Mr. Trichet said it would be inappropriate for the ECB to lend to Europe’s main bailout vehicle, the European Financial Stability Facility. A number of both U.S. and European politicians—not least the European Union’s Economic and Monetary Affairs Commissioner Olli Rehn—have urged that the EFSF be given a banking license, which would allow it to borrow from the central bank. However, a number of ECB officials have said this would break the terms of the EU treaty on monetary financing of governments. “We consider that governments have all capacity to leverage the EFSF themselves,” Mr. Trichet said. “We cannot substitute ourselves for governments.”
ASX 200 rally — but it’s still a bear market
Australia’s ASX 200 index rallied strongly Thursday and is headed for a test of the upper trend channel. 63-day Momentum declining below zero reminds that we are in a strong primary down-trend. Respect of the upper channel would warn of another decline — to test the lower channel border.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
We are experiencing exceptional volatility at present and risk of false signals is high. It is important in such situations to look for strong confirmation. One step is to wait for signals on the weekly chart to confirm those on the daily chart. As you can see, this bear market is a long way from over.
Rand triangle
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
The US Dollar looks like it is forming a triangle against the South African rand. Breakout above the upper border would signal continuation of the advance — with a target of R9.00* — while breach of the secondary trendline would warn of a correction to the longer-term trendline (at 7.35).
* Target calculation: 8.30 + ( 8.50 – 7.70 ) = 9.10
Japanese Yen
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
The dollar is testing support at ¥76, continuing its long-term bear-trend against the yen. Failure of support would signal a decline to ¥72*.
* Target calculation: 76 – ( 80 – 76 ) = 72
Pound joins Euro slide
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
The euro retraced to test resistance at $1.34 but is likely to continue in its downward trend channel. Reversal below $1.3150 would test our target of $1.30*. 63-Day Momentum declining below zero confirms the primary down-trend.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
The pound has been dragged lower by the euro-zone crisis. Breach of support at $1.53 would offer a target of the 2010 low at $1.43.
Kiwi dollar
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
The Aussie dollar found support between $1.23 and $1.24 against its Kiwi counterpart. The trend channel has weakened and AUDNZD is now likely to range between $1.24 and $1.28. The primary trend remains down, however, and failure of support would offer a target of $1.20*.
* Target calculation: 1.24 – ( 1.28 – 1.24 ) = 1.20
Commodities drag Aussie Dollar and Loonie lower
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
Falling commodity prices have started a primary down-trend on both the Australian and Canadian dollar. The Aussie rallied off support at its target of $0.94, but respect of the (secondary) declining trendline would warn of further losses.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
The Loonie also bounced of $0.94 and is testing the first line of resistance at $0.9650. Respect would again warn of further losses.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
Tesco’s UK sales slide as consumers cut non-essential spending | Business | guardian.co.uk
Apologies. I messed up the links at the bottom of the Trading Diary newsletter. For the correct link click here. Correct links are also available on the Trading Diary web page and under Recent Posts in the right margin of this page.
Tesco has reported its weakest six-monthly UK sales figures for 20 years as higher food and fuel costs contributed to stark decline in spending on non-essentials such as gadgets, CDs and games in its stores.
UK like-for-likes, excluding petrol and VAT, declined 0.5% in the six months to 27 August, with underlying sales down 0.9% in the final three months of the period.
via Tesco’s UK sales slide as consumers cut non-essential spending | Business | guardian.co.uk.
Oil touches new 2011 low – Business – CBC News
The price of oil, Canada’s biggest commodity export, reached a new 2011 low Tuesday.
November oil slipped as much as $74.95 US a barrel, its lowest since September of 2010. It recovered somewhat, but still closed down $1.94 at $75.67 on the New York Mercantile Exchange, its third straight day of losses.
Crude rose to three-year highs this year, but the reasons often cited for that increase — fears of growing Middle East tensions, rising Chinese demand, bullish views from investment banks and expectations of an aggressive U.S. stimulus plan — have diminished.
Other market watchers have suggested the price gained solely because of rampant speculation on the commodities markets.
How did Europe’s bank stress tests give Dexia a clean bill of health? | Business | guardian.co.uk
It may seem like a lifetime away, but it is only in July that the European Banking Authority published the result of “stress tests” on 90 banks across 21 countries in the EU, covering around 65% of the banking industry.
Eight failed. Sixteen were border line with core tier one capital ratios – a key measure of financial strength – of between 5% and 6%.
So presumably, Dexia, the Franco-Belgian bank on which markets are currently fixated, was in one of the danger-zone categories?
Well no. Its statement issued on the day proclaimed “no need for Dexia to raise additional capital”.
…….The tests have proved to be meaningless even quicker than they were in 2010 when Ireland’s banks were given a clean bill of health, only to be bailed out four months later. In July, 2011 the EBA had been reckoning that the capital shortfall of the banks that failed was just €2.5bn. Now the markets reckon that the hole is more like €300bn.
via How did Europe’s bank stress tests give Dexia a clean bill of health? | Business | guardian.co.uk.