S&P 500 futures taking out the 1030 resistance level today

Fri, Sep 11 2009, 05:47 GMT
by Per-Erik Karlsson

Market comment

S&P 500 futures taking out the 1030 resistance level today, which opens for a rally towards the yearly high at 1038.75. Euro breaking above the 1.4450 key resistance yesterday and has potential to rally towards the December 2008 high at 1.4719. Gold backed off the highs yesterday and traded back below 1000 USD today. We see a potential risk for a correction lower off the current levels as the move above 1000 USD looks like it was sold into. We are not looking to go short gold, but just paying attention to that it looks like a potential failure at 1007 key resistance. Our risk appetite parameter EURJPY is trading above the 134 level, but looks relatively weak compared to S&P 500. JPY has not sold off on the recent S&P strength and the correlation between S&P 500 and EURJPY looks to be fading. We think there is potential for a move towards the 139 key resistance level in the coming month as we still expect JPY to face selling soon. We don’t think the change of ruling party in Japan will bring any kind of positive support for JPY and expect the huge public debt to also bring problems for the JPY down the road. Japan’s public debt is at 170% of the GDP (highest among the industrialized world). Another problem is the aging population, which does not bode well for growth going forward either. We still favor weaker USD and JPY towards year end and we continue to like AUD, CAD and NOK. Nat Gas trading close to 3 USD in the October futures contract today and indeed the reversal it made last Friday fueled the rally. Nat Gas will most likely facing selling towards 3 USD as many weak longs will look to cover some of their positions on the recent rally to avoid being hit by another drop back towards 2.50 USD as the demand situation is still somewhat weak. We also keep an eye on Crude oil as it should rally if USD sells off further. Crude broke above the key 70 USD per barrel resistance yesterday, which opens for a test of key resistance at 75 USD per barrel.

Some interesting news stories:

Technical’s

Euro: Broke out and trading into new yearly highs today, next key resistance is 1.4719. Needs to hold above 1.4450 break out level to sustain the move higher.

Cable: Technically still long term bullish potential above 1.60. Resistance at 1.6623 and 1.67 today.
While EURGBP is above 0.87, it is likely GBP will struggle to stage any type of strong rally above 1.67 unless Euro totally takes off above 1.45, so should underperform Euro.

USDJPY: Breaking key 92 support today and looking to test the yearly low at 87.13 technically now. We still think JPY will struggle over the next few months and think we could easily see a short squeeze on any news release basically.

Swissy: Broke key 1.0530 support yesterday and looking now to test the December 2008 low at 1.0369.

AUDUSD: Broke above the key resistance at 0.8550 Monday, which opens for a test of 0.8814. Key support is now at 0.8241 today. Watch out for the AUS Employment change figure coming out in Thursday’s Asian session.

USDCAD: The falling trend line going back to 9th of March, coming in at 1.1110 held last week and strong Canadian payrolls have since support CAD. Looks like it will test 1.0633 (August low) near term.

EURJPY: Strong support down at the 132 to 133 support zone. Looks bullish as long as S&P 500 stays above 970 and key support in the EURJPY at 132. Looking for 139 later this year.

GBPJPY: GBP struggling vs. Euro this morning and still expect GBP to underperform Euro for the rest of the year. Especially as long as EURGBP trades above 0.87. However GBPJPY should still be dominantly driven by risk appetite in FX, so we favor higher levels over the next weeks. Support down at 149 (last week’s low).

AUDJPY: Key pivot point is 76.65 and basically medium term bullish outlook intact above this level.

Our outlook

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