GU, GJ and EU Analysis Thread

Glad to hear its going well...dont trade NZD/USD very often but will have a look for sure.

Nice GU bounce of 5470 area....weekly POC doing its job..stop at b/e...like the last 1.55 long trade I dont fancy its chances as I still think price wil spike toward 1.53 before reversing but just incase....will set this and leave it be.

Few longer term charts attached to clarify current position from a longer term perspective.

Stocky

GU 4hr Pin formed at 5470.

Stocky

Good afternoon all. Still in this GU short, and still targeting the Mp for close today.

Also took EU yesterday as price fell back through on a continuation of the 4hr Guppy profile. Filled at 1.28641

http://www.forexfactory.com/showpost...&postcount=369

Of course, the MP has long been passed, and approaching first set of targets:

http://cdn.forexfactory.com/attachme...7&d=1282216949

Have a good weekend all....thats me done for the day

Stocky

Yep and you too Stocky. Thanks for the analysis.

...it would appear the virtuous is fast becoming vile.

http://www.bbc.co.uk/news/business-11038577

Good weekend all.

Greece: They have met the requirements as demanded by the IMF and the ECB, and are now eligible to receive the second instalment of protection money for government and big business… strange times, it may seem, that we are living in when the mafia give money to their victims, but let’s not fool ourselves here, the Greeks are having to pawn their family silver… believing that they will be able to get it back once the ‘dirty’ money is repaid – along with the ‘vig’.

Many may say it is good that Greece has met the requirements so far; but that many, I count, as the few at the top who either have personal fortunes stashed somewhere and have not had to pawn any of this, or the remainder, either wearing tinted glasses or desperately scrambling for position and quick profit. For the remainder of the population, the real situation appears to be that your average citizen is depleting their savings faster than it takes for a ‘made’ official to decide to call a ‘hit’. Capital flight aside, those pennies saved for rainy days are now becoming the lifeblood for many, and fast approaching critically low levels.

As many are commenting upon, yes, Greece may have appeased the shylock this time round – it had to in order to be eligible for the next payment – but the ability to satisfy again may not be met, and the ‘juice’ may fall short of what is expected, leading to the increasingly expected default on repayment. As we have seen this week, spreads on 10-year Greek debt rose to levels last seen at the height of the Greek debt crisis last May. I’m sure the ‘consigliere’ in the IMF and ECB are looking at the potential failure to meet the ‘shy’ demanded, and also considering if the imminent retirement of the incumbent ECB ‘boss’ will be a good or bad thing.

With Axel Weber discussing a continuation of fiscal assistance within Europe, and thus holding a contrary view to that of the ‘boss’, this associate’s outlook may threaten his expected request to take the omertá. However, maybe he is shrewder than people think. With Portugal slowly but surely increasing its loans, and with Ireland and Spain renegotiating their positions, maybe the silver available here can cover any loss made from Greece.

In today’s editorial, Andrew Lilico, chief economist at the think tank Policy Exchange , hints at an interest rate appreciation in the UK that could encounter 8%. This would support some of my previous ruminations upon how Sterling may become the monetary vehicle of choice for big money seeking good gains on short-term deposits. Further reading can be found here:

http://www.telegraph.co.uk/finance/e...two-years.html

Of course, the concomitant repercussions of this for the majority of the population is a cruelly mixed bag of fortune. If you are a saver and mortgage free, your piggy bank will swell. If not, life will become more difficult than it is already as people, even with such low interest rates, struggle to keep control over what they currently have. An influx of capital, I fear, will primarily serve one industry; that of our financial sector… a sector that is estimated to account for 60%+ in terms of GDP, and 85%+ in terms of the UK service industries. On its own, this estimation is rather shocking, really, but it becomes more so when it is reported that in terms of people, those employed within the financial sector represent just 2% of the workforce. Figures that I have stumbled across indicate that 36% of these companies use tax avoidance schemes – sorry, I should be stating tax efficiency schemes, as is the parlance these days – or, pay nothing at all. A great article in the British press recently reported on the 100 companies that make up the FTSE; when asked to give figures on their tax returns, 97 did not answer. That is a luxury that big companies, being exempt from disclosure that you and me are not, enjoy.

To put some percentages on this. Large companies/big money produces approximately 49% of UK GDP, but pay approximately 10% of the country’s tax. You and me pay anything up 73% - IT, NIC and VAT. Doesn’t seem fair, does it? Add to this the increase in basic bank charges for us as of late – in spite of us effectively giving them the money to get themselves out of the mess that they created for us all, and not, unreasonably, wanting to see this money returned to us, as opposed to using it to carry on as if nothing had happened (bonuses and Bentleys) - and one can understand why there is no love lost between the financial sector and I.

Returning to potential interest rate increases in the UK. Put another way, if I am managing an investment fund and choosing instruments that give the safest short to mid-term returns, I am going to chase high interest, government-backed fiscal instruments – gilts spring to mind - as opposed to equity-based investment within a country that can longer manufacture products that the world can afford. Something within the region of 70% of all profits for companies listed on the FTSE 100 come from outside of the UK, so some equity-based investment may occur, but I doubt it will be in support of companies wishing to build manufacturing plants within the UK, but for a UK-listed company financing plant development outside of the UK. This effectively rules out a lot of the UK population profiting from such investment, as they cannot afford to hold equity. The UK just cannot manufacture anything in the high-volume produce market that can compete with the pricing of these same products that are made elsewhere – essentially, the developing nations.

I believe that we have entered a period of stagflation. I trust not the ‘official’ figures for unemployment – it is very interesting to see the constant redefining of what constitutes being termed employed - or economic growth, of which one can dissect many ways in order to reveal the complications within. I mean, how can the amount of businesses filing for bankruptcy increase, and yet the unemployment figure fall?

It will be interesting to see how the general UK population react to the 20% VAT rate that will be imposed in 2011, and even more interesting if, as the Institute of Economic Affairs urge, the UK Government via the Office for National Statistics, reveal that the true debt figure for the UK is somewhere nearer to £4.8 trillion mark, than the £816 billion (excluding bank bailouts) declared so far. These numbers mean little to many people, but it represents a frightening change in the order of magnitude. It is a revealing read:

http://www.telegraph.co.uk/finance/e...8trillion.html

…and gives a rather troubling appraisal of UK national debt not actually being 56% of GDP, up from the reported 48% last year, but more like 333%. Gulp…!

And then we have the hidden liabilities within banks when it comes to mortgage assets. It is a complicated affair that can be summed up with two words: off balance. Or one word: lying. Take your pick.

The recent celebrations of good news from higher retail sales and lower debt may yet prove to be a blip on a wider screen. Seasonality studies, and high-street sale reactions to a poor first 6 months of the year and then a good summer that pulls the consumers out, may play some part in these figures… of which, the reader may have appreciated, I take with a pinch of salt. And then, how many citizens, that do not, as we do, read the financial press and study the market, have believed the guff spouted by government and lazy media, and whipped out that credit card again in order to take advantage of the sale, or two for one deal?

Some points....

1) The finance sector certainly does not account for 60% of the UK's gross domestic product, nowhere near in fact. Please advise where you are sourcing this incorrect number from? Depending on how one measures the scope of what constitutes financial sector activity, the contribution is between 10-20%.

2) This is definitely not true, that no company out of the top 1000 has submitted more than £10 million in tax. Again, I would be interested to know where this statistic has been sourced from.

3) A relatively low corporation tax regime encourages inward investments to the UK and means there is a greater chance of foreign firms re-locating to, or remaining in, the UK ahead of other nations. Thus, jobs are created and maintained, meaning greater receipts of IT and NI from the employees of these global firms.

4) Could it be that, say, 100 small firms each employing 10 workers going bankrupt would be more than offset with a couple of global banks increasing their investment banking headcount by a few thousand.

5) This 333% figure includes, I assume, the total liabilities on the balance sheets of the banks in which the taxpayer holds stakes? If so, the vast majority of these liabilities are comfortably covered by the banks' equity base and the asset side of the balance sheet. Hence, the reason why the "banking bailout" is a contingent liability, an off-balance sheet item. for UK plc.

The bigger issue for the public finances is the ageing population, and the dangerously high level of the UK's unfunded pension liabilities, which amounts to over 85% of GDP. Some major, and long overdue, changes to the retirement age, the pension system and the entire welfare state are needed to tackle this 800 pound gorilla that is sitting in the corner of the room.

Some points....

The finance sector certainly does not account for 60% of the UK's gross domestic product, nowhere near in fact. Please advise where you are sourcing this incorrect number from? Depending on how one measures the scope of what constitutes financial sector activity, the contribution is between 10-20%.

A: As you quite rightly state, it depends upon how one interprets financial sector activity, and how one treats GDP and a country’s economy. I am by no means an economist, but for myself, and many other commentators, when a government borrow to bail out the financial services, I consider this the financial sector. Although how the government can borrow from busted banks is a little amusing, as is the confidence that the world has in the securities that it sells.

Of course, depending on what one considers to be inclusive to the financial sector, many sources can be found.

Here’s one with a figure of 76.2%:

http://www.economywatch.com/world_ec...ndicators.html

George Magnus of UBS states 60% – this chap has a lot of interesting comments and was credited with warning about the current financial crisis.

http://www.ft.com/cms/s/0/b05bf79c-f...44feab49a.html

Many others choose to look at public sector net borrowing rates:
http://www.hm-treasury.gov.uk/d/psf.pdf

And then ask themselves if this debt has come about from any other ‘industry’.?

However one argues, the sad truth is that the British public have been fleeced by the financial industry, and are set to be fleeced again through higher taxation and reduced social services that are coming into effect in order to reduce the public sector net borrowing… and then all the PFI and other hidden debt problems are just waiting to bite.

This is definitely not true, that no company out of the top 1000 has submitted more than £10 million in tax. Again, I would be interested to know where this statistic has been sourced from.

A: I will try to return to this, as the source used states that in 2009, ‘out of the top 1000 companies, not one organization paid over £10 million in tax’. I concede that this may be an error/sloppy research on my part as there may be a distinction between company and organization. The above submission has been edited accordingly. In the meantime, the following link provides for interesting reading in relation to big companies in the UK, and tax avoidance.

http://www.internationaltaxreview.co...038&SID=713626

A relatively low corporation tax regime encourages inward investments to the UK and means there is a greater chance of foreign firms re-locating to, or remaining in, the UK ahead of other nations. Thus, jobs are created and maintained, meaning greater receipts of IT and NI from the employees of these global firms.

A: I remain to be convinced that we can return to a business-friendly island that will attract enough investment to have any significant impact - even with the purported lowering of corporation tax over the next few years. With ever more sophisticated business infrastructures and levels of education in much cheaper and less regulated countries, our workforce and business environment is, in my opinion, not seen as attractive to substantial investment.

Could it be that, say, 100 small firms each employing 10 workers going bankrupt would be more than offset with a couple of global banks increasing their investment banking headcount by a few thousand.

A: Which will undoubtedly serve the economy in the ‘square mile’ but not the tradesperson suffering the bankruptcy.

This 333% figure includes, I assume, of the total liabilities on the balance sheets of the banks in which the taxpayer holds stakes? If so, the vast majority of these liabilities are comfortably covered by the banks' equity base and the asset side of the balance sheet. Hence, the reason why the "banking bailout" is a contingent liability, an off-balance sheet item. for UK plc.

The bigger issue for the public finances is the ageing population, and the dangerously high level of the UK's unfunded pension liabilities, which amounts to over 85% of GDP. Some major, and long overdue, changes to the retirement age, the pension system and the entire welfare state are needed to tackle this 800 pound gorilla that is sitting in the corner of the room.

A: Yes, that Gorilla troubles me, and will become heavier, I fear in the not-too-distant future.

Mr Magnus, an excellent economist, cites the financial sector and the housing sector as contributing to 60% of GDP growth, which is totally different to the financial sector contributing to 60% of the country's GDP, as your original post stated. The real figure of this sector's vital contribution to GDP is somewhere between 8%-20%.

I think it dangerously naive for the media - and grossly disingenuous on the part of politicians - to place the blame solely at the door of the financial industry for the credit boom and bust witnessed in the past couple of decades or so.

From the perspective of the UK, in my opinion, the blame needs to be shared between the bankers and the following parties:-

- the British public, who lapped up the plentiful and ultra-cheap credit and spent way more than they earned for far too long, based on the premise of continually rising house prices;

- politicians, central bankers and the inept regulators - all of whom were asleep at the wheel, enjoying the feel-good factor of what became known as "The Great Moderation". The benefits this "golden age" gifted them with were low inflation, healthy opinion polls and approval ratings and steadily rising tax revenues that funded perpetual increases in public spending;

- disinflationary forces emanating from the surge in globalisation that took hold in the 90s, which lead to both ultra-low market and official interest rates, across the developed world, for a very long period of time;

- countries running exchange rates at artificially low levels, which was part of the reason why many nations ended up running huge trade surpluses that were (are) used to fund the binge culture of the high-spending, deficit countries, thereby providing more fuel, in the form of cheap credit, for the fire. (the list goes on)....

But, hey, it's easier for the media to not fully comprehend all of the above inter-linking factors, to instead grossly simplify, and cast a few bankers, such as Fred Goodwin, as the sole villains of the piece.

I was merely pointing out, through using a hypothetical example, how corporate bankruptcy filings could increase while, at the same time, unemployment moves in the opposite direction.

Yes, the UK economy does need to re-balance, towards a model that spends less and produces more, one that is not so reliant on financial intermediation as an engine for growth.

Fair point, but my interpretation of the statement made by Mr. Magnus (and I am not alone here) was that housing sector equates primarily to mortgage instruments, which translates to me to a debt to a lender, and that an underlying point, at this time in our financial circumstance, was relevant to financial debt incurred so far via the financial services sector. Regarded from another perspective, the explosion in our debt this last couple of years can be said to have emerged because of ridiculously constructed financial packages that have at their core complicated mortgage instruments. As you intimate, many believed that brick and mortar could not fail – in a way tricked by the government and banks, if you like – and so regarded property as an investment vehicle that would secure a return… a tangible pension, of sorts.

…yeah, I know, one can split hairs on this issue – but it does make for an interesting discussion, and allows mud-slingers such as myself to have a rant.

I could not find supporting arguments, or interpretation of construction (I would have liked to have seen it), for the 76.2% cited here:

http://www.economywatch.com/world_ec...ndicators.html

As I answered, interpretation is subject to school of thought. Economics is constantly branching, and so as a layman, I regard financial debt, in its various forms, as a loan from a financial centre.

I most certainly regard with scepticism any government division of the UK economy into packaged sectors.

We continue with the Ichimoku trades, this time one on EURUSD:

Condor,

You may find this of interest. It is the official breakdown of UK GDP from 2008, sector by sector:-


Agriculture: 0.600%, Mining: 2.000%, Manufacturing: 12.400%, Utilities: 1.410%, Construction: 6.190%, Dist Hotels and Cater: 14.500%, Transport: 7.300%, Business Ser & Finance: 32.700%, Govt & other serv: 22.900%

From a statistical perspective, I think it important to clearly distinguish whether one is speaking of GDP, GDP growth or public sector debt-to-GDP ratios.

Mr Magnus, in this instance, was making a point that boom and bust, as Mr Brown often boasted, had clearly not been abolished. He backs this claim by citing that finance and housing was producing 60% of GDP growth at the height of the boom, a time when the UK was running such a high structural deficit.

A structural deficit is the amount of the government's annual budget shortfall that is not caused by cyclical (boom/bust) factors of the economic cycle. In 2009, the OECD estimated that the UK was running a structural deficit of over 7% of GDP. This figure was raised to over 9% at one point by Treasury officials.

Simply put, this meant that Labour, under Mr Brown, had over-estimated the long-term potential of the UK economy by a staggering amount. So one cannot solely blame the bankers for the huge increases in public debt-to-GDP levels.

Have a good week.

Morning All,

COT figures issued on friday for Sterling show...

Institutional Players: Net Long at 54%

Retail Players: Net Short 46%

Slight increase on Long positions from last report.

Stocky

Welcome to the thread Gammase

Stocky

Sorry that was incorrect....2nd attempt

Morning All,

COT figures issued on friday for Sterling show...

Institutional Players: Net Long at 54%

Retail Players: Net Short 53%

Slight increase on Long positions from last report for non commercial

****Keep in mind it is the Institutional figure we want to pay more attention to as majority of commercial trading is done via spot FX not on the futures market.

Stocky

GM Stocky - looking at the downside wicks on the daily chart - just into the area of the April highs - it makes me suspect that the big dogs have been adding to their longs......now will we get a last stop sweeping spike down before take- off ??.......TWT

Morning Islander,

Totally agree...I think we will head toward 5300/ 5400 area to clear weak longs before heading up. However with FX being FX it wouldnt suprise me if we head up from 5470 area. I have a long at that price from friday at b/e just incase..

Stocky