Market condition

Forex - Weekly outlook: December 23 - 27

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The U.S. dollar ended the week higher against most of its major counterparts, as demand for the greenback remained supported after the Federal Reserve announced plans to begin tapering its monthly bond-buying program.

The Fed announced Wednesday that it would reduce its USD85 billion-a-month bond buying program by USD10 billion in January. In his last press conference as Fed Chairman Ben Bernanke said the economy was continuing to make progress.

The U.S. central bank reiterated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%, the threshold at which the Fed has previously said it would start to consider rate increases.

The Commerce Department said Friday that the U.S. economy expanded by 4.1% in the third quarter, well above initial estimates for 3.6% growth.

USD/JPY rose to 104.64, the highest level since October 2008, before turning lower to settle down 0.14% at 104.09 as investors locked in profits.

Following a two-day meeting, the Bank of Japan kept its pledge to expand the monetary base by an annual JPY60 trillion to JPY70 trillion, in line with expectations.

EUR/USD fell to 1.3625, the weakest level since December 6, before turning higher to end up 0.07% at 1.3671.

Standard & Poor's cut the European Union's long-term credit ratings to 'AA+' from 'AAA' over concerns that E.U.'s financial profile has deteriorated while cohesion among E.U. members has lessened, though the euro shrugged off the news.

Meanwhile, the pound ended lower on Friday, with GBP/USD shedding 0.27% to end at 1.6329. Official data showed that the U.K. gross domestic product expanded by 0.8% in the third quarter, in line with previous estimates.

Elsewhere, the Canadian dollar ended Friday’s session higher against its U.S. counterpart after official data revealed that the country's consumer price index came in flat in November compared to expectations for a 0.2% fall. Core consumer price inflation, which excludes the eight most volatile items, ticked down 0.1% last month, confounding expectations for a 0.1% rise.

A separate report showed that retail sales in Canada slipped 0.1% in October, disappointing expectations for a 0.3% rise. Core retail sales, which exclude automobiles, increased by 0.4% in October, compared to expectations for a flat reading.

In the week ahead trading volumes are expected to remain light due to the Christmas holiday and as many traders already closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.

Meanwhile, the U.S. is to release key reports on durable goods orders, new home sales and jobless claims.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, December 23

Markets in Japan will remain closed in observance of the Emperor's Birthday.

The U.S. is to produce government data on personal spending and expenditure, while the University of Michigan is to release revised data on consumer sentiment and inflation expectations.

Meanwhile, Canada is to release monthly data on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health.

Tuesday, December 24

Markets in Germany will remain closed in observance of Christmas Eve, while France is to release data on consumer spending.

The U.S. is to release data on durable goods orders, a leading indicator of production, as well as a report on new home sales.

Wednesday, December 25

Markets in Australia, New Zealand, Europe, the U.K., Switzerland, Canada and the U.S. will remain closed for the Christmas Day holiday.

Thursday, December 26

Markets in Australia, New Zealand, Europe, the U.K. and Canada will remain closed in observance of Boxing Day.

Meanwhile, the Bank of Japan is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.

Later in the day, the Labor Department is to release the weekly report on initial jobless claims.

Friday, December 27

Japan is to release a series of data, including reports on household spending, inflation, retail sales and industrial production.

Meanwhile, the U.S. is to round up the week with a report on crude oil supplies.

Adapted from Top Forex Trading Resolutions For 2014

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Talking Points:

• Develop an Understanding of Counter-Trend Moves
  
• Keep An Eye For Diverging Monetary Policy in 2014

“Always bear in mind that your own resolution to succeed is more important than any other.”
-Abraham Lincoln

Last week, the Federal Reserve announced the Taper which brought the US DOLLAR into deserved focus and allowed the year to end in a similar fashion as the year began. A little less than a year ago, the US government shutdown was averted and that caused equity markets and JPY crosses to start the year off strong which pretty much carried through for the remainder of the year. Looking ahead, we do not know for sure what news headlines may cross our terminals but we can prepare to be ready when the news drops.

To help you prepare, here is a list of resolutions that you can look to implement in order to be ready to take on 2014 with the help of DailyFX:

Develop an Understanding of Counter-Trend Moves with Elliott Wave

Many traders quickly realize upon approaching this market that the trend in any market is their friend as a trend is often more likely to resume than reverse unless a news shock or lack of enthusiasm stops the trend in its tracks. However, that understanding can lead to confusion with how to enter into a trend because when a trend is most apparent to the masses like USDJPY in May of 2013, the trend can then be at most risk for correcting or reversing.

Learn Forex: USDJPY Wave 4 Displayed a Classic Triangle Correction before the Trend Resumed



Simply put, Elliott Wave allows you to not only clearly identify the trend and put the current price action in context but more importantly, Elliott Wave can help you identify countertrend moves within the overall trend so that you can clearly look for the resumption of the trend. Having a clear understanding of when a correction may be terminating based on a Fibonacci relationship or pattern recognition can be of great help to many traders who feel a bit hopeless when looking at the chart now.

Stock winners and losers of 2014 offer lessons

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Investors are gleeful about how stocks are steamrolling to a big year, but many may not realize how many big blue-chips have missed the train.

All told 48 stocks in the Standard & Poor's 500, including major stocks including International Business Machines, Intuitive Surgical, JC Penney, Caterpillar and Abercrombie & Fitch, are down this year. It's been a painful experience for investors holding shares of these laggards as the rest of the market has exploded to new highs. The S&P 500 is up 30% this year.

"Where you find earnings disappointments, or overvaluation, you find things haven't performed as well," says Robert Maltbie of Millennium Asset Management. It's even more painful to be left out given that this market rally has included a broader swath of stocks than ever before. With 452 stocks higher this year, the market's participation is at its best levels since the record in 2003 when 458 were up for the year, says Howard Silverblatt of S&P Dow Jones Indices.

That's not to mask the stellar performance of the winners. Investors turned extremely positive on stocks that were ridiculed or practically left for dead. Netflix was the year's biggest winner, up 280%, as investors appreciated the company's growth and it recovered from a public relations nightmare over pricing changes. Best Buy, supposed to be done in by online retailers, soared 230% as the company started renting space in stores to tech giants Apple, Microsoft and Samsung. And Micron Technology, a maker of memory chips, soared 220% on as demand for chips for tablets and smartphones has soared.

Yet, a closer examination of the stocks left out tells interesting clues about the market's direction, including:

• Several of 2012's "it stocks." International Business Machines and Intuitive Surgical, maker of robots that help perform surgery, were must owns in 2012 with many investors. The stocks were up 4.2% and 5.9% respectively in 2012. But this year, earnings disappointments at IBM and regulatory concerns at Intuitive have pushed the stocks down 8.4% and 25%. Homebuilders, too, had a big run in 2012. But in 2012, even though the home market is stable, shares of builders Lennar and Avalonbay are down 11.1% and 11.2%.

• Commodity plays. Miners of raw materials are having a tough year, as consumers in emerging nations, like China, curb demand. That's been a hit to gold and copper miner, Newmont Mining and Cliffs Natural. Along with these stocks, also hurt are makers of heavy equipment like Caterpillar and Deere, as demand falters, Maltbie says.

• Trampled retailers. J.C. Penney and Abercrombie & Fitch have been suffering to get their mojo in a fickle retail market. J.C. Penney is still recovering from a series of missteps under the guidance of former Apple retail head Ron Johnson, which alienated customers. Abercrombie & Fitch's results are struggling due to weak traffic to stores as its women's apparel designing missing the mark with consumers, according to a report by S&P Capital IQ's Jason Asaeda.

• Tech laggards. Data storage providers Teradata and EMC both missed the rally as did networking equipment maker Broadcom and open-source software firm, Red Hat. Disappointing earnings reports are not what tech investors are looking for. Slowing growth at Apple has lead to the stock rising just 6% this year, after being a darling in 2012.

Stock pickers who chose one of these laggards suffered mightily as the rest of the market took off, says Jack Ablin of Harris Private Bank. "It's tough to own individual stocks," he says. "That's where diversification pays off."

Weekly outlook: December 30 - January 3

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The euro rallied to a two-year high against the U.S. dollar on Friday, with moves amplified in poor year-end liquidity after European Central Bank Governing Council member Jens Weidmann said keeping interest rates low may endanger political reforms.

According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy. "We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly added.

The euro strengthened broadly following Weidmann’s comments, with EUR/USD climbing to 1.3894, the strongest level since October 31, 2011, before subsequently consolidating at 1.3745, up 0.4%.

The pound also rallied against the greenback, with GBP/USD rising to 1.6578, the highest since August 19, 2011, before ending at 1.6479, up 0.42%.

Trading volumes were thin as many investors already closed books before the end of the year, reducing liquidity in the market and increasing volatility, which helped exaggerate market moves.

Meanwhile, the dollar rose to a fresh five-year high against the yen amid ongoing expectations that the Bank of Japan will have to expand its stimulus program in the coming months in order to meet its target of 2% inflation by 2015.

Official data released Friday showed that consumer price inflation in Japan rose at an annualized rate of 1.2% in November, up from 0.9% in October.

USD/JPY rose to 105.19 on Friday, the highest level since October 3, 2008, before settling at 105.16, up 0.35%.

Elsewhere, the greenback advanced against the commodity-linked Australian, Canadian and New Zealand dollars amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will reduce its bond-buying stimulus program by USD10 billion a month starting in January.

In the week ahead trading volumes are expected to remain light, with many markets closed for the New Year’s holiday.

Meanwhile, China is to release closely-watched data on manufacturing activity, while the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s two largest economies.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, December 30

The U.S. is to release private sector data on pending home sales, a leading indicator of economic health.

Tuesday, December 31

Markets in Japan and Germany will remain closed for New Year’s Eve.

Australia is to produce data on private sector credit.

Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.

Wednesday, January 1

China is to publish government data on manufacturing activity, a leading indicator of economic health.

Meanwhile, markets in Japan, Australia, New Zealand, Europe, Switzerland, the U.K., Canada and the U.S. will remain closed for the New Year’s holiday.

Thursday, January 2

Markets in Japan and China will remain closed for a bank holiday. China is also due to release the final reading of its closely watched HSBC manufacturing PMI.

The euro zone is to release revised data on its manufacturing PMI, while Spain and Italy are also to release individual reports, while the U.K. will also release its manufacturing PMI.

Later in the day, the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The U.S. is also to publish data on construction spending.

Friday, January 3

Markets in Japan will remain closed for a bank holiday. China is to produce official data on service sector activity.

In the euro zone, Spain is to publish data on the change in the number of people employed.

Switzerland is to publish the results of its SVME manufacturing PMI in addition to its KOF economic barometer.

Meanwhile, the U.K. is to publish data on activity in the construction sector, a leading indicator of economic health, as well as a report on net lending to individuals.

The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.

I think - it will be interesting situation for GBPUSD for this coming week - we see at the chart that Chinkou Span line came to be very close to historical price - it may be breakdown (good for sell trade) :

What is the Pip Cost for Gold and Silver?

Gold: Symbol XAU/USD

The pip cost for 1 ounce of Gold (minimum trade size) is $0.01 per pip.


Silver: Symbol XAG/USD

The pip cost for 50 ounces of Silver (minimum trade size) is $0.50 per pip

Pip cost can be seen inside the Advanced Dealing Rates window in the box right above the Sell/Buy prices. The box for each metal is shown below:

check the relationship with EURUSD.

Even though the stock market has continued in its upward path in early 2014, some of the market bulls are already becoming a bit nervous about the market. If this trend continues, it will eventually be a positive for stocks as bearish sentiment is still way too high. In a survey of 14 Wall Street strategists, the average target is 1955 for the S&P 500 in 2014. That is quite a difference from last year when the analysts' average S&P 500 target was 1531 or a gain of 7.3%. The actual close at 1805 was 17.9% above the average target. Unlike 2013, no one is now looking for a lower close, while in 2013 two analysts were looking for the market to be unchanged or lower for the year. This year there are a number of targets above 2000. It should be noted that making long-range forecasts is difficult but investors, in my opinion, should be cautious about following a big firm's recommendations. A review of the most- and least-favored stocks for 2013 revealed that the least-favored stocks did almost three times better than those most-favored stocks. So what is an investor to do in 2014? Here are my recommendations for investing success this year.

More...

Silver is down, should you invest in it now?

What should investors do?

When the National Spot Exchange Limited (NSEL) introduced bullion investing in demat form (e-series), it caught on since only gold was available in the demat form as exchange traded funds (ETFs). The NSEL fiasco has come as a setback for e-series investors. "It was a good concept but was not implemented properly," says C P Krishnan, director, Geojit Comtrade.

Silver futures on the commodity exchanges are short-term contracts, better suited to speculators. Hence, longterm silver investors have no option but to buy the commodity in the physical form, which entails higher costs. Still, given the prospects of gold, it may not be a bad idea to invest in silver.

4 tips for silver investors

BUY BARS

Invest only in the standard 1 kg bar (0.999 purity), not in silver ornaments.

BEWARE OF TARNISH

Silver is bulkier than gold and takes up more space in the locker. In fact, the 1 kg silver bar may not fit into small-sized bank lockers.

STORAGE ISSUES

The investors who buy from commodity exchanges can leave silver in the certified vault. This takes care of storage problems, but you will have to pay additional charges for this facility.

STRIKE DEAL TO SELL

If you want to sell silver back to the jeweller, he will offer a discounted rate. The discount is higher if you buy it from another jeweller. To avoid this problem, strike a deal at the time of purchase that the jeweller will buy back silver at a reasonable discount at a later date.

GBPUSD Fundamentals

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Fundamental Forecast for the British Pound: Bullish

• British Pound Soars as UK Retail Sales Rise Most in 3 Years
• Price & Time: Sell GBP/USD Next Week?

The British Pound appears to be coiling up for another run at the 1.6600 handle as the positive developments coming out of the U.K. economy raises the Bank of England’s (BoE) scope to normalize monetary policy ahead of schedule.

With the BoE Minutes due out next week, a more hawkish policy statement may spark a near-term rally in the sterling, and Governor Mark Carney may show a greater willingness to raise the benchmark interest rate later this year as U.K. Jobless Claims are projected to contract another 32.0K in December. Indeed, Monetary Policy Committee (MPC) board member Ben Broadbent emphasized that unemployment is falling faster than the central bank expected while speaking earlier this week, but it seems as though there’s growing bets that the BoE will implement a dovish twist to its forward-guidance in order to preserve its highly accommodative policy stance for an extended period of time.


There’s speculation that the BoE will lower the unemployment threshold to 6.5% from 7.0% in its quarterly inflation report scheduled for February 12, and this theme presents the largest risk to the bullish British Pound forecast as market participants weigh the outlook for monetary policy. Nevertheless, Credit Suisse overnight index swaps are starting to show expectations for higher interests over the next 12-months as the BoE moves away from its easing cycle, and the shift policy outlook should continue to prop up the sterling over the near to medium-term as the central bank starts to unwind its non-standard measures.


With that said, we will continue eye the topside targets for the GBPUSD as long as it holds above the 1.6300 handle, and the rebound from key support may spark fresh highs in the pound-dollar as it continues to carve a series of higher highs paired with higher lows.