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Is the Euro Back on the Bullish Track?

Well, well, well. The EURUSD pair or the fiber as what traders call it in the streets appears to have broken out from a rectangle or consolidation. You see, the had been trending up from a low of 1.1876 last June 7 to a high of 1.3334 in August before correcting. All along I thought that the pair would already reverse but it did not. What it did was it only corrected to its 50% Fibonacci retracement level. It then continued to range or trade sideways until yesterday where it broke out to the upside when it finally breached the 1.2900 hurdle. However, the pair seems to be meeting some temporary resistance at 1.3000. If and when it moves past this number, chances are it would once again revisit its previous high just above 1.3300. Given the upside breakout, I can say that there is now a higher probability that the euro will move higher against the US dollar in the near term.

Germany’s September Zew economic sentiment index came in sour, unexpectedly falling to -4.7 (vs. 10.7) from from 14.0. The same sentiment index for the entire euro zone also slipped to 4.4 from 15.8. The slide in confidence can be attributed to the wide budget cuts done by the governments that make up the economic zone. Remember that the zone was being plagued with a credit crisis. One way to plug the countries’ deficit holes would be to drastically slash their spending. A cut in spending would obviously limit the business activity in the region but given Europe’s present fiscal situation, such move is really warranted.

Despite this, the euro still managed to outmaneuver the greenback thanks to the better than expected US core retail sales. Core retail sales in August grew by 0.6% which is twice of the market’s 0.3% consensus.

No high impact economic reports are due from the euro zone for the rest of this week. The euro, however, could take its cue from the releases from the United States. Today, the Us will publish its Empire State manufacturing index and its August industrial production. The former is seen to have reached 8.7 from 7.1 while the latter is expected to have increased again by 0.3%. The expected improvement in the Philadelphia Fed manufacturing index (from -7.7 to 0.9) which will be due tomorrow and the projected jump in the Prelim UoM Consumer Sentiment (from 68.9 to 70.3) could also induce some risk taking. Watch out for these reports.

Swiss Franc Flirting With All-time High Against the Greenback

Welcome to another day of FX trading! In today’s fx feature is the weekly chart of the USDCHF. As you can see, the pair has been losing a lot ground for several weeks now. After hitting a high of 1.1731 last May 31, it has slid since then. In fact, it had already touched the parity level early today. Still, previous supports around the 1.0000 psychological level have kept the price from falling any further. If if the 1.0000 marker gets breached, the pair could revisit its 1-year low at 0.9916. A break of this low could send it towards the pair’s all time low at 0.9635. But with investors protecting the price at 1.0000 and an oversold condition, the pair could, however, stage a rally.

Renewed confidence in the global markets have weakened the dollar’s valuation against its peers as of late. Both the DJIA and the broader S&P 500 have again logged in some beautiful gains yesterday, rising by 0.78% and 1.11%, respectively. Yesterday’s jump in confidence which was reflected in the rise in the equities markets was because of the Basel III agreement that was concluded yesterday. The Basel III is an international regulatory code that requires banks to raise their common equity to 4.5% from 2.0%. This equity will be used by the banks as buffer in case they encounter liquidity problems from say investor withdrawals and the like. In the East, China’s handsome industrial production (13.9%) and retail sales (18.2%) growth further supported the market’s optimism.

The highlight of this week for Switzerland is the Swiss National Bank’s monetary policy decision on Thursday (September 16). The SNB is expected to keep its interest rate unchanged at 0.25%. The bank, though, is very notorious in intervening in the fx market to prevent the Swissy appreciation. They do so because a higher Swissy negatively impacts their export industry. With the Swissy trading at an all-time high against the euro and flirting with historical highs versus the Us dollar, the SNB could indeed meddle in the market. If it does, then a sudden spike against the Swiss franc could occur. Nonetheless, even if the SNB intervenes, its effect would just be temporary. Market sentiment is still stronger and as long as optimism remains, the Swissy could strengthen still.

FLI High!

Hello to the followers of Filinvest Land Inc.! As you can see, the stocks of this company have been making a good run since August and is making new highs for the 2-year time frame. Two months ago, it was still at 1 peso. Now, it’s at 1.44 pesos exceeding the 1.33 peso resistance which also is my target price as I mentioned on my last post (kindly click here). We have here a nice example of a classic triangle pattern that broke out and reached it’s target price by getting the size of the triangle’s base added to the breakout point. However, the pattern I’m seeing could be different for others. Well in fact, looking at the 2.5-year time-frame, you could actually see a reversal cup and handle formation. Anyway, I also posted on this when it was just about to break out from the triangle pattern (kindly click here) and been monitoring it since then. For the lucky ones who were able to buy at 1 peso, an easy 40% for you guys in less than 2 months. Definitely not bad!

So what’s next for the Filinvest stocks? In my technical perspective, the stocks could consolidate around the 1.44 peso resistance area before it makes another move but this isn’t really necessary. If it decides to ascend right away, it could encounter some selling pressure at the next resistance at 1.68 pesos. On the other hand, if the stock price declines, the immediate support could be 1.33 pesos. If it drops further below that marker, the next support could be 1.14 pesos.

Oracle Stocks Soared, Thanks to Mark Hurd

Good day stock traders! For those who are not aware, the shares of Oracle Corporation soared by about 9.3% last week. As you can see from its daily chart, the bullish gods must be behind the company when its stocks gapped up after dangerously falling below both the 50-day and 200-day moving averages. In the process, the shares of Oracle went back above the mentioned averages and the resistance just above 24.50. Now, it could use these two averages including the 24.50 marker as supports in case Oracle weakens due to profit taking. Anyhow, Oracle could still rise until it encounters some resistance at its former peaks at 25.50 and at 26.50. A move above these levels could send it on track to another bullish run.

Last week’s jump was due when Mark Hurd, the former president of Hewlett Packard (HP) was hired by Oracle corporation as a co-president, director and board member. Mark Hurd was one of the better CEO’s that brought HP back to its former fame. In fact, he was named as a “TopGun CEO” by Brendan Wood International in 2009. He, however, resigned when he found himself in the middle of a sexual harassment case. Nonetheless, his hiring as the new president of Oracle sent the company’s stocks soaring.

The Ayala Corporation Run

Good morning guys! Here’s an update on my post about the Ayala Corporation breakout. Like what I mentioned last September 3 (kindly check this link), after the Ayala stocks (AC as listed in the Philippine Stock Exchange) shot up from the triangle formation, the next resistance they could encounter is the 400 peso psychological area and it was tapped. They just ran up unexpectedly. In my opinion, the stocks could consolidate for a bit first before trying to move past above the current resistance but if the bulls are really on the run, the 400-peso psychological marker could be taken out easily. If the 400 pesos gets cleared out, the next resistance that could be aimed for is 422.50 pesos. Then after that is 457.50 pesos. On the downside, the immediate support could be 382.50 pesos. If the AC stocks drop further below that price mark, the next support could be the 355.00-357.50 peso level. Then the next could be the 7-month uptrend.

I also mentioned last September 3 that the Philippine stock market will most likely be in the bullish territory the week ahead (this was last week) and it was. Most of the stocks that joined the band wagon were blue chips such as Megaworld, the Ayala-owned companies, the Aboitiz-owned companies and Banco de Oro and this propelled the Philippine Stock Exchange Index to reach new highs (kindly see the post here) during the last trading session.

The Aussie’s Due For a Retracement

Happy weekend FX people! On today’s FX feature is an update of the AUDUSD pair which I posted last September 5 (please see it here). As you can see, the pair has continued to rise within an ascending channel. And as I’ve suggested, the pair indeed rose to mark its fifth wave (wave 5). If the Elliot Wave Principle holds true and if my wave counting is correct then as the theory suggests, the pair should be due for a retracement. Remember that the EWP predicts a correction in the prices after the completion of the fifth wave, starting with wave A and ending with wave C. And given the obvious technical resistances ahead and an overbought condition as indicated in the stochastics, the pair could indeed dip or at least move sideways. If the Aussie weakens against the US dollar, the peak of the third wave around the 0.9200 level and the channel’s support should keep it from falling further.

The Aussie along with the non-dollar currencies rose this Friday due to the better-than-expected July wholesale inventories report in the US. Wholesale inventories has risen by 1.3% as compared to the 0.4% market forecast. China’s better-than-projected industrial production (13.9% vs. 13.1%) , retail sales (18.4% vs. 18.0%), new loans (545 billion vs. 500 billion), M2 money supply (19.2% vs. 17.5%), and the slower PPI (4.3% vs. 4.6%), have also helped the Aussie. Remember that Australia is one of the biggest supplier of raw materials to China. Hence, an increasing business activity means more business for Australia. A weaker PPI, in the same way, benefits the Aussie since a monetary tightening by the Chinese government would be postponed which would allow for business to go on without additional restrictions as of the moment.

For the coming week, no market moving events are scheduled in Australia. Given the lack of economic reports from the country, investors could take this as a chance to pocket some of their profits from their long Aussie positions.

Canadian Dollar Remains Weak Versus the Yen Despite BOC Rate Hike

Good day FX peeps! To cap the week I present to you an update of the CADJPY. You see, the pair has consolidated within a small symmetrical triangle after it broke down from a bigger descending triangle formation. As of the moment, the pair is already nearing the apex of symmetrical triangle. This suggests that a break out whether to the upside or to the downside is imminent. But given the pair’s general trend (downtrend) and its recent break down from a descending triangle formation, I can say that it has a higher chance of moving south than north. Even it breaks the resistance of the small triangle, a solid resistance is still present at the 82.00 marker which incidentally is also the former support of the previous descending triangle to push back down. In any case, a move below the support of the present triangle could send it back to the previous low at 78.41. A move above the 82.00 level, on the other hand, could change the pair’s course to at least sideways.

In my post last September 6 (please see it here), I mentioned that it’s possible for the Bank of Canada (BOC) to hold its interest rate unchanged rather than hiking it. However, I was proven wrong when the central bank actually raised its benchmark interest rate as expected by the market by 0.25% to 1.00% from 0.75%, making the interest rate differential between the Canadian dollar and the Japanese yen wider. This decision, though, was not enough for the CADJPY to break key resistances at its long term downtrend line and at 82.00 as it only increased from an opening of 79.93 to close at 80.96. Yesterday’s weaker-than-projected housing starts number (183k vs. 185k) and the worsening of Canada’s trade balance figure to -C$2.7 billion from -C$1.8 billion did not help as well.

Canada’s employment change and unemployment rate for the month of August are on deck today at 11:00 am GMT. Canadian firms are seen to have added about 30,800 jobs in August after laying about 9,300 during the previous month. The country’s jobless rate, though, is still projected to remain the same at 8.0%. Generally, an improvement in Canada’s labor market is bullish for the economy and the Loonie. But is the expected increase in employment or better enough for investors to push the CADJPY above 82.00? Let us see.

Hello PSEi All-time High!!!

Hello beautiful people! Let’s get back the to the chart of the Philippine Stock Exchange Index (PSEi). The last time I posted on this was last month (kindly see it here) and back then, the ascending channel was still intact (indicated by the yellow parallel lines). Two weeks ago however, the index cleared out the ascending channel’s resistance and surged higher. Then, in just six trading days, it moved past above the 3667.74, 3770.18 and the 3896.74 resistances. I actually just noticed now the PSEi has already doubled its value in less than two years after coming from the bear market. Also, a few minutes ago, the US reported a decline in unemployment claims, from 472k previously to 451k now which brings the US market sentiments towards the positive side. This could be good for the global economy including the Philippine Stock Exchange as the US economy is still a benchmark for the global market.

Technically speaking, what is ahead of the Philippine Stock Exchange Index? Like I mentioned earlier, the PSEi has breached the 3,896.74 resistance (this would still be the all-time high if not for today’s bullish session) and could head higher as there are no more resistances left. However, there could still be some selling pressure at the 4,000.00 psychological level which I personally consider a resistance. If that gets taken out, the PSEi could just shoot all the way up again until it finds some resistance around 4,100. In my opinion, the break above the 3,896.74 resistance isn’t convincing as there is no significant surge in the volume. The index could slightly decline before it heads back on track but who knows right. There are many cases on breakouts without much volume but still went all the way up. Aside from that, the volume is just a secondary indicator next to the price action (price is still king). Anyway, on the pessimist’s point of view, if the index suddenly drops, the former resistances could act as supports. If not, the 18-month uptrend could be the strongest support among them all and like I always mention, as long as the uptrend remains intact, the northbound direction of this index will most likely continue. Enjoy the long weekend guys, let’s see what happens on Monday. Cheers!

Singapore Dollar Trading At An All-Time High Versus the US Dollar!

Good day Forex friends! In today’s FX special, I present to you the monthly chart of the US Dollar versus the Singapore Dollar (USDSGD). As you can see, the USDSGD pair has been sloping downwards for quite some time now. Last Friday, however, it was able to cross below the psychological 1.3500 support, marking a new all-time high for the Singapore dollar. With an oversold condition (as indicated in the stochastics), the pair could still rally. Though the long term downtrend line should keep it from rising further. A potential descending triangle could be forming if that scenario occurs. In any case, a clear break below the 1.3500 support could send the USDSGD pair lower by about 4,000 pips! Long SGD anyone?

Last week’s better-than-expected employment and housing figures in the US have sparked some risk taking among investors, causing them to leave the safety of the greenback for the like of the SGD. Singapore is actually a highly developed economy in Asia despite its size which makes it a prime place of investment. Everyone knows about the double digit growth in China but Singapore is actually the fastest growing economy in the world, expanding by 17.9% for the first half of 2010! In any case, some analyst say that the Monetary Authority of Singapore (MAS) would intervene in the market to prevent the SGD’s rapid appreciation in order to protect the country’s export industry which is its main source of revenue. But if risk taking persists, a higher valuation of the Singapore dollar could be very well tolerated.

Caterpillar Stocks Preparing to Climb!

Caterpillar Inc. or CAT in the New York Stock Exchange is the world’s biggest manufacturer of construction and mining equipment like natural gas engines and industrial gas turbines. They supply engines for tanks and submarines. Most of the bulldozers and the biggest bulldozers you see around are owned by Caterpillar. They also sell financial products and insurance. Anyway, there is a symmetrical triangle formation setting up on the Caterpillar stock chart and like I always mention, if the stocks are coming from an uptrend the triangle will most likely be bullish. This is a good setup for the stock value to climb higher. If the Caterpillar stocks break out and move past above the triangle’s resistance, the $75.87 marker could be the next resistance. If the stocks further move up, there could be some selling pressure however at the $80.00 psychological resistance. Then after that, the next resistance could be $85.96. On the downside, the immediate support could be the triangle’s support. If the stocks drop further below that, the next support could be the 18-month uptrend. Then after that is $63.34.

YUM Stocks Breakout!

Hey there awesome readers! Here’s an update my technical analysis on the stocks of YUM brands (the world’s largest fast food restaurant company) which I posted a week ago. If you wish to see it, kindly click here. As I mentioned the last time, there is a bullish triangle formation on its stock chart and could be ripe for a breakout. Fortunately during last Thursday’s trading session, the stocks broke out from the triangle’s resistance (indicated by the red circle) and went higher. We could also see the $44.00 resistance has been cleared out as the YUM stocks are now making new highs. However, if it decides to head further north, there could be some selling pressure at the $48.00 price mark which is my personal target price (I got this by adding the base of the triangle to the breakout point). On the downside, the current support could be $44.00 then after that could be the triangle’s resistance. If those supports still don’t hold, the next area could be $40.00-40.50.

British Pound Weakening Against the Swiss Franc

Hiyo FX peeps! Here’s a weekly chart of the GBPCHF pair. As you can see, the pair has been trading sideways after hitting a low of 1.5118 back in December 29 back in 2008. Just recently, however, the Swiss franc was able to hurdle below the 1.5825 marker against the British pound. Given this price action, the next support that I see for the GBPCHF pair is the low that it marked in 2008 (1.5118). Hence, the pair could fall back to around the mentioned low unless it is able to climb over the support-now-turned-resistance at 1.5825.

The main event of this week for the UK will be the will be the monetary policy decision of the Bank of England (BOE) on Thusday (September 9). Last month, the bank’s MPC kept its monetary policies unchanged. It left its interest rate at 0.50% and its asset purchase facility at 200 billion. The UK’s economy began to grow during the last quarter of last year. It even expanded by 1.2% during the second half of this year. The bank, however, views that there is still a big chance that this recovery will not be sustained. It said that there are still a lot of uncertainties and risks surrounding the UK’s market.

From then until now, the UK’s economic environment remains mixed. While the country’s retail sales came out with a 1.1% growth against the 0.7% consensus, the country’s home prices remain subdued. In fact, the UK’s HPI is on a 3-month losing streak, dipping by another 0.9% during the last month. Both manufacturing and services PMI also showed weakness during the last couple of periods. Switzerland, on the other hand, showed surprising 4.8% jump in their retail sales, more than doubling the 2.3% market estimate. So between the UK and Switzerland, the later appears to be the less fragile.

Union Pacific Corporation Stocks Breakout!

Hey guys, let’s go take look again at the stock chart of Union Pacific Corporation or UNP as listed in the New York Stock Exchange. By the way, for those who are unaware, their operating company, Union Pacific Railroad, is the largest railroad network in the United States. Anyway, as I mentioned on my previous post about it two weeks ago (kindly check here), there is a triangle formation setting up on its stock chart and is most likely bullish as its coming from an uptrend. Fortunately last Friday, the stocks breached the resistance of the ascending triangle formation and went higher (indicated by the yellow circle). In case it continues to go up, which is more likely to happen as a follow through to its breakout, it could encounter some selling pressure at the $80.00 resistance which also is a psychological level at the same time. If the UNP stocks move past above the 80.00 marker, the next resistance could be $85.80. On the flip side, the immediate support could the be triangle’s resistance. Then after that support, the next one could be the $70.00 price mark.

The Bank of Canada Could Hold Its Rate Unchanged

Welcome to another week of forex trading! In today’s FX feature is the daily cast of the CADJPY. As you can see from the chart, the pair broke down from a descending triangle pattern. Since then, it has been trading between 78.60 and 81.70. Last Friday, we the Canadian dollar rallied against the Japanese yen to push the CADJPY pair closer to where the former support of the triangle. In my view, there is still some room for the pair to move higher although it could turn back when it hits a resistance at this former support. If it does, it could fall back to around 78.60.

The Bank of Canada will hold its monetary policy decision this coming Wednesday (September 8). The bank is expected to raise its interest rate to 1.00% from 0.75%. But like what I said in my title, there’s an outside chance that the BOC could surprise the markets by not hiking its benchmark interest rate.

Let’s us check Canada’s recent economic data to see why. First of all, the country’s unemployment rate unexpectedly rose to 8.-% from 7.9% with firms cutting about 9,300 jobs. Its Ivey PMI, which gauges the activity of both manufacturing and sercies industry through the eyes of purchasing managers, also dipped by several notches to 54.0 from 58.9. More importantly, Canada’s wholesale and retail sales have continued to suffer with the former slipping by 0.3% and the core retail sales sliding again by another 0.5%. As a result, the country’s core CPI for the month has also slipped by 0.1%.

The above data shows that the situation as of the moment does not merit a rate hike as of yet especially with the unexpected slide in the latest month-ever-month CPI. The Loonie would almost surely take a hit if the BOC surprises the market by not raising its interest rates. But in case it does, the Canadian dollar could still trade on a range bound fashion or even fall since a rate hike is already forecasted and priced in by the market.

Australian Dollar’s Silent Rise

Good day to you my fellow FX men and women! Today I present to you the daily chart of the AUDUSD. As you can see, the pair has been trading within an ascending channel since the middle of May 2010. Of course, the pair would more like trend higher as long as the channel’s support does not buckle. The Aussie, however, could meet some resistance at the pair’s previous high near the 0.9200 level. With the stochastics in the overbought area, it could rest for a while before making another move to the north. A move past the 0.9200 level could push it towards 0.9300. The Elliot Wave Principle (EWP) also seems to confirm this potential price action. If my wave counting is correct, the AUDUSD could already be in its fifth wave. This then suggests that the next short term up-move would more likely surpass the peak at 0.9200.

Recent economic data in Australia goes to support the positive sentiment towards the Aussie. For one, the corporate profits of Australian firms for the second quarter of the year have unexpectedly soared by 18.9% compared to the market’s 5.9% growth forecast. The firms’ 1Q scores were also positively revised to 4.3% from 3.9%. The country’s building approvals have also expanded for the first time in 5 months. The account surprisingly rose 2.3% in July after dipping by 3.4% during the previous month. Retail sales for the same period have also shown some good figures, expanding by 0.7% in July and 0.4% in June. More importantly, the country’s second quarter gross domestic product (GDP), has surpassed the market’s 0.9% forecast with a 1.2% growth. the first quarter’s overall output expansion was also revised upwards to 0.7% from 0.5%.

On Tuesday (September 7), the Reserve Bank of Australia will have its monetary policy decision. While the bank is still expected to hold its benchmark interest rates at 4.5%, the bank’s tone would more likely lie towards the hawkish end of the spectrum given the improvements economy. Any positive outlook regarding the country would of course be bullish on the Australian dollar as well.

The EURO Bears Got Trapped!

Hiyo my avid forex fans! In my previous article about the euro, I mentioned that its recent rally after breaking down from what appears to be a head and shoulders formation could be over soon. However, a full blown breakdown and a reversal did not really pan out as the euro bulls were able to out-muscle the bears to place them back on top. As you can see from the EURUSD’s 4-hour chart, the bears were forced to cover their short positions when the price of the euro went back above the neckline of the head and shoulders. The pair actually found support at the 50% Fibonacci retracement level which interestingly lies almost in line with the psychological 1.2600 marker. For awhile, it met some resistance at the neckline and it even fell below the support of the rising wedge (please see my previous post here). But like I said, the euro was able to turn the tide to its favor.

Yesterday, the fiber of the EURUSD broke out from a bullish pennant pattern. Though, it would more likely range for awhile before making a move north. The stochastics, being in the overbought region, also suggests a temporary pause in its ascent. If its able to move past the resistance at 1.2900 then its next stop would be at 1.3000. A move past 1.3000 could propel it higher all the way to the peak of the head of the former formation.

The better-than-expected US employment report pushed the anti-dollar currencies like the EUR back into the spotlight. US firms only slashed 54,000 jobs as compared to the 101,000 estimate. The job cuts in the previous month were also revised downwards to 54,000 from 131,000. Still, the US’s unemployment rate rose slightly to 9.6% from 9.5%. Nonetheless, the encouraging jobs numbers (compared to the market’s consensus) lifted the investors risk appetite during the session.

No high impact economic reports are due this week in the euro zone. The euro, however, could take its cue from the developments in the other nations particularly in Australia, Canada, and the UK. Australia, the UK, and Canada will have their monetary policy decision this week. Australia and the UK are expected to keep their rates unchanged while Canada is anticipated to hike. Any hikes and/or hawkish statements could favor the non-dollar currencies including the euro.

The Ayala Corporation Breakout! – September 3, 2010

Hello stock traders! It’s been a while since I last posted on Ayala Corporation or AC in the Philippine Stock Exchange. If you want to check my post three months ago, kindly check here. As you could see, it took 5 months for the Ayala Corporation stocks to setup the triangle formation that could trigger the break above the 355.00-357.50 peso 2-year resistance area. Fortunately, it did on September 2 which is just yesterday (indicated by the yellow circle). Right now, the Ayala stocks could further head up but could encounter some selling pressure at the 400.00 peso psychological area which I also consider a resistance. However, if the stocks move past above the 400.00 peso marker, the next resistance could be 422.50 pesos. On the downside, in case the stocks start to drop, it could bounce off the 355.00-357.50 peso resistance-turned-support. If it slips and slides below that area, the next support could be the 7-month uptrend.

Yesterday, the US reported a great news on their Pending Home Sales data as it turned out to be positive. Currently, they also reported a stability on the unemployment rate which triggered the Dow Jones Industrial Average and the other major indices to stay on the bullish territory, well at least for now. Since the US market’s with the bulls right now, the Philippine market will most likely be as well on the coming Monday trading session. Good news for the blues! Happy weekend guys, cheers!

Gold Poised For An Upside Breakout? – September 2, 2010

Welcome to a brand new month of trading! In today’s feature is the monthly chart of gold (kindly check here for my last post on it). The month of August was a good one for the gold bulls as the price of gold was able to rebound after if fell to a low of $1,157.15 per ounce after tapping a new all-time high of $,1265.05 back in June. As you can see, the price of gold sprung back after finding some support at its 19-month uptrend line (black trend line). Presently, it seems that gold is poised for a bullish breakout since it has been consolidating within an ascending triangle for the last 5 or 6 months. If it’s able to move above the high at $1,265.05, it could set a new high by potentially reaching $1,500.000 (gauged by measuring the height of the triangle). However, if it is unable to do so and the black uptrend line breaks, the price of gold could fall all the way down to $1,000.00 or even back at the longer term uptrend line (blue line).

The commodity dollars like the Aussie, Kiwi, Swissy, and Loonie could benefit from the gold move upwards. Why? Well, the mentioned currencies have about 80% correlation with the price of gold. Hence, whenever gold loses value, the comdolls tend to fall as well and vice versa. A rise in gold prices could at least temper these currencies’ move downward. An upside move could likewise benefit the mining industry particularly those companies which produces gold. Of course, the mining companies’ revenues and profits would increase even if the volume of their production remains the same.

Head and Shoulders in American Express? – September 1, 2010

The American Express Company also called as AMEX or AXP in the New York Stock Exchange is most known for its charge and credit card products. AMEX is the main competitor of Visa and MasterCard credit cards. The American Express stock price is currently at $39.87 but could go lower as there could be a head and shoulders setup forming on its stock chart. This will be confirmed once the stocks breakdown from the neckline of the head and shoulders formation. If it does, the stock price could head all the way down until it finds some support around $34.26. If it further drops below that marker, the next support could be $31.69. If the breakdown doesn’t take place and the stocks decide to move higher, the resistance it could encounter is $45.68. If the stocks further goes above that level, the next resistance could be $49.00-50.00.

Are the Dollar and Euro to be Dance Partners in Lieu of Domestic Growth?

Pick your movie metaphor, but it appears that the U.S. Dollar and the Euro are entwined in their own version of the “Last Tango in Paris”, where neither is sure where the relationship will head, but time marches on. Ever since the Greek debt crisis hit the global stage in May, markets have been in turmoil, until finally resuming something short of normalcy in the past few weeks. Volatility has subsided. Fundamentals seem to mean something once again, but uncertainty still hangs like a foreboding cloud over the horizon.

A look at the “EUR/USD” chart history for the past year does not reveal any hints of where it might head either:

Forex news reports have showcased the Euro’s ten-year march to fame and glory. It bobbled in 2008 when Lehman Brothers went down, but resumed its march thereafter, only to tumble once again in May. It rests now around the $1.30 mark, the same range it visited during its 2008 fall. Perhaps, U.S. tourists and businessmen will get more for their buck when traveling to Europe these days, but there are more important issues to consider going forward.

The Euro and Greenback have been tied together in this sideways trading pattern for over a month. German exporters are brimming with confidence and have been quick to grasp a competitive advantage in the global export market, luxury cars and all. U.S. exporters remain hopeful, but the turmoil in commodity markets happened after planting season had already begun, leaving no opportunity to adjust priorities. U.S. importers are eyeing European goods once again, but more imports, even at reduced prices, will only exacerbate a deficit-laden trade imbalance and weaken the Dollar more. The two dance partners twirl about as all onlookers debate when the dance will end and a breakout will occur.

Europe has well-documented debt issues among its weaker member states, known euphemistically as the PIIGS (Portugal, Italy, Ireland, Greece, and Spain). Concerns about a possible Greek default on its national debt are surfacing again in the news, and German bankers are disturbed that Spain has ignored requests for fiscal austerity and resumed public spending on national projects. The U.S. has debt and deficit problems of its own, corporations are sitting on nearly $2 trillion in cash but will not hire domestically, and any government policy changes in an election year are highly unlikely.

On balance, the relative value of the respective economies may be deadlocked due to fundamentals for some time to come. As for near-term projections, the analysts at Forecasts.org stand by their forecast of a weakening Dollar for the remainder of the year, as the Euro rises to $1.35 in December and crests at $1.36 in the quarter thereafter. Although there has been a brief dollar comeback of late related to not only the Euro, but also other “basket” currencies, the question is will this strength hold if poor preliminary GDP news is released this Friday? This entire week is laden with economic data releases, and consumer confidence figures and another speech by Fed Chairman Bernanke will complete the Friday trinity, so to speak.

The major “elephant in the room” that is blocking progress is the need for domestic growth. Domestic growth creates employment and increases tax revenues that can reduce deficits and pay down debts. According to the IMF’s recently published “World Outlook Report”, GDP growth for developed countries of the world has been on a 40-year decline from 4% in 1970 down to 2% for 2010 and the five years ahead. A GDP growth figure of 1.5% is seen as necessary to provide enough jobs for the growing population on annual basis. While we languish about 2%, developing countries are more in the 8% range, with China trying to rein their industrial growth machine back to 9.7% for 2010.

Gold has also made an incredible run up of 7% in the last four weeks, indicating that risk aversion is once again creeping into market psychology. Concerns of a possible double-dip recession or a Greek default have investors worried. Although corporate earnings were up in the stratosphere, the emphasis was on Asia for future growth, while most of Asia is presently consolidating their near-term growth plans. Pessimists believe that a major drop in the S&P 500 is imminent.

But, the beat goes on, as does the “EUR/USD” dance. In the “Last Tango in Paris”, Marlon Brando recants from his young French protégée, but soon presses for more commitment, only to be rebuked by a gunshot that leaves him dying on a staircase balcony. The two lovers were “caught up in the frenzied beat of a carnal dance they could not seem to stop.” Hopefully, our Greenback will have a better fate, or at least choose a waltz instead.