- EUR/USD - The break higher is underway
- Chart of interest - perfect night for 'risk on' view
- Chart of Interest - China PMI & AUD
- January 1st 2013 - Game Changer for Gold
- USD/JPY and JPY crosses - is this the retirement trade?
- Apple Inc - Far enough for now?
- NZD/USD - No one's talking about it!
- Interesting Snippet on US Oil Production
- NZD/AUD - Sunk by back-to-back poor NZ data
- Stunning Gold Chart - Gold on the Cusp of a Strong Rally?
- View archive...
As I warned in my output of Thursday (Charts of Interest – perfect night for ‘risk on’) the EUR/USD today appears to be confirming the attempted break higher of Friday.
The ‘Inverse Head and Shoulders’ pattern documented in the chart below should now come into effect suggesting a rise as high as 1.4300 can unfold in the weeks/months ahead.
Understand this ! – that the previous Eurozone ‘Crisis Indicators’ …the outright cost of borrowing for Spain and Italy (and the cost relative to safe haven Germany) are now at their lowest levels in 7 months. The so called troika (ECB, IMF and the European Commission) has done its job and created cheap enough funding now so that Greece and other stressed countries can safely battle through for the next 2 years, time for their governments to implement the necessary fundamental reforms.
1) The 18 month trend line is now broken
2) A closer looks shows that Friday’s failed attempt has been overcome paving the way for the new move.
This morning there are numerous charts suggesting we could be on the verge of some very healthy moves higher i.e. risk on.
At the very least the overnight moves gives some very clear parameters to trade against, particularly if you hold a (extremely) bullish view as I do. I always have to check myself when my sentiment is so strong, however I will not be ‘falling in love’ with any positions. My stop loss levels will be clearly defined and my risk taking appropriate for the size of my account. It’s not a crime to be wrong but it is to stay wrong!
Ok here we go.
1) Dow Jones Index - Opened 1% down, ended up 0.85%. Essentially a bullish engulfing day with huge rejection tail.
2) EUR/USD – Butting up against 18 month trend line resistance. Down again or explode up through it…..what’s your call?
3) EUR/USD – A closer look. Its abundantly clear that a MASSIVE battle is taking place between bulls and bears right now given the price action of the last two days. I like to view it in somewhat barbaric terms. A battle is on and to the victor….the spoils! For whichever camp prevails in this battle the rewards will be quite long lasting I think.
4) NZD/JPY – As suggested in yesterday’s piece ‘Part 2 – NZD/JPY – a pause?’ when moves are strong the 10/20 day ‘river’ is a great indicator and overnight it did a nice job (as did my short term model) so I suspect that NZD/JPY should now not go under 67.00
There are a myriad of charts that all look the same but obviously there’s no point reproducing them all here. So I’m very bullish and have clear parameters to trade against. It’s an exciting prospect for a trader.
A lovely look at the components of yesterday’s Chinese Flash PMI. Note the big jump in export orders.
The 2nd chart is an overlay of the Chinese PMI plotted against the AUD/USD. 7 years of correlation suggest the PMI will lead AUD higher in coming days.
On January 1st 2013 the latest edict from the Basel Committee on Banking, an elite group of financial rule makers who’s task it is to define capital requirements and banking standards, comes into play. The new rule will be that Gold is attributed with First Class Asset status in the banking world ie any gold that a bank holds will be counted 100% towards the collateral of that bank whereas currently they can only count 50% of their Gold holdings in their equity totals.
So what does this mean for Banks, well for the first time in over 40 years they will be able to rate the Gold they hold in their vaults as a First Class asset and will therefore be able to lend 100% against it, of course this also means at the same time they will now no longer have to hold as much government bonds or mortgage backed securities and let’s face it both of these have had their reputations tarnished over recent years. Thus it will be no surprise to see Bank’s significantly increase their Gold holdings relative to the other First Class assets that they hold especially as part of the new rules has stipulated that Banks must increase their First Class Assets from 4% to 6% of their overall assets.
This move attributes to Gold an equal status as cash, in other words it once again becomes essentially a currency. This is a massive development and yet the mainstream media seems hardly to be noticing such a huge and potentially game changing story for the importance of Gold.
It is not surprising that authorities are keeping fairly quiet about this as Central Banks are quietly going about the business of accumulating more gold into their coffers in anticipation of the new rules at year end and they certainly don’t want to be competing with all and sundry (for example you and me) during this process as they want to keep competition, and therefore price, down to a minimum.
For all we know this could well be the first move to return to some sort of Gold standard, something that we are constantly told would be impractical and will not happen. You can rest assured that if such a development was ever enacted the general public would receive no prior warning of it.
Is this new rule likely to lend itself to a significantly higher Gold Price- well it is not very likely to cause the opposite effect now is it.Jan
The USD/JPY has attained the state that I refer to as ‘trending’. Price pushing up hard and fast against spaying Bollinger Bands . The ‘morning star’ rejection of lower levels that I documented on the 10th of November has been a wonderful indicator.
From observing this technical state in the past I’ve noted that ‘pullbacks against the trend can be quite sharp but they are usually brief by time’ (24/48 hours).
This pair, in my opinion has been incredibly depressed for a number of years, and it could really fly going forward. Why not 100+?
For a bit of perspective (and showing my age) this pair was at 250.00 when I started in FX and had been at 360.00 in the late 1960’s.
What about Gold (the store of value as central banks globally attempt to inflate their way out of trouble) versus the JPY? Check the 1 year consolidation break out!
And NZD/JPY ? The Christchurch rebuild will make NZ’s economics look unlike any other western economy and on the other side of the ledger Japan’s problems (which I’ve documented many times recently) undermines the JPY. 100 on this cross anyone?……………………….and you get paid to hold it!
A trade weighted type portfolio of each of these pairs may be vastly rewarding going forward.
Apple Inc. shares have fallen 28% since September (20% since Steve Jobs death) in a rather brutal sell off. As long time writer Dennis Gartman is want to say “Apple was one of the ‘Generals’ leading the equity market troops to the topside in days gone by and has been the ‘general’ leading the way south. Can Apple now lead markets higher again in the near term?
Fridays price action is highly suggestive of very strong buying interest in the US$505/525 area. Perhaps the killer sell off has gone far enough for now ?
I’m amazed that there is so little chatter around the potential for a really stiff NZD/USD fall. Has the recent lack of relative volatility lulled the market into complacency?
Sharply falling global share markets, rotten local employment and retail sales data and our closest (and biggest) trading neighbour is in the midst of an interest rate cutting cycle and I’m not seeing terribly much interest to sell. Nor am I seeing much chatter on the wires regarding the possibility of a big fall. AMAZING!
Here’s an overlay chart of NZD/USD (in yellow) and the Dow Jones Index (in black). Since the GFC the two instruments have been highly correlated but look at the magnitude of the Dow fall comparative to that of the NZD in recent weeks.
The NZD/USD has been viewed by most as being somewhat overvalued for quite some time now, certainly departing RBNZ Governor Bollard fired a parting shot at the U.S. and the FED’s policies which keep the USD depressed (and as a result overvalue the likes of the NZD). I’m hearing the farmers have their cheque books firmly closed at present which doesn’t help. Is the Q3 in NZ just a soft blip or something more, is the USD ready to roar……..no one knows of course but the sum of what we do know right now suggests the kiwi may have quite a bit further to fall.
I have been a fan of shorting U.S oil on just this theme of increased U.S production (refer ‘Time to sell Crude Oil?’ dated 29 Aug. Crude then US$96 – now US$85).
A somewhat less risky trade to capture this theme could be a ‘pairs’ trade selling U.S Crude buying Brent as the supply expectations widen.
US is top dog in oil
Many of us can (vaguely) remember the oil crises of the mid-70s when the Middle East countries held the world to ransom over oil supply, causing petrol prices to skyrocket.
An everyday item that we all took for granted suddenly became an expensive luxury, particularly if your Dad drove a big Holden V8 gas guzzler to cart the kids around.
Now the worm has turned.
For so long, Saudi Arabia has been the world’s largest single country producer and together with all its OPEC mates has kept the western world on tenterhooks for the best part of three decades or more.
But now with the shale gas revolution in the US (and elsewhere around the non-OPEC world), the International Energy Agency (IEA) thinks that the US will become a net oil exporter by 2030 and almost self-sufficient in oil by 2035. The US currently imports around 20% of its oil requirements and is by far the biggest consumer of petroleum products.
The IEA’s latest annual review of world energy supply says the US will overtake Russia as the biggest gas producer by 2015 and become the world’s largest oil producer by 2017.
The combination of producing its own energy and more frugal consumption through technology, education and basic economics will also dramatically shift the geopolitical balance of power around the world.
In short, the US may not have to be so friendly to the Saudis or anyone else in the Middle East any more.
The shale gas bonanza also has the fortuitous side effect of replacing coal as the main energy fuel stock in the US which would also go a long way to mitigating many greenhouse gas concerns.
This story has a very long way to play out, but has already become a major global issue.
I have been a fan of NZ’s prospects over that of Australia in recent times given the Canterbury rebuild and a number of droughts around the world keeping NZ’s soft commodity prices elevated compared to that of Australia’s hard commodities. The strategy has given a couple of nice runs higher to trade on the NZD/AUD cross but recent data has abruptly turned that around.
Today’s very weak Retail Sales data, coming hot on the heels of the shocking 13 year high in NZ Unemployment, may see built up long NZD/AUD positions liquidated in coming sessions.
My modelling analysis worked very well today capping the recent bounce in the cross at 0.7860 versus the model sitting at 0.7870/92. The model is splayed wide which is suggestive of a strong move underway and the readings are dropping very quickly. That means selling NZD/AUD around here may have its risk mitigated very quickly, say within 2/3 days.
The daily chart is suggestive of a forthcoming test of one year support at 0.7745. A break of that level could get very ugly indeed.
No one expects that the RBNZ will need to cut because they think the boost from Canterbury will be ‘real’ in the RBNZ’s own words but if the world sinks a little again, we get another decent jolt delaying the rebuild.
For a very long time Gold has been considered a commodity, however since the GFC and the massive money printing conducted by the world’s central banks, the modern view is to consider Gold as money i.e. that classic store of value when everything around it is being debased. To whit Gold has been rising steadily as Copper (the Dr with the PHD in Industrial Activity) has been declining just as steadily.
Given that Gold was one of the main beneficiaries of the first few rounds of QE and the world’s central banks have again, over the last few months, embarked on another easing frenzy one could expect that Gold will begin to rise again.
In that context this long term chart of Gold, as measured against its 55 week moving average, makes for very interesting reading.
Since the 2001 low of US$255.00 oz the 55 week moving average has done a simply amazing job of defining the major trend. Now the recent sharp drop to US$1.672 oz very much looks like the low made in April 2009 before Gold embarked on a massive 122% rise. (This was the same period that my Mr Silverballs rode NZ$1,500 to NZ$1,000,000 in Silver using the leveraging capabilities of the BBY Online system).
Further hardening my resolve that Gold may be on the cusp of another strong rise after a 13 month consolidation, the weekly bounce off the 55 week m.a. was a ‘bullish engulfing week’.
Chart 1 – The 55 week m.a. documented.
Chart 2 – A closer look at the recent bounce.
I think that this could be one of those very rare occasions where an truly stunning opportunity exists. I have multiple ideas on how to capture any ensuing move should you be interested.