Forex Investment

Income trust investors are holdinga protest rally on Parliament Hill Wednesday afternoon to mark the first anniversary of what they call the “Halloween night massacre.”

It wasone year ago that Finance Minister Jim Flahertystunned the investment communityby announcing the Conservative government would bring in a tax on income trusts by 2011 reversingacampaign pledge made months earlier to leave them untaxed.

The wrath of the hundreds of thousands of investors who had poured billions of dollarsinto these trusts was immediate and it wasn’t hard to see why.

Income trusts had fast become a favourite place for many investors to put their money especially seniors.

Most trusts paid distributions that were far higher than what they could earn with GICs or dividend-paying stocks.

On Tuesday, a Chicago couple filed a claim under NAFTA, seeking $6.5 million in damages.

“Based on Stephen Harper’s very public promise, thousands of individuals and grandparents like us invested our hard earned money in income trusts and energy trusts,” Marvin Gottlieb said.

The value ofincome trusts tumbled hard in the wake of Flaherty’s announcement.

Within two weeks of the Halloween announcement, the income trust sectorlost about $35 billion of its market value, according to industry figures. Partial recovery

A year later, the sectorhas partiallyrecovered.

The TSX income trust index is still down 10 per cent from where it stood just before Flaherty’s announcement.

The energy trust index isdown 16 per cent, even though oil prices have surged to record highs in the last year.

Monthly distributions have helped to mitigate total losses, but it’s clear many investors are still smarting.

A few business trusts, like the Aeroplan Income Fund, havemanaged sizable gainsin the past year.

But for most trust investors, the only big gainshave come from takeover offers for their trusts and the often juicy premiums attached tothem.

More than 40 trusts have been acquiredsince the Halloween announcement.

Trust investors havespent much of the last year protesting the trust decision in a variety of ways.

Through countless news conferences, petitions and online forums, they have vented at what they see as a betrayal. Flaherty stands firm

Despite all the pleas from investors andvigorous lobbying from the industry, Flaherty stood by hisdecision.

Income trusts would eventually face the same taxesas corporations do. Only eligible real estate investment trusts would be exempt.

Flaherty said the “tax leakage” from so many companies converting to trust statuswas threatening the economy.

The Canadian Association of Income Trust Investors has always disputed the “tax leakage” claim that trust conversions were robbing the treasury of half a billion dollars in tax revenue a year.

It wants the finance department to show how it arrived at its tax loss conclusion.

“To date, all we’ve gotten is 18 pages of blacked-out documents to justify what we consider basically to be an eviction notice from our landlord who says we aren’t paying our monthly taxes, when in fact, we are,”Brent Fullard, CEO of the trust investors group, told CBC News.

The association also says its early prediction that the weakening of the trust sector would lead to many of them being swallowed up by foreign interests has proven correct.

No newincome trusts have been created in the last year,but more than 200 still survive. By 2011, however, it’s widely expected thatmany willconvert to corporate status.

Action Insight | Written by ActionForex.com | Sep 21 07 06:43 GMT |
Forex Daily Technical Report Canadian Dollar Breached Parity, Looks into Retail Sales

Dollar remains generally weak across the board, continuing to press record low against Euro. Also, Dollar finally breached parity against Canadian dollar, the first time since Nov 1976 on surging oil and commodity prices, which also boosts Aussie and Kiwi. The Loonie will look into today’s retail sales report from Canada for further strength. Headline sales is expected to turn flat in Jul after a big disappointment in Jun. Meanwhile, ex-auto sales is expected to rebound by rising 0.3% mom.

Eurozone current account and advanced reading of PMI manufacturing and Services will be featured today. Also, markets will listen to Fed Mishkin’s speech in Germany, as well as Plooser’s remarks at Philadelphia conference and Wash’s speech in Albany. EUR/USD

Daily Pivots: (S1) 1.3980; (P) 1.4039; (R1) 1.4122; «www.actionforex.com»

EUR/USD turns sideway after reaching as high as 1.4098 yesterday. At this point, further rise is still expected towards next upside target of 161.8% projection of 1.3360 to 1.3719 from 1.3550 at 1.4131. Below 1.4021 minor support will turn intraday outlook consolidative first. But recent rally from 1.3550 should remain in force as long as 1.3828 support holds.

In the bigger picture, medium term strength in EUR/USD is confirmed by breaking of 1.4 psychological resistance as well as medium term trend line resistance which limited it’s rally at 1.3364, 1.3681 and 1.3851 before. As discussed before, prior break of 1.3851 high confirmed that up trend from 1.1639 has resumed. Next medium term upside target is 1.4523 (95 high)

On the downside, even though a break below 1.3828 will indicate a short term top is formed, downside is expected to be contained above 1.3550 support and bring at least another rise before making a medium term top.

GBP/USD

Daily Pivots: (S1) 1.9983; (P) 2.0064; (R1) 2.0156; «www.actionforex.com»

After all, cable is still bounded in stabilized range between 1.9879 and 2.0172. Intraday outlook remains neutral. Rebound from 1.9652 has completed at 2.0365 already, as an interim correction to the whole corrective fall from 2.0652 only. Strong rebound from 1.9879 suggests that some more choppy consolidation should be seen before another fall. But further downside to retest 1.9652 low is still expected to be seen after taking out 1.9879 low. Also, even though above 2.0172 will bring stronger rebound, a break above 2.0365 resistance will indicate rebound from 1.9652 has resumed. Otherwise, risk remains on the downside.

In the bigger picture, with cable staying above 1.9621 support as well as 55 weeks EMA (now at 1.9624), there is no confirmation of long term reversal. But still, a medium term top is in place at 2.0652 with bearish divergence condition and daily and weekly MACD. Break of 1.9652 low will confirm that correction from 2.0652 has resumed for 1.9365/71 cluster support (100% projection of 2.0652 to 1.9652 from 2.0365 at 1.9365, 50% retracement of 1.8090 to 2.0652 at 1.9371). Also, sustained trading below 1.9621 support will add more weight to the case that whole rally from 1.7047 has indeed completed after failing 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 and bring deeper decline to next support zone of 1.9183 and 38.2% retracement of 1.7047 to 2.0652 at 1.9275 first.

However, above 2.0365 high will revive the case that price actions from 2.0652 is probably developing into sideway consolidation only. But still, 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 remains a key resistance. Decisive break of this resistance is needed to confirm rally from 1.7047 has resumed for 100% projection of 1.3680 to 1.9554 from 1.7047 at 2.2901. Otherwise, another fall could still be seen before completing the consolidation.

USD/CHF

Daily Pivots: (S1) 1.1658; (P) 1.1751; (R1) 1.1816; «www.actionforex.com».

USD/CHF turns sideway after falling to as low as 1.1685 yesterday. At this point, intraday bias remains on the downside as long as 1.1753 minor resistance holds. Further decline is expected towards 100% projection of 1.2467 to 1.1816 from 1.2214 at 1.1590. Above 1.1753 will turn intraday outlook consolidative first. But consolidation should be brief and another fall should be seen as long as recovery is limited below 1.1922 resistance.

In the bigger picture, sustained trading below the lower trend line support (1.1919, 1.1878, 1.1816) confirm medium term bearishness. Current fall from 1.2214 is treated as resumption of decline from 1.2467 and is expected to head towards mentioned 1.1590 support first. Also, this will be tentatively treated as resumption of medium term down trend that started at 1.3283 which could extend further to retest 1.1288 (04 low).

On the upside, even though stronger rebound could be seen in case of a break of 1.1922 resistance, break of 1.2214 resistance is needed to confirm a medium term bottom is formed. Otherwise, further decline is still in favor, just after lengthier consolidation.

USD/JPY

Daily Pivots: (S1) 113.79; (P) 114.94; (R1) 115.89; «www.actionforex.com»

USD/JPY’s intraday outlook is flipped to the downside after rise from 112.58 topped at 116.36 and break of 114.78 minor support. As discussed before, this suggest that price actions from 111.59 is probably developing sideway consolidation. Further fall could be seen towards 112.58 support or even a retest of 111.59 low. On the upside, above 116.36 will suggest rebound from 111.59 has resumed for 100% projection of 111.59 to 117.11 from 112.58 at 118.10 before completing such corrective rise.

In the bigger picture, as discussed before, daily MACD’s stay above signal line suggests that the whole decline from 124.12 could have already completed at 111.59. Hence, further break of this low is needed to confirm that sharp fall from 124.13 has resumed. Otherwise, USD/JPY could still develop into lengthier consolidation.

Also, prior break of long term rising trend line (101.65, 108.99) indicates the the whole up trend from 101.65 could also have completed at 124.13 already, with bearish divergence condition in weekly MACD and RSI.. Break of 111.59 will indicate fall from 124.13 has resumed for support zone between 108.99 and 61.8% retracement of 101.65 to 124.13 at 110.23.

EUR/JPY

Daily Pivots: (S1) 160.58; (P) 161.48; (R1) 162.28; «www.actionforex.com»

EUR/JPY turns sideway after reaching as high as 162.54. At this point, intraday bias remains on the upside as long as 160.50 minor support holds and further rally should be seen towards 165.39 cluster resistance (100% projection at 165.55). On the downside, below 160.50 will turn intraday outlook consolidative first. Further break of 158.76 support will indicate a short term top is possibly formed. But still, below 155.15 support is needed to confirm rebound from 149.27 has completed. Otherwise, another rise is still expected after pull back.

In the bigger picture, firstly the break of trend line support (137.16, 150.75) confirmed that rally from 130.60 has already completed at 168.93, with bearish divergence condition in weekly RSI. Hence, an important medium term top is in place at 168.93 already. However, secondly, since EUR/JPY is still supported within the rising channel shown in the monthly chart. the whole up trend from 88.9 could still be in force and price actions from 168.93 is probably just developing into consolidation to this long term up trend. Also, the three wave structure of the fall from 168.93 to 149.27 suggests that it’s probably developing into sideway consolidation instead of deeper correction.

So, further rise to retest 168.93 high cannot be ruled out. But firm break of 168.93 is needed to confirm long term up trend has resumed, otherwise, another fall could still be seen before completing the consolidation that started from 168.93. On the downside, a firm break of 149.27 low will have the long term channel support taken out too. This will add much favor to the case that up trend from 88.9 has indeed completed and bring much deeper decline.

Forex News Digest

«www.bloomberg.com»

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«c.moreover.com»
Fri, 21 Sep 2007 01:53:00 GMT from Yahoo! Canada

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Fri, 21 Sep 2007 01:45:00 GMT from Philippine Daily Inquirer

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Fri, 21 Sep 2007 01:43:00 GMT from CBC

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Fri, 21 Sep 2007 01:35:00 GMT from The Scotsman

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Fri, 21 Sep 2007 01:33:00 GMT from The Australian

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Fri, 21 Sep 2007 01:33:00 GMT from The Australian

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Fri, 21 Sep 2007 01:17:00 GMT from Bloomberg

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Fri, 21 Sep 2007 01:12:00 GMT from Bloomberg

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Fri, 21 Sep 2007 01:07:00 GMT from Bloomberg

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Fri, 21 Sep 2007 01:01:00 GMT from Reuters

«www.actionforex.com» Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Japan All industry index Jul -0.4% -0.40% 0.20%
8:00 EUR Eurozone Current account (euro) Jul N/A 11.4 B
8:00 EUR Eurozone PMI manufacturing Sep 53.9 54.3
8:00 EUR Eurozone PMI service Sep 57.5 58
12:30 CAD Canada Retail sales M/M Jul 0.00% -0.90%
12:30 CAD ex. Autos Jul 0.30% -0.30%

«www.actionforex.com»

Last week witnessed a sudden unwinding in the yen carry trade, as a global market downturn affected investor sentiment towards risk.Volatility is the only market force that could seriously contend at collapsing the carry trade, and last week produced significant volatility.All of the worlds majors fell against the Yen, namely the New Zealand Kiwi, which fell by 7.5%.The kiwi, you may recall, has been one of the main currencies on the other end of the carry trade, due to its high interest rates.However, analysts are reluctant to proclaim an outright end to the popular carry trade, preferring to wait and see how volatile the worlds capital markets appear in the coming weeks.The Financial Times reports:

The wave of risk reduction also prompted investors to take profits in the Australian and New Zealand dollars, which have surged this year from central bank credit tightening or expectations of more tightening to come.

Read More: «www.ft.com»

Venezuela’s president, Hugo Ch?vez, has signed a string of agreements in Cuba with the country’s temporary leader, Raul Castro, reaffirming the countries’ burgeoning anti-US alliance.

The pair agreed on a series of trade-related deals in Havana yesterday, in areas ranging from oil production to tourism.

Venezuela and Cuba “can form a confederation of republics, two republics in one, two countries in one”, Mr Ch?vez said.

At the weekend, the Venezuelan president met Fidel Castro, the 81-year-old Cuban leader whose long convalescence from serious illness has seen him temporarily replaced by his 76-year-old brother, Raul, since last year.

The Cuban leader has not been seen in public since reportedly undergoing surgery for an unknown complaint.

In a videotape of the Saturday meeting, the elder Mr Castro looked somewhat frail but was alert and in good spirits.

He also joined Mr Ch?vez by telephone on Sunday as the Venezuelan leader hosted his weekly live television and radio show, Alo, Presidente!, from the central Cuban city of Santa Clara.

The pair discussed the legacy of the Cuban revolutionary figure Che Guevara. Mr Ch?vez is in the country to mark the 40th anniversary of Guevara’s killing.

The new trade deal is part of Mr Ch?vez’s push for a so-called Bolivarian trading zone, also comprising Bolivia and Nicaragua, and intended as an alternative to US free trade pacts.

Yesterday, the US state department spokesman, Tom Casey, said he was “delighted that Fidel Castro has had an opportunity to discuss things with his good friend President Ch?vez”, adding: “It’s too bad that in almost half a century of misrule in Cuba, he’s never had the same conversation with his own people.”

BUDAPEST (Thomson Financial) - Lower-than-expected February wage growth in Hungary was largely due to contained wages in industry and will be a positive sign for Hungary’s national bank before its rate setting meeting on Monday, analysts said.

The gross average Hungarian wage was up 5.7 pct year-on-year in February compared to a rise of 7.1 pct in January, Hungary’s statistical office said this morning.

The figure is significantly lower than the market expectation of 8 pct, with analyst forecasts in the range of 6.5-9.5 pct.

However, private sector wage growth remains elevated at 8.0 pct gross compared to 10.4 pct the month before.

“The data should be a big relief for the Monetary Policy Council (MPC),” said Gyorgy Kovacs, an economist at DZ Bank, who attributed the better-than expected-figures to low wage growth in the key industrial sector.

“The MPC could consider a rate cut this month or next month … But the data is still noisy — going up and down — and it does not mean that they will not wait another month [until June],” he continued.

The base rate is currently at 8 pct, which analysts expect to drop to 7 pct by the end of the year.

edward.krudy@thomson.com

ek1/amb

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