Thanks to a subscriber for submitting this list of academic reports, contributed in the spirit of Empowerment Through Knowledge.

Fed: "What Does the Change in the FOMC's Statement of Objectives Mean?"


Bruegel: "THE THREAT OF 'CURRENCY WARS': A EUROPEAN PERSPECTIVE"


Fed: "Technical Analysis in the Foreign Exchange Market"


IMF: "European Financial Linkages: A New Look at Imbalances"


Fed: "What Explains the Growth in Commodity Derivatives?"


DnB: "Public Debt Managers' Behaviour: Interactions with Macro Policies"


DnB: "Do Financial Markets Expect Bank Defaults to be Contagious?"

Eoin Treacy's view I found the St Louis Fed report on commodity derivatives to be particularly illuminating. Here is a section from the conclusion:

The lesson from this financial crisis is not that the government should prevent firms and investment funds from investing in commodity futures. As we noted, it was the unregulated, opaque OTC trading that was a critical factor in the financial crisis. The Dodd-Frank Act is intended to limit this type of trading and to make it more transparent. This outcome is already suggested by the incoming data. On organized exchanges (where traders are monitored and protected against counterparty failure), trading of commodity derivatives has nearly recovered to the peak achieved in June of 2008, while OTC trading in commodity derivatives has continued to decline.

A lesson from the crisis is that regulators and policymakers should monitor financial innovations closely to learn whether they are being used to take excessive risks-that is, risks firms would not take if they were operating outside the government's safety net. Under new regulations, the CFTC will collect information that should make trading in commodity derivatives more transparent. Banks argue that they need to use commodity derivatives to help customers manage risks. This may be true, but the recent experience in commodity futures did not reduce risks but exacerbated them just at the wrong time. The challenge to the government is to prevent too-big-to-fail firms from using current and yet invented derivatives to increase overall risk in the financial system.

The fact that the Fed released a paper discussing the impact of commodity derivates at the same time that the CFTC is discussing a similar topic is a clear indication that the authorities are concerned with activity in the commodity sector. Against this background, the risk premium attached to commodities, particularly those most overextended relative to their trend means, has increased.

Silver has failed to sustain upward breaks on three occasions since November and has pulled back rather sharply over the last week to test the $28 level. Silver's loss of momentum has helped to at least partially unwind the extreme overbought condition relative to the 200-day MA but a clear upward dynamic is now required to check potential for a deeper corrective phase.

Palladium has also been unable to sustain upward breaks but has held a more well-defined progression of higher reaction lows. These would need to be taken out, with a sustained move below $740, to suggest a more rapid corrective phase is unfolding.

Gold has failed to hold three breaks above $1400 and has pulled back towards the lower side of the three-month range. A deeper correction towards the 200-day MA is looking increasingly likely and a clear upward dynamic would be required to check current scope for some additional downside.

Platinum continues to hold in the region of $1800 but the chances are slim that it will sustain an upward break when the other precious metals are under pressure. Nevertheless, a sustained move below $1650 would be required to question medium-term upside potential.


The Chart Seminar - There is now only 1 place remaining for the Sydney seminar. We close bookings at 50 to ensure a good workshop environment for delegates. Once we reach 50 reached, further applicants will be put on a waiting list, in case there are any cancellations. The dates for all our seminars in 2011 are:

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We are currently taking bookings for all four of these seminars. Sarah Barnes is on holiday this week but I will be answering her emails relating to The Chart Seminar. Anyone interesting in securing a place at any of our seminars can continue to contact us at [email protected].

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