Tuesday, October 19, 2010

Gold Closes Lower after China Rate Hike

James Hyerczyk, Futures Hound
Published 10/19/2010 - 8:58 p.m. EST

December Gold sold off on Tuesday after China’s central bank raised interest rates. The move by China surprised traders who began selling riskier currencies and commodities.

The People’s Bank of China raised its benchmark one-year lending and deposit rate by 25 basis points effective from October 20, the first increase in nearly three years. The move was most likely tied to pressure from the U.S. to increase the value of the Yuan. Others believe it was an effort to prevent the economy from overheating. The action by China triggered a rally in the U.S. Dollar, thereby weakening demand for gold and silver.

The current break in the gold market is the largest in terms of price and time on the daily chart in a few months. This could be an indication that further downside movement is coming.

The current main bottom on the daily swing chart is $1325.60. A trade through this price will turn the main trend down.

Based on the current closing price reversal formation, the first down side target is the 50% level at $1313.00, followed by the Fibonacci level at $1295.30. On Wednesday, an uptrending Gann angle comes in at $1293.00. This makes $1295.30 to $1293.00 an important support cluster.

Wanna know when the BOJ will intervene?

By Sean Lee || October 18, 2010 at 22:48 GMT

If so, keep a sharp eye on this page from the BOJ, http://www.boj.or.jp/en/type/stat/boj_stat/fx_daily10/index.htm, and add it to you favourites. The number to watch is the trade weighted index down the bottom of each pdf. The BOJ intervened when the index got close to 120 and as its now back above 124, the pressure is probably off.

Tuesday, October 12, 2010

Dollar Trades Near a 15-Year Low Versus Yen After Federal Reserve Minutes

By Candice Zachariahs and Catarina Saraiva - Oct 13, 2010 7:15 AM GMT+0800

The dollar traded near the weakest in 15 years against the yen and a record low versus the Swiss franc on speculation Federal Reserve officials will reiterate they are poised to resume bond purchase to support growth.

The Dollar Index, which tracks the greenback against major trading partners, was near its lowest since January after the Fed said yesterday in minutes of its September meeting that it was set to take more credit-easing steps “before long.” The bank will announce increases in Treasury purchases, or so-called quantitative easing, in November, Goldman Sachs Group Inc. has said. The euro was near a nine-month high before a report likely to show European industrial production rose in August.

“The Dollar Index will remain under pressure,” said Kurt Magnus, executive director of foreign exchange sales at Nomura Australia. A second round of quantitative easing “is imminent and the minutes suggest that it will be large and aggressive.”

The dollar traded at 81.81 yen as of 8:02 a.m. in Tokyo, from 81.72 yesterday in New York. It reached 81.39 on Oct. 11, the lowest level since April 1995. The euro fetched $1.3915 from $1.3924 yesterday and touched $1.4029 on Oct. 7, the most since Jan. 28. The yen traded at 113.84 against the euro from 113.79.

The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against currencies including the euro, yen and Swiss franc, slid 0.1 percent to 77.363 yesterday. It touched 76.906 on Oct. 7, the lowest level since Jan. 15.

The index will decline to 76.70 this week, corresponding to the euro advancing through $1.41, Magnus said.

The gauge of the U.S. currency has fallen 3.8 percent since Sept. 21, when the central bank said in a statement following its policy meeting that it’s prepared “to provide additional accommodation if needed” to support the recovery.

‘Before Long’

That phrase was meant to be in accord “with the members’ sense that such accommodation may be appropriate before long,” according to the central bank’s minutes yesterday.

The Fed will announce increases in its Treasury purchases at its policy meeting Nov. 2-3, helping the U.S. avoid the “very bad” economic outcome of a renewed recession, New York- based Jan Hatzius, chief U.S. economist at Goldman Sachs, said yesterday via e-mail.

Fed Chairman Ben S. Bernanke will discuss business innovation in Pittsburgh today and speak on monetary policy objectives and tools in Boston on Oct. 15.

The Swiss franc traded at 95.71 centimes after yesterday gaining as much as 1 percent to 95.56 centimes against the dollar. It touched 95.55 centimes on Oct. 7, the strongest ever.

Weber Comments

Industrial production in the euro region probably rose 0.8 percent in August, economists forecast before the European Union’s statistics office report today.

The report supports European Central Bank Governing Council member Axel Weber’s comments yesterday that the risk of Europe sliding back into recession is “negligible.” The central bank should stop its bond-buying program, he said.

“These securities purchases should now be phased out permanently,” said Weber, who also heads Germany’s Bundesbank, in a speech delivered in New York yesterday. With policy makers debating when to withdraw other emergency measures, Weber said the risk of “exiting too late” is greater than the danger of “exiting too early.”