annual letter to Berkshire Hathaway Inc. shareholders. Schroeder speaks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

What To Watch: February 28th, 2011

Kicking off the week, look for earnings from Quiksilver Resources, Salix Pharmaceuticals, Warnaco Group, Range Resources and Sotheby’s. You can also be on the lookout for a number of economic data reports including Personal Income, Personal Spending, Personal Consumption Expenditures and Personal Home Sales.

Commodities, Forex & Stocks: Thoughts and Analysis on Gold, the US Dollar and the SP500

Chris Vermeulen,

So far 2011 has been an interesting to say the least. Stocks and commodities have been jumping around with high volatility generating mixed trading signals. This choppy price action typically indicates trends are in their late stages. The late stages of a trend is very difficult to trade because volatility rises meaning larger day to day price swings, and at any time the price could either drop like a rock or go parabolic surging higher in value. Generally the largest moves take place during the final 10% of trend, but with a sharp rise in price keep in mind the day to day gyrations are much larger than normal, hence the false buy and sell signals back to back on some investment vehicles.

Taking a look at the charts it’s clear that we are on the edge of some sizable moves in both stocks and commodities. It’s just a matter of time before a correction is confirmed or this current pullback in stocks is just a dip (buying opportunity). I am in favor of the longer term trend at work here (bull market) but it only takes a 1 or 2 bid down days and that could change.

SPY (SP500 Price Action) – 60 Minute Chart

This chart shows intraday price action with my market internals. It is signaling a short term bottom within the overall uptrend on the equities market. The big question is if this is a just an opportunity to buy into this Fed induced bull market or the start of a larger correction?

Currently I am bullish but the next couple trading sessions could confirm my bullish view or a correction could be unfolding. Until then, we must remain cautious.

Price Of Gold – Weekly Chart

Gold has staged a strong recovery in the past four weeks. But it has yet to break to a new high. I do feel as though it will head higher because of the way silver has been performing (new highs). But it is very possible we get a pause for a week or two before continuing higher.

Because of the international concerns in the Middle East both gold and silver should hold up well even if the US dollar bounces off support. But, if the US dollar breaks down below its key support level we could see stocks and commodities go parabolic and surge higher in the coming months. It’s going to be interesting year to say least…

Dollar Weekly Chart

This long term view of the dollar shows a MAJOR level which if penetrated will cause some very large movements across the board (stocks, commodities and currencies).

In short, a breakdown will most likely cause a spike in stocks and commodities across the board which could last up to 12 months in length. On the flip side a bounce from this support zone will trigger a pullback in both stocks and commodities. This weekly chart is something we must keep our eye on each Friday as the weekly candle closes on the chart.

Weekend Trend Report:

In short, 2011 has been interesting but trading wise it’s has yet to provide any real low risk trade setups which I am willing to put much money on. There are times when trading is great and times when it’s not. It all comes down to managing money/risk by trading small during choppy times (late stages of trends), and times when we add to positions as they mature building a sizable portfolio of investments which I think will start to unfold over the next few months.

I continue to analyze the market probing it for small positions as this market flashes short term buy and sell signals.

Last week we say a lot of emotional trading and that typically indicates large daily price swings should continue for some time still so keep trades small and manage you positions.

You can get my FREE Weekly Analysis here:

Chris Vermeulen