UK & Europe Archives - Page 56 of 89

July 19, 2012

Three Converging Factors May Slash Economic Growth By 71% | Daniel Amerman | Safehaven.com

An excellent historical analysis of this issue can be found in the working paper, “Debt Overhangs: Past and Present”, which was published by the National Bureau of Economic Research in April, 2012. Authored by Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff, it examines 26 different “debt overhangs” that have occurred around the world since 1800, with “debt overhang” being defined as public debt exceeding 90% of GDP for at least five years…..What Reinhart, Reinhart and Rogoff found was that the average duration of a debt overhang was 23 years, and that the end result was a 24% reduction in the size of national economies, compared to what they would have been if they had grown at their average growth rates when not crippled by large government debts.

via Three Converging Factors May Slash Economic Growth By 71% | Daniel Amerman | Safehaven.com.

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.

July 19, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar, South African Rand and Japanese Yen

The Euro retraced to test its new resistance level at $1.23. Respect would confirm a decline to test the 2010 low at $1.19*. Declining 63-day Twiggs Momentum continues to signal a strong down-trend. Breach of the 2010 low would become likely if the ECB indicated an intention to directly or indirectly purchase government bonds — and would suggest long-term weakness.

Euro/USD

* Target calculation: 1.23 – ( 1.27 – 1.23 ) = 1.19

Pound Sterling’s up-trend against the Euro is accelerating, with steep advances followed by short corrections. Rising 63-day Twiggs Momentum confirms. Target for the current advance is €1.295*.

Pound Sterling/Euro

* Target calculation: 1.255 + ( 1.255 – 1.215 ) = 1.295

Canada’s Loonie continues to weaken against the Aussie Dollar but long-term bullish divergence on 63-day Twiggs Momentum (and breach of the descending trendline) warns of reversal to an up-trend. Breakout above parity would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar broke resistance at $1.03 USD and is headed for a test of $1.05*. Recovery of 63-day Twiggs Momentum above zero would suggest a primary up-trend, but we first need a correction to form a higher low (trough).

Aussie Dollar/USD

* Target calculation: 1.03 + ( 1.03 – 1.01 ) = 1.05

The Aussie Dollar is testing resistance at R8.50 South African Rand after respecting support at R8.30. Breakout would offer a target of R8.70*.

Aussie Dollar/South African Rand

* Target calculation: 8.50 + ( 8.50 – 8.30 ) = 8.70

The Australian Dollar/Japanese Yen is a good reflection of global risk tolerance. Euphoric highs of 2007 were followed by blind panic in 2008/2009 before settling into a mid-range oscillation between ¥72 and ¥90 — suitable for range traders. The higher low in 2012 reflects a more bullish stance but we are a long way from breakout above ¥90. 63-Day Twiggs Momentum oscillating around zero mirrors the uncertainty.

Aussie Dollar/Japanese Yen

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.

July 17, 2012

UK & Europe momentum rising

Dow Jones Europe Index is headed for a test of the long-term descending trendline at 240. Upward breakout would support the bullish divergence on 63-day Twiggs Momentum, indicating a primary up-trend. Breakout above 265 would confirm. Respect of resistance at 240, however, would warn of another test of primary support at 210.

Dow Jones Europe Index

The FTSE 100 penetrated its descending trendline, suggesting that a bottom is forming. Retracement that respects support at 5250 would confirm. Recovery of 63-Day Twiggs Momentum above zero would also favor an up-trend.

FTSE 100 Index

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.

July 16, 2012

A lack of money isn't the problem: it's time to shrink – The Drum – ABC News

Alan Kohler: Debt was built up through 30 years of current account imbalances after currencies were finally unshackled from the gold standard in 1971, and the depression of the 70s came to an end in 1982.

Central banks, principally the Federal Reserve, complied in the process of debt build-up by holding down interest rates and allowing asset prices to rise, keeping balance sheets in the black.

The credit crisis of 2007-08 brought asset prices down rapidly and rendered banks suddenly insolvent, so they had to be recapitalised by governments. Now the governments of Europe, the US and Japan are insolvent, and the only question is when the central banks will monetise their debt – that is, print more money and buy their debts…..

via A lack of money isn’t the problem: it’s time to shrink – The Drum – ABC News (Australian Broadcasting Corporation).

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.

July 12, 2012

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

The Euro broke medium-term support at $1.23, signaling a test of the 2010 low at $1.19/$1.20. Declining 63-day Twiggs Momentum warns of a strong down-trend. Breach of the 2010 low becomes likely if the ECB had to indicate an intention to directly or indirectly purchase government bonds — and would suggest a long-term decline.

Euro/USD

Pound Sterling broke through €1.26 against the Euro and is now retracing to test the new support level. Rising 63-day Twiggs Momentum indicates an accelerating up-trend. Respect of support is likely and would offer a target of €1.29.

Pound Sterling/Euro

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

Canada’s Loonie is weakening against the Aussie Dollar but long-term bullish divergence on 63-day Twiggs Momentum (and breach of the descending trendline) warns of reversal to an up-trend. Breakout above parity would confirm.

Canadian Loonie/Aussie Dollar

The Aussie Dollar broke support at $1.02 USD and its recent broadening wedge on the 2-hour chart. Expect a decline to $1.01; confirmed if short-term support at $1.015 is broken.

Aussie Dollar/USD

* Target calculation: 1.02 – ( 1.025 – 1.015 ) = 1.01

A long-term chart shows the US dollar forming a bottom against the Yen after long-term bullish divergence on 63-day Twiggs Momentum and breach of the descending trendline. Breakout above the current descending trendline and resistance at ¥80 would indicate another test of ¥84/¥85, while breach of that level would confirm a primary up-trend.

Aussie Dollar/Japanese Yen

* Target calculation: 84 + ( 84 – 78 ) = 90

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.

July 7, 2012

Roubini Says 2013 `Storm' May Surpass 2008 Crisis

Nouriel Robini on Bloomberg TV: The Euro summit was a failure… markets were expecting much more. Either you have debt neutralization [EFSF purchases of government bonds] or debt monetization by the ECB or EFSF/ESM be doubled or tripled using leverage ….or you will have a worse crisis in the next few weeks.

The ability of politicians to kick the can down the road will run out of steam in 2013…..next year could be a global perfect storm

Bloomberg TV: Roubini Says 2013 `Storm’ May Surpass 2008 Crisis

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.

July 6, 2012

Economists React: How Likely Is QE3 Following Jobs Data? – WSJ

CAPITAL ECONOMICS: QE3 will depend on second-quarter GDP and July’s ISM data because the jobs report was not bad enough to make QE3 “a done deal.” Both GDP and ISM numbers will be released just ahead of the Fed’s next policy meeting.

via Economists React: How Likely Is QE3 Following Jobs Data? – Real Time Economics – WSJ.

Comment:~ The range of opinion canvassed by WSJ leans toward the Fed holding off QE3 for the present because jobs numbers aren’t bad enough to warrant drastic intervention. In the long run QE appears inevitable — and not only in the US. There are three options: (1) stagnation with low growth and high unemployment; (2) debt-deflation as in 2009; and (3) inflation. Option (3) would reduce the public debt load by raising nominal GDP and rescue underwater homeowners and banks by lifting real estate values. Those on fixed incomes would suffer but they do not appear a powerful enough lobby to deter politicians from this course.

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.

July 5, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar, Japanese Yen and South African Rand

The Euro broke support at $1.25 before falling sharply through $1.24, warning of another decline. Narrow consolidation below the new resistance level is a bearish sign. Follow-through below $1.23 would offer a target of $1.20.

Euro/USD

Pound Sterling broke resistance at €1.25 against the Euro, offering a target of €1.28.

Pound Sterling/Euro

* Target calculation: 1.250 + ( 1.250 – 1.215 ) = 1.285

Canada’s Loonie is strengthening against the US Dollar on the back of rising oil prices. Expect another test of $1.02.

Canadian Loonie/US Dollar

The Aussie Dollar threatens to break down from its recent flag formation. Failure of support at $1.025 would suggest a test of $1.01.

Aussie Dollar/USD

The Aussie Dollar continues to range between ¥72 and ¥90 Japanese Yen. Dips are getting shorter and range traders may need to move their base to ¥75.

Aussie Dollar/Japanese Yen

Against the South African Rand, the Aussie Dollar is testing resistance at R8.50. Breakout would offer a target of R9.00. Narrow consolidation above R8.30 would be a bullish sign.

Aussie Dollar/South African Rand

* Target calculation: 8.50 + ( 8.50 – 8.00 ) = 9.00

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.

July 5, 2012

Europe Central Banks Fight Slowdown – WSJ.com

The ECB lowered its main lending rate by 0.25 percentage point to 0.75%, the lowest level in the central bank’s 13-year history. It reduced the rate it pays banks that deposit funds overnight with the central bank by the same amount, to zero. Both decisions were unanimous.

via Europe Central Banks Fight Slowdown – WSJ.com.

Comment:~ Lowering interest rates will help restore liquidity, but will not fix the current solvency crisis.

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.

July 4, 2012

Euro/USD

The Euro retreated from resistance at $1.27 on the 2-Hour chart and, after breaking support at $1.255, is headed for a test of $1.24. Follow-through below $1.25 would strengthen the signal, while reversal above $1.255 would negate. Penetration of the descending trendline would suggest that a bottom is forming, with another test of $1.27 to follow.

Euro/USD

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.