Month: June 2011

Leading up to this afternoon’s US jobs report the British pound has slipped versus the dollar and the euro with the EUR/GBP recovering to levels prior to the renewal of the European debt crisis two weeks ago.

A weaker than forecasted UK Services PMI number slumped to 53.8 from 54.2 on consensus forecasts of 54.4. This had sterling on its back foot with the cable briefly falling below 1.6300 before trading back above the support. The 1.6300 level has significance for two reasons; it is a previous resistance/support level from the high of May 20th and the 20-day moving average is housed there. The move lower in the GBP/USD may have scope back to the rising trend line from the May 2010 lows which comes in today at 1.6140. Sterling was also weaker in the crosses as the EUR/GBP rallied above levels prior to the renewal of the European debt crisis two weeks ago. The EUR/GBP could climb to test the April high at 0.9040.

The EUR/USD is trading back and forth before the jobs report. Initially the EUR/USD rose after the euro zone final services PMI came in above expectations but the pair soon gave back those gains and now trades just below the 1.4500 level before the report. As previously discussed a better than expected jobs report may allow the USD to regroup after suffering sharp losses this week to the euro. The EUR/USD could climb to 1.4570 at the 61% retracement from the May declines, but a likely scenario may be the EUR/USD gives back some of the weekly gains before the weekend close.

As always the risk runs for off the cuff comments from European or Greek officials as a new bailout package for Greece looks to be forming between the parties. No restructuring of Greek debt will take place at this time but the possibility exists for a debt reduction in the future.

Read more forex trading news on our forex blog.

Stemming from the stream of negative US economic data this week economists have scaled back their forecasts’ for today’s non-farm employment change. Market sentiment has once again shifted against the dollar buta surprisingly positive jobs report may catch many USD shorts off guard.

Today’s Economic Data Releases

GBP – Services PMI – 08:00 GMT
Expectations: 54.4. Previous: 54.3
Sterling surged yesterday after better than expected construction PMI numbers but the gains were scaled back later in the New York trading session. While today’s services data may have a short term impact on the pound, the kicker will be this afternoon’s jobs report. Cable has support at 1.6300 and break here could spur declines to the trend line off of the May 2010 low at 1.6140. Resistance is found at the 1.6515-50 resistance zone.

USD – Non-Farm Employment Change – 12:30 GMT
Expectations: 194K. Previous: 244K.
While consensus estimates are for roughly 194K new jobs to have been added to the US economy in the month of May, economists have largely adjusted their forecasts lower following Wednesday’s disappointing ADP jobs report. Market sentiment has once again shifted against the dollar and a surprisingly positive jobs report may catch many USD shorts off guard. Therefore, a pullback in the EUR/USD would not be too farfetched. For the EUR/USD, a move above 1.4570 would set the stage for gains to the May high but a retreat below 1.4350 would shift momentum to the downside.

Read more forex trading news on our forex blog.

By CountingPips.com

June 3, 2011 – Economic News Releases – All Times GMT

01:00 Chinese Non-Manufacturing PMI
02:30 Chinese HSBC Services PMI
08:00 Eurozone PMI
12:30 United States Nonfarm Payrolls Employment Report
14:00 United States ISM Non-Manufacturing

Economic Calendar

EURUSD stays in a rising price channel on 4-hour chart, and remains in uptrend from 1.3969. As long as the channel support holds, uptrend could be expected to continue and next target would be at 1.4550. However, a clear break below the lower border of the channel will indicate that a cycle top has been formed and the rise from 1.3969 has completed, then the following downward move could bring price back to test 1.3969 support.

Forex Blog

By Adam Hewison

Today, I decided to do a video to show you how you can protect your capital using something other than gold.

In this new, never before seen, 7 minute video, you will see exactly what we’re looking at and how you can protect your nest egg very easily using tools that you may or may not be familiar with.

It would seem as though the financial markets, particularly certain financial stocks, are incredibly vulnerable. The erratic recovery we saw from the lows in March of 2009 maybe in jeopardy. In fact, with many financial stocks making new lows for the year, it does not augur well for the future.

Also, there’s been a lot of prognostication about the end of America as you know it. “Kiss America Goodbye,” and “The Death of America,” are just a few of the wild headlines that are out there. This video takes you to the next level and offers you a concrete path on what to do to protect your capital and nest egg.

All the best in every success in your future,

Adam Hewison,
President of INO.com and Co-founder of MarketClub.com

The latest feedback on the state of the U.S. economy does little to boost confidence in the overall health of the world’s largest market. Growth for the first quarter fell far short of expectations registering a paltry 1.8 percent. For the previous three months, the economy expanded by a robust 3.1 percent but this trend is clearly on the decline.

Certainly the U.S. has faced recessions in the past and has suffered through sustained cycles of low growth but in each of these cases, there was always a secret weapon held in reserve – the might of the American consumer. Historically, the buying power of U.S. consumers accounts for about 70 percent of the total economy and there was always a sense that as soon as people started spending again, recovery was all but assured.

This time though, it feels very different; and not even the continuation of record low interest rates have proved tempting enough to entice consumers to open up their wallets.

There are a couple of reasons why this is so. Firstly, there has been very little improvement in the employment outlook. Prior to the recession, unemployment was in the range of 4.5 percent – after the onset of the crisis in late 2007 however, unemployment rose steadily peaking at 10.1 percent in October, 2009. A year and a half later, unemployment has improved only marginally to 9 percent and even this is in jeopardy based on the decline in the latest Institute for Supply Management’s factory index reading.

The true number of unemployed is actually much higher of course. The official survey used to arrive at the unemployment rate considers only those who reported that they were actively looking for work. Those that have quit looking, or those working part-time but would like to be full-time, are not counted as unemployed.

Regardless of the method to determine the unemployment rate, the simple fact is that the current unemployment rate remains double the rate considered “full” employment prior to the recession. On the plus side, the economy is finally creating new jobs; but at the anemic rate it is doing so, it will take several years to recover the jobs lost since 2007.

In May, just 38,000 new positions were created compared to April’s 244,000. Even those that are working are feeling vulnerable and in a bid to protect themselves, consumers are spending less while saving more.

The other factor hampering consumer spending is the rise in inflation. Driven by higher energy and food costs, these essentials are taking a greater chunk of total income leaving less for the non-essentials. Since January, inflation has been on a steady rise from 1.6 percent at the beginning of the year, to 3.2 percent in April.

The Consumer Price Index was up 0.4 percent in April with gasoline prices jumping 3.3 percent for the month. On a more positive note, commodity prices have retreated somewhat and the expectation is that inflation will ease as a result. While this will be welcomed by consumers, until we see a significant improvement in employment, it will take more than a slight easing in inflation to convince consumers to crank up the spending.

Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog

By CountingPips.com

U.S. weekly jobless claims decreased by less than expected in the week that ended on May 28th, according to a release by the U.S. Labor Department today. New jobless claims fell by 6,000 workers to a total of 422,000 unemployed workers following the previous week’s 428,000 initial jobless claims. The 4-week moving average of unemployed workers decreased by 14,000 workers from the previous week to a total of 425,500.

Market forecasts were expecting jobless claims to edge down to 417,000 workers for the week.

Meanwhile, workers seeking continuing claims for unemployment benefits for the week ending May 21st also decreased for the week. Continuing claims declined by 1,000 workers to a total of 3,711,000 unemployed workers. The four week moving average of continuing claims decreased by 10,000 workers to a total of 3,737,750.

US Dollar trades mostly lower. Stocks, Commodities under pressure today

The U.S. dollar has been mostly lower in trading in the forex markets while the American stock markets have been slightly down on the day. The dollar has fallen versus the euro, Australian dollar, British pound sterling and the Japanese yen, according to currency data in the afternoon of the US trading session. The American currency has been trading close to unchanged on the day against the Swiss franc, New Zealand dollar and the Canadian dollar.

The U.S. stock markets, meanwhile, have been lower today with the Dow Jones dropping around 40 points, the Nasdaq trading nearly unchanged while the S&P 500 is down by over 2 points at time of writing.

In commodities, oil has moved lower to the $99.94 per barrel level while gold futures have fallen by $13.40 to trade at the $1,529.00 per ounce level.

On Tuesday, Jared talked to you about buying gold in euros. If you haven’t read his article, take a few minutes after you read today’s Smart Investing Daily. It might change how you look at his idea.

There’s a rumor floating around. We’ve talked about it here before, but from a worst-case scenario point of view.

Now the mainstream financial news media is talking about it.

I’m talking about the rumor that the Federal Reserve is thinking about another round of quantitative easing. Quantitative easing is when the Fed buys government debt in order to inject more dollars into the economy.

Think of the economy like an ultra-marathon runner… those half-mad guys who run distances of 50 miles or more in a single event. Right now, our runner is bonking out. He’s cramping up and hitting a wall, and he’s running up hill.

If he doesn’t get a chance to rest soon, he’ll collapse.

But instead of getting a rest, he’s cramming power bars and energy gels, just to try and make it up this hill.

The problem is it’s too late. Those power bars will do nothing but sit like lead in his stomach.

The quantitative-easing “power bars” aren’t giving our economy any energy. In fact, all the Federal Reserve is doing is tying a weight around our ankles. The second round of the Fed’s bond-buying program shifted talk from deflation to inflation — from paying less for things to paying more.

But we’ve had a string of horrible economic reports, and now folks are starting to talk about a third round of quantitative easing.

From a Reuters article, titled “Analysis: Third time’s the charm? Whispers of QE3 emerge”:

“The U.S. economy is hitting the brakes at exactly the wrong time for the Federal Reserve,” said Douglas Borthwick, managing director at Faros Trading in Stamford, Connecticut.

“With the expected end of QE2 within reach, the U.S. economy is in a situation where its only form of life support is about to be ripped away from it.”

Look, we all know how important this race is… If our economy can’t make it up the hill, the costs are going to be hugely painful.

But if the Fed keeps forcing bond-buying power bars down our economy’s throat, we’re going to end up running off the side of a cliff. These power bars are going to push us into an era of sharply higher inflation.

We’ve seen the start of this already.

Traditionally, commodities are the first things to climb, and we’ve all been suffering under higher gas and food prices. This should be an early warning that more inflation is coming.

Some investors are already packing up and heading for higher ground.

Again, from Reuters…

Investors stampeded out of stocks and into bonds on Wednesday as dismal U.S. economic data led the S&P 500 to its worst day in 10 months and benchmark Treasury yields fell below 3.0 percent the first time since December.

But I told you a couple weeks ago that bonds might not be the place you want to set up camp. The thing to remember is that bonds aren’t the only asset that investors run to when they’re scared.

I probably sound like a broken record, but I can’t emphasize enough how important it is to have gold in your portfolio. We’ve been right on this account so far, and I remember talking to a local business man about it in mid-winter.

He asked, “Gold’s the thing to buy right now, isn’t it?” Gold was sitting at about $1,330 an ounce. I told him what I told you guys back in late January… That gold could bounce much higher.

Yesterday, gold closed at $1,540 an ounce. And I’m going on record saying that we could get another strong price move this month.

That second round of quantitative easing is about to close. The Fed is slated to finish buying $600 billion in government debt in June. And with the economy getting weaker and weaker, we could see a major market hiccup.

Gold will go ballistic.

We’ve given you a number of ways to get gold into your portfolio. We’ve talked about one company, Goldcorp (GG:NYSE).

I first mentioned this gold mining company back in late January, and since then, the company has climbed more than 22%. I think there’s still a lot more potential with GG, too.

In my initial assessment, I said GG could climb as high as $48.94, its former 52-week high. But the company has already climbed well past that. If you’re sitting on gains with GG, we’d love to hear about them. You can send us an email at [email protected].

GG has climbed as high as $56.20, and has dipped back to about $48. This should be a support point for another move higher as gold prices continue to pop. We’re keeping an eye on GG, and any dips below $48 might be cause to cut and run with 20% gains.

We’ve also talked extensively about the SPDR Gold Trust ETF (GLD:NYSE). Jared highlighted this ETF in his article on Tuesday.

And as I told you at the beginning of this article, you might want to go back and look at Jared’s idea with fresh eyes now that rumors of QE3 are hitting the financial mainstream. The economy (and the dollar) is bonking out. Now might be the perfect time to consider other options.

Editor’s Note: You know, gold isn’t the only precious metal you should be considering when adding “safe havens” to your portfolio. Silver has had a lot more punch in recent months, and the time is ripe for another round of profits with this other precious metal.

I was just reading about a key report that talks about silver mining discoveries that help investors gain the lion’s share of profits once those discoveries hit the news. Not a lot of people know about this report, but you can learn more about it here.

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