The markets were mixed overnight as investors applied various strategies ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress. The EUR/USD and gold traded higher while the GBP/USD and crude oil posted lower prices.

Based on early stock market activity, it looks as if investors expect Bernanke to maintain a dovish tone if asked about ending the Fed’s aggressive stimulus program. His criteria for ending the program are expected to be the same – economic growth and a drop in the unemployment rate.

If Bernanke is pressed by Congress, he may reveal the Fed’s plan to end the stimulus. Since May 1, there has been speculation that the Fed has been mapping out an exit strategy. This has helped drive the U.S. Dollar to a new high for the year while pressuring the Euro and gold markets.

The EUR/USD rallied for a third straight day on Wednesday, sending the market into a key downtrending Gann angle from the 1.3242 top. This angle at 1.2942 was penetrated, but investors couldn’t sustain the move. If Bernanke comes out dovish, then look for investors to mount another breakout attempt. The daily chart pattern suggests that 1.3019 is a potential upside target.

The GBP/USD broke sharply today after a government report showed U.K. retail sales unexpectedly declined last month. The weak report opens the door for additional stimulus from the Bank of England. This action tends to weaken a currency because it keeps pressure on interest rates.

Technically, the market broke through the Fibonacci level at 1.5127 with conviction before finding intra-day support on a slow-moving uptrending Gann angle at 1.5032. A break through this level could trigger an acceleration to the downside.

June gold traded higher as investors resumed the move created on Monday when the market reversed to the upside after reaching a low at $1336.30. If investors can sustain the developing rally then look for a near-term test of $1411.75 over the near-term.

Fundamentally, dovish comments from Bernanke could weaken the U.S. Dollar, triggering greater demand for gold and the start of a possible short-covering rally.

A weaker dollar could also trigger a rally in July crude oil. Earlier in the week, sellers stepped in as the market neared the May high at $97.38. If Bernanke convinces investors that the stimulus will continue, then look for a break in the dollar to trigger a quick rally in crude oil.

Technically, a breakout over $97.38 could fuel an acceleration to the upside with $98.22 a potential target. On the downside, the nearest support target is $94.88.

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It was about time that I looked into this headline sensation called “Bitcoin” and to be truly honest, I am still not sure what to make of it all. My first response when beginning my research was there is an awful lot of press about “Bitcoin”, but upon deeper investigation, I found that most of the press and publicity just seemed to repeat itself. Bloggers and online news services were simply rewriting the same topics over and over again.

My first step was to get a better understanding of exactly what Bitcoin was supposed to be, the explanation I found was more confusing than educational. Bitcoin, for those not aware, is a completely digital currency — one where exchanges between individuals are largely anonymous and secured through cryptography, and one that has seen its hype-meter go off the charts in recent months.

I am a bit old fashion and I was under the impression that currencies were issued by governments, who stood behind the value of the money. There have been other currencies, but these have been gold coins that had a value based on the gold content or those back up by gold in vaults. Bitcoin seems to have no value, no base and no exchangeable value outside that given by the buyers and sellers or investors at that particular time.

I wanted to learn how a buyer can invest in bitcoins, so I downloaded their software called “wallets” and thought I would purchase some bitcoins to better understand the process. Once the software was downloaded I looked for a button to purchase or invest in this digital currency. There was none, there were ways to transfer bitcoins to other users or to pay for some purchases but not a way to easily buy and sell bitcoins through the company. I know learned that I had to go online and locate bitcoin exchanges or dealers. I was able to find a few of these, but none that seemed to have any regulation or controls or approval. I decided to try to purchase some bitcoins using my PayPal account to find that was very difficult as most of these dealers did not accept PayPal for one reason or another. I found a list of sellers, offering an array of selections of bitcoins for different values. Now I was confused, if bitcoin has a value at a set day and time, why can I not purchase or invest in bitcoins at that time at that price.

Now a question started for form in my mind, how do I turn my bitcoins back into easily accessible cash money? I am still not sure of the answer to this, it seems that regardless of the value at that day and time, I have to post these for sales and wait for someone to purchase them.

As I continued my investigation, I came upon a recent news story actually several involving government actions and investigations. The US government took its first action against the bitcoin exchange freezing the US accounts of Mt. Gox, which is the largest bitcoin exchange in the world, processing 75 percent of all transactions in the last 30 days. Ok this is bad. The explanation I found read “Under the law, Administrators are defined as “a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.” Because bitcoin cannot be redeemed, under this definition, there are no Administrators in the bitcoin ecosystem. An Exchanger, on the other hand, is “a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.” Mt. Gox, fits under this designation, as do all other exchanges operating in the US”

At this time I reserve my judgment and my decision to invest in bitcoins. A digital currency is only as strong as the corporation standing behind it and the users’ confidence. Right now I do not feel so confident, but I will continue my research. I will keep you updated. Please remember that these are my opinions and I am just starting to dig deep in the “bitcoin” world watch for my future articles over the next few weeks, my opinion is subject to change.

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The uncertainty surrounding the Fed’s decision on whether to continue with the asset-purchase program has been one of the main US market’s drivers recently.

During Tuesday’s session, all major U.S. indices closed at new historical highs. The main reason for Wall Street’s renewed growth came from officials’ speech which suggested that the Fed’s stimulus program will continue. The Fed’s meeting minutes, which are expected to shed some light on the matter, will be published today.

However, markets were calmed yesterday, after the Fed’s St. Louis President, James Bullad, said that the quantitative easing should continue because financial markets indicate they are in a process of recovery.

The Central bank’s chairman Ben Bernanke is due to make a statement today, reflecting the outlook before the US economy. Some officials have already expressed willingness for reducing the QE over the next few months.

During yesterday’s session, the S&P500 gained 2.87points, or 0.2%, and closed at a new record level – 1669.16 points, reaching an intraday high of 1674.93 points, with five of its ten industries reporting an increase.

Wall Street Continues Record-Breaking Rally Amid Indications that Fed’s Stimulus Will Remain
The other record-earning performer was the Dow, which added 52.30 points, or 0.3%, to its value, touching a fresh historical peak at 15,387.58 points, with an intraday high of 15434.50 points.

The Nasdaq100 also did not leave behind as it increased by 5.48 points or 0.2%, reaching a new 52-week record at 3026.45 points.

One of the best performers among companies was Home Depot Inc., which added 2.5% to its value and ended the session at $78.71 per share. The biggest household chain in the US reported better earnings for the first quarter, compared to analysts’ expectations. JPMorgan also rode the green wave, increasing by 1.4% and reaching $53.02 per share.

Apple, on the other hand, lost 0.7% to $439.99 per share on accusations that it has been avoiding taxes by creating numerous offshore companies. Apple is the latest big corporation accused of tax avoidance – along with Google, Amazon and Starbucks. Carnival Corp., too, erased 4.3% of its value, closing at $33.81 per share.

Looking further in the day, US market volatility is expected to come from the report on Existing Home Sales, along with the highly anticipated Bernanke speech and FOMC minutes. Outside the economic calendar, among other major companies that are due to announce their quarterly earnings, are Hewlett-Packard Co. and Synopsys Inc.

Source: dfmarkets.co.uk

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Market players pushed stocks higher into record territory yesterday after comments from a Federal Reserve official raised hopes the central bank will continue to pump money into the financial system. Dow Jones and S&P 500 both closed at record highs Tuesday, gaining 0.3% and 0.2% for the day. The NASDAQ added 0.2% to end at its highest level since 2000.
Investors have been paying close attention to comments from various Fed officials recently as they attempt to gauge when the central bank will begin to taper off its stimulus programs. Fed chairman Ben Bernanke will discuss his outlook for the economy Wednesday before Congress.

European stocks inched higher on Tuesday, with investors cautious about making any major moves before clarification on the U.S. Federal Reserve’s potential exit from easing measures. DAX 30 index gained 0.2% to 8,472.20 while France’s CAC closed 0.3% higher at 4,036.18. U.K.’s FTSE 100 index added 0.7% to 6,803.87, the highest closing level since December 1999.

There has been very little on the economic calendar and very little news flow, leaving traders eager for some direction and reasons to trade, giving Fed comments a bit too much attention.

As the equity markets soared the US dollar fell from its 5 year high on Friday to trade at 83.86 down from 84.3. The weakness in the US dollar helped sentiment shift to the euro. The euro was able to gain a few pips but remained locked in its range below the 1.30 level. The euro is trading this morning at 1.2921.

Disappointing inflation data in the UK and a lack of support from the Bank of England left the pound unsupported, as it tumbled by over 100 points this week to trade at 1.5155. The majority of the decline has occurred following the release of lower than expected inflation data, where y/y CPI has fallen to 2.4% with core CPI falling to 2.0% y/y. The BoE’s inflation target is 2.0%, and last week’s inflation report included downward revisions to the outlook for CPI that maintained a 50% probability of inflation remaining above target as far out as Q2 2016.

The Aussie and the kiwi remain weak against a strong US dollar as disappointing economic data and worries about China’s trade balance weigh on the currencies. It was reported over the weekend that 10% of the Chinese trade balance numbers were from erroneous or fictitious orders. Business sentiment in Australia took a tumble reporting on a negative note, after the release of the new budget which calls for major cuts. The AUD is trading at 0.9788 while the NZD is at 0.8156.

The Japanese yen is trading at 102.49 after the Bank of Japan held rates and policy as expected today, but gave a strong assessment of the economy and the results of the stimulus programs, but the bank noted that domestic prices remained in deflation. Prime Minister Abe’s is about to launch some major internal program to help the domestic economy rebound.

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Lately the International Monetary Fund and the World Bank have moved from bankers and lenders and supporters of developing economies to enforcers of economic policy, as seen in the recent eurozone bailouts and the troika. As bailouts seem to over for the present and the disbanding of the troika, these bankers seem to be moving to not only economic enforcers but also lobbyists. Recently the IMF urged the Bank of England to move from austerity to growth and tried to push the Bank of England into action. The IMF and the World Bank have changed their stance and program of economic reform and are now pushing global economies to adopt the US and Japanese growth scenario. With the failure of austerity measures and Portugal, Spain, and Greece deep in recession with record high unemployment their GDP continues to contract making it impossible for these countries to reach budget levels demanded for continued economic support. The UK which voluntarily adopted a program of austerity continues on their own accord. Ireland is the only one of the bailout nations that seems to be recovering. Cyprus has just received their financial support and already find they will need more assistance.
The OECD released their most recent global outlook, which now shows the developed nations economies returning to growth in the first quarter of 2013 though the euro zone continued to lag behind the U.S. and Japan, according to figures released by the Organization for Economic Cooperation and Development.

The OECD said the combined gross domestic product of its 34 developed-country members grew 0.4% from the final three months of 2012, when output was flat. The OECD said there were “diverging patterns” across its membership, but that largely involved a contrast between contractions in France, Italy and the euro zone as a whole, and a pickup in growth in Japan, the U.S. and the U.K.

With growth so unbalanced and business and consumer confidence weak in the face of uncertainties surrounding the euro zone’s fiscal crisis and fiscal difficulties in the U.S., economists don’t expect a strong pickup in global growth in the near term.

The German economy is likely to grow at a stronger rate in the current quarter than in the first three months of the year, but the euro-zone crisis remains a significant risk, Germany’s central bank said yesterday. An expected recovery in construction after weather delays in the winter and encouraging signs from the industrial sector support the improved outlook, the Bundesbank said. Data released last week showed that Germany was the only major euro-zone economy to grow in the first quarter, eking out an expansion of 0.1% from the previous quarter. The 17-nation currency bloc’s economic output declined by 0.2%, marking its sixth straight quarter of contraction. Germany is expected to be the locomotive to pull the eurozone out of its crisis, but with the drop of the Japanese yen and exports shifting to Japan, exports from the eurozone continue to decline.

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Since when did central bankers become superstars? Just a few years ago, not many of us knew the name Alan Greenspan, one of the most acclaimed Chairmen of the Federal Reserve. Before Mr. Greenspan, not one name comes to mind. Just a few years ago, deep in the global financial crisis Mr. Bernanke took over from Mr. Greenspan and due to the economic situation; the central bank had taken a step into the spotlight. Later that year at his Jackson Hole presentation, Mr. Bernanke reached world acclaim announcing the Fed’s first steps into monetary easing. Most of the world did not even know that Jackson Hole existed. Not only did Mr. Bernanke elevate Jackson Hole to world acclaim, his rise to stardom pulled along his other FOMC members. Not only was the Chairman a global market maker, now each of the members of the FOMC became minor celebrities with their comments, speeches and press coverage making the headlines of the global new services. At the end of the week, Chicago Federal Reserve President Evans pushed to US dollar to new highs, after he commented that he might support tapering of monetary policy. Rumors that the Fed were considering a reduction in monetary stimulus saw the US dollar hit highs on Friday not seen since 2008, with the dollar trading at the 84.30 range.

This week we have seen speeches by FOMC members Bullard, Evans and Dudley. St Louis Fed President James Bullard and New York Fed President William Dudley known as the ‘fence-sitters’ – neither strongly supportive of boundless QE3 purchases nor showing favor for a near-term tapering. Dudley maintained his ambiguous position on when a change in the Fed’s policy machine will be needed. Bullard’s comments were far more interesting. The statement that he doesn’t see a good case for tapering QE unless inflation rises is far more direct and suggests he won’t vote to curb stimulus at the June 19 meeting. While Evans now says that he will support ongoing stimulus as the economy is facing strong headwinds. On the docket, we have Bernanke set to testify before Congress which is likely to elicit a more definitive opinion from this regular dove. The May 1 FOMC minutes will also be scoured to see whether progress was made on the exit conversation at 2pm today. Central banks will remain on center stage this week.

The euro has been able to gain a few pips as the US dollar weakened a bit as traders now expect the FOMC to hold its current policy at its June meeting. The euro is trading at 1.2921 but remains weak unable to break above the 1.30 price level.

With central bankers in mind, the Bank of Japan meet earlier today and as expected held rates and policy, but upgraded the economic outlook The JPY is trading at 102.49. Economy minister Akira Amari said Sunday that it is generally believed the yen’s excessive strength has been largely corrected. Last week Chief Cabinet Secretary Yoshihide Suga said the government’s mission of correcting the excessive strength as a way to stamp out deflation was making good headway.

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