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Definition of an ‘Alpha Generator’

Any security that, when added to an existing portfolio of assets, generates excess returns or returns higher than a pre-selected benchmark without additional risk. An alpha generator can be any security; this includes government bonds, foreign stocks, or derivative products such as stock options and futures.

The Alpha Generator ltd. seeks to increase an investor’s profit through an investment solution where the asset allocation will add at least one security to a portfolio that will outperform all others without notably increasing the level of risk. This is achieved through relevant and prudent advice, financial education, and shrewd money management services. The Alpha Generator employs highly trained, intelligent analysts that have years of experience in the financial markets and knows them intimately. Each analyst is adept at a specific field in investment, whether it be stocks, bonds, ETFs, commodities or forex, and is ready and able to provide services regarding that field at your request. The Alpha Generator was primarily established to provide investors who do not have a background in finance with the tools necessary to trade for themselves. We work with our clients tirelessly and continuously so that they turn a profit, month on month.

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Joshua Brown

Director Expertise: Macro trends impacting currencies, commodities and other markets. Technical and fundamental analysis.

Joshua Brown earned degrees in Economics, Finance, and Business Management from RMIT University in Melbourne, Australia before entering the financial industry in 2001. He has since worked for prestigious companies such as Goldman Sachs JBWere and the Commonwealth Bank of Australia. In his last position he was employed as a senior analyst, senior account manager and department manager at AvaTrade. His experience ranges from forex trading and commodity derivatives, all the way to portfolio management, investor relations and education, financial planning, and even penny stocks. He also currently writes for several financial websites such as DailyFX and Seeking Alpha.

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Darren has an extensive knowledge of web development and marketing fields. He is generally an all round superstar and is involved in high level account management services.

Eric Harbor

Senior Analyst Expertise: Financial markets, Investment analysis, Electronic trading, Technical analysis and Account management.

Eric is a well respected element in the forex and commodity trading world. He is the director of Caesar Trade, a successful online brokerage and the author of the Poor RIchards forex blog. Eric has been trading forex and commodities since 2006 and provides perfected account management services.

The Trade Marked Blog

A quick analysis of Crude Oil
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crudeoil

By looking at the CCI and Stochastic RSI and combining them with cyclical up and down movements of the price, we might start to imagine the price falling back to about $100 a barrel. In order for this to happen, we would need to see a slight improvement in the geopolitical arena of Libya and Ukraine. Perhaps the market is building this oil tension into the price, and it could get a lot worse, but we saw a severe decline in oil stocks which really lifted the price. This decline may be due to seasonal higher demand and global economies generally recovering. In any case a sell stop at 103.80 might be an idea.

More on top of this, as the EUR falls, we should see the price of commodities which are priced in USD to fall along with it. Ie as Oil becomes more expensive, less is bought. There is a well established correlation coefficient of about 0.50 - 0.80 so if the euro continues to fall as Draghi introduces QE, we may see further downward pressure on crude oil.

According to the US Energy Information Agency, it estimates U.S. total crude oil production averaged 8.3 million barrels/day (bbl/d) in April 2014, which would be the highest monthly average production since March 1988. U.S. total crude oil production, which averaged 7.4 million bbl/d in 2013, is expected to increase to 8.5 million bbl/d in 2014 and 9.2 million bbl/d in 2015. The 2015 forecast represents the highest annual average level of production since 1972.

A Flightless Bird Took Off This Year But Will It Stay Airborne?
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Summary

  • Why all the interest in the kiwi?

  • The current drivers and downside risks of the NZD.

  • The historically overvalued kiwi sets the stage for a fall below the support of NZDUSD 0.85.


  The "kiwi."

The New Zealand dollar is often ranked as being one of the most traded currencies which is somewhat counterintuitive as it represents the 53rd largest economy. The national currency was de-pegged from the US dollar in 1985 and since then it has fluctuated greatly though often trading in a manner highly correlated to the Australian dollar. The government of New Zealand and the Reserve Bank has historically been hesitant to manipulate the price with the last major action taking place in 2007 with the reserve bank selling NZD in order to drive down its value.

The kiwi has seen lows of less than 0.40 USDNZD in 2001 and 0.50 in 2009 and seen highs of 0.88 in 2011 and in recent months we are witnessing a renewed climb to parity with the price reaching 0.87 this month. Analysts often explain the current strength of the kiwi is being derived the growth of the Chinese economy and strong demand for dairy products. New Zealand is also the first economy to raise interest after the GFC, with the last raise in April to 3%; one of the highest in the western world and acts as a magnet for carry trade funds. There has been recent calls by certain sectors and political parties to intervene in the high value of the kiwi, but as of yet no action has been taken and exporting industries have sustained the rise in their stride. A move to parity or perhaps over 90c would certainly, nonetheless be highly worrisome for the RBNZ and put a brake on monetary contraction.

The idea of a merger or union of the Australian dollar with the kiwi dollar, both highly correlated currencies with shared drivers has long been discussed in order to remove conversion costs, build economic strength and financial power. It would seem New Zealanders are most in favour of this union (as Australia is its main trading partner) and as the currencies move towards parity, this option may garner further consideration. A common currency would also create a trading bloc that would increase the wealth of small pacific Island states that would most likely also adopt the new dollar. At the moment, this idea may not be so palatable after the euro experience, however US economics professor Barry Eichgreen of the University of California says it is worth examining and so it should be more seriously debated in the coming years.

Another reason why the New Zealand dollar is one of the most highly traded currencies is because it represents an economy that is the first to trade after the close of the US markets. Due to its geographical timezone, New Zealand markets are the first to digest and react to American events and released data and often global markets will follow its lead. While other markets are closed, the New Zealand dollar will be the only currency trading with any volatility.

Drivers of the kiwi

The New Zealand economy was forecast to outperform its developed market peers at the beginning of the year and indeed it has met that expectation. Strong demand of its exports, such as dairy and wool, rose in China and Australia - its largest trading partners. This lifted the economy despite interest rate hikes reducing investment spending.

Other factors bringing value the kiwi comes from large wave of immigration that has led to a housing and construction boom. This includes the residential investment in re-building Christchurch following the earthquakes of 2010 and 2011 that devastated the region. Tourism is also up with annual growth of 5% and tourism expenditure rising to 9%. Small businesses are considered to be a large driver of economic growth with New Zealand rated as being one of the best places in the world to do business.

Along with the Australian dollar, New Zealand is also an attractive destination for the investment funds of a newly cashed up Chinese middle and upper class who are now able to invest their funds abroad. The relatively high NZ and Aussie interest rates plus the depreciating yuan have caused the Chinese to park their funds in this stable pacific region.

Potential downside forces of the kiwi

    The New Zealand dollar is considered to be overvalued by many analysts. Here are some of the reasons why:
  • The Kiwi is exposed the economic uncertainty of China. A drop in exports will lead to a drop in kiwi demand.

  • High interest rates will reduce investment which in turn offsets the growth of the economy and private consumption.

  • reduction in the prices of dairy and cattle products such as wool and meat.

  • New Zealand sits upon an unstable geological fault line. This fault line is a potential hazard for some of the largest New Zealand residential areas such as Christchurch and its capital Wellington. The country is also vulnerable to droughts and naturally occurring phenomena.

  • The demand for exports might be hampered by the strong New Zealand currency and would in turn widen the current account deficit, despite the best efforts of the Government to reduce it (by reigning in spending).

  • The rise of foreign interest rates may pull funds away however this risk seems to be some time off.

  • A reduction in Asian investment as the Chinese economy slows. We might even see a reversal as Chinese debt rises or growth drops to a point where investors becomes risk averse and want their funds situated closer to home.


A New Zealand dollar outlook

It would appear that the kiwi is trading at historical highs and technical indicators say the currency is overbought over NZDUSD 0.85. Strong resistance lies at 0.87, 0.88 and good support lies at 0.85, 0.80 and 0.77. The moving average is still rising but it's hard to see how there is enough upwards pressure to see the currency reach parity with either the AUD or the USD considering the NZD has probably priced in all favourable conditions. We should enter a period of price stability with movement between 0.87 and 0.80 and this opens up the currency to profitable range trading opportunities. In the near future we should see a retracement to ~0.81 should the currency drop below 0.85. After the recent increases of the interest rate, the reserve bank will probably wait to see its effect on the economy before taking action again. On the other hand, the US continues to contemplate how and when it will raise rates and therefore at the current rate of 0.856, the downside risks are stronger than upwards momentum. We at the Alpha Generator make this New Zealand dollar prediction with a downside bias but a drop below the support of 0.85, would crystallize this opinion.

download
 
The EUR/USD is oversold according to various indicators
Posted by admin | Uncategorized | 0
and perhaps when can we go long to take advantage of a correction or a reversal? download Perhaps we can see a correction to the historical support. A move above that could indicate a reversal. A buy order may be profitable at this level.

In this chart, I've included some oscillating indicators to help us decide if the EUR/USD is oversold and make a prediction about when we can jump into the market and take a long position. I must admit that predicting the bottom carries enormous amount of risk, but the rewards are worth the effort. Considering Draghi hasn't actually lowered the interest rate, and he could be just jaw boning the currency lower, the market will probably call his bluff (again) and we should see the price rise next week according to many analysts.

An explanation of the Indicators:
Stochastic RSI - Oversold. When indicator climbs back into the channel. Then buy.
CCI - Oversold. When indicator jumps back into the channel, again a buy signal. Historically oversold except for an instance in early April. In this case the price also bounced up again.
Momentum - This one is interesting and somewhat subjective. Go long when the price jumps up above the black line which represents the historical support line in the actual price chart. Historically oversold.
RSI - Oversold. Go long when the price goes back into the channel. Historically oversold.
April Forex Roundup and Trading Conditions heading into May
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April Forex Roundup

The forex market in April was characterised by an unusually low level of volatility. Some pairs traded between tight ranges not seen since the late 1990s. A 50 pip range for currencies such as the USD/CAD persisted for several weeks and it was not until the last few days of the month did we see some real movement in the prices.

Despite the lack of price movement, the major factors affecting the market have not been insignificant. The crisis in Ukraine, deflationary concerns, data released indicating the slow recovery from the debt crisis and the relatively high exchange rate have all weighed in heavily on financial decision making in Europe. As Draghi contemplates QE, analysts believe he is faced with the most important decision of his career. With the ECB renowned for inaction, a misstep with the delicate balancing act required to push the EU along the path to recovery could spell a return of recessionary fears. This may result in an audit of the effectiveness and functions of the ECB and a major shakeup could ensue. The economic data from Europe broadly show that unemployment is falling while manufacturing and sentiment is mixed. Worryingly, the inflation rate estimates continue to drop with the latest information showing a 0.7 Flash Estimate y/y.

The Australian dollar was stimulated by better than forecasted economic data and the recovery of the American, Japanese and Euro markets, but this was offset by the declining Chinese growth and the possibly related reduction in commodity prices. Central Australian financial bodies are eager to see the major driver of growth and national income shift from the resources sector to other industries such as manufacturing, finance and technology. The historically high Australian dollar tempers exchange-rate sensitive exports and so the Reserve Bank will most likely look to keep rates on hold well into 2015. In any case, Australia has been a destination for carry trade funds and cash-rich Chinese investors seeking to avoid risking their recent earnings by denominating it in the falling yuan. This capital inflow has propped up the AUD to a large degree and the RBA would not want to exacerbate this unexpected inflow by increasing the interest rate further. The similarly commodity driven economy of Canada faces similar issues, however despite the prevailing positive economic sentiment, it will look to the resurging US economy to compensate for the decrease in Chinese exports. The only problem being the US economy is not growing as much as desired. Economic data for Australia show that inflation, building approvals, retail and business confidence is down while the trade balance and employment is up.

The slowdown of the economy in China may only be temporary but it is having a rippling effect across almost all financial markets. The US specifically is not immune to this reduction in growth as China is her second largest trading partner. It could be argued that this is a major handbrake on the expansion of the US economy. Rising stock market indices indicate generally solid growth, but the question is whether the economic stimulus is filtering down to households and unemployment remains a large concern with the Fed. Chairwoman Yellen seemed to announce prematurely that rates will finally lift in 2015, however Fed members seemed to retract that statement on her behalf by reiterating that growth is slower than desired and it all comes down to the numbers, especially employment data. Nevertheless it does seem a real possibility that rates will rise in 2015 and consequently so will the USD. With US economic data in April, manufacturing and exports are down, employment is mixed but sentiment up and so is retail and home sales.

The NZD economy seems to be outperforming regional counterparts and has raised rates for the second time in two months. It was the first developed country to exit record-low borrowing costs. Despite the fall in dairy products, its financial health is going from strength to strength. Many analysts believe the NZD is headed for parity with the AUD and even the USD. Chinese capital inflow, Australian economic growth and strong immigration will push it along this path. Building and exports are up while business confidence and inflation are down.

Overall the British economy is doing better than the EU; made evident by the EUR/GBP pair which has declined to 0.82. Retail sales, borrowing, unemployment and manufacturing all produced better than forecasted data and at the beginning of the month, FSB's Carney said that financial markets should prepare for higher rates. GDP grew slightly below forecast and by no means is the progress a smooth ride, but sentiment is positive and the economic plan is on track for Britain to make a full recovery from the deep recession.

Bank of Japan's president Kuroda said recently that the Central Bank will continue easing until 2% inflation is stable, but it's a important acknowledgement that Japan is finally emerging from its deflationary cycle. Japan seems to be moderately closer to a full throated recovery and the Bank of Japan's full year forecast for 2014 is an increase of GBP of 1.1% (though down from the 1.4% forecast in January). Japanese retail sales and optimism are up but exports and manufacturing are down.

Market Characterized by Low Market Volatility and Consolidation

Many major currencies traded between a narrow band in April representing a multi-year drop in volatility. According to Bloomberg, the waters calmed as global central-bank balances sheets continued to grow, driving more liquidity into financial markets as economies worldwide recovered. Perhaps this price stability was also created by the uncertainty surrounding the Russian invasion of the Crimea and the potentially drastic measure of European QE; the major market players are just waiting to see what happens next. Some currencies such as the Swedish Krona, South African Rand and the Chinese Yuan bucked the trend and the price moved considerably. The lack of price action nevertheless presented market participants with some interesting trading opportunities - trading between ranges and anticipating breakout opportunities. The GBP/JPY for example has produced a perfect triangular range and as this goes to print, we still expect a breakout in either direction at any time (see also the EUR/JPY chart).

GBPJPY The EUR/CHF is an example of a pair that offered breakout opportunities that were easily identifiable during the April trading period.

eurchf The main currency drivers in May

We expect market volatility to return in May but all eyes will be on further inflation data and the reaction of Draghi to this information. Oil and natural gas prices may rise should Russia invade Ukraine but I can't foresee Western troops entering this conflict. I don't believe there is an appetitive for war as EU economies continue to recover from the GFC. There will be a prolonged period of heightened tension and the euro may suffer instability due to this crisis on its doorstep. With this in mind, safe haven currencies such as the Swiss CHF and the Swedish krona become attractive.

China will continue to see a reduction in economic growth, but many analysts believe this to only temporary. The reduction of foreign imports and building in East Asia will affect the AUD, CAD, NZD and USD to some degree but this will be offset by other emerging economies. We may see continued range trading with these currencies. The major economies will most likely continue to grow and May will be a month of increased talk with regards to raising interest rates. Although global rates will most likely not rise (except in minor economies), central banks will be able to give traders an indication of the conditions in which they will be able to raise interest rates or even perhaps a specific forecast or target.

We should see unemployment fall in Europe and US while manufacturing and inflation in Western countries should increase. We head into May with broadly positive economic sentiment.

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