UK & Europe Archives - Page 49 of 88

November 22, 2012

Euro and Aussie Dollar long tails

The Euro reversed direction in response to the weakening dollar, breaking resistance at $1.28 to indicate another test of $1.31/$1.32. Respect of the new support level would confirm.

Euro/USD

The Aussie Dollar likewise displays evidence of buying pressure, with long tails below resistance at $1.04. Breakout would offer a target of $1.06*. Reversal of of 63-day Twiggs Momentum below zero, however, would warn of a primary down-trend.

Aussie Dollar/USD

* Target calculation: 1.04 + ( 1.04 – 1.02 ) = 1.06

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

November 21, 2012

Euro and Aussie Dollar meet resistance

The Euro respected resistance at $1.28 and another test of medium-term support at $1.265 is likely. Breach of support would indicate a correction to $1.23.

Euro/USD

The Aussie Dollar likewise respected resistance, at $1.04. Follow-through below $1.03 would test primary support at $1.02/$1.015. Recovery above $1.04 is unlikely but would test $1.06*. Reversal of of 63-day Twiggs Momentum below zero would suggest a primary down-trend.

Aussie Dollar/USD

* Target calculation: 1.04 + ( 1.04 – 1.02 ) = 1.06

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 18, 2012

French fury at Economist’s ‘time-bomb’ warning | FRANCE 24

Katharyn Gillam at France24 writes:

In its edition set to hit news stands on Friday, the highly-respected British weekly [The Economist] warned that France’s high taxes on businesses were eroding the country’s competitiveness and that France was a bigger danger to Europe’s single currency than the debt-stricken countries of Italy, Spain and Portugal………The right-leaning magazine highlighted [France’s] strategic position in the Eurozone and its massive public sector that accounts for 57% of gross domestic product…….

via French fury at Economist’s ‘time-bomb’ warning – FRANCE – FRANCE 24.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

UK: Bank break-up an option if ring-fence fails | Vickers

Matt Scuffham and Steve Slater write:

Britain could force banks to fully separate their retail operations from riskier areas if lenders fail to implement a “ring-fence” that sufficiently safeguards taxpayers or improves behavior, the architect of the plan said on Monday.

The Independent Commission on Banking, chaired by Sir John Vickers, recommends that UK banks “ring-fence” their retail operations to protect customers from riskier investment banking activities.

Andy Haldane, the Bank of England’s financial stability director, commented last week that ring-fencing would only work if the retail operations have a separate management, pay structure and balance sheet.

via Bank break-up an option if ring-fence fails: Vickers | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

Europe tests support

Today we look at the long-term view, with monthly charts. Germany’s Dax closed below 7200, warning of a correction to the rising trendline. 13-Week Twiggs Money Flow oscillating above zero indicates buying pressure. Respect of the rising trendline would indicate a primary advance. Breakout above 7600 would confirm, offering a target of 8000*.

DAX Index

* Target calculation: 7000+ ( 7000 – 6000 ) = 8000

Reversal of the Madrid General Index below 760 would warn of a correction. Respect of 700 would be bullish but a test of 600 is more likely. A 63-day Twiggs Momentum trough above zero, while unlikely, would also be a bullish sign.

Madrid General Index

The FTSE 100 found resistance at 6000 and is likely to re-test the rising trendline. 13-Week Twiggs Money Flow oscillating above zero indicates long-term buying pressure. Respect of the trendline would indicate another primary advance, while breakout above 6100 would offer a long-term target of 6750*. Penetration of the trendline is less likely, but would test primary support at 5250.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 11, 2012

Taking the leverage out of economic growth | Reuters

Edward Hadas points out that long-term credit growth has exceeded growth in nominal GDP (real GDP plus inflation) in the US and Europe for some time. Not only does this fuel a credit bubble but it leads to a build up of inflationary pressure within the economy. If not evident in consumer prices it is likely to emerge as an asset bubble.

For the last two decades, accelerating credit has been closely correlated with the change in GDP – both in the United States and the euro zone. GDP growth tended to speed up shortly after the rate of credit growth increased, and slowed down after credit growth started to decrease.

This correlation implies there is an equilibrium rate of credit growth – the rate that corresponds to the long-term pace of nominal GDP growth. Though the pace of credit growth can vary from year to year, over time private debt and nominal GDP have to expand at the same rate for overall leverage to stay constant. That’s not what happened in the past two decades. Since 1990, Deutsche found a significant gap between credit and GDP growth in the United States and the euro zone.

In both, the neutral rate of credit growth – the rate associated with the economy’s long-term growth rate – was 7 percent. Those long-term nominal GDP growth rates were lower: 4.8 percent in the United States and 4 percent in the euro zone. In a single year, the difference of 2-3 percentage points doesn’t have much effect. Over a generation, though, it leads to a massive increase in the ratio of private debt to GDP.

The gap between growth in Domestic Debt and Nominal GDP widened in 2004/5 during the height of the property bubble and has narrowed to near zero since 2010.
Domestic Debt Growth Compared to GDP Growth
Hopefully the Fed have learned their lesson and maintain this course in future.

via Analysis & Opinion | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 11, 2012

Europe’s Populists at the Gate by Barry Eichengreen – Project Syndicate

Barry Eichengreen writes:

In focusing on summit declarations and promises of far-reaching reforms of EU institutions, investors are missing the real risk: the collapse of public support for, or at least public acquiescence to, the austerity policies required to work down heavy debt burdens – and for the governments pursuing these policies. Mass anti-austerity protests are one warning sign. Another is growing popular support for neo-Nazi movements like Golden Dawn, now the third-largest political party in Greece.

The rise to power of a “rejectionist” European government – that is, one that unilaterally rejects the policy status quo – would immediately bring the crisis to a head…….

via Europe’s Populists at the Gate by Barry Eichengreen – Project Syndicate.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 11, 2012

Why Investors Shouldn’t Expect Much Euro Zone Reform | Institutional Investor

David Turner writes:

Most economists think deregulation is, in the long term, good for these countries’ economies, and hence for the sustainability of their sovereign debt markets. The economic case for pressing ahead with liberalization is strong. Can institutional investors therefore look forward to a fast pace of growth across the entire euro zone, boosted by deregulation?

The answer is “no,” for several reasons.

Experience shows that politicians will continue pressing ahead with reform only if the markets take them by the heels to dangle them over the precipice……..

via Why Investors Shouldn’t Expect Much Euro Zone Reform | Institutional Investor.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 8, 2012

Europe tests support

Germany’s Dax continues to test medium-term support at 7200. Respect of support would signal strong accumulation, while failure would indicate a correction to the rising trendline. 13-Week Twiggs Money Flow oscillating above zero indicates buying pressure. Breakout above 7600 would confirm a primary up-trend.

DAX Index

* Target calculation: 7000+ ( 7000 – 6000 ) = 8000

Dow Jones Europe Index consolidates below resistance at 265. Reversal below 250 would warn of a correction to test primary support, while breakout above 265 would signal a primary advance. Oscillation of 63-day Twiggs Momentum around zero suggests a ranging market with no clear primary trend.

Dow Jones Europe Index

* Target calculation: 260 + ( 260 – 210 ) = 310

The FTSE 100 continues to test support at 5740/5750. Failure of support would signal a correction to the rising trendline. Breakout above 6000/6100 is unlikely at present, but would offer a long-term target of 6750*. 13-Week Twiggs Money Flow oscillating above zero indicates long-term buying pressure.

FTSE 100 Index

* Target calculation: 6000 + ( 6000 – 5250 ) = 6750

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 6, 2012

Forex: Euro, Pound Sterling, Australian Dollar and Canadian Loonie

The Euro is testing support at $1.28. Breakout would respect the primary down-trend, warning of another test of primary support at the 2010 low at $1.19/1.20. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal. Recovery above $1.32 is less likely but would indicate an advance to $1.35/$1.36*.

Euro/USD

Pound Sterling rallied off support at €1.225 against the Euro. Breakout above €1.26 would indicate an advance to €1.29. A 63-day Twiggs Momentum trough above zero — and respect of the rising trendline — would both indicate a healthy up-trend. Breach of support at €1.225, however, would signal a primary down-trend.

Pound Sterling/Euro

* Target calculation: 1.26 + ( 1.26 – 1.23 ) = 1.29

Canada’s Loonie is testing support at parity against the greenback. Respect would indicate an advance to $1.06*. Breach of resistance at $1.03 would strengthen the signal and a 63-day Twiggs Momentum trough above zero would confirm. Failure of support, however, would warn of another test of primary support at $0.96.

Canadian Loonie/Aussie Dollar

* Target calculation: 1.03 + ( 1.03 – 1.00 ) = 1.06

The Aussie Dollar broke resistance at $1.04 after the RBA announced that it would not cut interest rates, leaving them on hold until December. Expect an advance to $1.06*. 63-Day Twiggs Momentum oscillating above zero suggests a primary up-trend.

Aussie Dollar/USD

* Target calculation: 1.04 + ( 1.04 – 1.02 ) = 1.06

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.