Archive for the ‘Important Announcements’ Category

Rejuvenating the Economy – Quantitative Easing (QE)

Friday, December 28th, 2012

Fundamental and Technical analyst alike are employing news to guide their trading decisions. Though their degree of usage may vary, it’s better for beginner traders to familiarize themselves with terms that are usually found within the news. Quantitative Easing for one.

Quantitative Easing is an unconventional monetary policy used by central banks to induce support on an economy. It is a stimulant aimed to assist an economy if in case it is in an unfavorable state. The concept behind it is that additional money will flood the market which will give the economy a push by by promoting an increase in lending and liquidity.

It is often carried out by buying financial assets from commercial banks and other private institutions with the newly created money to induce a specific amount of money in the economy.

At present, the world has already witnessed the said boost for three times already. First was during the time of George Bush back in 2008 wherein $500 billion was initially spent on mortgage backed securities. An additional $750 billion was made during the time of Barack Obama’s first term. By June of 2010, $2.1 trillion worth of assets was already bought by the bank.

The second round was demonstrated in 2010 when Federal Reserve provided $600 billion for long-term government bonds. Some claim that this effort was put in vain because the money just ended up in EU’s foreign reserves.

The third was the most recent. The buzz started when Ben Bernanke, chairman of the Federal Reserve in America, had announced last September 14,2012 that the third round of the quantitative easing will be given for the $40 billion a month bond purchasing program and also to continue the very low rates policy.

Though the unconventional way boosted the economy at first, its effect is dwindling as years passes by. Doubts and debates regarding its effectiveness arose from every corner and some became pessimistic about it. The previous rounds taught traders that they should perceive the possible chain reactions that the third easing will produce rather than just the short term effect.

Stephen Stevenson

Is the Gold Rush Over?

Wednesday, December 12th, 2012

The 2008 financial crisis really shook the world, most especially the wealthy. Economic debris is still on the mending process and some countries had just started to pick themselves up and their neighbors too. The U.S. economy has just stirred to stand back up from its huge fall since the Great Depression. Moreover, Greece had just received its rescue from its euro brothers while others’ turn is still yet to come.

But there are those who wasn’t standing on the epicenter, although shaken a bit, but utterly stable compared to others. Standing intact and able to withstood its impact, one of those who were able to maintain the capriccio of its citizen while others loom to survive was Australia.

Australia’s known for its abundant natural resources – more specifically it’s metal resources. Mining had started to boom around the early 19th century and since then fulfilled the financial needs of the barren centered country. Gold, iron ore, nickel, bauxite or aluminum, copper, and silver are just some of the widely mined resources that pumps money into economic veins of Australia.

It was the reason why Aussie is one of the commodity currencies. Its exports, most especially metals, greatly affects how its economy would perform. China’s been one of its major trading partner and the Sino – Australian relations is still growing stronger over the years. The aggregating demand of China to iron ores makes its pact with the currency commodity sturdier than ever.

However, many are speculating about its imminent halt in the near future. Everything is bound to end as the old always says, and sooner or later those fields will be exhausted. What would happen if it does?

Some are claiming that it was already over but experts says that the time has yet to come. If In case their resources were indeed exhausted, how do you think that their economy would fare?

Australia, although highly dependent on their exports, have other things to offer other than metals. Agricultural products, like wheat and wool, are also being exported. Not only that, energy sources such as liquified natural gas and coal are also being sold to other countries worldwide. Eco tourism would also be possible due to their vast land and sea mass. Although dessert terrains is abundant near the center, its outskirt really has something to offer.

Stephen Stevenson

Overbought and Oversold

Friday, December 7th, 2012

Often, when we check the market analysis for the day, the term overbought and oversold is included in the analysis. But what does it really mean and how will you discern which is which? How will it affect the market movement?

By definition, Overbought refers to a situation wherein the demand for the currency pairs exceeds what is expected of it, resulting to a very significant movement, which can no longer be supported by the fundamentals. It is a sudden upward movement of the currency that surpasses its acceptable level. On the other hand, Oversold means that the price had a drastic fall and its level is beyond what is expected. It is usually an effect by the market overreaction or panic selling.

Now that we have provided its definition, how can we know if a currency is overbought or oversold? In technical analysis, there are is a type of technical indicator which detects whether a pair is overbought or oversold. They are called Oscillators.

Oscillators are technical indicators which measures the momentum through the use of its price compared to its historical price within a given time period. The most famous indicators of this kind are the RSI (Relative Strength Index) and Stochastic. The indicators, after inserted to a chart, will displaythe market movement within a scale of 0-100. In the case of Stochastic, if the indicator goes beyond the value of 80 then the pair is overbought. Meanwhile, if it goes below 80 then the market is considered to be oversold. But in the RSI, the overbought value is 70 and the oversold value is 30.

What happens if it does push through those values? The longer the indicator exceeds those values, the higher the chance of a reversal. But please take into account that a pair may sustain an overbought or oversold status for a long time especially on a strong trend. So it must only assist your main trading strategy by signaling when a reversal might occur.

Stephen Stevenson

Fiscal Cliff: The Valley of Debt

Tuesday, November 27th, 2012

One of the key points in the recently concluded election was about how the “would be president” then would tackle the ominous fiscal cliff. But many, especially non Americans, are still unfamiliar with the term.

The term “Fiscal cliff” was an expression that was used throughout the history especially on budget talks. According to research, the earliest reference to the term was traced back in 1957, when it was used in a New York Times article about home ownership.

At present, the term denotes the effect of a number of laws in the United States which may lead to spending cuts and tax increases. The whooping $7 trillion in spending cuts and tax increases was scheduled to take place at the beginning of this incoming year, 2013, which is approximately 35 days from now. The buzz word first entered the scene during a speech by Federal Reserve Chairman Ben Bernanke to the House committee on Financial Services last February 29,2012.

Under current law, on January 1st, 2013, there is going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long run fiscal improvement without having it all happen at – at one date.

The laws involved are the Bush tax cuts and the Budget Control Act of 2011. The Bush tax cuts or Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is an act centered on the two-year extension of the Economic Growth and Tax Relief Reconciliation Act of 2011 provisions which was intended to delay the return of tax rates similar to the Clinton administration. It was passed by the United States Congress back in December 16,2010 and was signed as law by President Barack Obama a day after. It is scheduled to expire at the start of 2013 which would result to tax increases.

Meanwhile, the Budget Control Act of 2011 is a federal statute and was signed as a law by President Barack Obama on August 2,2011 which mainly focuses on debt ceiling and deficit reduction. It is also scheduled to expire almost the same time as the Bush tax cuts and would result to spending cuts.

The two effects would lead to a reduction in the budget deficit in 2013. The abrupt deficit would then lead then to an increased recession on the same year which would greatly damage its present economic recovery.

Stephen Stevenson

A History of the Brittle Cease Fire for Israel

Thursday, November 22nd, 2012

After eight days of unrest, both Israel and the Palestinian group Hamas had finally agreed to call upon a cease-fire. The move was initiated by the Egypt’s new Islamist government and supported by the United States.

The conflict which had just been recently reignited by Israel’s “Operation Pillar of Defense,” resulting to numerous civilians casualties for both sides. Four years after the Gaza War back in the winter of 2008-2009. The ideal – rooted conflict can be traced way back in 1988 when the founding charter of Hamas declared for a Jihad – Holy War.

Hamas

Is an acronym for Harakat al-Muqawamah al- ‘Islamiyyah which can be literally translated as “Islamic Resistance Movement.” It is a militant fundamentalist Islamic organization who currently occupies the West Bank and Gaza. Originally, it is an alternative group of Palestinian Liberation Organization (PLO) which is founded by Sheikh Ahmed Yassin aimed in establishing a network of charities, schools and clinics in the region. But certain ideologies and circumstances had urged it to engage into several bloody conflicts with Israel.

A year after the declaration of Jihad, its founder was convicted by an Israel court for giving orders to its members to kidnap and kill two Israeli soldiers which gained him a 9 year sentence in jail. He died 7 years later from an airstrike by Israel. According to reports, the group has been targeting Israelis with suicide bombing which now tolled to 500 individuals since 1993.

The group is viewed differently depending on the audience. Israel, United States, UK, and other western countries treats it as a terrorist group. Meanwhile, Arab and Muslim nations has a different perspective regarding them. They considers them as a victim of Israeli aggression.

Israel

a formidable ally of the United States in the middle east, Israel had age-long conflicts with its neighbors. Many Muslim countries and groups had outrageously deny its existence and called for its destruction. Hamas is one of them. The military power of Israel proved to be more capable than their foes which gained them territories in the Six-Day War.

Over time, some had yielded their advocate but conflicts still ravages on. Gaza War is one of those. It is a result of an offensive measure of Israel against Hamas over the disputed Gaza Strip, a strip of coastal land on the Mediterranean sea. It resulted to more than a thousand Palestinian and 13 Israeli soldiers dead.

Present Conflict

The present conflict was temporarily halted after a truce between the two sides has been agreed upon which took effect 14:00 EDT on Tuesday. According to reports, It stopped a supposedly Israeli ground

invasion which may lead to further casualties aside from 162 Gazans and 5 Israelis dead from bombing and rocket fires. Unfortunately 37 of the present casualties are children.

Stephen Stevenson