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Last Wednesday the six leading central banks decided to put off this Monday’s cheaper dollar liquidity. The central banks will cut their dollar swap rates, thus approaching more easily, especially European banks in U.S. dollars. The markets reacted to this decision with a massive stock market rally. The EURUSD for example, rose in a few minutes to more than 200 pips and the DAX rose by 5%. I assume that we will learn this week, more background information about the central bank action.
To stop the sharp appreciation of the Swiss franc, the Swiss National Bank intervened in early September with a definition of a minimum rate of 1.20 against the euro. The appreciation was actually stopped, but the more somber economic outlook remains unchanged for the moment (See graphic of the KOF barometer). Therefore hardens the rumor that the Swiss National Bank will intervene in the near future once more. The latest COT (Commitment of Traders) report shows banks and fund managers speculating on this rumor.
The declining unemployment rate has been positive, for me anyway, the market appeared relatively calm. It is the first time that the rate has fallen significantly below 9%. The news is very positive.
Unemployment rate for U.S
Next Thursday the leaders meet for a wider Europe Summit Meeting, which will be heavily monitored. Already on Monday to meet Sarkozy and Merkel, a common line in Europe to represent the summit. At the same time on Thursday, the ECB and the Bank of England interest rate decision with your next press conference announced. On Tuesday, the interest rate already in Australia and Canada will be announced.
As you can see, we expect a week with many decisions of central banks and political change, you act accordingly, be careful!
The beautiful AB = CD pattern that I saw last week was, unfortunately, blew through the dollar liquidity by central banks. The picture has now become more complicated than that. Many indicators are pointing upward. The COT report, however, tells a different story. Commercial and non-commercial positions are stronger than ever on a weaker euro. The course is open Wednesday and Thursday rebounded at the Fibo 23.6 (closing price of the daily chart). I now wait for a favorable short position, which at the moment is of course unclear. I'll keep you up to date...
EURUSD on December 5 after market opening
The Dax has rebounded yet again in the 50s Fibo. I therefore look more like a short term downside potential in the DAX (price targets at around 5870). However, should the closing price of a daily candle well over 6150 points, the image in the Dax would brighten considerably. In addition, policy changes should necessarily be taken into consideration when you decide to trade the Dax (See above fundamentals).
DAX Future Dec-11
Only the USDCHF shows a chart in my opinion one positive image. Looking at the chart picture, the rumors of the Swiss central bank intervening, and the COT report shows that the price should go up. Maybe I would wait for an approximate closure Gap (Gap between December 2 and December 5).
USDCHF opening on 5 December 11
The weekly view is by no means an invitation to trade, but serves only as a market study.
The Japanese government interventions have had injection type effects but then the trend has prevailed. This week’s intervention looks to be no exception. That being said the rise and rise in the value of the yen must hit an upper limit and swing. It will be interesting when there is a momentum shift to see if the Japanese central bank continue to intervene under political pressure to further safeguard value for their export goods.
The full story of MF Global’s demise will come to light in the course of time we are still feeling 2008. What is sure is that most of the premier financial providers of the time have exposure and so hold the debt. The question for me is how the JP Morgans and Deutsche Banks decide to absorb this debt.
A feel good story to inspire is that of Angry Birds. A small Finnish company convinces the most stylish company in the world to take a risk on them, both prosper and the Finnish company now grows up to stand on her own two chicken legs. Read on http://www.bloomberg.com/news/2011-10-31/-angry-birds-creator-will-open-its-first-retail-stores-in-china-this-year.html
I have been focusing on gold a lot lately and as I write my target of $1280 has been surpassed. It will get to $1300 but my T/P level at $1280 banks profits before that emotional resistance. Gold is now suddenly the focus of media attention and suddenly every tin pot analyst has their theory.
On one hand there is just nothing good happening to the USD and the announcement today on monthly core CPI (excl food and energy) may well continue the gloom and cause the rise and rise of gold.
On the other there has to be a bubble effect. Retracements are inevitable. Profit taking is inevitable.
Little short selling opportunities exist but due to the underlying circumstances if one can pick bottoms of the retracements and go long they will be swimming down the river. Remember the money management that you use should limit positions that can withstand a $20 or even $30 price movement.
Silver is a precious metal like gold but also has commercial and industrial uses. Over the long term one ounce of Gold is worth sixteen times that of one ounce of Silver. When the Gold/Silver ratio gets far from sixteen you expect a return to the mean. Silver price moves can be very volatile.
There is a strong argument for looking at silver as it may be a little more solid, due to it’s dual identity.
Below the 1 hr graph shows the USD/JPY post Japanese intervention. The longer it goes horizontal the higher the probability of successful short trading.