Business-Insider

by S. Wade Hansen

The USD/JPY has been steadily falling since late July. Well, that is not actually true. It has had a few moments where the USD has been able to recover a little bit or when the JPY bulls have had to rest and recoup. But after each consolidation period or attempted rally, the USD/JPY has continued its march lower.

This current consolidation is no different. The USD/JPY is heading lower---down to 105.00. Are you ready to make 300+ pips?

To see why I believe the USD/JPY is dropping to 105.00 and how you can take advantage of it, click here: http://www.pfxglobal.com/index.php?o...296&Itemid=188
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LONDON (Thomson Financial) - Gold rose and was steady above 800 usd as dollar weakness and high oil prices spurred buying, although trade was thin as a result of the US Thanksgiving holiday.

Weak equity markets, after US shares slid yesterday, and the growing perception that the world's economy will not escape a serious slowdown next year sparked some gold-buying as the precious metal is seen as a safe haven.

Players like to put their money somewhere safe and into a less risky asset in times of turmoil.

'Gold's pre-eminent allure was demonstrated on Wednesday as it was the only metal, base or precious, to finish in positive territory,' said UBS analyst Robin Bhar.

At 12.38 pm, spot gold was trading up at 802.70 usd per ounce against 798.10 usd in late New York trade yesterday.

Weakness in the greenback, which hit yet another record low against the euro earlier today, spurred buying from those trading in other currencies because they found dollar-denominated gold to be cheaper.

Meanwhile, higher oil prices, which stayed close to a record high of 99.29 usd struck yesterday, sparked inflation jitters -- to which gold is often bought as a hedge.

Gold has risen some 30 pct since the start of this year and surpassed analysts' expectations who had previously seen 750 usd an ounce as the key price milestone.

The precious metal hit 845.58 usd per ounce earlier this month -- less than 5 usd lower than its all time peak in January 1980 of 850 usd.

Dollar weakness, sky high oil prices and ongoing market-turmoil are likely to continue and players reckon these factors are likely to support gold going ahead.

In late October, Credit Suisse said gold could fetch over 1,000 usd per ounce by 2010, and will average 838 usd next year on account of global economic worries.

Other banks' views are not far off either. Gold will race past its record high by early next year on dollar weakness and as the precious metal's safe-haven quality is likely to boost buying, said RBC Capital Markets earlier this month. In the first quarter of 2008, RBC expects gold to rally to as high as 900 usd per ounce.

JP Morgan analyst Michael Jansen said precious metals are likely to draw support 'as long as a) the USD remains weak, b) crude oil remains strong and c) investors continue to look to hold precious metals as a hedge.'

The only way gold might fall is if and when players sell off their holdings in a bid to raise cash to cover losses elsewhere.

In other precious metals, platinum was up at 1,464 usd per ounce from 1,458 usd.

Silver was up at 14.49 usd per ounce against 14.42 usd late in New York yesterday, while palladium dipped to 353 usd per ounce against 355 usd.


anealla.safdar@thomson.com as/slj COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved.

PARIS (Thomson Financial) - European Central Bank president Jean-Claude Trichet will meet French President Nicolas Sarkozy in Paris this evening, the ECB and the Elysee palace said.

Trichet is due to appear before the Attali commission, which was set up by Sarkozy to identify obstacles to French economic growth, at the French Senate at 5.30 pm and he will hold talks with Sarkozy after this, they said.

They could not say whether Trichet or Sarkozy would make any comments after the meeting.

Trichet regularly holds talks with European heads of state and government but this is understood to be his first such meeting with Sarkozy since the French president's election in May.

Sarkozy has regularly complained about the euro's appreciation and criticised ECB interest rate hikes.


steve.whitehouse@thomson.com sw/slj COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved.

Equity markets and carry trades had a strong finish on Tuesday, with a good amount of bullish momentum in the last 90-120 minutes in spite of the fact that Citibank will have additional sub prime related writedowns. There were several good reasons for this but probably the most significant was the news that Citigroup named Richard Stuckey to unwind their sub prime positions. What's interesting is that Stuckey was the executive who helped unwind Long-Term Capital Management's bad bets nine years ago.

Meanwhile, in what could be remembered as he quote of the day (month, year?), Lawrence White, professor of economics at NYU's Stern School of Business, said that unwinding Citi's positions might be difficult due to the "opaqueness as well as the stinkiness'' of what Citibank is holding in sub prime paper.

What also helped support the market was a classic case of bad news= good news. The Fed yesterday reported that major banks made it much tougher for all types of customers to get loans over the past three months and that residential mortgages were harder to get than at any time in the 17-year history of the Fed's survey of banks' senior loan officers. The reason why this disturbing news went over so well is because it brings a further rate cut, or cuts, back into play.

And now that the fed is back in play, the Non-Farm Productiviy report will take on special significance because as productivity rises, inflation falls. High productivity basically means that business' can provide goods and services at lower cost at the consumer level becasue their cost of production is low.

Productivity is a key factor that the fed looks at in making their inflation projections and it's something they discuss at every meeting, according to the minutes. So with commodities like Oil (and now gasoline) rising in price, productivity will be especially important for market participants.

In this time of market uncertainty, any bullish momentum will need to see the fed's door open to the possibility of reducing rates further in order to be maintained. Low productivity means higher inflation and far less chance of the fed making another move and as far as this market is concerned, that's an especially bad thing.

Thanks for reading my post and I hope you use my blog occasionally:
thenewstraderfx.blogspot.com

If you're interested in finding out about my ten dollar/week trade room (no comittiment-cancel any time) contact newstraderfx@yahoo.com.

No it didn't blow up in one day, Christmas is still coming and your kids will be OK. That's why i changed the title from "Ended" to "Changed". But they may need to learn a bit more about Chinese culture then was taught when we were in school. Two events that occured today will be where the dividing line in the shift of economic power from West to East will officially be noted.

Citibank will go bust unless The Federal Reserve prints as much money as it needs and gives it to them. Even so, the bail-out will be seen as further evidence of hospice care, much as the so-called SIV superfund is being viewed.

At the same time PetroChina tripled in value from it's IPO and it's valuation is over one trillion dollars. That makes it a bigger company then ExxonMobil and General Electric COMBINED and it makes the state-owned oil company worth more then the entire Russiian stock market. It also means that 5 of the 10 largest companies in the world are from China and it also makes the Chinese stock market bigger then London's.

And unless they pull the plug on the S&P 500 today-

1. Carry trades will unwind as the dollar strengthens vs. the high yielding currencies and depreciates vs. the Yen

2. Gold and Oil will fall in price.

3. U.S. debt will be bought, especially the shorter end of the yield curve.

4. Fear indexes like the VIX and Ted Spread will appreciate.

5. It will become more and more difficult for Hong Kong to maintain it's dollar peg as the demand for HKD (needed to buy Chinese H-shares) rises. The Hong Kong government and economy benefit from the peg so it's doubtful that they will abandon it however, currency specualtion may force the issue. De-pegging the HKD would cause it to rise rapidily and dramatically vs the dollar.

Thanks for reading my post and please do not vote usesless UNLESS you have a specific comment to make that expresses your opinion. Any and all opinions are always welcome whether you agree with me or not. If you're interested in finding out more about my trade room (ten dollars a week, no minimum number of weeks) contact newstraderfx@yahoo.com. Thanks.

HONG KONG (Thomson Financial) - The US dollar gained against the euro in afternoon Asian trade Monday as investors bet the European Central Bank (ECB) will likely keep its key interest rate steady when council members meet this week to decide on monetary policy

'There is significant uncertainty in the market and on the economy that the ECB has to consider, including higher oil prices and a weak financial sector,' said Thomas Lam, treasury economist at United Overseas Bank. 'I don't think the current backdrop warrants a rate hike.'

At 1.00 pm (0500 GMT), the euro was trading at 1.4490 dollars, down from 1.4518 in Sydney this morning. The euro on Friday rose to an all-time high of 1.4527 dollars in New York.

Against the Japanese currency, the dollar was quoted at 114.56 yen, little changed from 114.54 this morning.

The ECB is meeting on November 8 and most economists are expecting European policy makers to keep the benchmark rate at 4 percent.

Some economists expect the ECB to increase the key rate in coming months to curb inflation, which accelerated to 2.8 percent in October from 2.1 percent in September.

'There is a little bit of profit-taking, so the dollar strengthened a bit,' said Tim Concon, research head at ING Financial Markets.

The dollar's gain is expected to be short-lived on growing speculation of another rate cut in the US by the year-end, which would weaken the greenback further.

The Federal Reserve on Oct 31 cuts its key rate by 25 basis points, sending the dollar plunging against other major currencies. It was the Fed's second rate hike this year as policymakers struggled to rescue the troubled financial sector and keep the economy from slipping into a recession.

Aside from falling to record lows against the euro, the dollar also slumped to a 57-year low against the Canadian dollar and a new 26-year low against the sterling last week, as investors switched to higher-yielding currencies.

The euro's recent strength is supported by 'real portfolio flows' such as purchases by other central banks to boost their foreign exchange reserves. Thus, even if the ECB decides to keep its rate unchanged for the rest of the year, the single currency won't suffer a major correction against the dollar.

'It seems that in recent weeks, there appears to be real portfolio flows into the euro zone and these are non-speculative flows. So even if there is a sudden shift in expectations, the euro won't retreat aggressively,' Lam said.

Meanwhile, the yen strengthened against the dollar this morning from 114.85 in New York on Friday, as money flowed back into the Japanese economy.

Citigroup Inc, the world's biggest bank, said it expects to make additional writedowns of up to 11 billion US dollars to reflect the declining value of the roughly 55 billion dollars in US subprime-related securities it holds on its books.

The bank said its subprime assets have experienced 'significant declines' in value since September 30, following downgrades by major ratings agencies and other market developments.

The writedowns will shave about 5 to 7 billion dollars off net income, Citigroup said in a statement.

Citigroup made the disclosure a day after it announced the resignation of chief executive Charles Prince. Prince is the second CEO of a major US financial institution to quit in the last week because of massive losses from subprime assets. Merrill Lynch CEO Stanley O'Neal also resigned last week after Merrill disclosed its biggest-ever quarterly loss.

'The yen's movement is consistent with what's happening in the equities market,' said ING's Condon. 'The unwinding of carry trades is the theme today as investors become more risk-averse.'

Under the yen carry trade, investors borrow from Japan, where the 0.5 percent rate is the lowest among developed countries, and invest the proceeds in higher-yielding securities including stocks.

The greenback was buying 93.62 Canadian cents this morning compared with 93.35 cents at the end of last week, off a low of 93.20 cents, its lowest level against the Canadian currency, or ''loonie,'' since the latter was floated in 1950.

Hong Kong 1.00 pm (0500 GMT)

US dollar

114.56 yen

1.1535 sfr

Euro

1.4490 usd

166.05 yen

1.6719 sfr

0.6939 stg

Sterling

2.0878 usd

239.20 yen

2.4086 sfr

Australian dollar

0.9205 usd

0.4407 stg

105.47 yen

New Zealand dollar

0.7640 usd

jun.ebias@thomson.com

je/zr

COPYRIGHT

Copyright Thomson Financial News Limited 2007. All rights reserved.

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

Here is the original post: http://www.forexfactory.com/news.php...0p#post1697689

Here is Part II from us, a can of worms may be opening up here, so let's go fishing. This may be hard to read, and for some they will not agree, and that is fine. Its importance cannot be ignored, or can it?:

Until the US can instigate a replacement Energy source, or against all odds, convince itself that a life-style change has to be made because the 'Good ol' Oil Days of Oil at $50' are just around the bend, it will remain crippled with a Current Account deficit, and a Trade Imbalance. It is OK hearing that a cheap $ helps Export Prices, the reality is however that the US is a net Importer (more comes in as Imports than goes out as Exports), and therefore a cheap $ may not be as beneficial as some think.

Just look at the options outside of Saudi Arabia, the main source of US Oil Imports;
Canada.
The Trade disputes over Soft-Wood lumber did damage to trade relations that are still being felt now, and instigated Canada opening up Exports to other Global regions more quickly than it otherwise might have.
Venezuela.
When the President of Venezuela said at an International Convention that he could “still smell the sulpher” having followed George Bush to the podium (a reference to the Devil) it summed up the desire that each country would have in expanding further relationships that benefit each other.
Nigeria.
Strong links to Europe and the Middle East that the US will not break.
Russia.
Increased Oil production in 1990, the first Global producer to be able to do so since the 1970’s, but that collapsed as quickly as the new private company, Yukon, collapsed. Russia now just about produces enough Oil to feed itself and the surplus goes to China.
Iran.
The second largest producer of oil in the world. Iran states that it needs to build a Nuclear reactor because in a decade its own Energy needs will not be enough; without the reactor they say that they will become a Net Importer of Energy. If Iran needs to have Nuclear, and the power that gives the country, it will be in return for a continued flow of global Oil. What price to pay is that for Global Powers? Whatever the answer is, Iran needs Nuclear to allow Oil to flow; will their excess be fed straight to the US? Just think about the politics there for a moment; neither country has too much trust of the other, and both will say, "for good reason".
UK
The staunchest ally of the US, but that is getting questioned by public opinion. The growing minority population in the UK are becoming politically strong, as is their right, and as such the UK/US link may not be as strong in 10 years as it is right now. The North Sea Oil production cannot increase capacity to supply excess US needs, there is just about enough to cover the UK needs, and they still import Oil.

So, back to Saudi Arabia; they seem to have peaked in production, and for whatever reason cannot increase the flow at a rate that the US and Chindia (China and India, the worlds future Super Powers?) need just to feed the current growth rates. The Saudi's walk a fine line in the close Export link that they have with the US, as the religion that is practised by many is Wahhabi, a form of Sunni Islam. As such there is a distrust of Christian, Jew, Shiites, and, as a seperate group, the US.

So, where next? We need to look in the mirror and see if we can find Oil there, if not we need to look at whether we are each prepared to make something change, because the arguments are that if we don’t tough times ahead are going to be very likely.

This is not going away, and Traders could be seeing historical times if the US is not to be dominated by Oil Exporting countries. It is moving that way right now, a change in lifestyle is what is required;

1) Look to renewable Energy like Wind, and Tidal, the initial cost of infrastructure on them will soon look cheap compared to the cost of a Global shortage in Oil.

2) The Industrial Revolution was enabled only after switching from burning wood, an easily accessible source of Energy that was dwindling, to Coal, an Energy source that was plentiful but harder to find. Without making that sacrifice the UK would have stayed as an Island in the North Sea, rather than a tiny country that lead a Global revolution of change and advancement.

3) Maybe look to learn how to fend for ourselves, asking and learning from Parents and Grandparents the basics of Family life and survival on our own terms, and to do it before they are not able to teach us. Survival enslaved to Energy that powers our cars and computers that link us to the world will be redundant if the Oil situation is not addressed.

4) Save more, (Hard to understand for a society that has the largest net per capita income and the lowest net per capita savings rate in the world), but the lack of savings makes us reliant on Government help in creating liquidity in hard times. If Energy is not addressed the Government, running the largest deficit ever seen and the ballooning Trade Balance, will be facing debt numbers that look small at these historically high levels right now. In the next cycle of economic slow-down where will the cash come from for the Government to flood the market with cheap Interest Rates, lower Mortgage levels and Tax cuts to jump-start things again? We can't expect the Fed to just turn the printers on, or can we?

We would not maybe be as concerned if we were flexible enough and prepared to change our lifestyles, learn from older generations, (who needs to ask Grandpa when it's a lot easier just to Google it), and to save to be able to look after ourselves. In reality however we are just not prepared to do that, and unfortunately that may be our downfall in regard to Energy.

One thing is certain out of all of this; there are few, if any, nations on earth as adaptable as the US, and few more committed to 'getting it done' in good time, and therefore it will be surprising if this realization does not get addressed, it may be however that the US public need to instigate the moves at home, rather than wait for the consequences of this Energy Shortfall.

1929, 1945, 1982. Sound familiar? Depression, World War II and Recession. All three had record Government deficits and Resource shortages. In all cases Government spending tripled, higher Energy costs were then reflected in high unemployment, and the Government needed to spend its way out of trouble with Tax cuts, Interest Rate cuts, and Government work contracts. (Remember the White House having a wood burner put in to save Energy costs, and a wind turbine fitted? Where have they gone?).

If it sounds familiar it is because that is what we have now, and that is why most Trade Desks are not in Dollar Long positions for anything other than Hedges against forward positions, or to address end-of-day Risk/Assets Ratio excess and looking to earn overnight Swap Interest. (Remember that the USD is now a net PAYER of Swap Interest on some Pairs, and if the Rate Cuts continue it will cost money to hold $ Longs overnight.

We have not even started on Gold, that looks the same to us regarding US debts. Long Gold, deliverable Gold too, not paper, is where some are looking to be, the stuff that you can touch, and in small denominations that are easily tradable, and hideable. But, that really is another story.

Our Alerets have been centered around this for a while now, if you are interested please feel free to pop in each day, most of our information is free, and some say it is also priceless. Free and Priceless? How unusual is that!!!
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Analysis by TheLFB.com
© 2007 LFB Services, LLC. All rights reserved.
99 Wall Street, New York. Scottsdale. London.

by John Jagerson

It is unlikely that the tier of small announcements due this week will be able to change the trend on their own, which means we need to be on the lookout for the unexpected. Technicals will likely be important this week as traders try to set profit targets and projections for the next few weeks.

Outside the forex, I am watching yields and stocks very closely for signs of a breakout. A change in the risk bias in these markets through a breakout or unexpected news will ripple through the forex. Clearly that would impact the JPY but the commodity currencies may also be sensitive to these changes if investors flee to quality again. Although the AUD and NZD look very fundamentally sound, it makes sense to manage our risk more aggressively on those pairs in the short term.

To listen to the podcast, click here: http://www.pfxglobal.com/
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Analysis by Profiting With Forex (PFX)

This is an excerpt from an article written by Danske Bank. For the full text of the original please visit: http://www.danskebank.com/danskeresearch


The EUR/USD has risen again to a new all-time high of around 1.45. The greenback has thereby weakened close to 9% vis-à-vis EUR since the beginning of the year. But USD weakness is even more widespread, with the DXY index also falling to an all-time low. We argue here that even though the USD weakness is prevailing, it is not inexplicable or out of touch with the factors normally driving USD. In fact, these estimations suggest an even weaker USD and that a level of 1.50 is not far away. We advise, however, that these results should be treated cautiously, since investors might be reluctant to buy EUR against USD at current levels and some latent factors might come into play if USD keeps declining.

A falling USD should in fact be a mystery to nobody. It is consistent not only with relative interest rate trends but also with wider developments in both financial markets and the global economy. Among the key drivers behind recent dollar weakness we note the following:

* Led by emerging markets, the global economy continues to grow well above trend; in particular, Chinese output has been impressively high and thus carries on to be the world's growth locomotive. While USD is a good defensive currency, it performs quite badly in good times.
* US interest rates have fallen sharply relative to other markets during the year. Since the middle of June the 3M US-Euroland spread one-year forward has narrowed by 70bp.
* Oil prices have rallied more than 40% since June, which is directly negative for USD / positive for EUR. Combined with sky-rocketing freight rates this makes energy extremely expensive in the US causing growth to slow down further.
* The stock market has risen rather strongly since the middle of August while equity volatility has slumped. None of that favours USD.
* US house data has of late been frankly terrible. US housing starts are currently at a 14-year low, existing home sales are at the lowest level since the series began in 1999 and new home sales have dropped since late 2005.
* The Fed has performed 'damage control' by lowering rates to help home-owners in distress. Speculation on a new easing cycle from the Fed might have spurred some of the USD sell-off.
* The huge deficit on the current account is the big elephant in the room nobody talks about. There is currently not much attention on this topic and the somewhat weaker USD will to some extent reduce the problem. It can, however, pop up occasionally causing further stress on USD.
* USD tends to under-perform when risk aversion rises. The credit crunch pushed risk aversion to all-time highs and we remain at an elevated level of risk aversion.

As we have argued on a number of occasions during the past few months, US dollar weakness has been entirely consistent with relative economic and financial trends. This continues to be the case. The combination of strong global growth, rising oil prices and relative US weakness is a highly negative mix for the dollar. Hence, we still see no reason to argue that the dollar weakness is driven by structural rather than cyclical factors, nor does EUR/USD strength seem excessive.

The dollar can stay weak for some time. The factors mentioned above are likely to persist - to a greater or lesser extent - for some time. The global economy is still expanding, US yields do not seem to go higher than elsewhere, oil prices might adjust but are still elevated, the stock market is not heading towards a major correction, US housing data is still awful, the Fed has a 'neutral' bias (ie, no tightening bias) and it will probably take some time before risk aversion returns to those levels we saw as 'normal' before the credit crunch.

We run a simple model on EUR/USD based on 3M forward rates, five-year real rates, oil prices, VIX and S&P500 (R2 0.88). Based on these fundamentals, this generates an estimate of 1.48(!). In fact, we are only one standard deviation from the psychologically important level of 1.50. There is - in other words - plenty of room for USD to drop even further. When one adds seasonality effects (USD tends to under-perform at year-end) we would not be surprised if we take 1.50 out soon.

So are there not any risks to this? Of course there are. That is why we take profit at 1.4510 on our long EUR/USD position opened on 10 October. And no-one has ever been blamed for locking in profit. USD has gained 7% in two and a half months. That said, if we see more USD negative factors ahead, we might take another ride upwards. Some investors will be tempted to cash in before a correction, which can be based on a number of things:

* US growth is still strong. Preliminary numbers for Q3 surprised on the upside by rising 3.9% y/y. If Europe could post such growth rates, we would still be celebrating.
* Q3 earnings for US companies have been strong. Around two-thirds have reported better than expected earnings (which, however, is quite normal), ie, the situation for US companies has not been shaken that much by the recent market turmoil.
* US business confidence and consumer confidence are still at reasonable levels, although declining but not unambiguously pointing towards a forthcoming US recession.
* The prospects for growth in the euro zone might have been exaggerated. If that is the case, this will not favour EUR going forward.
* The USD is fundamentally undervalued relative to EUR. Our PPP analysis suggests that EUR/USD should correct towards 1.20 if purchasing power should equalise in the regions. This level is not far away - we were there in March 2006.
* If USD keeps drifting lower, a coordinated central bank rescue plan might be set up to stop the decline. The G7 meeting failed to deliver a common point of view for the delegates but this forum has earlier intervened to correct currency movements considered 'unhealthy'.

Our newly adjusted EUR/USD forecasts are now as follows: 1m at 1.43, 3m at 1.46, 6m at 1.50 and 12m at 1.38.

We will monitor the situation closely as USD obviously is of primary concern. We recommend to hedge USD positions as the uncertainty towards USD is linked with considerable risks at the moment.

Danske Bank
http://www.danskebank.com/danskeresearch

Disclaimer

This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets' research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.