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Weekly Forex Forecast - Week 42

2013-10-15T21:10:00.004+02:00

Debt ceiling extension shifts focus temporarily back to Fed

Debt ceiling extension reveals popular pressure on republicans

In the end it looks like the republicans blinked well ahead of the October 17 deadline, or at least "half-blinked". Indeed, the fiscal shutdown that initiated on October 1 (which is not exactly the same as the debt ceiling issue), had already considerably damaged the republicans in the opinion polls, without significantly affecting the standing of President Obama and the Democrats. As such, they decided to give in to a short-term extension without conditions. It is still too early to call the shots on the final outcome of this saga, yet the bargaining position of the Republican side seems to have weakened considerably.

Next week's Beige Book might be more important than usual

At least temporarily markets will now shift their concern away from Congress (fiscal policy) to the Federal Reserve (monetary policy). Moreover, since the shutdown has also affected the delivery of reliable and sufficient statistical data, next week's publication of the Fed's Beige Book (which is a collection of anecdotal evidence on the strength of the economy in the United States), might have more impact than it usually has. There is a concrete risk that the indications out of the Beige Book might be a bit disappointing, as initial jobless claims have recently picked up. More in general, the absence of data combined with continuing uncertainty, might well induce the Fed to further postpone the taper. Or, if they would proceed, they would qualify as being a very bland taper and reserve themselves to reverse it at a minimum sign of weakness.

Nothing new under the sun?

On page 5 we discuss the investment implications of these latest political changes. We see temporary dollar weakness. But we do not think that the prospects for commodity currencies and emerging markets have significantly improved.

Overextended GBP/USD exposed to a slowing UK recovery

BoE to remain on the sidelines in the next months

As widely expected, the Bank of England (BoE) kept its interest rates unchanged at 0.5% and the size of its bond buying programme on hold at £375bn on 10 October. Given the Committee's unanimous stance on the monetary policy last month as well as the recent economic data pointing to a recovery, a more accommodative stance from the BoE is unlikely to occur in the next months. Also, the forward guidance set by the BoE does not call for a rate hike until 2015 at the earliest

The British pound has already priced in a lot of good news

With the BoE likely on the sidelines for the next months, the strength of the UK recovery is likely to influence significantly the valuation of the British pound. Despite being oversold, the recent rise in GBP/USD has been impressive, suggesting that most of the prospect of a robust recovery has been priced in. However, recent weaker than expected retail sales, as well as the surprise decline in industrial production, suggest that the recovery might not be as strong as the market expects. Thus we do not see a compelling medium-term upside potential for GBP/USD at the current prices.

Strong resistances around 1.63-1.64 area in GBP/USD

Looking at the chart, the major resistance area between 1.6302 (30/04/2012 high) and 1.6381 (02/01/2013 high) coupled with long-term declining trendlines confirm that a move above these levels will be hard. In the short-term, the medium-term rising trendline could spur a recovery in GBP/USD, but, in the medium-term, we see the region around 1.63 as an attractive medium-term short opportunity

The never-ending US fiscal saga continues

Nothing new under the sun

What are really the implications of the now very likely six week extension of the debt ceiling? First and foremost, the continuation of the uncertainty is going to prevent the Federal Reserve from taking a very aggressive stance. Thus the US dollar is going to remain under pressure, also versus the euro as the ECB is unlikely to adopt a monetary stance which is significantly more expansive than its current one (over a longer period we still see Europe's single currency weakening against the greenback). Likewise, while we caution against massive strengthening of the pound sterling (see page 4), the Fed's cautious stance is certainly giving some short-term upside potential to cable. And whilst we could also envisage some very short-term strength of commodity currencies, here we really think that the provision of continuing central bank liquidity might well continue to go hand in hand with further weakness of the Aussie, and other natural-resource based currencies. Likewise emerging market currencies are not significantly going to rebound as their commercial surpluses continue to shrink and the vulnerabilities of some emerging markets have clearly come to the forefront, independently of the prospect of the taper at some point in time.

Yet something has changed

The fact that emerging markets and commodity prospects have hardly changed in spite of monetary policy plausibly remaining on hold tells us something interesting about the six week debt ceiling extension. Sometime, as these coming six weeks run their course, we could expect renewed tension as towards the middle of November a deal must be made (or another short-term extension is decided). At that time, all risky assets, such as equities and emerging bonds, might again come under pressure. Thus there is a concrete risk that the prospective weakness of the Japanese yen and the Swiss franc might be short lived.

Aussie and Swissie favoured by purchasing power parity

Three currencies seem too far away from their "fair value"

The purchasing power parity is an economic theory that allows to derive the long-term "fair value" of a currency relative to another. Calculation of this fair value usually derives from either the consumer price index (CPI), the producer price index (PPI). A well-known alternative to general price baskets is the Big Mac Index. The OECD has developed a specific basket that is also widely used. At the end of September, three currencies among the major ones have one or more PPP measures that are viewed as overvalued or undervalued compared to the US dollar, calling for long-term move back to their estimated fair value.

The Aussie and the Swissie remain overvalued

The first one, USD/CHF is overvalued by three measures (CPI, Big Mac and OECD). Given also the SNB's threshold at 1.20 in EUR/CHF and the looming US tapering, we see very little limited medium-term downside risk in USD/CHF.

The AUD/USD is in our opinion much more interesting and overvalued by two measures (CPI and OECD). This overvaluation confirms our longer term bearish view on the AUD/USD. Indeed, the growth rebalancing from the slowing mining sectors to the rest of the economy will force the Reserve Bank of Australia to keep an accommodative monetary policy for an extended period of time, supporting a weak AUD/USD.

The third one, USD/JPY is undervalued by one measure (Big Mac). Yet, we continue to favour further longer term rise in USD/JPY towards 105.50-110.00 given a persistently accommodative Bank of Japan. Thus, given the BoJ's very aggressive unconventional policy, the JPY might weaken further, yet the bulk of weakening might already be beyond us an investors should get cautious above the 105 level.

Weekly Forex Forecast - Week 41

2013-10-08T19:44:00.006+02:00

Europe gradually stabilising

Italy's political developments confirm political stabilisation

For the first time in 20 years Mr. Berlusconi has been outmaneuvered by the political movement he himself created. Italy has now, for the first time over the same period, a government that not only has an ample majority in the parliament. It is above all a homogeneous government composed of the most moderate faction from both the right side and the left side of the political spectrum. The chances, therefore, that this government might be able to finally pursue some badly needed reforms is high. Being both mainstream parties in the government, special interest groups and unions will have a harder time to push for the safeguarding of their particular privileges.

Slow adjustment in the periphery

Except for Italy, all other periphery countries have already achieved a significant adjustment of their competitiveness versus core countries, mainly through a reduction in labor costs. This does not mean that the growth pick-up, which will continue to materialize over the next coming months, will be very strong. It will be weak, and it will be weak for years to come. The main point is, however, that - barring a major global crisis - there will no massive austerity measures that would further create severe growth slowdowns.

Stabilisation explains temporary strength of the euro

As will be better explained on the next page, it is the the current stability that is preventing the ECB from taking more aggressive liquidity actions, in spite of being the only central bank whose outstanding liquidity is shrinking. We doubt that this will be for ever sustainable. The start of the Fed taper, in particular, might force the ECB to counteract with more liquidity. That could be the trigger for euro weakness.

The ECB is on hold ... for now

The ECB does not seem in a hurry to loosen its monetary policy

The European Central Bank (ECB) announced on 2 October that their monetary policy will remain accommodative for as long as necessary. However, comments from Mr Draghi did not suggest a forthcoming cut rates or that new unorthodox measures like the LTRO were ready to be launched. The perception that the ECB could remain longer on the sidelines, associated with the resolution of the recent Italian political gridlock, have lifted EUR/USD to new highs. However, the persistent low level of inflation, the fragile recovery, the decreasing level of liquidity in the Eurozone and the strong Euro are likely to trigger a new monetary stimulus from ECB in the next months.

Relative monetary policies less supportive for EUR/USD in 2014

The still questionable access to credit for small and medium enterprises (SME) in periphery countries and the increasing negative pressure coming from the strong Euro on exports could derail the current fragile recovery. Furthermore, the upcoming ECB's asset quality review of European banks is unlikely to lead to an increase in lending in the next few months. Also, the eventual US tapering is likely to push for higher borrowing costs globally, increasing the risk of derailing the Eurozone recovery. It seems therefore very likely that the ECB will eventually have to step in and loosen further the monetary conditions, potentially when the ECB will have a clearer view of banks' balance sheets.

Medium-term upside likely limited in EUR/USD

From a technical point of view, the key resistances are at 1.3711 (February peak) and 1.4000 (psychological level and long-term declining trendline). Given the respective monetary policies expectations and the increasing number of long Euro investors, we would not chase EUR/USD above 1.3711.

US government shutdown and the FX market

USD/CHF and USD/JPY are potential buying opportunities

We consider that an US default is very unlikely, therefore a deal is expected to be found before the unofficial deadline on 17 October. In such an event, a relief rally is expected that should lead to outflows out of safe haven currencies, leading to a decrease in value of the Japanese Yen and the Swiss franc. That decrease should be sustained by the persistent monetary policies conducted by the Bank of Japan and the Swiss National Bank. On the other hand, the US dollar is poised to rebound should a US default being averted. Therefore, USD/CHF and USD/JPY are prime candidates for a long position when the uncertainties will be lifted. The timing will likely be heavily linked to the resolution of the US political crisis. From a chart perspective and given that prices tend to anticipate events, a long strategy on USD/CHF and USD/JPY could also be favoured should they be able to move above a previous high. Currently, the resistances to monitor are 0.9078 (02/10/2013 high) in USD/CHF and 98.73 (01/10/2013 low) in USD/JPY.

RBA's wording more complacent on the Aussie

The RBA is waiting to see more effects of previous rates cuts

On 1 October, the Reserve Bank of Australia (RBA) decided, as widely expected, to leave rates unchanged at 2.5%. However, the wording concerning the valuation of the Australian dollar (not anymore described as "at a high level") and the persistent non-mention to any "scope for further monetary easing" suggest that the RBA could remain longer on the sidelines. Indeed, the rise in housing prices, one of the main beneficiary of the RBA's loose policy, tends to boost consumer confidence through the "wealth effect".

The rebalancing of Australian economy favours further RBA actions

In the longer term, we continue to believe that the end of the mining investment boom will lead to further below trend growth for Australia. Subsequently, the RBA will need to keep a loose monetary policy to help growth pick-up in the non-mining sectors.

High short GBP positioning has been erased

The International Monetary Market (IMM) non-commercial positioning is used to visualise the flows of funds from one currency to another. It is usually viewed as a contrarian indicator when it reaches an extreme in positioning.

With the US shutdown now in place, mounting uncertainties surrounding the debt-ceiling have pushed safe haven currencies, like the Swiss francs or the Japanese yen, higher. However, while the Swiss franc appreciation has been associated with investors adding long positions, the Japanese yen short positioning continues to move towards its historical extreme. We think that an eventual resolution of the debt ceiling issue should therefore act as a significant driver for a new phase of weakness in these currencies, especially the Swiss francs given investors long positions.

As expected, the Euro and the British pound have been bought after the FOMC meeting. The Euro long positions have exceeded their February peak and are now in territory where major tops have previously been made in EUR/USD. Therefore, even though we continue to favour a move towards 1.3711, a sustainable move higher is not warranted by Euro long positions.

The Australian dollar has seen some increase in its short positioning. However, the less dovish comments from the Reserve Bank of Australia on 1 October could lead to a closure of some of these short positions and fuelled short-term strength in AUD/USD.

Weekly Forex Forecast - Week 40

2013-10-01T18:31:00.004+02:00

Monetary uncertainty to weigh more than fiscal uncertainty

Federal Reserve uncertainty weighs on markets and the US dollar

One should not illude oneself: Mr. Bernanke's September 18 decision not (yet) to proceed with QE tapering reflects the serious concern that such move could still derail the recovery, based as it is on the highly interest rate-sensitive housing market. Inflation, furthermore, remains on historically low levels. On one hand this gives the central bank more room for manoeuvre. On the other hand, low inflation is an indication of the continuing deflationary threats in the economy, its threat to still high household debts, as well as the continuing weakness of the very recovery.

In this respect, we believe that the monetary policy concerns related to the QE tapering dilemma are more risky than the never-ending fiscal saga in Washington. At the same time, we concede that the combined effect of enduring uncertainty on both fronts could represent a major risk for the markets, over the next coming weeks. After all, if markets do not like uncertainty, they hate policy uncertainty. And, today, we are facing an unpleasant combination of monetary and fiscal policy uncertainty.

Labour market data key

September monthly job creation, more than the unemployment rate which is currently at 7.3%, will be important to give further clues about the strength of the economy and, consequently, the Fed's determination to pursue tapering. If the number would edge closer to 200k than to 150k, and if earlier in the week the purchasing manager figure (ISM) will remain above 55, it should be fair to expect some US dollar strength on the back of increased tapering prospects. If, on the other hand, the labor data would disappoint, the euro might further strengthen against the US dollar. And, this time, also equity markets would remain jittery.

Is Japan really on its way towards fiscal balance?

Japan is likely to take a first step towards more fiscal soundness

Mr Abe is expected go ahead with the first phase of the sales tax hike, implying a rise to 8% in April 2014 from the current 5%. The measure should be associated to a ¥5tn stimulus to cushion the blow on economic growth. Even though this is a first step towards balancing the budget, more steps should be taken to increase the odds of attaining this goal. In particular, the social welfare program needs to be revised and not only by raising the age of retirement, which was decided by the government before Mr Abe's. In 2011, the cost of Japan's welfare program was around 23% of GDP, which is in the average of the major economies. Sadly, Japan society is characterised by an aging population, which will lead to an inevitable increase in the cost of welfare. Therefore, should Abe fail to follow through courageous reforms in government spending, even an increase at 10% in October 2015 implied by the second phase of the sales hike is unlikely to be sufficient to balance the budget. Indeed, social welfare spending will reach a record ¥29.1tn this year while the government expect a yearly ¥13.5tn revenue with a tax at 10%. The resulting effect would be a loss of confidence among Japan's creditors, which could lead to upward pressures on government yields, leading to dire consequences for a country with a debt to GDP ratio of around 210%.

A technical overview on the Japanese Yen

As the Swiss franc, the yen has recently appreciated given its perceived safe haven status. However, we view this decline as temporary and we continue to expect EUR/JPY and GBP/JPY to hit their 2009 peaks (139.22 in EUR/JPY and 163.09 in GBP/JPY). USD/JPY is also attractive as it is close to a key support at 97.76 (see also the 200 day moving average) and that its longer term target lies between 105.50 (61.8% of the retracement of the decline from June 2007 peak) and 110.66 (August 2008 peak).

Uncertainties continue to weight on EUR/CHF

Uncertainties overshadow the recent EUR/CHF supportive news

EUR/CHF usually rises when investors are more risk seeker than risk averse. Therefore, the postponing of the tapering by the FOMC and the ongoing narrowing spreads in the Eurozone among core and peripheral countries should have lifted EUR/CHF. However, since the Fed decision to delay the start of the reduction of its liquidity injections, EUR/CHF has declined. This counterintuitive behaviour could be explained by the increasing uncertainties related to the US fiscal situation. Indeed, since the FOMC meeting, markets have focused on the threats implied by the short-term budget and the debt ceiling. Overall, the bigger risk lies in the debt ceiling as it is linked to the capacity of the US to service its debt.

The SNB continues to find the Swiss franc highly valued.

On the other hand, the Swiss National Bank reaffirmed on 19 September its commitment to defend a EUR/CHF floor at 1.20 and continues to consider the Swiss franc as highly valued. Given the lack of signs of inflation risk in Switzerland, we continue to see 1.20 as a credible backstop for EUR/CHF in the foreseeable future. Coupled with the potential mild recovery in Europe and the persistent global monetary accommodative policies among central banks, the medium-term outlook of EUR/CHF remains tilted to the upside.

Short-term uncertainties offer buying opportunities for EUR/CHF

Looking at the chart, EUR/CHF is moving below the key support at 1.2268 (06/08/2013 low). As the debt ceiling uncertainties could linger on until early November, it would be prudent to wait for the short-term uncertainties to be lifted before entering a long EUR/CHF. The way US lawmakers will manage the budget, and the potential government shutdown, is likely to give clues on the likelihood of a deal for the debt ceiling issue.

Long-term equilibrium broken in GBP/CAD

GBP/CAD is exhibiting an attractive technical configuration

The precepts of technical analysis mention that the upside or downside potential implied by technical patterns derives from two elements. The first component is the variation of the price inside the technical configuration or the height of the pattern. The second component is the time spent inside the technical configuration or the length of the pattern.

As a large pattern comes from wide price swings, the target is expected to be more significant as prices tend to offset the previous price extremes. Therefore, the greater the height, the bigger the potential target. Similarly, as a long pattern results of a persistent equilibrium between buyers and sellers, the break of this equilibrium is likely to lead to a significant move as many investors are wrongly positioned and have to close their positions, adding fuel to the new trend. Hence, the longer the pattern, the bigger the potential target.

Looking at GBP/CAD, the bullish breakout of the resistance at 1.6474 (26/08/2010 high) put an end at three years of consolidation. Given the length of the pattern (called a rectangle), we can expect a long-term rise in GBP/CAD. The height of the pattern (0.1225=1.6474-1.5249) implies a minimum target at 1.7699 (0.1225 added to 1.6474). Given the resistance at 1.7934 (09/11/2009 high), the minimum upside potential could be even pushed a little bit closer to that level. Furthermore, even if the September 2009 peak should be hard to break, the extended time length of the consolidation suggests that a move towards the next key resistance at 1.9304 is far from unlikely.

With a stop-loss slightly below the support at 1.6174 (28/08/2013 low), the minimum risk/reward ratio is above 2.5, which makes a long GBP/CAD position attractive for the medium- to long-term time horizon.

High short GBP positioning has been erased

Except the Japanese yen, all currencies have been bought during the week ending on 17 September. The side-effect is an overall reduction in long USD positions. As the FOMC took place on 18 September, it is safe to assume that more of this erosion in long USD positions has occurred.

In particular, investors have almost closed all their short positions in GBP. Given the neutral readings, any rally in the British pound will not be lifted by GBP positioning. Investors have increased their long position in Euro back to levels seen in February 2013. The ongoing reduction in Eurozone liquidity could lead to a further increase in the long positioning. Finally, commodity currencies have recently experienced a reduction of their short positions. Further closings of short bets could lead to a longer appreciation in these currencies in the short-term, especially the Australian dollar which has recently broken its strong resistance at 0.9345.

Weekly Forex Forecast - Week 39

2013-09-24T14:12:00.003+02:00

Gradual improvement fosters deadlock in the eurozone

How come the euro is so resilient?

In the next pages we explain how the euro could further strengthen against the US dollar in the coming weeks, even months. The arguments for such further strengthening are both technical and fundamental, in particular the continuing divergence in monetary policy with the ECB's balance sheet shrinking, whereas the Federal Reserve sticks to QE.

Solving the euro conundrum

LTRO repayments by the banks imply a reduction of outstanding liquidity. What is more important, such reduction has not prevented a gradual improvement of business confidence and the old continent is therefore soon expected to move into, albeit very modest, positive growth territory. This improvement is not spectacular and "normal" after the reduction of fiscal pressure in the two larger periphery economies, Italy and Spain.

Bad news means action, no news means deadlock

Yet, this modest economic stabilisation is enough to ensure that no major action from the ECB is to be expected over the next months. Indeed, both the LTRO and the OMT were announced under pressure and in agreement with the German government. Pro-active, instead of reactive, unconventional monetary policy is not yet part of the ECB's operational handbook. As a result, the ECB's balance sheet could continue to shrink and, as long as the Fed does not embark on effective and significant QE tapering, upside pressure on the euro could persist. If, however, the global economic situation would unexpectedly deteriorate, for example because of the US congress not agreeing on fiscal policy, spreads could re-widen, political instability in the Spain and Italy could again become relevant, and the euro would again come under pressure, even before the Federal Reserve finally embarks upon its tapering intentions.

The FOMC meeting confirms an ultra accommodative Fed

A longer dovish Fed is hurting the bullish case for the US dollar

Mr Bernanke surprised the market on 18 September by postponing the tapering process. Notwithstanding the US dollar decline following the announcement, the dovish commitment by the Fed is expected to have further medium-term effect on the greenback. The continuation of the full monthly $85 bn liquidity injection by the Fed and the concerns about the tightening of financial conditions highlighted by the FOMC suggest a significant slower tapering process than previously hinted by Mr Bernanke in June. Indeed, the tapering seems now unlikely to start in October as the Fed will only have one month more of data to assess if the recovery is strong enough to sustain a reduction in liquidity injection. Moreover, the uncertainties linked to the US debt ceiling are also suggesting that the Fed could wait until December before tapering. Furthermore, the likely nomination of Mrs Yellen as the new Fed chairperson strengthens the stance of an ultra accommodative Fed. One could also speculate that the more dovish stance reflects the prospect of a forthcoming Yellen nomination. On the other hand, the European Central Bank (ECB) is still passively removing liquidity through the LTRO repayments. This increasing gap, which could persist for longer than expected in the light of the September FOMC meeting, is supportive for EUR/USD. In the UK, this supportive effect should be less significant as the liquidity remains unchanged through the decision of the Bank of England. Overall, even though the US dollar could receive some short-term support from a potential escalation in the debate surrounding the debt-ceiling, the persistent divergence in liquidity across the Atlantic should remain a supportive factor for EUR/USD in the next few months. In the longer term, we remain convinced that the US is more advanced in the tightening cycle, which should eventually favour a sustainable rise in the USD. However, the recent developments suggests that this time is farther than previously thought.

A technical update on forex after the FOMC decision

EUR/USD is breaking its summer peaks...

The surprise move by the FOMC has had a significant impact on the Forex market. Cyclical currencies like the EUR and the AUD have significantly appreciated against the USD following the news. EUR/USD has broken its summer peaks at 1.3417 (19/06/2013 high) and 1.3452 (20/08/2013 high), opening the way for a test of the annual high at 1.3711 (01/02/2013 high) and potentially its long-term declining trendline around 1.40. Even if we do not expected this move to be made in a straight line, the mediumterm prospects are now tilted to the upside. AUD/USD is also benefiting and broke its strong resistance at 0.9345. The technical configuration favours a further short-term rise towards 0.9666 (14/06/2013 high), possibly 0.9843 (21/05/2013 high). However, a bigger upside is unlikely given the long-term distributive phase that has taking place since mid 2011.

...while the yen is weakening

Even though the initial move from USD/JPY was on the downside, the annual highs posted by EUR/JPY and GBP/JPY are positive and confirm a global bearish stance on the yen. It is true that major resistances in these pairs are looming (EUR/JPY: 139.22, GBP/JPY: 163.09), which calls for caution, especially as the yen is extremely shorted among investors (see page 7). However, USD/JPY, with its potential symmetrical triangle and its major resistances around 105.50 (61.8% retracement from the decline from June 2007) and 110.66 (15/08/2008 high), suggests that the yen could weaken further in the medium-term.

Mr Summers' exit reduces uncertainty of future Fed's policy

Democrats support Mrs Yellen to be new Fed chair(wo)man

The lack of support for Mr Summers among democrats, especially in the Senate Banking Committee, has forced him to withdraw his candidacy for Fed chairman. Indeed, with four democratic senators openly against Mr Summers and given the thin democratic majority in the Committee (12-10), Mr Obama would have had to rely on Republicans to back Mr Summers' nomination. A too difficult prospect given the looming confrontations with Republicans around the budget and the debt ceiling.

New chairman expected to follow Bernanke's monetary stance

Even though a new candidate could still be chosen by Mr Obama, the future Fed chairman is likely to be either Mrs Yellen (highly likely) or Mr Kohn. Both have served as vice-chairman for Mr Bernanke and share his view on the monetary policy, so the continuity in the Fed's commitment to keep interest rates low is increased, strengthening the credibility of the Fed's forward guidance. A nomination of Mrs Yellen would likely lead to further transparency and clarity in the Fed's communication, reducing uncertainties in the Fed's monetary policy. Furthermore, her nomination would strengthen the Fed's determination to fight high cyclical unemployment even if that would lead to potential temporary overshoots in inflation.

Implications for the Forex market

The withdrawal of Mr Summers was negative for the US dollar as he seemed less inclined to leave rates as low as Yellen's "lower for longer". Now that the market has mostly discounted a Yellen nomination, we would see any other choice than Mrs Yellen herself or Mr Kohn (at the limit a return of Mr Bernanke) as rather bullish for the US dollar, as it could potentially weaken the forward guidance put in place over the last year.

Short JPY positions are edging towards historical extremes

No real changes, again, in the week ending on Tuesday 10 September.

The Japanese yen short positions have reached a 5 year record at -48.23% and are edging towards the historical extreme made on June 2007 at -53.39%. Given this large pool of sellers and the strong resistance in many yen crosses (110 in USD/JPY, 139 in EUR/JPY and 163 in GBP/JPY), it is difficult to call for an aggressive medium-term bearish view on the yen.

The Australian dollar remains also heavily shorted, representing potential fuel for a further short-term rise. Therefore despite the recent sharp rise, we remain a short-term positive bias on AUD/USD as a risk of a further spike higher remains significant. However, we continue to see this rise in AUD/USD as a counter-trend move within the underlying medium- to long-term downtrend.

The British pound remains attractive due to its relatively high short positioning. However, the GBP appreciation has by now priced in most of the surprises caused by the strong economic data from UK and the lessthan-expected dovish stance from the Bank of England. Furthermore, on a 12 month horizon, the BoE is expected to be the second most dovish major central bank, only behind the Bank of Japan.

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Weekly Forex Forecast - Week 38

2013-09-18T09:09:00.002+02:00

Europe's industrial production still disappointing

Europe's industrial production does not confirm PMI trend

In spite of continuing improvement in the overall, as well as manufacturing, PMI index, industrial production is not picking up in Europe. The fact that it is not picking up is, however, not surprising. First of all, industrial production, unlike the aggregate gross domestic product, is a very volatile indicator. Second, for industrial production to pick up consumption must pick up in a more sustained manner. In other words, we would like to see at least a full semester of consumption picking, before industrial production increases. Thus, given the only very slow speed at which many EU countries are recovering out of the crisis, it does not make sense to expect too much out of industrial production for the next few months.

Growth in any case likely to remain subdued

In addition, it should be kept in mind that even in the United States, where the economy has been more resilient, growth has remained confined to a few sectors such as the residential sector and, to some extent, the automobile sector. What really matters, however, is that across the Atlantic growth is likely to remain below its long-term trend. In the United States this means 2% real growth versus close to 4% real growth. In Europe this means that real growth is too stick around 1% yearly at best. The investment implications of this dire scenario is that tapering is going to be far more modest than the market has been discounting, and also the ECB is going to dilute its latest "green shoots" rhetorics.

Japan prepares itself for its first sales tax rise since 1997

Green light from growth figures for sales tax hike

By early October, Mr Abe will have to decide what is his position on the first phase of a sales tax rise. This increase, which has been voted under the previous legislation, should lift the current 5% levy to 8% in April 2014 (first phase) and to 10% in October 2015 (second phase). To keep things into perspective, a value added tax (VAT) at 5% is a record low among advanced economies that have a VAT, whereas the average stands around 19%. The upside revision of GDP figures for the second quarter, one of the key indicator that Mr Abe has linked to its decision, seems to leave little excuses not to go ahead with the voted schedule.

Stimulus to be launched to protect the economy.

The opponents of a rise fear that a sales tax hike would derail the still fragile Japan recovery. It is true that a reduced consumption would hurt growth as it represents roughly 60% of its GDP. On the other hand, any perception that Japan's fiscal management is undermined could also have some negative effects on bond prices and ultimately jeopardise the recovery. The Bank of Japan (BoJ) has already warned Mr Abe's government that any tax plan change could lead to a spike in interest rates caused by a loss of confidence among investors in Japan's commitment to meet its debt obligation. Furthermore, the BoJ upgraded its assessment of the Japan economy (recovering moderately), the strongest language used by the Bank since March 2008. Finally, the BoJ stands ready to increase its monetary stimulus should the tax increase significantly deteriorate growth. Barring negative figures from a survey of business sentiment on October 1, recent developments seem to indicate that Mr Abe will indeed let the rate hike goes as planned but will launch an economic stimulus to cushion the negative effects of the sales tax increase. The stimulus, that could be as much as ¥5tn (half the size of the stimulus launched in January), would also allow him to manage public support as he will need it to implement his growth strategy (third arrow).

Potential stimulus favour short-term JPY weakness

Implication for the forex market

The increase in the consumption tax is a step towards fiscal austerity, even if the expected economic package used as a cushion should erase a large part of the gains made by the tax hike in its first year. Therefore it should act as a potential lift to the value of the Japanese yen in the medium- to long-term. However, as we expect this austerity to be associated with the launch of an economic stimulus from the Japanese government, and potentially also from the BoJ, the short-term effect should lead to a devaluation of the JPY. Looking at the charts, the short-term stimulus followed by the medium-term austerity favour the test of long-term resistances on the major yen crosses (110 in USD/JPY, 139 in EUR/JPY and 163 in GBP/JPY) but any sustainable moves above are unlikely. On the other hand, any delay in the sales tax hike would likely be perceived as a lack of commitment to address Japan's debt issue. The expected rise in yields would lead to a stronger yen in the short-term. However, a persistent rise in yields would increase the cost of the Japanese debt and, with the BoJ as the main buyer of new government-debt issuance (70%), it would likely bring closer the spectre of a sovereign debt crisis with long-term damaging effects on the vale of the yen. Overall, as the first scenario is the more likely, we favour a weaker JPY in the short-term. However, we would not be too greedy close to the aforementioned key resistances.

The financial markets do not read Mr Carney's lips

Housing prices and unemployment favour tighter monetary bias

The Bank of England (BoE) has tied its monetary policy to the level of unemployment through its forward guidance. Even though a decline of the unemployment below 7% will not automatically lead to a rate hike, an improving UK labour market suggests that the start of a tightening cycle is getting nearer. Furthermore, the recent sharp rise in housing prices (especially in London), fueled by low rates and stimulus such as the "Funding for Lending" and "Help to Buy" schemes, favours more restrictive rules to credit access, especially with a still highly leveraged private sector. All these factors have helped to lift the value of the British pound.

Is there more upside for the British pound?

On 12 September, Mr Carney reaffirms the view that unemployment should not fall to 7% until mid 2016, indicating that the start of the tightening should not start before the second half of 2016. On the other hand, market expectations favours a first hike in late 2014 or early 2015, possibly earlier than in the US. With about 75% of the interest rates relating to the BoE's benchmark, we believe that the GBP strengthening is starting to be overstretched. From a technical point of view, GBP is close to major key levels. In GBP/USD, the break of the resistance at 1.5752 is bullish. However, given the underlying downtrend since April 2011 and the overextended rise since the low at 1.4814 in July, we see a limited upside potential. Furthermore, the bigger deleveraging in the US make them more ready for a rate hike than the UK. In EUR/GBP, the support near 0.8411 is challenged. We would favour a further medium-term decline toward 0.8225, possibly 0.8082 (see page 7). In GBP/JPY, the break of the resistance at 156.77 opens the way for further rise towards the strong resistance at 163.09. Finally, GBP/CAD remains technically very attractive especially should the strong resistance at 1.6474 be broken.

EUR/GBP remains a sell considering market positions

No major changes in positioning has occurred in the week ending on Tuesday 3 September (IMM data cover a week ending on Tuesday).

Euro has seen some reduction in its long positioning before the ECB meeting on 5 September. Given the very cautious stance of Draghi concerning the Eurozone recovery and the potential for lower rates should money market rates be unwarranted by the ECB's medium-term outlook, further EUR long positions could have been reduced. However, from a pure positioning point of view, the gap between the positions in Euro and British pound remains wide and favours a medium-term bearish stance in EUR/GBP.

The Australian dollar remains thus far extremely short. The recent batch of positive news relative to Australia (see our last weekly report) could force investors to close some of their short AUD bets. Therefore, even though our medium-term stance remain negative on AUD/USD, we would not be aggressive sellers of AUD/USD in the short-term.

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Weekly Forex Forecast - Week 37

2013-09-12T21:35:00.002+02:00

QE tapering still on the agenda

Labor data confirms Federal Reserve tapering QE

In August the US economy created only 169'000 new jobs and July figures were revised down to 104'00 from 162'000. Worryingly, while the unemployment rate fell to 7.3%, the labor force participation rate continued to slide gradually south, reaching 63.2%, a level not seen in decades. We have, however, stressed that the labour market will recover only gradually and, considering also the recent strong improvement in the ISM index, we still see a large likelihood of a reduction of the monthly 85 bln USD asset purchases already this month. It would be important to stress that tapering would be implemented in a very cautious manner. First of all, only additional liquidity injections will abate, total outstanding liquidity remaining unaltered. Furthermore, so as to mitigate negative implications for the housing market, the Fed is likely to first focus on reducing Treasuries acquisitions, rather than mortgage-backed securities. Most importantly, the Fed will stress that it would resume acquisitions in case the improvement of the outlook would appear to be at risk

Modest tapering already in the prices

In spite of all the moderate language by the central banks, borrowing costs have now significantly risen not only in the United States, but also in the Europe, with markets pricing in a Fed rate hike towards the end of 2014, and a ECB rate hike in the summer of 2015. There is a clear risk that some of the enthusiasm regarding the recovery in advanced economies, especially in Europe, is overdone. Thus, while further upward pressure on US yields is in the cards, it is far less likely that Europe would be able to manage a similar development. Over a one year horizon, a very anemic recovery in Europe is more likely to determine a further decoupling of cross-atlantic yields and, with it, further downward pressure on the euro.

Who will lead the Fed next year?

Discussions have started to replace Mr Bernanke in February 2014

All eyes are on the Fed, as the 17 September FOMC meeting could start the tapering liquidity injections. However, the nomination in fall by Mr Obama of Mr Bernanke's successor is also of critical importance as the new chairman could deviate from the current monetary policy led by the Fed. Mr Obama has acknowledged that he is in the process of interviewing three candidates: Larry Summers, Janet Yellen and Donald Kohn. The former is perceived as the front-runner, while the latter, a Fed vice chairman, is the less likely to be chosen.

Summers is Obama's favourite, while Yellen represents continuity

Mrs Yellen, as the current vice chairwoman of the Fed, would be the choice of continuity at a time when the Fed will have to manage an exit of its unorthodox monetary policy. She would likely lead the Fed in the same way as Mr Bernanke, as she has been deeply involved in the bond-buying programmes and introduction of forward guidance. Furthermore, her leadership would not differ too much than Mr Bernanke's: strong focus on data and a consensus-building approach, aimed at minimizing surprises and market volatility. Mr Summers, on the other hand, has never served at the central bank, but his years of experience at the US Treasury (two as Secretary) and at the National Economic Council give him a good understanding of financial markets, and plausibly better experience in crisis-management (because, a.o., of his involvement in the 2009 auto bailout when he gained Mr Obama's trust). However, his provocative nature and his involvement in financial deregulation during Clinton's presidency have also left him with many detractors, especially among democrats. It has to be noted that both are seen as "doves", putting more focus on supporting the US recovery than worrying about potential inflation threat. However, Mr Summer, by questioning the benefits of the Fed's asset purchase in 2012, seems less dovish.

Implications for the US monetary policy

A Yellen nomination would mean an unchanged monetary policy, as she has been one of the key architects behind Mr Bernanke's policy. She would continue to put a strong focus on the clarity and the transparency of the Fed's policy. A Summers nomination could lead to less predictability and transparency in the US monetary policy, resulting in more market volatility. Furthermore, increasing odds of a Summers' nomination should support a stronger US dollar, as he seems more worried about the risks of the unorthodox measures taken by the Fed to lift economic growth. However we remain sceptical that, over time, Mr. Summers would dramatically change the thrust of US monetary policy. Therefore any short-term spike in the US dollar preceding a Summer nomination would be best sold.

A Summers nomination could lead to undesired effects

To become the new chairman, the candidate must be chosen by the President and then confirmed by the Senate. Even though the Senate has a democrats majority, the public endorsement of a group of democrat senators for Mrs Yellen suggests that the favourite candidate of Mr Obama could face a long and painful confirmation. Moreover, Mrs Yellen could decide to leave the Fed at the end of her vice chairwoman term in October 2014 if she is not elected. Coupled with other already announced or potential departures (four in the next year), a confirmation of Larry Summers could lead to a significant reshuffle inside the Fed's Board of Governors, thereby raising uncertainty, especially with regard to the Fed's long-term commitment to keep rates low. This would additionally add to US dollar strengthening and increasing market volatility.

Australian dollar supported by short-term positive news

Slightly hawkish statement from the RBA

As expected, the Reserve Bank of Australia (RBA) kept rates unchanged at 2.5% during its 3 September policy meeting. However, the statement following the decision did not mention the usual "scope to ease policy further", suggesting a less dovish stance than in August. Coupled with better-than-expected domestic growth figures and recent improvements in China (a key trading partner), the odds of a rate cut before year-end have greatly decreased. Furthermore, although the RBA is independent, broad-based political support for further rate cuts seems to be shrinking.

Rally could be fueled by extreme short AUD positions

Looking at the technical configuration of AUD/USD, we note that shortterm improvements have occurred: the previous low at 0.8848 (05/08/2013 low) has been successfully tested in late August and a significant declining trendline has been broken. Coupled with diminishing odds to see a rate cut in the next few months, the current rally could be further supported by a short-squeeze among investors, the majority of which is heavily short AUD (see page 7). Therefore, in the short-term, AUD/USD is likely to edge higher towards its strong resistance at 0.9345 (26/06/2013 high). However, in the medium-term, we remain skeptical on China and on the ability of Australia to manage a smooth growth transition from its mining sector to the rest of its economy.

British pound still favoured by a persistent short positioning

The data ending on 27 August show that long positions in Euro have continued to increase. As mentioned last week, EUR long positions, though not extreme, favour a bearish stance as the current levels are near the ones reached during EUR/USD February peak. On the other hand, the British pound remains highly shorted. Overall, the dichotomy between EUR and GBP positioning favours a bearish stance on EUR/GBP.

The Australian dollar and the Japanese yen continue to exhibit extreme short positions. Although it calls for some short-term caution, we continue to view these extreme as a confirmation of a structural shift in the underlying trend of the currencies (from structural appreciation to structural depreciation).

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Weekly Forex Forecast - Week 36

2013-09-03T14:00:00.000+02:00

The US cycle remains key for the global economy

The return of optimism

A summer has gone by and, war worries notwithstanding, it is time to reassess where we stand with the global economic cycle. Whilst emerging economies seem to be under pressure, courtesy also of prospective QE tapering, the United States recovery still looks pretty stable while the prospects of a European recovery, where PMI indicators continue their slow but steady rise, seem now also more concrete. From our perspective it remains key to stress two aspects. First, QE tapering will result initially in a reduction of additional liquidity injection, and then an elimination of further injections. Tapering does not aim at a reduction of the outstanding pool of liquidity. Therefore markets may already price in its implications or, worse, have overreacted. Second, Europe, China and Japan appear vulnerable. As such, also continuing good news from Europe will rest on the US steady recovery to continue.

What to watch in the United States

One should in particular bear in mind that the US recovery has to a large extent been driven by the housing market and, as such, the July drop in US new house sales raises concerns. As can be seen from the chart, however, confidence remains relatively high. It is true that tapering concerns have raised the 30 year mortgage rate to 4.6%. It is also true, however, that that remains historically a low rate (and might paradoxically induce some people to buy in the expectation that rates have now firmly bottomed). As importantly, new house inventories are relatively low, which should deter downward pressure on prices. Next week's all important ISM and national labor data will give us further important clues as to the recovery of the US cycle, which we continue to consider sustainable.

The Fed steals the show among next central bank meetings

This week's central bank meetings should have a minor effect on FX

Between the 3 and 5 September, five central bank meetings on monetary policy are going too take place. However, the outcome from these meetings are likely to be uneventful. Indeed, the European (5 September) and the British (5 September) central banks have now tied their monetary policy to forward guidances, which are not expected to change as they have been published less than 2 months ago. A potential further wording down about the "unwarranted" rise in long-term yields should be mentioned, similar as what Mr Carney did during his 28 August speech, which could have a mild negative effect on the Euro and the British pound. In the Pacific, the Bank of Japan (5 September) is poised to leave its asset purchases programme unchanged, while the Reserve Bank of Australia (3 September) is unlikely to lower rates for a second time in a row. Finally, the Bank of Canada (4 September) is unlikely to move rates given their tightening bias and a still not normalised domestic economy. Overall, we do not expect a major effect on forex from these monetary policy meetings.

All eyes are fixed on the FOMC meeting on 17 September

On the other hand, the FOMC meeting could have a significant impact on FX crosses. For the time being, even if a tapering seems highly probable before the end of this year, the precise timing remains blurred. The US August job reports, published on 5 and 6 September, are likely to give more precise hints as to whether tapering will occur very soon, i.e. in September. It should be noted that the potential tapering should be very gradual, and would only be followed through should key economic data like job creation and growth exhibit persistent improvements.

The US dollar seems poised for a short-term rally

Short-term oscillators are oversold in US dollar

Looking at EUR/USD, GBP/USD, USD/CHF or simply the US dollar index, the long-term trend remains in favour of the US dollar. The summer decline in USD has brought all these crosses to short-term overbought (for EUR/USD and GBP/USD), respectively short-term oversold (for USD/ CHF and US dollar index) conditions. Furthermore, most of these crosses are close to significant resistance or support levels, notably 1.3417 on EUR/USD, 1.5752 on GBP/USD and 0.9022 on USD/CHF. The conjunction of these underlying long-term trends, the short-term overextended moves and the critical levels in the vicinity makes a compelling case for building a long USD position.

Investors positioning remains a supportive driver for GBP/USD

Given an already short GBP positioning among investors, the potential for a significant USD strength against the British pound appears less likely than compared to the Euro or the Swiss franc. On the other hand, the Euro long positioning is at levels consistent with a medium-term downward reversal (see page 7). Furthermore, the monetary stance of the Swiss National Bank and the potential loss of attractiveness of safe haven assets, should market perceptions of the risks in the Middle-East region ease, could offer some support to the Swiss franc. Looking at the EUR/ USD, the natural stop-loss for a medium-term long USD strategy is slightly above the February peak at 1.3711. Therefore, if possible, we would try to wait for EUR/USD to be close to 1.3500 to improve the risk/reward ratio of our strategy. However, in the case of a break of the key support at 1.3190 (02/08/2013 low), we would be less patient as the break of this pivot point would favour a medium-term bearish trend reversal. Then, the stop-loss would have to be lowered close to the recent high at 1.3452 (20/08/2013 high).

Market volatility should be a short-term drag for EUR/CHF

EUR/CHF caught between two opposite forces

In Europe, the recent improving economic data and the continuous reassuring presence of the OMT have narrowed yields spreads between the core of Europe (Germany) and the peripheral countries (Italy and Spain). This improved confidence among investors should favour capital inflows inside Europe while reducing the recent years' outlows in safe haven countries like Switzerland. EUR/CHF is therefore expected to benefit from the potential improving Eurozone outlook. On the other hand, the looming Fed's tapering, coupled with persistent rising longterm yields and overextended stock markets, could lead to an increase in volatility, favouring flows in safe-haven asset like EUR/CHF. Furthermore, the tensions in the Middle-East (Syria) is an additional source of volatility that could trigger a flight towards safe-havens.

Buy on weakness remains our favourite strategy

The second forces (Fed's tapering and Middle-east tensions) are likely to continue to grab the short-term attention, so EUR/CHF could remain weak in the next few weeks. A sustained recovery in the Eurozone, on the other hand, is likely to take more time to materialise, leading to a more gradual and medium-term support for EUR/CHF. Overall, given the 1.20 threshold put in place by the Swiss National Bank and the improving outlook of the Eurozone, we continue to favour a medium-term positive stance on EUR/CHF. Therefore, the potential short-term strengthening of the Swiss franc could lead to attractive entry point, especially should EUR/ CHF falls near 1.2120 (26/02/2013 low).

Euro long positions at levels seen on February top

No real change in positioning since last week, except in Euro, whose long positions continue to expand. Although not at historical extremes, the EUR long positions have almost reached the level of the previous peak in February for EUR/USD. Admittedly, EUR/USD is not as high as in February, when some European political leaders started to raise concerns on the negative effect of a strong Euro on their domestic growth. However, coupled with a looming tapering from the Fed, we expect a limited upside potential for EUR/USD.

Short positions in British pound have marginally been reduced, but remain well anchor in negative territory. As mentioned in our last report, the conjunction of a less dovish BoE's forward guidance, the persistent short GBP positions among investors and the improving technical configurations (especially against AUD, CAD and JPY) favour a more constructive stance on Sterling.

Long Swiss franc positions have been reduced to neutral. However, this move does not bare any conclusive hint about the future evolution of the Swiss franc.

Weekly Forex Forecast - Week 35

2013-08-27T14:00:00.000+02:00

Rate of change in US unemployment to affect Fed tapering

Uncertainties in the timing of both tapering and rate hikes

Last Wednesday the Fed minutes for July's FOMC meeting were released. We note that all Fed members agreed to start tapering the asset purchase programme later this year. There is still high uncertainty regarding the timing of this tapering. There is also uncertainty based on the anticipated rate at which the gap between the unemployment rate, presently at 7.4%, and the current threshold of 6.5% can be closed. Indeed the minutes reveal a new debate concerning the lowering of this threshold which was highlighted by a couple of Fed members. The first reaction of the markets was negative as stocks fell and bond yields went up further.

Markets, in particular the bond market, are now looking even closer at the employment situation in the US. On Thursday, the latest figures for initial jobless claim came out at 336K, more negative than before and higher than expected. This led to short-term relief in bond yields and supported stocks further.

The overall situation in the US economy has improved during the last weeks. The housing market stabilised, most confidence indicators are rising and GDP growth rates went up further. We believe in a strong US domestic market additionally driven by the shale gas revolution. This is likely to lead to additional investments in durable goods. This environment may potentially push bond yields higher towards 3.5% which can be a region where stock markets may react significantly and rising housing costs may affect mortgage demand negatively and therefore housing investment.

Mr Carney introduces forward guidance

The BoE is also linking its monetary policy to unemployment

On 7 August, the Bank of England (BoE) provided forward guidance on interest rates. The BoE does not intend to raise the Bank Rate (currently at 0.5%) until, at a minimum, the unemployment rate has fallen to 7% or below. Should this threshold be met, it would not automatically lead to a raise in interest rates but to a reassessment by the BoE of its policy. Moreover, the forward guidance could be bypassed if one out of three conditions were to be breached. These three conditions, or knockouts, are based on:

- the inflation outlook (if the Monetary Policy Committee finds it more likely to see CPI inflation, 18 to 24 months ahead, 0.5 percentage points or more above the 2% target),

- inflation expectations (if medium-term inflation expectations, measured by survey and forecasts on market participants, no longer remain sufficiently well anchored),

- financial stability (if the Financial Policy Committee judges that forward guidance is causing asset bubbles).

It should also be noted that as long as the unemployment threshold is not reached and that no knockout has been breached, the BoE intends not to reduce its asset purchase programme and even stands ready to expand it. As the BoE currently only expects to see unemployment reach 7% in the second half of 2016, at the earliest, forward guidance suggests that monetary policy should remain supportive for the next three years.

Additional quantitative easing unlikely in the next months

The introduction of forward guidance indicates a new monetary strategy from the BoE, which previously relied mostly on expanding its asset purchases programme. Furthermore, the improving UK economy coupled with a Committee, which was already against additional stimulus when the UK economy was weaker, signal that an increase in quantitative easing is unlikely in the next months.

Short-term outlook for GBP is positive

The market is not convinced by the BoE's forward guidance

Mr Carney's arrival as the BoE's chairman was expected to bring a more dovish tone to the BoE's monetary policy. However, the announced forward guidance was widely expected by the markets and the knockouts soften the pledge, especially as the minutes later showed that one member voted against the guidance as he wanted a more rigorous condition (i.e. a shorter time horizon) on the inflation outlook. Taking into account the latest strong economic indicators, market expectations continue to bet on a first hike in 2015. As a result, long-term interest rates have risen and the British pound has appreciated.

The outlook is supportive for the British pound in the coming months

Short-term drivers are in favour of further British pound appreciation. Indeed, the IMM data (see page 7) show that investors are still short, therefore capitulation among GBP sellers could lengthen the current appreciation of the pound. Also, as previously mentioned, the introduction of forward guidance marks a shift in the BoE's monetary strategy. Therefore, an increase of the BoE asset purchases is unlikely in the coming months, especially in light of the recent batch of strong economic indicators. On the other hand, the medium-term outlook is less positive for the British pound, as its central bank stance should remain very dovish in 2014 relative to the ECB and the Fed, which should be in the midst of its tapering process. Taking into account the technical configurations, GBP/AUD represents our preferred way to be exposed to further GBP strength, with an objective at 1.8144. Our second preferred cross is GBP/JPY, but we would wait for lower prices as fiscal policy uncertainties are elevated. GBP/CAD could also be interesting as it is close to breaking a three year range. A decisive break of the range would likely lead to a phase of GBP appreciation towards 1.7699.

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Monetary Policy

US Federal Reserve (Fed) - Next meeting: 17 September

• The strengthening labour market and higher inflation has increased the likelihood to see tapering of the monthly $85 billion bond-buying programme in September. However, the pace of the reduction is expected to be extremely gradual and highly dependent on the labour market and the inflation outlook. A termination of the asset programme in mid-2014 likely represents the most optimistic scenario.

• The Fed funds rate will not be raised as long as the unemployment remains above 6.5% and the inflation outlook is consistent with the Fed's 2% target. Therefore, a rate hike seems very unlikely in 2014.

European Central Bank (ECB) - Next meeting: 5 September

• The OMT with its potentially unlimited purchases of debt creates a strong and credible backstop to protect the eurozone’s weaker members from high borrowing costs.

• The ECB has broken an unwritten rule in July by giving forward guidance on interest rates. Based on a subdued outlook for inflation, rates are expected to remain at present levels, or lower, for an extended period of time (without giving a clear deadline). The apparent lack of discussion about rate cuts contrasts with the "extensive discussion" before July's meeting.

Bank of Japan (BoJ) - Next meeting: 5 September

• The BoJ has introduced its "quantitative and qualitative monetary easing", a bold and aggressive monetary programme aimed at reaching an inflation target of 2% in a 2 year time window. In order to do so, the monetary base will be doubled (from ¥138 trillion at end-2012 to ¥270 trillion at end-2014), mainly by increasing JGB purchases (of all maturities). The reduction in JGB volatility favours no change in the BoJ's programme.

• Thus the BoJ changed its target for money market operations from the overnight call rate to the monetary base.

Bank of England (BoE) - Next meeting: 5 September

• The BoE has maintained the size of its asset purchase programme at £375 bn and has announced forward guidance on its monetary policy. Barring some exceptions, a supportive monetary policy will remain in place as long as unemployment remains above 7%.

• Using the BoE's forecasts, interest rates are expected to stay at 0.5% till late 2016.

Reserve Bank of Australia (RBA) - Next meeting: 3 September

• The Australian economy is suffering from a growth transition from the resources sector (whose peak may have already occurred) to the other sectors. The RBA has eased its monetary policy over the past 18 months to help this transition and would also welcome a lower AUD, whose levels are still viewed as high, as an additional support.

• Thus, the RBA has lowered the cash rate by 25 basis points to 2.50% and has left the door open for more stimulus, though rates should remain unchanged at least until the November meeting.

Bank of Canada (BoC) - Next meeting: 4 September

• The BoC is expecting exports to be the key driver to boost growth in the private sector. Notably, the central bank is committed to leave rates unchanged as long as there is significant slack in the economy and a soft landing is emerging in the housing market.

• The overnight rate was left unchanged at 1%.

Swiss National Bank (SNB) - Next meeting: 19 September

• The SNB is expected to continue to defend with the utmost determination the minimum exchange rate at 1.20 in EUR/CHF.

• Target range for 3-month Libor is unchanged at 0.0-0.25%.

Short GBP positions remain elevated

Since our last weekly report, the main significant changes in IMM positions have been the move back into positive territory for Euro positions and the lack of change in short GBP positions, despite a significant rally in GBP/USD. From a technical point of view, both currencies remain in a long-term downtrends compared to the US dollar. However, IMM positions suggest that the British pound could benefit from a more significant reduction of GBP short positions. On the other hand, the current long EUR positioning and its proximity to the February peak favour a cautious view on EUR/USD.

The Japanese yen and the Australian dollar remain extremely shorted. While we continue to favour medium-term weakness in both currencies, the high uncertainties in Japan linked to the willingness of Abe's government to address the dismal public debt through a sales tax hike and structural reforms, indicate a risky environment in the short-term. On the other hand, the relentless effort of the RBA to lower its currency and the strong exposure of Australia to a the slower growth in China make us more comfortable with our bearish outlook in AUD/USD.

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Investment Strategy 2013 Q3 Part I

2013-08-12T21:12:00.001+02:00

Economic outlook

Although fiscal drag increased massively in the United States, the US economy remained quite resilient. This resilience stands in stark contrast with the continuing recession in the European Union but possibly also with slower growth in Asia, and in particular in China. We expect growth to remain moderate in the United States as the fiscal drag is likely to persist through 2013. If the recovery in the United States is to appear sustainable, the Federal Reserve might first decrease the rate of liquidity injection, and subsequently - but only very gradually - reduce liquidity. As a result we do not expect interest rates to significantly increase globally. It is to be seen of course, how more vulnerable economies will face higher financing costs, in particular European periphery economies, but plausibly also some emerging markets.

Stocks

Stocks have come under pressures as uncertainties about the slowdown of the US economy, alternated with concerns about QE tapering by the Federal Reserve. As we will move through 2013, QE tapering concerns will become the main concern, as the US housing sector will continue to improve. The change in monetary policy is likely to prevent very strong rises in equity markets. Yet, equity markets should recover earlier than bond markets from the change in monetary policy direction. As yields stabilise, we would expect equity prices to move up again sometime after the summer, albeit at a more moderate rate as we had during the first part of 2013.

Commodities

Prospective monetary tightening in the United States, as well as a secular globaIly deflationary trend, do not bode well for commodity prices. Gold will remain under pressure as emerging markets suffer less inflation, and their current account surpluses continue to shrink. Smaller current accounts mean that these countries, which over the last years have been important buyers of gold, will reduce their demand for this precious metal. If yields continue to rise, this could act as a drag on gold prices as it loses relative appeal compared with bonds. In a global low growth environment, industrial metals are unlikely to pick up meaningfully. This is even more relevant because the biggest consumer of industrial metals, China, will continue to grow at rates that are significantly lower than the double-digit rates we were used to in the previous years.

Given this current economic slow-down, oil prices are also expected to remain subdued. However, as long as uncertainties in the Middle East persist, oil prices are unlikely to go significantly below 100 US dollar the barrel. If uncertainties are able to translate into an effective rise of tensions, for instance the nuclear energy standoff between Iran and the US, we would not exclude a sharp rise in the oil price.

Bonds

The steady pace of economic growth in the US has, as we had expected, ensured a continuation of the current upward trend in bond yields. This has been further exacerbated by new economic projections by the Fed which makes tapering of the QE program more likely. German yields have also increased, albeit at a lower pace due to continued weakness in the periphery of Europe. The massive increase in Japanese yields reflects, for now, that markets are taking the BoJ's inflation targets seriously.

We expect global yields to rise a little further but to stabilise sometime towards the end of 2013. Although recent movements in yield suggest an end in the 30 year bull market, more evidence is required for this to be conclusive.

Currencies

Whilst US yields have thus far risen more than yields in Europe, the euro has remained remarkably resilient. In fact, whilst many currencies - in particular commodity currencies and the yen - have suffered against the US dollar, the EUR/USD exchange rate has not changed significantly. As real reforms in Europe are likely to deliver results only very gradually, and as significant fiscal stimulus appears politically unfeasible, we would expect the European Central Bank at some point to deliver more stimulus through some sort of unconventional liquidity injection. In other words, we expect the European Central Bank to catch up with other major central banks. As that happens, and as the Federal Reserve will start tapering QE, we expect the euro to weaken versus the US dollar. Likewise the yen will also weaken as the Bank of Japan is likely to further step up stimulus through 2013. We also believe that commodity currencies, such as the Australian dollar, will continue to suffer against the US dollar because of less demand for raw materials from China.

Major Risks and Opportunities

The "sequester" might still derail the US recovery in 2013. This would clearly force the Federal Reserve to protract rather than unwind Quantitative Easing. Paradoxically, unless the slowdown in growth is violent, such a situation could lengthen, rather than undo, the current upswing in equities. Again, under the scenario of a violent slowdown safe-haven flows would strengthen the US dollar, the yen and the Swiss franc versus the Euro and Sterling. If the slowdown is more moderate, currency implications would be less straightforward as the continuing expansionary stance of US monetary policy might stall the upward trend of the greenback.

We consider fiscal consolidation in the Euro-zone as a special risk factor. In fact, social hardship in the periphery might well undo continuing political support for austerity. To overcome this type of risk, more progress on the banking union and more relaxation on austerity would be welcome. This is, however, unlikely to happen before the German elections in September. As such, recurrent spikes in spreads and downward pressures on the Euro and periphery equity markets are not to be excluded. China may face political economy issues as it moves away from an export-driven growth model to a more domestically driven growth model. Internal political problems might also aggravate external territorial tensions with its neighbours. Further more the People`s Bank of China have taken a hard line regarding credit expansion due to its rapid rise in the first quarter. If this stance by the PBoC continues, the implicaions for the overvalued real estate market and GDP growth in general could be dire.

The major risk countries right now are still Egypt, Syria and Iran. Recently also Turkey seems to question its political destiny. Further political destabilisation in the region might lead to a simultaneous increase in USD and in oil prices. Historically the solution of political problems in the Middle East, or the prospect thereof, have often led to tailwinds for equity markets.

Weekly Forex Forecast - Week 32

2013-08-06T10:00:00.000+02:00

Europe's very slow recovery

Stabilization rather than recovery

For the first time in 18 months the Eurozone's composite PMI regained the critical threshold level of 50. It now looks like the recession, which lasted a record six quarters, is finally over. We would argue, however, that the old continent's economy is stabilizing rather than recovering. A sustained recovery is still not in sight given continued depressed demanded in many member-countries.

Divergence not only between core and periphery

While PMI indicators have improved more or less across the board, it is worthwhile to note that consumer confidence indicators are diverging not only between the core and the periphery. Indeed, while the rise in disposable income has improved consumer sentiment in Germany, in France consumer confidence is at a record low because of ever more oppressive taxation and rising unemployment. If one adds France to the periphery countries that are still in recession, one can come to two conclusions: 1) a strong Eurozone recovery is not on the cards; 2) divergence amongst the regions remains alarmingly high.

China's ominous slowdown adds to Europe's concerns

China's Flash PMI indicator contracted again in July. Thus, while Europe's periphery economies will continue to constitute a drag on growth, the old continent is also unlikely to benefit from strong external demand. The China slowdown is particularly bothersome for Germany, which is a main exporter to China of both luxury goods (especially cars) and capital goods, such as machinery.

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Recent FX sideways moves favour the use of oscillators

Oscillators call for patience during summer

Given the recent trendless environment notably in USD/JPY, AUD/USD or the roller coaster moves in EUR/USD and GBP/USD, it is difficult to find an attractive directional trade. Oscillators could be helpful in these market conditions as they can improve the timing of a potential trade.

Uncertainties in Japan exacerbated by extreme JPY short positioning

USD/JPY is facing significant risks in the Autumn. Mr Abe, who now controls both chambers in parliament (together with his coalition partners), is expected to propose a new batch of pro-growth reforms and an agenda for consumption tax, where a hike was approved in late 2012 to improve Japan's fiscal imbalance. The bold monetary stimulus from the Bank of Japan remains a strong driver for further yen depreciation. However, the substantial aforementioned uncertainties coupled with extreme short JPY positions make current prices unattractive from a risk/ reward perspective. We would therefore wait for oversold conditions to initiate a long USD/JPY position. Given the oscillators current high levels, it is unlikely that we will find attractive entry points in the next two weeks.

AUD/USD marginal new lows suggest weakening selling pressures

Although we remain confident about further medium-term weakness in AUD/USD, given the slowdown in China and the rebalancing of growth from mining to the rest of the economy in Australia. However, we are skeptical about further short-term weakness. Since 20 June, the Aussie has only been able to make marginal new lows, suggesting a short-term exhaustion in the selling pressure. Furthermore, the extreme AUD short positions and the decent rebounds occurring in related markets like Gold or NZD/USD increase the likelihood of a short-term rebound. Once again, it would be wiser to remain on the sidelines until short-term overbought conditions make a short position more attractive.

EUR/USD and GBP/USD sideways moves favour the use of oscillators

Since March, the Euro and the British pound have been moving broadly sideways. In this case, the use of overbought and oversold conditions are interesting to monitor in order to identify selling and buying opportunities Currently, we would focus on overbought conditions given the recent rise in prices. Furthermore, while the Fed is willing to reduce the pace of liquidity injections, The European Central Bank (ECB) and the Bank of England (BoE) are still striving to be more accommodative. In that respect, the 7 August announcement of the Bank of England about the use of forward guidance should put pressure on the British pound.

Summer should alleviate some excesses in FX positions

To sum up, for the time being, we do not see attractive entry points in major FX crosses coherent with our medium-term outlook. We would therefore wait for the market to erase some of the directional excesses in positioning, notably in the Japanese yen and the Australian dollar, while bringing prices to more attractive levels in respect to our medium-term outlooks.

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Monetary Policy

US Federal Reserve (Fed) - Next meeting: 31 July

• The monthly $85 billion bond-buying programme is expected to be tapered later this year (at the earliest in September). The pace of the reduction is expected to be extremely gradual and highly dependent on the labour market and the inflation outlook. A termination of the asset programme in mid-2014 likely represents the most optimistic scenario.

European Central Bank (ECB) - Next meeting: 1 August

• The OMT with its potentially unlimited purchases of debt creates a strong and credible backstop to protect the eurozone’s weaker members from high borrowing costs. Still, despite the overall low sovereign interest rates, SMEs' access to credit is difficult in peripheral countries.

• The ECB has broken an unwritten rule by giving forward guidance on interest rates. Rates are expected to remain at present levels, or lower, for an extended period of time (likely more than 12 months).

Bank of Japan (BoJ) - Next meeting: 8 August

• The BoJ has introduced its "quantitative and qualitative monetary easing", a bold and aggressive monetary programme aimed at reaching an inflation target of 2% in a 2-year time window. In order to do so, the monetary base will be doubled (from ¥138 trillion at end-2012 to ¥270 trillion at end-2014), mainly by increasing JGB purchases (of all maturities). The reduction in JGB volatility favours no change in the BoJ's programme.

• Thus the BoJ changed its target for money market operations from the overnight call rate to the monetary base.

Bank of England (BoE) - Next meeting: (1 August) / 7 August

• The BoE has maintained the size of its asset purchase programme at £375 bn. On 7 August, the Committee will announce potential implementations of thresholds and forward guidance, as well as its view of the trade off between growth and inflation.

• Forward guidance has already been introduced when Mr Carney mentioned that the rise in the expected future path of Bank rates was not warranted, suggesting that rates are expected to stay at 0.5% longer than expected.

Reserve Bank of Australia (RBA) - Next meeting: 6 August

• The RBA has to manage a growth transition from the resources sector (whose peak may have already occurred) to the other sectors, which have been hurt by the strong AUD and the relatively high interest rates.

• The RBA has maintained the cash rate at 2.75%, but has left the door open for more accommodative measures given the below trend growth.

Bank of Canada (BoC) - Next meeting: 4 September

• The BoC is expecting exports to be the key driver to boost growth in the private sector. The central committed to leave rates unchanged notably as long as there is significant slack in the economy and a soft landing is emerging in the housing market.

• Thus, the overnight rate was left unchanged at 1%.

Swiss National Bank (SNB) - Next meeting: 19 September

• The SNB is expected to continue to defend with the utmost determination the minimum exchange rate at 1.20 in EUR/CHF.

• Target range for the 3-month Libor unchanged at 0.0-0.25%.

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Sustainable JPY weakness unlikely given short positioning

No real change in positioning except perhaps the persistent augmentation of sellers in Swiss franc. However, the levels are nowhere near extreme, so little conclusions can be drawn from these readings.

In the Japanese yen, net short positions are the most extreme (-47.01%) in six years and are coming closer to the historical extreme made in June 2007 (-53.39%). As more structural reforms are only expected for September, we do not see many catalysts to weaken the yen much further. On the other hand, any signs that Mr Abe is watering down his promises for structural reforms could lead to a strengthening of the yen. Furthermore, a visit to the Yasukuni Shrine on 15 August would indicate that Mr Abe is following his nationalistic instincts, along with constitutional changes that could consume much of the government's energy, at the detriment of his economic agenda. Overall, we do not see sustainable weakness in the yen until at least September especially given the elevated net short JPY positions.

Weekly Forex Forecast - Week 31

2013-07-30T20:29:00.000+02:00

Europe's very slow recovery

Stabilization rather than recovery

Divergence not only between core and periphery

China's ominous slowdown adds to Europe's concerns

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Recent FX sideways moves favour the use of oscillators

Oscillators call for patience during summer

Uncertainties in Japan exacerbated by extreme JPY short positioning

AUD/USD marginal new lows suggest weakening selling pressures

EUR/USD and GBP/USD sideways moves favour the use of oscillators

Summer should alleviate some excesses in FX positions

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Monetary Policy

US Federal Reserve (Fed) - Next meeting: 31 July

• Thus the BoJ changed its target for money market operations from the overnight call rate to the monetary base. FX Markets Monetary Policy Bank of England (BoE) - Next meeting: (1 August) / 7 August

• The RBA has maintained the cash rate at 2.75%, but has left the door open for more accommodative measures given the below trend growth. Bank of Canada (BoC) - Next meeting: 4 September

• Thus, the overnight rate was left unchanged at 1%. Swiss National Bank (SNB) - Next meeting: 19 September

• The SNB is expected to continue to defend with the utmost determination the minimum exchange rate at 1.20 in EUR/CHF.

• Target range for the 3-month Libor unchanged at 0.0-0.25%.

Sustainable JPY weakness unlikely given short positioning

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To LOOP, Or Not To LOOP? That Is The Question

2013-07-26T10:50:00.000+02:00

Almost done! You’ve checked the programs in a number of different ways using Search It! as your “private investigator.” By considering the plus signs, the minus signs, and the red flags, you’ve eliminated the high-risk dogs that don’t deserve your time. And you’ve researched each POSSIBLE PARTNER for each of your keywords.

You have gone even further and investigated some other models of

monetization M.

Finalize your selection of affiliate programs and other income streams. If you don’t find enough good programs, you may have to broaden your concept or even replace it. Or you may want to simply focus on PREselling/selling your own service!

With that perspective in mind, please allow me to remind you of a small-business truism. The two biggest mistakes any entrepreneur makes are actually opposites of each other...

1) FIRE-READY-AIM -- the person who leaps before he looks. If this fits you, I can only repeat Ben Franklin’s quote... “By failing to prepare, you are preparing to fail.” In other words... ignore the preparation work at your peril.

2) READY-AIM-READY-AIM-READY-AIM -- the person who researches, then researches some more, then some more.

or this person, I can only offer this profound wisdom... Fish or cut bait. Or, as Nike would say... Just do it!

So... if you have isolated a good theme for your service, picked your highestprofitability topics, selected excellent merchant-partners that you are proud to represent, and if you have considered other potential monetization models, then you are ready to roar ahead.

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Write And Publish Your Own Outrageously Profitable Ebook(r) In As Little 7 Days

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Check Out Other Monetization Models

2013-07-25T10:49:00.000+02:00

Your Most Wanted Response is to have your visitor contract your service. But what if your visitor doesn't need your assistance today? Instead, she notices another one of your offerings.

This is good for her, and good for you… WIN-WIN. Your visitor is happy and your Web site is steadily bringing you a stable income.

Start now. Investigate and plan your site's monetization models. Take a week, if necessary -- money is involved!

Your two basic goals are...

1) Investigate and assure yourself that this Site Concept can indeed make substantial profits. Of course, not every monetization model has to start immediately. But the potential must be there!

2) Lay out your plan for the monetization mix. Start with your primary income stream, your service.

Build a client base, locally and/or globally as Nick and Nadir demonstrate…

http://case-studies.sitesell.com/#SERVICES

Marc and Richard hung out their Webmaster shingles…

http://case-studies.sitesell.com/#PROS

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Write And Publish Your Own Outrageously Profitable Ebook(r) In As Little 7 Days
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How and when will you lay out your options? Let’s do a quick overview of some possibilities…

• Google’s AdSense Program -- AdSense is tailor-made for Theme-Based Content Sites. Combine participation in the AdSense Program with membership in two or three quality affiliate programs and you have a solid monetization base in place.

How does AdSense work? Upon acceptance in the program, Google selects relevant ads for you to place on your Web pages. You are paid for every ad clicked upon.

See how Michelle monetizes using AdSense on her site…

http://case-studies.sitesell.com/#WAHM

• Referral/Finders’ Fees -- With this model, you send visitors to specific businesses (offline businesses, especially) and get paid for the lead or sale that results.

Nori explains how she earns income through referrals…

http://case-studies.sitesell.com/#FINDERS

• Net Auction Selling -- Auction products (hard or digital goods or services) that relate to your theme. Put eBay to work for you.

Merle and Pam use their site to funnel prospective clients to their eBay auctions…

http://case-studies.sitesell.com/#AUCTION

• E-good Creation/Sellers -- Almost anything can be digitized and sold… ebooks, photos, software.

Shaun and Marney show you how…

http://case-studies.sitesell.com/#EGOODS

• Network Marketing -- Use the networking power of the Web to generate warm, willing-and-wanting-to-talk-to-you prospects... people who will call you, not the other way around.

Jim and Sara use their sites to extend their “warm circles of friends”…

http://case-studies.sitesell.com/#MLM

• Online store -- Sell hard goods that are related to your theme as Jim and Richard do…

http://case-studies.sitesell.com/#HARDGOODS

• Local Business -- Increase your local reputation and expand your client base. Let John and Judd tell you about their successes…

http://case-studies.sitesell.com/#LOCAL

Bottom line? Always follow this strategy…

If you don’t monetize a visitor one way, convert her into dollars another way! The more you diversify, the more stable and sustainable your business will be.

And that brings us to an important decision you need to make… To be continued...

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Write And Publish Your Own Outrageously Profitable Ebook(r) In As Little 7 Days
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Reduce Risk by Diversifying

2013-07-24T10:47:00.000+02:00

One of the major attractions of becoming an affiliate is the small amount of risk involved. As an affiliate, you have little or no...

• product development expenses

• advertising costs

• inventory to maintain

• overhead expenses (salaries, physical location, etc.)

In other words, affiliates do not have millions at stake. But you do have one big risk...

If a merchant or backend provider goes out of business, it takes you with it. Let’s talk briefly about how to minimize this risk...

After you review the affiliate directories and backend providers, you should have a good selection of programs. How many programs should you choose? How do you know which ones are solid?

You don’t, really. Yes, you can weed out the dogs by doing the basic research outlined below. But most of us just don’t have the ability or time to thoroughly analyze a company, its financials, and its business model… and then predict success or failure.

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Write And Publish Your Own Outrageously Profitable Ebook(r) In As Little 7 Days
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So your best bet is to spread your business among as many programs as possible that fit with your Site Concept. But there are some important qualifiers to this policy...

1) If you represent 10 programs, don’t put them all on the same Keyword- Focused Content Page. Work in only the few that are tightly relevant to the content of each page.

2) Pick the best-of-breed from each category of merchant. For example, if you plan on representing a Net marketing company, SiteSell would be the obvious choice (ahem!).

If you plan unusually heavy support for a given category of product, you might want to represent the best two merchants. For example, suppose you foresee hundreds of book links on your site. It might be a good idea to choose the best 2 online bookstores -- if Bookstore A and Bookstore B fit with your concept and both seem to be stable companies, then use these two. No more, though...

3) Don’t choose too many programs. Tracking each program takes time, so 10 programs is probably a good balance. If any one of them dies, you don’t lose too much.

4) Your best results will come from focusing on a smaller group of quality programs (from within the 10). Their products must...

• be excellent • be complementary with, even enhance, each other • fit your concept and... • be from a rock-solid company. Since you will give these companies more attention than the others, you must feel very comfortable with their business prospects.

Here’s the bottom line... Don’t give too much emphasis to any single program, unless you have some special reason to feel unusually comfortable with it. Things happen. So protect yourself by choosing a variety of affiliate partners. Of course, you can also reduce your risk by weeding out the dogs through some basic research...

Prune by Eliminating High-Risk Programs

Find the good programs and eliminate the dogs by considering the following plus signs, minus signs, and red flags. Let’s start with the plus signs, signified by +, which means “good things to look for.” Here they are, in the approximate order of importance...

+ High quality product or service -- Remember, it’s your reputation that is on the line (and online!). Don’t recommend products that UNDERdeliver.

+ Merchant has a good site that sells effectively.

+ Ability for affiliate to link straight to individual products, rather than just to the home page. (If the visitor has to find the product that you recommend, your Conversion Rate plummets.)

+ Type of payment model... Pay-per-sale and pay-per-lead are good. This is true “performance marketing.” If your referred visitor delivers the desired response, you get paid. What about “pay-per-click?” See red flags below.

+ Affiliate Support...

• Accurate, reliable, real-time, online accounting, preferably with some kind of ability to “audit” by spot-checking

• Detailed traffic and linking stats

• Notification by e-mail when a sale is made

• Useful marketing assistance -- provides traffic-building and sales-getting tools

• High-quality newsletter that educates, trains, and accounts for amounts earned

• Professional marketing materials available

• Affiliates receive discounts on products

+ Pays good commission -- Hard goods have lower margins than digital ones so their commissions will be lower. Still, you should make at least 10% (hard goods) or 20% (digital goods) on any product that you recommend. Don’t be scared off by low-priced products if they offer a good % commission -- the lower dollar value per sale is offset by the higher sales volume.

+ Must be free (no charge) to join, no need to buy the product.

+ Lifetime commission -- If the program pays a commission on future sales of other products to customers that you refer, this is a huge plus.

+ Two-tier commission -- If the program pays a commission on affiliates who join because of you, this is also great.

+ Lifetime cookie -- Do you receive a commission if the person you referred returns and buys within one month? Three months? The cookie that tracks this should not expire.

+ Restriction on number of affiliates -- You won’t find many of these. But if you do find one, grab it.

+ Monthly payment, with reasonable minimum. Do all those plus signs have to be present? No. But the more, the merrier.

Minus signs are definite detractors. Naturally, if you are unable to give a + to any of the criteria listed just above, consider its absence to be a minus. And watch out for these negative factors...

— Slow and/or poor support.

— Unethical conduct of any kind.

— Reports of late (or lack of) payments.

— Allowing spam, or seeming to send spam themselves.

— Defective affiliate-joining process. Hey, if they can’t get this right...

— Clauses in the agreement that you find unacceptable.

• Example -- If lifetime customers are important to you, then a clause that allows unilateral termination or modification of the agreement at any time by the company without just cause effectively makes the lifetime commitment of no value.

• Example -- No exclusivity (i.e., you should be allowed to represent more than one book vendor).

And perhaps the most worrisome factor of all…

— “The dark side” of affiliate programs. Is the program really just a way to legally bribe folks to recommend overpriced, UNDERdelivering products in order to collect excessive commissions?

Red flags are warning signs...

“Pay-per-click” method of payment. In this method, you get paid whenever a visitor clicks on your link. No purchase or lead-generation necessary. Unfortunately, it’s wide open for abuse -- very sophisticated folks create incentives to get thousands of people to click on their links. But the visitors could care less about the products being promoted. The scam is virtually unstoppable. And merchants end up paying for nothing.

So merchants cancel or change the program. Microsoft’s Clicktrade used to offer pay-per-click backend programming for merchants. Microsoft dropped it due to the level of fraudulent activity that hurt merchants.

Multi-tier commission. This is online Multi-Level Marketing (MLM), which is perfectly legal. Do your due diligence to make sure, of course, that a multi-tier program is not an illegal pyramid scheme. If the “game” is to earn income by signing up others, you are most likely dealing with a pyramid. Many people confuse honest, legal MLM with dishonest, scammy pyramid schemes. With MLM (also known as Network Marketing), it becomes as important to build a strong downline as it does to sell product. Also, MLM companies are subject to numerous regulations (to prevent them from becoming pyramids, basically). Not all online companies are complying (or even know about this!).

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Write And Publish Your Own Outrageously Profitable Ebook(r) In As Little 7 Days
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Watch for a big shakeout with many of these companies going belly-up. If multitier interests you, I would recommend that you check out established offline MLMs that are now online.

Or... investigate all others extremely carefully before you decide to invest a lot of time in these.

Poor or little info about affiliate program available. What kind of priority could it have?

Dead links on merchant site.

No clear anti-spamming policy visible on site.

Site that promotes “get-rich-quick” gimmicks.

Financially unstable. You can lose a lot of momentum if a company goes under, especially if you are banking on lifetime customer/2-tier promises.

Weekly Forex Forecast - Week 30

2013-07-23T20:17:00.001+02:00

Central banks to remain accomodative

Mr. Bernanke's transparency

One big novelty of central banking since Bernanke has been an increase in transparency as to the future direction of monetary policy. The increase in transparency, however, does not always imply an increase in clarity. Indeed, as monetary policy is being made dependent on quantitatively defined economic tresholds, its future direction can only be as clear as the economic scenario itself. Thus while the Federal Reserve has made it abundantly clear that it would like to reduce the pace of liquidity injection, it will only do so if an when it is convinced that the moderate US recovery is firmly on a sustainable track. As long as it is not, and as long as inflation keeps on trending below target, it will think twice before doing so.

Mr. Bernanke's clarity

Some things are clear, however. First, Bernanke is not going to reduce reference rates before 2015 at the earliest. Second, once he has completely eliminated additional liquidity injection (he hopes sometime in 2014) he would try to maintain total liquidity constant, i.e. he would reinvest the proceeds of expiring securities. In other words, the Federal Reserve is keenly aware that growth will remain moderate and that the overall monetary stance needs to remain accommodative. As such, one should not expect further significant spikes in bond yields.

Emerging market concerns to continue

Global deflationary pressures will force other central banks to become even more accommodative. As China's slowdown becomes more and more concrete, all emerging markets will remain under pressure as they will be forced revise their export-driven growth model. Concerns about rising USD rates have only triggered the recent emerging markets' correction. The underlying causes run deeper and will not go away with softer words from Mr. Bernanke.

Mr Poloz is not an advocate for a lower Canadian dollar

Mr Poloz does not seek a substantial weaker Canadian dollar

On 18 July Mr Poloz, the new governor of the Bank of Canada (BoC), published his first comments following the central bank decision to keep interest rate unchanged at 1%. The previous tightening bias has been kept, though slightly softened, as the highlight has been placed on stable monetary stimulus "for a period of time". On the other hand, Mr Poloz removes the sentence concerning the hurdle caused by "the persistent strength of the Canadian dollar" which was included in previous monetary policy reports. As Mr Poloz still focuses on a gathering momentum in exports to boost confidence and then lead to an increasing growth in business investment, we do not believe that the new governor would be pleased with a too strong Canadian dollar. On the other hand, as USD/CAD was mostly at the same levels as at the previous BoC's meeting (29 May), little help is expected from Mr Poloz for a sustainable weaker loonie. Therefore, as the US is the main importer of Canadian products, the evolution of the US economic health is seen as a key driver for USD/CAD.

Medium-term upside limited in USD/CAD

Looking at the technical configuration of USD/CAD and taking into consideration the aforementioned factors, we expect the strong resistance at 1.0870 (November 2009 peak) to cap the medium-term upside potential. On the other hand, we do not expect a too strong Canadian dollar as it would hinder export growth. Therefore, a medium-tern sideways move is likely, favouring the use of oscillators to buy oversold conditions and to sell overbought conditions.

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Who is king in the kingdom of the commodity currencies?

CAD remains our favourite major commodity currencies

Even though we do not favour commodity currencies, we continue to favour the Canadian dollar compared to the Australian and the New-Zealand dollar. We already mentioned that the Canadian central bank, though pledging to keep interest rates low "for a period of time", does not seems concern too much with the value of its currency. Furthermore, the value of the Canadian dollar is likely to be influenced by the still positive economic trend in the US economy. On the other hand, the Reserve Bank of Australia (RBA) still considers its currency to be at a high level. Moreover, the Australian dollar should continue to suffer from the domestic growth transition from the mining to the non-mining sectors and the dim outlook of China, Australia's biggest trade partner. As the RBA, the Reserve Bank of New-Zealand also considers its domestic currency to be overvalued. However, the central bank is not expected to lower its rates on 25 July, as surging house prices in Auckland and Canterbury constitute a threat to price stability.

Technical configurations favour CAD over AUD and NZD

Looking at the price action of AUD/CAD, the break of a 21 month distribution phase calls for a decline towards 0.9050. The chart of CAD/NZD is less clear. However, the break of a long-term declining trendline is positive and favours a phase of CAD appreciation against NZD towards the significant resistance around 1.3000.

In Abe, we are waiting to trust

Time to delivery is getting closer for Mr Abe

The upper house elections on 21 July are expected to be won by the LDP coalition, giving Mr Abe the majority in both houses of the Parliament until the new national elections in 2016 and reducing political hurdles to push pro-growth structural reforms. A failure for the LDP coalition to secure the upper house would likely lead to a sharp strengthening of the Japanese yen. However, a victory is unlikely to lead to a strong weakness in yen. Indeed, for a sustainably weaker yen, bolder but less popular structural reforms to improve industry competitiveness should be announced by Mr Abe. The question then is: will Mr Abe deliver?

July's TPP talks as an early indicator?

The first talks on Trans-Pacific Partnership (TPP) negotiations on 23-24 July are likely to give some early hindsight on Mr Abe's plan for the agriculture. As TPP principles push toward abolishing all tariffs within 10 years, Japan will find it difficult to defend its existing trade barriers, where tariffs imposed on imported products like rice, wheat or sugar easily exceed 200%, to strong agriculture exporters like the US or Australia.

Short-term downside risks increasing for USD/JPY

Even though business and consumer confidence is improving, we would remain cautious as many risks from vested interested among LDP members to modification of Japan's post-war constitution could derail Mr Abe from continuing structural reforms. Especially as the elevated short JPY positioning could exacerbate any strength in the yen. But, Mr Abe seems aware that a status-quo in reforms is not an option with a public debt of around 240% of GDP. Should Mr Abe rightly seize this great opportunity to push for bolder structural pro-growth reforms, then we would reinstate our call on a weaker yen.

Australian dollar close to record net short positions

The USD long positions were close to its highest on 9 July, with all major currencies being short compared to the US dollar. This partly explains the sharp decline in the US dollar index following Mr Bernanke's dovish comments on 10 July. As explained in our last report, we continue to expect a medium-term stronger USD, therefore, the induced short-term volatility caused by elevated long USD positions is likely to stay, especially with a tapering schedule which remains uncertain.

The Japanese yen is worth monitoring. Indeed, the short JPY positions is close to its December 2012 low. The upper house election on 21 July and the capability of Mr Abe to propose a stronger third arrow, or in other world, to push for stronger pro-growth structural reforms are likely to add some volatility in yen crosses.

Australian dollar short positions were close to record a new historical low. However, we see these levels more as a confirmation of the change in perception in the Aussie than a reason to be contrarian. Indeed, the expected structural peak in mining and the dovish Reserve Bank of Australia do not bode for more than short-term rebounds in AUD/USD.

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Forex forecasts in the future

2013-07-23T20:01:00.001+02:00

We are making a little change in our new forex news schedule.

To be more accurate to the upcoming weeks, we post our weekly report on every Tuesday for the whole week so traders could get more insight of the market moves.

We hope you will find your counting with our forex news.

You are writing about forex? You are trading and want to share your experience? Feel free to contact us at wazzeh[at]wazzeh[dot]info and become our publisher.

Have a nice day!

Grow A List Of Possible Partners

2013-07-22T10:45:00.000+02:00

Remember how we brainstormed the list of KEYWORDS and then chose the best? We're going to choose affiliate partners in the same way. And, of course, Search It! will be our super-efficient assistant as usual.

Solid research sets a solid foundation. That’s why the strategies below try to cover almost every angle for choosing POSSIBLE PARTNERS. However, being this thorough can be overwhelming, especially if you are already time-crunched. So pick and choose the strategies that you know you can realistically execute.

And then do them!

I highly recommend that you do at least four types of searches if at all possible. You want to increase your chances of finding quality affiliate programs that fit best with your business blueprint. But more importantly, you want to be confident about the merchants that you represent!

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Write And Publish Your Own Outrageously Profitable Ebook(r) In As Little 7 Days

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Grow Through Search Engines

A good place to start your search for merchants would be, of course, at the Search Engines! Do a search for one of your keywords, plus the word “affiliate.” Let’s use this example...

+ab exercise +affiliate

(The “+” sign means that both words must appear on the Web page returned by the search.)

Grow Through Directories... Search and/or Drill Down

Directories are also a good place to research POTENTIAL PARTNERS. An interesting place to start is…

Since this is a large directory and there is a substantial annual fee, it has only serious merchants. Many of the sites listed here will have affiliate programs so this search is like hitting pay dirt in a gold mine.

Grow Through Specialized Affiliate Directories

Now let’s investigate your POSSIBLE PARTNERS and add some new merchants, too. How? Easy...

Visit a site that appeals to you. If it has an affiliate program that fits your Site Concept, first enter what kind of merchandise it sells and then enter the URL of the “join page” into POSSIBLE PARTNERS for that keyword (as explained above). Check the top ten sites -- twenty if you are feeling ambitious -- and record those with potential.

Repeat the process for each keyword in your Master Keyword List (i.e., replace “exercise” with another keyword like “ab exercise”), starting with your specific high-profitability keywords and then following up with your general Concept Keywords (ex., “weight training” and other “concept-level” keywords that you develop, such as “exercise equipment,” etc.).

Read the review of each potential match. Look at the ratings and take advantage

of any evaluation services offered.

You can also look for “cross-concept companies.” These are companies selling products that, because of their nature, fit with most or all Site Concepts. For example, whether your concept is about “Renaissance art” or “pricing” or “exercise,” you’ll find books about it. So always include a bookstore in your group of affiliate programs.

Still in the searching mood after all that? Try this final suggestion… You already have a list of POSSIBLE PARTNERS. Use the search tool at AssociatePrograms to check out partners. Just enter each domain into the search tool.

If you want to be really, really, really thorough, and you have more spare time than I do, you could check out these affiliate directories…

Associate Programs

http://www.associateprograms.com/

Refer-it

http://www.refer-it.com/

1webindex

http://www.1webindex.com/

Grow Through The ClickBank Network

ClickBank, through its fast-growing Marketplace, gives you access to over 10,000 digital products and a commission range that extends as high as 75%.

http://www.clickbank.com/

Its account setup is simple and free. And ClickBank’s tracking and payment procedures are reliable and accurate. The company manages the publisher (merchant) relationship so you always receive your payment.

Grow through Affiliate Backend Providers/Networks/Aggregators

There are several companies that provide the tools, technology and services that online businesses need to register, track, report and pay affiliates. In other words, merchants don’t have to “do it themselves” because these companies provide all the backend functionality necessary to run an affiliate program. The “backend providers” prefer to call themselves “affiliate networks.” Why? Because they do more than just provide merchants with affiliate software. They also provide merchants with affiliates, and vice-versa. Since they have a pool of hundreds of thousands of affiliates, a merchant’s program gets instant exposure to potentially interested affiliates.

And affiliates get exposure to a wide variety of merchants. So join each of these backend providers. You will likely come across many of the same merchants that you found in the affiliate directories. But you will also find new ones. So it is worth checking to see whether they feature any programs that fit with your concept....

Commission Junction

http://www.cj.com/

LinkShare

http://www.linkshare.com/

If you find merchants with products that fit, enter what kind of merchandise they sell and also enter the URL of the “join page” to the POSSIBLE PARTNERS column in your MASTER KEYWORD LIST for each keyword that is relevant.

Grow through Alexa

Use Search It! to find potential affiliates through Alexa or Quantcast. Choose the Popularity search category. Alexa, for example, displays traffic ranking, in-pointing links, and even visitor reviews! Once you establish which sites in your niche are the big players, use the Related Links tool from Alexa to expand your horizons!

Grow Through Search Engines & Directories...

Favorite Tricks Now for a quick peek at a couple of my favorite tricks... How else can you find merchants through the Search Engines? Easy!...

1) Visit the advertisers!

2) Sniff affiliate sites (They’ve already done the homework for you!)...

These “linked-to” merchants already have affiliate programs -- all you have to do is check them out and see if they fit with your Site Concept! Add the ones that do fit with your list of POSSIBLE PARTNERS.

Grow Through Back Links

Find other sites that link to a site with this query….

Many of these sites will be content sites that also link to other exercise-related merchants as affiliates (you can often tell by the linking URLs). More than likely, these linked-to merchants already have affiliate programs -- all you have to do is check them out and see if they fit! Add the acceptable ones to your list of POSSIBLE PARTNERS for each keyword.

And you can use link-finder technique for all of your POSSIBLE PARTNERS for all of your keywords! Google is your friend.

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Plan Your Monetization Models

2013-07-19T10:42:00.000+02:00

As a service seller, your #1 goal has to be the “sale” of your service -- getting that first contact from your prospect. That’s perfectly understandable. Even so, don’t discount the idea of affiliate marketing and its potential secondary income. This DAY will highlight the affiliate monetization model but keep in mind that you do have other models to consider…

Out of every 100 visitors to your site, it’s likely that only a small percentage will follow through and contact/hire you for your professional service. The others? Well, maybe they have slightly different needs. Perhaps they are looking for a lower-cost option or they are “just looking, thanks.” There may be any number of reasons why a visitor may not be an ideal candidate for your service.

You could, if you wished, let those visitors proceed merrily on their way. But why would you? After all, you worked very hard to get them to your site, right? So why not make recommendations for niche-related, non-competing products and/or services that may be more suited to the needs of those visitors? That way, your traffic is not wasted. Instead, it supports an additional revenue stream.

But there’s another bonus...

By offering links to non-competitive sites that provide solutions for your visitors, your site becomes an even more valuable resource. This is doubly true if your service is locally based and unlikely to be of interest to anyone outside of an hour’s drive of your office.

• Ideally, you don't want to leave any money on the table. Your visitor may not respond to your primary Most Wanted Response, but she may be attracted to one of your secondary offerings.

• The key is to never be dependent on any one income source -- “all your eggs in one basket” is a high-risk strategy. By diversifying, you increase your revenue, stabilize your business, and take charge of your own business destiny.

Grow a list of good merchants with affiliate programs that have product lines that fit. Then choose the best ones and group them according to high-profitability keywords. For example, you may want to investigate Amazon’s aStore…

http://astore.amazon.com/

or eBay’s Editor Kit…

https://www.ebaypartnernetwork.com/files/hub/en-US/index.html

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Medium-term outlook still positive for the US dollar

2013-07-18T21:45:00.000+02:00

A surprisingly dovish Bernanke tumbles the US dollar

On 10 July, the FOMC minutes revealed a majority of voting members would like to see further improvements in the labour market before slowing the pace of the asset purchases. Shortly after, Mr Bernanke's was particularly dovish, notably mentioning that a hike in short-term rates was unexpected in the foreseeable future. Therefore, as the start and the pace of the tapering remain highly questionable, an update on our forecasts for the greenback seems warranted.

US energy independence is a long-term positive for the USD

The persistent reduction of US dependency on foreign source of energy should act as a long-term supportive effect on the US dollar. Indeed, the lower costs of imported energy and, eventually, the generated profits through natural gas exports should lead to a structural improvement of the current account deficit. Furthermore, the US has significantly decreased its budget deficit through a reduction in public spending and increase in tax revenues. From an extreme at -10.4% of GDP, it stands now at -5.7% (as of end of March). Therefore, the "twin deficits" is unlikely to remain a structural drag for the US dollar. On the other hand, the deficit reduction in the US should lead to a further reduction of the current account surplus of many emerging countries, causing a devaluation of their currencies versus the US dollar.

Slowing diversification out of USD for FX reserves

The growth of foreign exchange reserves has been impressive this last decade, with the side-effect of prompting a diversification out of the US dollar whose rates were unattractive. However, the slowing reserve accumulation (notably in China) and reduction in diversification out of the US dollar indicates that the Euro could lose of its biggest supporters.

Global monetary policies should continue to lift the US dollar

The Fed has been the first central bank to lower rate at the onset of the financial crisis and to introduce unorthodox monetary stimulus. Given the economic outlook, it should also be the first to start reducing its monetary expansion. Even though tapering may occur later than in September, the Fed is still leading the way in the liquidity cycle compared to the other central banks. Therefore, in the medium-term, the US dollar should continue to benefit from global monetary policies. Furthermore, the dovish intervention of Mr Bernanke should also partly be put in context with the recent dovish comments of Mr Draghi and Mr Carney. By talking down interest rates, he reduces the risk that a too steep rising cost of borrowing chokes the recovery.

Safe haven status and valuation in favour of US dollar

Looking at the Purchasing Power Parity, the US dollar remained undervalued against most major currencies (see our last report). A notable exception is the Japanese yen. However, the BoJ's aggressive monetary stimulus, which is expected to continue till the end of 2014, should hamper any sustainable decline in USD/JPY. Coming back to the future tapering of the Fed, the safe haven status of the US dollar is attractive. Indeed, the strong rise in asset prices, boosted by the massive injection of liquidity from central banks, could suffer from a reduction in monetary policies. In such a case, investors could repatriate their money in safe havens, such as the US dollar.

The technical configuration remains supportive of a stronger USD

From a technical point of view, many currencies compared to the dollar were close to critical levels (EUR: 1.2797-1.2662, GBP: 1.4832, CHF: 0.9839) or were likely forming short-term bases (AUD). Coupled with short-term overbought conditions in the US dollar index, the US dollar was ripe for a corrective phase. In the end, the unexpected dovish stance from Mr Bernanke sparked an impressive decline in the USD fueled by elevated long USD positions. Looking at the US dollar index (see chart), the mild succession of higher lows and lower highs remains in place. Even though a break of the support at 80.50 (June 2013 low) is needed to invalidate this positive configuration, a break of the support at 82.12 (61.8% retracement of the previous rise) would already put in jeopardy our bullish technical scenario. Another interesting resistance to monitor is the one at 1.5305 on GBP/USD (3 July 2013 high). A break of this threshold would weaken our technical interpretation of the US dollar.

Buying the US dollar on weakness remains our preferred strategy

For all these aforementioned factors, we continue to favour further significant medium-term strength in the US dollar. However, the renewed uncertainty on the timing is likely to stem further short-term price volatility. Therefore, it could be wiser to let prices digest the recent news and form a more tradable technical configuration. For the time being, levels close to 82.12 on the US dollar seems an attractive entry points. Moreover, currencies like the Australian dollar are less dependent on the US tapering than on China's rate of growth. Therefore, AUD/USD close to 0.9345 (26 June 2013 high) could be an attractive entry point for a short AUD/USD position.

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Identify Possible Themes To Compliment Your Service

2013-07-17T10:40:00.000+02:00

If you’re going to promote your service and expand your customer base using the Net, potential clients have to be able to find you quickly and easily and be able to trust you.

But simply finding you is not enough...

They have to find you in a confidence-boosting manner. An endorsement from a valued friend or colleague, or a top ranking position for a keyword search on a Search Engine, or a referral from a strategic partner are the types of “leads” that boost your credibility.

Once a visitor finds you, the content on your site must cement that confidence by providing high-value, benefit-focused info -- exactly what your prospective client is looking for, wants and needs.

Bottom line?...

A visitor must find you in a credible fashion. And then you and your service must be perceived as being trust-worthy before she will be confident enough to contact or hire you.

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Soon, we will do the groundwork for building a site that is “easy-to-find” on the Net -- a Theme-Based Content Site that works with the Search Engines so that you can achieve a “Top Ten” position in their search results. (Most surfers don’t have the patience to research past that point. It’s a big Web out there, with lots of sites to explore!)

Your first action step is to discover the best “theme” that correlates with your service. Then narrow it down as tightly as possible so that you attract only the people who would be interested in your service (and, if you choose to do so, the products you are representing as an affiliate).

Suppose, for instance, you are a personal trainer. Offline, you could simply promote your service as “Kyle Brown, Personal Trainer” and use ads in the local newspaper, business cards and friends’ recommendations to create a buzz around your service.

Unfortunately, online, words like “exercise” for your site’s theme and “personal trainer” for your service are much too general to make any impact in the Search Engine world. There are thousands of different kinds of exercise and thousands of different trainers. Where do you fit in? If you are not able to be more specific, you might as well take a number and join the long line to nowhere.

These two keywords, however, would probably be sufficient if you were creating a site only for visitors who already know or have heard about you (i.e., your existing clients or people in your region who have seen your offline promotions).

But...

If you’re hoping to use an online presence to expand your client base in and beyond your immediate locale (and create a second income stream), the people who don’t know you have to find you first... and the majority will come to you via keyword searches at the Search Engines (SEs).

The key to attracting targeted visitors to your site is to take your general service theme and narrow it down to a tight niche, which is what SEs like. Using that focus, you can pinpoint theme-related keywords that will interest a particular group of visitors and pull them to your site. This interest qualifies these surfers as potential customers for your service (i.e., your target group).

Does all this sound a little complicated? Don’t panic. Creating a Theme-Based Content Site is very do-able, no matter what level of Net experience you have. Let’s begin at ground level -- identifying your theme. You have three ways to approach this...

OPTION #1 -- Narrow the theme to reflect the true nature of your business. As an illustration, let’s say that you are an advertising consultant. Here’s what you would do…

i) Identify your main clientele (budget-minded small businesses)... and your main service (low cost, highly effective advertising solutions).

ii) Pinpoint the major solution your service provides or the problem it solves (provides clients with high-exposure for reasonable cost).

iii) Condense this information into a single sentence...

i) Identify your main clientele (pregnant women who want to remain fit throughout pregnancy) and your main service (individualized nutrition plan and a gentle stretching exercise program that is customized to how the woman is carrying the baby throughout her pregnancy).

ii) Pinpoint the major solution your service provides or the problem it solves (keeps women fit, flexible and well-rested through the third trimester of pregnancy).

iii) Condense this information into a single sentence... “Keeping pregnant woman fit and flexible though the third trimester of pregnancy!” See how this theme is much more focused than “fitness trainer?”

OPTION #2 -- Narrow the theme to effectively target a particular segment of your market. Let’s go back to the advertising example.

Even if your advertising consulting business does provide a wide range of services to a wide range of customers, you’ll still need to narrow your theme if you intend to attain success within the framework of the Net. Remember that Search Engines like tightly focused sites and show their pleasure by giving these types of sites higher positions/ranking on the search results pages.

With this in mind, you decide to focus on providing solutions to budget-minded small businesses. Watch the evolution of this theme as it tightens... Service: Advertising Consultant General Theme: Advertising General Focus: Advertising consultants Slight Focus: Small business advertising consultants Tighter Focus: Small business budget advertising consultants

Of course, there is such a thing as tightening your service's theme too much... Too Much Focus: Small business budget advertising consultants for left-handed Norwegians

OK, OK, I’m kidding. But you see what I mean? You have to be careful not to restrict your market too much, or your niche becomes too small. You won’t have the numbers to create or increase income.

This is exactly why your theme has to be niched (to quote Goldilocks)...

OPTION # 3 -- Narrow your theme to take advantage of the profitable keyword opportunities you discover (as highlighted by keyword SUPPLYDEMAND- PROFITABILITY

Basically, this means narrowing your theme and building your site according to the interest displayed on the Net. Of course, this can be accomplished only if your service is somewhat “flexible” and can be smoothly “tied into” these keyword opportunities.

You will choose keywords for your theme that...

• Lead to a natural cross-sell of your service.

• Show great opportunity for profitability -- plenty of demand (# of searches performed by surfers) with relatively little supply (few results returned by the SEs for those same keywords).

• Permit a smooth referral to a merchant partner for commissionable sales. Of course, you have to balance niche-tightening with common sense and your own personal experience.

If you are a personal trainer, you can’t suddenly switch over to being a gymnastic coach just because there is a lot of interest or demand for that service. And here’s an example where personal experience comes into play...

As an advertising consultant, your keyword research indicates that there is a bigger online interest in budget-related consulting. However, it’s been your experience that big businesses are much more likely to hire you as an advertising consultant and, in general, tend to spend 10 times as much on your services as medium-sized businesses do. So you decide to stick with your current direction.

Bottom line? As a service seller, your range of criteria for establishing the theme of your service site depends on three factors. The “best” theme must...

1) Be highly profitable -- there is a strong demand. This means that lots of people are willing to pay for your service. They will be actively searching for a site like yours, which is why your theme must be as narrow as possible. If it’s too general, your visitors won’t find you in the crowd.

2) Display plenty of opportunities for niche-related keyword targeting -- these keywords provide you with different angles by which you can approach your theme. You want to find the angle with the highest demand and the lowest supply. This will make it easy to attract targeted traffic (i.e., interested potential clients) to your site because competition is limited.

3) Excite you -- passion is key to your online longevity. It’s difficult to stay

committed to something you don’t like.

Time for a quick recap. In order to position your service on the Net, you need to narrow your theme. You can accomplish this by... • reflecting on the true nature of your business Or... • effectively targeting a particular segment of your market Or... • zone in according to demand on the Net (the best option for working with the Search Engines).

If you followed the first two guidelines, you probably have narrowed your theme choices down to a handful of possibilities. At this point, you need to know how profitable each one is before you can make your final selection for your theme. If you chose the third guideline, you are anxiously waiting to narrow your theme according to demand... to actually start your theme-identification process! Regardless of which option you chose, your next step is... keyword research.

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China adds to global deflationary concerns

2013-07-16T21:40:00.000+02:00

China's slowdown is here to stay

China's exports are now down 15% since the beginning of the year. While the downward in imports is somehow less pronounced, it is nevertheless also significant. Thus while it remains unclear whether the US economy has reached so-called "escape velocity", and the European cyclical improvement is likely to be modest only, we should not count on China as an engine of additional growth.

Likenomics explained

Like his Japanese counterpart Abe, Li Keqiang has also three arrows:

1) no stimulus;

2) de-leveraging;

3) structural reforms.

Given the massive expansion of credit over the last years, and manifold signals of bubbles in the housing sector and over-investments in manufacturing, these arrows are absolutely justified. During the last US-China Strategic and Economic Dialogue in Washington, finance minister Lou Jiwei hinted at a downward revision of 2013 growth from 7.5% to 7%. Such revision of an official target is unusual and might reveal more downward pressure than the markets have so far internalised.

Global implications

Implications are probably more important for emerging markets than for advanced economies (although it is an additional reason for Bernanke to go slow on QE tapering and a potential source of concern for Germany's capital goods and car exporters). Commodity exporting emerging markets with current account deficits are more at risk. Energy producing emerging markets should be more resilient. Asian countries that export intermediate manufacturing goods to China should resist even better and could actually, over time, profit from the development of a more significant domestic market in China.

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Position Your Service

2013-07-15T10:37:00.000+02:00

You have just arrived at the most important part of your entire effort in using the Web to grow your service-selling business. Some of you may not have started one yet. And some of you may have a service business that you are looking to jump-start to higher sales. In any case, you really want to get going! And yes…

Your start will be delayed if you prepare everything before you begin. But once you have completed preparations, you’ll roar ahead. There’ll be nothing to repair or repeat once you launch. The few hours or so that you spend here in preparation will determine exactly how big your success will be.

Most people fail in any business because they don’t plan adequately. That’s three times as true for an Internet business and five times as true for what you are about to do. If you don’t take the time to position your service properly on the Net, nobody will find you... and you’ll be missing out on some fantastic opportunities.

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PREpare, Not REpair

Think about how you want to spend your time. Benjamin Franklin’s words may keep you on track through these beginning DAYS… “By failing to prepare, you are preparing to fail.” What’s the best online approach for your service business? Simple. Follow this 3-step process...

#1) Position your service for success.

#2) Identify hundreds of HIGH-PROFITABILITY service-related keywords.

#3) Identify non-competing merchant partners to leverage an additional income

stream.

So many small businesses fail to start at the beginning with Content. Instead, they start at the end with Monetization.

They spend time and energy setting up a shopping cart and a merchant account or some other way of “collecting the money.” That’s putting the (shopping) cart before the e-horse of traffic. As we saw earlier, Monetization comes last. It’s the final result of doing everything else (C T P) correctly.

The hardest part, where 98% of small businesses fail, is in attracting Traffic, the visitors who convert, into income. Yet many start with the cash register! The solution? The only solution?...

Content >> Traffic >> PREsell >> Monetize

Follow the advice here and I guarantee you’ll find golden opportunities you didn’t even know existed!

If you position your service wrongly, if you develop the wrong theme to “tie-in” with your service, if you target the wrong keywords, and if you attempt to leverage your service business with the wrong complementary affiliate programs, if you start with monetization before you’ve built the content...

You’ll get the wrong results. That is, no results.

This section of the Service Sellers Masters Course focuses on setting the groundwork. It guides you past the barriers and hazards and sets you on the road that is right for you. Your road to success.

You are embarking upon a truly rewarding journey. Have no doubts -- this is “winnable” e-commerce. It’s totally under your control.

What you are about to read is likely a radical departure from what you have been doing. Take your time and read carefully... receive the key to becoming a Service Selling Master.

OK, enough “kung-fu grasshopper” stuff. Back to real-time preparation. You have already started your journey in the right direction by completing the first preparatory step...

STEP 1 Understand PREselling and its effect on Conversion Rates: Business Basics.

This step is the foundation for all future actions. There are three more prep steps to tackle as well...

STEP 2 Position your service for success!

Brainstorm several service-themed concepts, different angles that you can use to present your service. Discover the best “theme” that correlates with your service. Then narrow it down as tightly as possible so that it correlates to the service you offer, presents the richest keyword opportunities, and shows potential for secondary income streams.

Remember... It takes just as much time to build a low-potential business as a high-potential one. So invest the time now to maximize your returns later.

STEP 3 Develop HIGH PROFITABILITY theme-related keywords for your service.

Develop hundreds of possible service theme related keywords for your Site Concept, and then narrow them down to the ones with the most profitability. In other words, cast a Net (ahem!), over the Web to “catch” as many visitors as you can who will be interested in your service! Relax, it’s a snap once I introduce you to a few Net tools.

STEP 4 Plan your monetization models.

Sure, your #1 priority is to PREsell your service on your Web site and to get that initial contact with a targeted prospective client. However, you must expect that a certain percentage of your site’s visitors will not be interested in acquiring your services.

Maybe those visitors have different needs... maybe they are window-shopping... maybe they can’t afford you. Whatever the case may be, why let these visitors just “up and leave?” After all, you’ve worked so hard to get them to your site, right?

Develop partnerships with several reputable, non-competing merchant partners to help convert those who are not interested in your service. Create an e-book and sell it. Or choose other monetization models that are appropriate for your business…

And, there’s another wonderful bonus to this strategy… Partnering with non-competing merchants actually increases the value of your site -- as you provide even more solutions for your visitors!

A WIN-WIN result. “WIN” for your visitors. “WIN” for you.

If you decide to leverage profit through a secondary source of income, On that DAY, you will identify and select affiliate programs that excite you, fit your service theme, and leverage your income earning ability! Don’t rush through the prep DAYS. They are easy -- so it’s tempting to zoom. Don’t. Even though they are not difficult, they do require thoughtful consideration.

I hate to be a nag, but please remember… Building a profitable business is a process. Take as much time as necessary to do each DAY properly. There is no stopwatch ticking.

Some careful planning and fine-tuning will pay you big dividends down the road… down your road.

Now’s the time to nod, say “Yes dear,” and move ahead...

CAD short positions is not extreme anymore

2013-07-12T10:25:00.000+02:00

No major change has occurred in major currencies positioning. The Euro and the Swiss franc are the only two currencies with net long positions, while the Australian dollar and the Japanese yen remains at extreme short positioning.

The Swiss francs saw some reduction in its long positioning. However, investors' positions continue to be supportive of CHF weakness.

Canadian dollar short positions have been trimmed despite Mr Poloz's inaugural speech on 19 June, which strongly hinted at a welcome weaker Canadian dollar. Therefore, we do not see this reduction as a contrarian call to be long CAD. Instead, we see the lack of extremes levels in short positions as the removal of an hurdle in the on-going devaluation of the Canadian dollar, whose our medium-term target around 1.0870 (November 2009 peak) in USD/CAD.

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Get the Personal Contact

2013-07-12T10:00:00.000+02:00

This section deals with how to PREsell effectively. Let’s look at examples of how you can create negative mindsets in your visitors by making how-you-reachthem, what-you-say, or how-accessible-you-are boo-boos...

1) HOW To Reach Your Visitor...

Free-For-All Sites (FFAs) are a great example of how not to reach people. For the most part, they have become so seamy and useless, that no matter what you say, you’re doomed from the start. You have no credibility. Compare this with how smart and open-minded your visitor feels when she finds you via a Search Engine!

2) WHAT You Say To Your Visitor...

Don’t write a site purely devoted to “h ard-selling” yourself and your service. Imagine a visitor who hits your site and reads an immediate sales pitch. That person will resist because she does not know you.

Develop related content that PREsells your expertise, knowledge base and professionalism.

3) HOW Accessible You Are...

Scrolling to the final page of your site to find out how to contact you creates unnecessary frustration and shows a lack of respect/interest in your visitor. Ready access to your phone number and/or Web contact means instant gratification when she wants to talk to you now.

Now for a critical Action Step...

Review your site or whatever other means you are using to reach and talk to prospective clients. Put yourself in your customer’s brain. What will she think, how will she feel, at each of the 3 major steps above?

Consider how much higher your Conversion Rate (CR) would be if a visitor found you in a bona fide manner (ex., as a result of doing a search on a Search Engine), then became your “friend” (or your trusting admirer if you do a truly awesome job!) because you provided excellent content, and finally was able to communicate with you... pronto!

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The bottom line?

Get inside your visitor’s head -- realize how she will feel each step of the way. Whatever you do, consider the impact on your visitor -- if it does not make her more open-to-hire, don’t do it.

PREselling is really all about selling yourself and your service to your customer, every step of the way. You reach the right folks in a proper fashion, deliver valuable, appropriate editorial content that inspires their trust, and provide easy access to yourself so that when she is ready to reach out, you are there.

Your CR will soar.

It’s a two-step process that builds to a job contract...

STEP 1 You PREsell to get an open-to-hire phone call or response to your contact form... that first contact. Once you have that...

STEP 2 You “sell” your service and close the deal with a contract.

So, whatever you do, however you do it, PREselling should always pull your visitor one step closer to delivering your Most Wanted Response... ... an open-to-hire contact call or response to your contact form.

If your visitors basically perceive a straight sales effort on your site, you’re selling, not PREselling. That means that the two-step process is now SELLSELL...

Redundancy = Turned OFF visitor = LOW CR.

But if you develop great content that leads to contact, you become a friend she can trust rather than a stranger making a sales pitch…

Trust = Turned ON customer = HIGH CR.

In other words, don’t push your visitor to that first contact, make her want to reach you. It makes all the difference if your visitor feels that it’s her idea to deliver your MWR.

A question? Geez, I was about to grab a coffee. Fire away! Can you give me a concrete example of using content to PREsell? You want “concrete”? OK, concrete you get. Here’s a real concrete, non-Webbased, service example that will succeed...

It’s all about creating a Theme-Based Content Site that is loaded with Keyword- Focused Content-Rich Pages. Your theme?...

You love concrete. Yes, cement! It’s been your livelihood for years. “Concrete Solutions” is the name of your company and your VPP (“Valuable PREselling Proposition”) is “Service as Solid as the Rock of Gibraltar!” It’s also been your hobby, your passion...

Concrete statues. Concrete painting. Decorative concrete. Concrete in the garden. Repairing concrete. Concrete molds. The various types of concrete. Hand trowels.

Anyway, let’s say that you decide to create a Theme-Based Content Site that is all about concrete. Your home page explains how your site is the site for everything concrete, from structural to esthetic.

And it includes references to your services which range from consultations to customization to repair to custom molds/sculptures and everything in-between... and references as well to your finely-honed skills developed through years of experience and accumulated knowledge.

You also, of course, create high-value content-jammed Keyword-Focused Content Pages. For example, your page about concrete statues explains all about how to make striking statues for the home and garden. You could even expand it into an entire “Statue Section,” with a page on the history of concrete statues and another one about how to market and sell the statues that the visitor makes. Your contact info is presented on the bottom of all of these pages. By creating truly excellent, high-value content you deliver exactly what your visitor sought at the engines and this content strongly reinforces your expertise in the world of concrete -- which in turn earns her trust and respect.

By providing great content, you PREsell yourself and your services to your visitor. She sees you as a “Concrete Authority” and phones you, thus increasing your site’s Conversion Rate.

In addition, you develop multiple streams of income by representing related and excellent merchants on your site (earning affiliate income from these noncompeting sites). You weave relevant, “in-context” text links right in the content, as appropriate.

Links to...

• Books about the topic (ex. concrete statues, if that’s what the page was about)

• A garden supplier for concrete molds, trowels, etc.

• And so forth.

She trusts you, so she also trusts your recommendations. This is the way to go!

The ECB still relies on wording for its monetary policy

2013-07-11T10:35:00.000+02:00

The ECB is also giving forward guidance

The ECB kept rates unchanged on 4 July. However, the European Central Bank unanimously decided to break a long-standing rule of "never precomitting" to future interest rates decisions by giving a forward guidance to keep interest rates at present or lower levels for an "extended period of time". Nevertheless, it refrained to give any clarification on the time frame except that it was not twelve months. In a similar way as Mr Carney sooner during the day, Mr Draghi's forward guidance is a reaction to the rise in borrowing costs, while the economy is still shrinking, though at a slower pace. However, unlike the BoE, the monetary tools to actively lower rates seems more limited. Indeed, the Banking Union is far from being complete, narrowing the capacity of ECB's actions. However, even though Mr Draghi still relies on wording, the radical shift of using forward guidance shows that the ECB should remain as dovish as it is it allowed to be in the coming months. Therefore, as for the British pound, a sustainable appreciation of the Euro compared to the US dollar is unlikely.

Rise in EUR/USD should be limited to short-term rebounds

Looking at the technical configuration of the EUR/USD, we continue to favour a medium-term bearish bias in EUR/USD that should lead to an eventual break of the support at 1.2662. However, we would favour a sell on strength strategy as key supports are getting closer and short-term oscillators are close to oversold levels. Another interesting chart is EUR/GBP, which is still moving within a range between roughly 0.8411 (1 April low) and 0.8637 (17 April high). In the short-term, the rise following the BoE and ECB statements suggests that the market is giving thus far more credits to the dovish monetary policy of the BoE. Another key resistance lies at 0.8815 (25 February peak).

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