31 MAY 2013: NEW RALLY IN CURRENCY MARKET – EURO PREVAILS OVER DOLLAR

All conditions were created for a rally of EUR/USD: reports from the Eurozone were better than forecast, and at the same time for the USA – worse than predicted. The result didn't keep itself waiting for long, the pair could go above the strong resistance level at 1.30, although it reached a maximum on 1.3061 and finished the trading session around 1.3040. It is quite interesting actually, that the data from the USA were not as dire as predicted, and the Eurozone in general was not presenting something really satisfying or exceptional. The conclusion comes by itself – the overbought USD gives power to the Euro.

So, GDP (Gross Domestic Product) of the USA in 1 quarter was reconsidered to fall from 2,5% to 2,4%, and the number of the unemployed who have submitted an application for receiving a grant, grew to 354 thousand. It is absolutely not enough to frighten Bernanke, but it is quite enough to provoke investors to close long positions on USD on tops. This also gave support to the British Pound and GBP/USD from the level of opening at 1.5129 pair reached a maximum of 1.5219, having finished the trading session around 1.52.

After disappointments with the labor market in Germany, today it is worth looking at the data on retails in the country. Usually there is direct correlation: there is no income – there are no expenses, however analysts predict the indicator’s growth, so tension in the market increases. If sales volumes will really increase, it will give additional support for further strengthening of EUR/USD to the next resistance levels on 1.3070 and 1.3110.

In relation to Japan today, it is worth acknowledging the statement of IMF (International Monetary Fund), in which it completely supported the current monetary policy of the country, and stated extensive prospects of its further realization.  Furthermore, the problem with growth of profitability of state bonds is considered to be completely controllable. Asian stock markets started the day positively, however, by this time, buyers confidence had already evaporated. Japanese Nikkei slightly restores yesterday's losses, while the Hong Kong’s Hang Seng again looks worse than its"colleagues".

Prices for precious metals are stable, with Gold on 1417.08$ and Silver on 22.74$. Prices for oil are slightly down, with Brent on 102.07$ per barrel and WTI on 93.47$. Today the next meeting of representatives of member countries of OPEC becomes a key event of the day in the oil market. Questions on the current quotas of production, and also the increase in production of oil in the USA will be discussed. America now produces record volumes of oil, thereby reducing the dependence from former exporters.

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07 MAY 2013: BULLISH STOCK MARKETS SET FOR NEW RECORDS

US and Asian stocks reached new record highs as the Japan’s Nikkei average soared 2,8 % on Tuesday morning.  For the first time since June 2008 the Nikkei broke above 14 000 as the market played catch-up from an extended holiday. The strong US jobs data eased concern over the health of Japan’s biggest export market. Japanese exporters as Toyota, Honda and Sony led the rally jumping more than 3 %.

In the US the S& P led by Apple and financials pushed further above 1600. The S & P has gained 13,4 % since the beginning of the year.  Decent earnings together monetary easing and low interests rates have helped the stock markets to new records. As long as the world’s leading central banks are providing markets with liquidity  the stock  rally is most likely going to continue at least in the short term.

Asia is today focusing on Australia where markets are waiting for the Central Bank of Australia’s decision on interest rate. Analysts are split on whether the interest rate would be lowered by a quarter point to a record low of 2,75 %. A jump in stock prices are then predicted. Australian stocks fall 0,4 % prior to the central bank’s verdict.  The Asian Pacific, MSCI-index, was as the Korean Kospi slightly down after big upward jumps on Monday.

In the currency market the Euro is on the defensive Euro/USD trading at 1.3077.  The head of the European Central Bank (ECB), Mario Draghi, stated yesterday that ECB is watching economic data and is ready to take further action if needed. The upcoming German elections in September make changes in the austerity policies unlikely in spite of Germany being under pressure from other EU-members.

While gold, USD 1465,  is losing ground on continued outflows in holdings at the world’s largest gold backed exchange traded funds, SPDR Gold Trust, crude and copper are steady.  Brent crude continues to trade above USD 105 a barrel.

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16 April 2013: Gold prices collapse

Gold collapsed completely yesterday as precious metals plunged to the lowest levels seen in years. Gold trades at USD 1351 an ounce falling 250 dollar in two days. Silver fell from USD 28,25 ending yesterday at 22,50. Oil and other commodity prices sharply declined. Brent crude fell below the critical USD 100 a barrel level at USD 98,42. Stock market plunged as investors dumped risky assets and worries over slowing growth in China and US took hold. After a short spell of relief, Japanese yen, JPY, continued to slide against USD, before rebounding to 97,67 yen to a dollar.

The dramatic development in financial markets follows a worldwide rally in stocks in the first months of 2013 where daily new records on Wall Street have outpaced fundamentals. The monetary easing in the US, Europe and lastly Japan have injected huge capital into stocks without succeeding to create new employment. Risk markets have been rallying at a pace not in line with a tepid global growth recovery. Investor’s sell off of precious metals, commodities and shares might be seen as a last ditch effort to take some profit while markets evert to levels more in line with fundamentals.

Investors are reassessing their portfolio allocations for the second quarter of 2013 on that basis. In this perspective it seems likely that funds would be pulled out of the US stock market also taking European uncertainties into account. US debt might then back as a secure long term investment and reduce demands for an alternative safe-haven as gold. There are therefore valid question marks as to whether the deep plunge in gold will continue and that we are still far from a bottom.

USD/JPY recovered during Monday. The dollar fell to 95,67 yen. The Euro hit a low of 125 yen. Both USD and Euro have rebounded. Euro is trading at 126,75 yen. In a market dominated by steep falls and quick rebounds, EURO/USD has traded steady in an interval between 1.3050 and 1.31. In early Asian trading, the Asian-Pacific index, MSCI, has stabilized after a 2% drop in European and US markets yesterday. A bomb explosion killing two and injuring 130 people at the finish line of the Boston marathon added to the downward pressure on the New York exchanges.

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