Easy Forex Daily Currency Trader Update

It had been a erratic day of trading on Tuesday as markets grappled with the effects involving extending U.S. tax cuts for two years. The moves will energize the U.S. economy as well as world-wide usage however stifle efforts to bring the debt to sustainable ranges. The U.S. dollar initially sold off yet eventually rallied and the bond market was routed.

Economists assert the tax package can be a game-changer for the U.S. economic climate in 2011 and beyond. Apart from extending the Bush-era tax cuts for all income brackets, it is going to lower payroll taxes and extend unemployment benefits. The moves symbolize a rash of spending and journeyed beyond what a majority had been expecting.

The 1st response had been a boost in risk appetite that saw the stock market rally over 1% and ‘risk’ currencies like AUD benefit while the USD and yen dropped. The bond market didn’t look positive on the news and rating’s agency Moody’s stated fears regarding the long-term fiscal situations in the united states. Bonds initially increased after which surged greater with 10-year yields going up the to 3.17% from 2.93%. The climb in yields makes U.S. assets much more attractive internationally and that sparked a rally in the USD subsequently in the day. As the dollar rallied, the risk trade reversed which sent commodities and commodity currencies further down.

The tax breaks have outweighed worry about the European sovereign crisis. Eu finance ministers ruled out broadening the 750 billion stability fund at meetings in Brussels. The concentration has now moved to Ireland where Irish lawmakers voted 82 to 78 to accept budget steps which will clear the way for the EU/IMF bailout to occur.

The Australian dollar is the best G10 performer after the Reserve Bank of Australia kept interest rates at 4.75%, to no surprise. Policymakers reported inflation might be contained through mid-2011 and that financial policy will be “appropriate for the economic outlook.” The Australian dollar initially fell though later increased on wide-ranging positive sentiment.

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Should you be setting up a new trade, wait for a trend to appear and go along with it. Then, retain an eye on your trading display screen and wait for your reversal signal before closing out your position. You will discover forty classic reversal patterns in Japanese candlestick trading. The 4 best patterns for your forex trading systems are these.

Engulfing lines: They are generally a two-candlestick pattern that signals a substantial alternation in emotion. Within a downtrend, bearish engulfing line pattern consists of little unfilled (green) line as well as a substantially bigger filled (red) line. If the bearish candlestick completely exceeds and closes below the bullish line, it can be a sign the uptrend has run its course. Should the bearish candlesticks engulf two or more of the preceding bullish candlesticks, the effect is enhanced. The contrary will additionally apply to bullish engulfing lines.

Tops n bottoms tweezer: The perfectly-named tweezer top and tweezer bottom are modest reversal patterns. A tweezer top develops whenever several shadows (or wicks) form a price top at just about same level. It signals that the bulls are experiencing problems busting thru this level. Note that the tops don’t require being in sequential intervals. A tweezer bottom will be the complete opposite of a tweezer top.

Evening star – morning star: These effective three-candle patterns function exceptionally well. A morning star reverses a bearish trend, the first candle incorporates a long, bearish real body when the downtrend increases. The second candle continues the fall early in the period however later recovers some of its losses. The 3rd candlestick carries a strong rally and closes higher than the midpoint of the initial candlestick. An evening star will be the reverse and serves tocap an uptrend.

Hammer hanging man: A hammer is a bullish pattern if it comes soon after a noticable downtrend. It possesses a small real body having a long lower shadow. The body might be filled or empty (red or green). This pattern connotes a sharp rejection of a new low and implies a potential alternation in trend. This one candlestick pattern is simply somewhat dependable. Watch for verification of a reversal in the subsequent candlestick before you make a conclusion. The opposite of a hammer is called a hanging man.

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–Maybe that missile off the coast of California was fired by Ben Bernanke as his first big blow in the currency wars. Maybe it was filled with dollar bills and on its way to China. Sneak attack or not, the U.S. IS exporting inflation to China faster than you can say “I’ll have General Tso’s chicken.” The task of today’s Daily Reckoning is to put the last weeks’ monetary events into a bit of strategic perspective.

–To begin with, let’s turn to a master strategist. Military theorist Carl Von Clausewitz reportedly once said that, “No military plan survives its first contact with the enemy.” We got to thinking of that this morning when looking at the huge price swings in the gold and silver futures markets over the last 24 hours. The Bernanke Fed’s plan to suppress U.S. interest rates and float U.S. asset markets has not survived its first contact with reality. Asset markets have scattered and surged.

–Note that we’ve replaced “the enemy” with “reality” because the Fed’s real enemy is itself, not China. They may be blackhearts and villains, but are central banksters really stupid? Do they not know that their actions fundamentally weaken the dollar and lead to lower of standards of living for everyone through competitive devaluation?

–Well, they’re probably not stupid. But they are acting stupidly, which tends to happen when you act like you have a God’s eye view of the marketplace when, in fact, your vision is rather limited. If you want to continue with the military terminology, the banksters (including General Ben) are operating in a closed-loop decision cycle. They act as if every Fed action has an equal and predictable reaction in the asset markets (stocks higher, bond yields lower). And they act in a methodical, plodding way.

–But if you can unleash a lot of water on a herd full of horses, you still can’t predict where the liquidity is going to run. In the current situation, the Fed hasn’t even really entered into the market as an active bond buyer yet (it plans to buy $150 billion over the next month).

–But it HAS caused an obvious change in global capital flows. Things you can’t print—gold, silver, food, fuel, and metal—are going up in value against the declining dollar. Global investors realise that if the Fed intends to buy up all the new U.S. debt issued (monetise it), the policy is clearly inflationary. And by crowding everyone out of shorter-term yields, the Fed forces everyone to speculate on other asset classes.

–That’s the primary trend and that’s what’s animating the melt-ups in stocks and hard assets. There may be secondary and counter-cyclical trends. But in the last week, it sure does seem like the primary trend has picked up speed.

–And no, it does not feel like a blow-off top in precious metals, although the “feeling” is admittedly subjective. It “feels” like a mortal body blow to the dollar standard that has left everyone a bit staggered and unprepared for the sooner-than-anticipated transition to a world currency system without the dollar the centre.

–But we’ll save commentary on all that for tomorrow. The Gold Symposium was a resounding success and left your editor with a lot to think about. We’re back at our post in Melbourne and dutifully scratching our chin…thinking. In the meantime, our old friend from London Adrian Ash has something he’d like to get off his chest about a gold standard. So Ade, what is it you have to say?

Courtesy The Daily Reckoning Australia

What Is The Real Value Of Gold?

There is a saying “worth its weight in gold” and many people wonder just what is the value of gold. One of the precious metals found on earth, gold is considered valuable today and had been throughout civilization.

Gold is used for numerous purposes that put it into the category of one of the most valuable metals. Many various kinds of jewelry are comprised of gold, but this is merely one of numerous situations where gold is used as a component. Gold is also used as an financial investment.

One thing that you can do is look at the historical prices that gold has been sold for. The prices that you will find when you are looking at the different investment charts and graphs are the prices that it is sold for in ounces. If you have never paid attention to the price, you might be amazed to find out how much it is sold for. It costs over a thousand dollars to be able to own even one ounce of gold!

The many items that are made of gold, together with the desire of people to possess it, are the reasons that gold is valuable. The historical variations in its value are due to the fact that there is a specific, limited quantity available worldwide and the demand for it at any given point in time. The price of gold is indirectly proportional to the quantity of gold that is held in reserve.

Taking a moment to review the historical prices of gold, you will realize that over recent years its price has been on the incline and that lately the price has increased quite a bit. Whether the price of gold will continue its rise is dependent upon supply and demand. As the supply is not increasing and gold it difficult to find, the price should stay at these high levels, for as long as people continue to want to possess it.

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Currency, Gold and Silver

From Dan Denning in St. Kilda for: The Daily Reckoning Australia.

–Well well well! So China has agreed, in a roundabout vague way, to allowing a freer float of its currency the yuan. This was ostensibly the big news over the weekend. But what does it really mean?

–During the financial crisis of 2008, China halted the managed free-float of the yuan and pegged its value to the dollar at 6.83. This meant that no matter how weak the U.S. dollar got, the Chinese currency would always remain relatively cheaper. This was a boom to Chinese exporters.

–A stronger local currency might mean China is changing gears in its economic growth plan. That is, rather than relying on export-driven GDP growth, it will shift toward more domestic demand (people spending money). According to the Financial Times, consumption as a percentage of GDP in China has actually fallen from 45% to 35%. In other words, Chinese economic growth has become even more export reliant.

–Is that changing now? Hmm. We’ll see. For Australia, there’s an argument to be made that a stronger Chinese currency is bullish for commodities. China can use its stronger currency to buy more tangible assets and fewer U.S. Treasury bonds. And maybe the unleashing of Chinese domestic demand will boost demand for certain Australian resources that are used in the production of finished consumer goods and not capital goods.

–Maybe. The other take on the China move is that it’s a race to the Keynesian bottom globally now. We’ll save the explanation for tomorrow. But it could be that the mantle of leadership for engineering global inflation has shifted East over the weekend.

–Let there be no doubt, though, the mantle of manufacturing leadership has definitely shifted east. According to US research firm IHS Global Insight, China is set to overtake the US in the dollar value of its manufactured goods output by next year. The mercantilist export policy has worked in incentivising global manufacturers to either move to China…or shut their doors because they cannot compete on unit labour costs.

–IHS reckons that this year U.S. manufactured goods will account for 19.9% of global output while China-sourced goods will account for 18.6%. The U.S. has held the lead in this category since 1890, when it assumed the title of “world’s workshop” from Great Britain. With such a long run at number one, is this evidence of the Money Migration…the gradual shifting of the world’s economic balance of power from the Western Welfare States to the managed economies of the East?

–Well, to some extent the statistics are probably misleading. The goods may be made in China. But who makes the profits from their sale? In the age of multinational corporations and long supply chains, the source of the manufacturing may be less important (from an investment perspective) than who has the best margins in the whole process (raw materials, capital goods, finished goods, retailers).

–But the big picture? China seems to be growing its capital stock at a faster rate than the United States. A big global debt-deflation will certainly reduce consumer demand everywhere. But when the global economy adjusts a lower equilibrium (with less credit in the system) where will all the factories be?

–Switching to another tangible asset, did you see that gold made a new high in the spot and futures markets? Spot gold hit $1,261.90 in New York trading while the August futures contract hit $1,263.70. This prompts the question among those new to gold: is the high in?

–Obviously, we don’t think so. When you’re talking about the end of the super cycle in fiat money, gold’s ceiling is considerably higher. Although, if you take a look at the chart below, it shows that silver might be the better speculation right now. It’s lagged gold’s recent move, judging by the gold/silver ration (the number of ounces of silver it takes you to buy an ounce of gold using spot prices).

Gold/Silver Ratio May 2010
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