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Technical Research

Comprehensive FX and Futures Daily Research

Thu, Mar 12 2009, 14:13 GMT
by FastBrokers Research Team

FastBrokersFX

EUR/USD

The rally in the EUR/USD stalled at our previous top-end resistance of 1.2868, and is proving indecisive in reaction to more negative data from Germany. The economic data released from Germany this week is jaw-dropping. Today Germany reported a 7.5% decline in Industrial Production, eclipsing analyst expectations of a 3.3% decline. We can’t forget Germany’s terrible Factory Orders report in addition to PPI showing deflation. In other words, Germany’s economic environment has taken a sudden turn for the worst, and the ECB is likely taking notice. The question becomes whether the ECB lowers rates from 2.5% or implements quantitative easing. Either choice is very negative for the EUR/USD, giving us all the reason to be bearish on the currency pair trend-wise. Bottom line, the ECB will need to take action, and fast. The EUR/USD still faces February highs and our 2nd tier downtrend line, not to mention the psychological 1.30 zone licks its chops in the distance. Fundamentally, we find support of 1.2770 with additional supports resting at 1.2730, 1.2706, and 1.2680. To the topside, see resistance at 1.2797 with additional resistances hanging at 1.2828, 1.2868, and 1.2916. The EUR/USD is currently exchanging at 1.2787.



GBP/USD

The Cable tried to rally from our previous bottom-end support of 1.3683 yesterday, yet failed to close above March 10 lows on the 4 hour. The GBP/USD is heading south Thursday in reaction to alarming industrial production data from Germany and China coupled with a disappointing unemployment claims number from the U.S. The global economy is still weakening and the optimism from Citi is hardly reflected anywhere else in the market. Britain is already in a tight spot economically having to nationalize Lloyd’s Bank and rely upon quantitative. Hence, the weak economic data is testing the patience of a fundamentally weakened GBP/USD. The Cable appears headed towards 2009 lows again. If U.S. equities can’t follow through on their stabilization process, then the 2009 lows could become a distant memory. In fact, if the lows don’t hold, then we could see an incredible selloff in the near-term. However, before we get ahead of ourselves, the Cable still has March lows to count on. We maintain our negative outlook on the GBP/USD for the reasons mentioned above. Fundamentally, we find resistances of 1.3726, 1.3777, 1.3805, and 1.3844. To the downside, we see supports of 1.3683, 1.3626, 1.3590 and 1.3565. The 1.40 level serves as a psychological barrier to the upside with 1.35 playing as a cushion to the downside. The GBP/USD is currently exchanging at 1.3710.



USD/JPY

The USD/JPY is recovering from earlier losses, rallying from our 1st tier downtrend line. Though Japan’s Final GDP showed a decline of 3.2%, the number was still better than analyst expectations of a 3.5% decline. The correlation between the S&P futures and the USD/JPY is all over the place these days as investors contemplate whether to rally the currency pair to the psychological 100 level. If investors continue to favor the U.S. economy over Japan’s and U.S. equities piece together another rally, we could see new March highs. However, the downtrend is still in control of the USD/JPY. Our 3rd tier downtrend line looms in the distance and there is little motive to send the USD/JPY over 100 right now. Hence, we could continue to see the currency pair consolidate as investors make up their mind over whether to commit to a U.S. recovery. Fundamentally, we maintain our 98.25 resistance while we hold our additional resistances of 99.05, 99.96, and 100.69. To the downside, we maintain our supports of 97.66, 97.22, 96.59 and 95.92. The USD/JPY is currently exchanging at 97.98.



Crude Oil

Crude futures sold off sharply on Wednesday in reaction to higher than expected weekly inventories. Yesterday’s report broke the three week streak of inventories coming in lower than analyst expectations. OPEC will certainly take the rising inventories into consideration when the oil producing countries meet on March 15th. Further hampering the price of crude is news that production is declining at a rapid pace in manufacturing powerhouses such as Germany, Japan, and China. Declining production results in lower consumption of Crude, placing downward pressure on demand, and consequently price. Crude futures sank below both of our uptrend lines before stabilizing just above our previous bottom-end of $42.43/bbl. It seems Crude futures will recover Thursday, possibly hopping back above our uptrend lines. Wednesday’s selloff may have been an overreaction. If OPEC cuts output by a great amount to exercise its force, we could see a large surge to the upside. Fundamentally, we find supports of $43.04/bbl, $42.51/bbl, $41.93/bbl, and $41.33/bbl. The $45/bbl area serves as a psychological barrier with $40/bbl acting as a cushion. To the topside, we see resistances of $44.03/bbl, $44.67/bbl, $45.27/bbl, and $45.81/bbl. Crude futures are currently trading at $43.34/bbl.



Gold

Gold has rallied strongly over the last 24 hours, finding confidence from the psychological $900/oz level and our 1st tier uptrend line. The precious metal has climbed above our 2nd tier uptrend line, and is heading towards what we view as a formidable foe to the upside from $920/oz-$927/oz. We slapped on a near-term downtrend line exemplifying the prevalence of the moment. If Gold should rise through the upcoming congestion, then we could witness excited gains in the precious metal. Of course, the direction of U.S. equities will have much to do with the direction of Gold. Should the key U.S. economic data released today disappoint, then we could see the S&P tumble and Gold fly sky high. Then again, if equities stabilize, Gold could weaken and duck back into its downtrend. Fundamentally, we find resistances of $919.01/oz, $922.92/oz, $928.57/oz, and $932.04/oz. To the downside, we see supports of $913.80/oz, $909.89/oz., $905.55/oz., and $901.64/oz. Gold is currently trading at $915.70/oz.



S&P

The S&P futures failed to follow through on Tuesday’s rally, seesawing to end the session with slight gains. Investor excitement from Tuesday was tempered by disconcerting economic news from Japan, China, and Germany. Production is grinding to a halt globally, showing the economic crisis continues despite the positive news from Citi. Meanwhile, foreclosures continue to pile up while unemployment rises. Today’s Unemployment Claims release came in at 654,000, topping analyst expectations of 642,000. Furthermore, the previous release was revised upwards to 645,000. On a positive note, retail sales beat analyst expectations today. However, we should consider how much of the stabilization in retail sales has to do with discounted prices due to declining demand. Ultimately, unemployment trumps retail sales, which could result in profit taking this afternoon. The data surfacing from Germany this week is alarming. The ECB may need to act quickly or the economic condition in the EU could freefall. It’s truly difficult to find many silver linings around the globe. Japan’s GDP showed a decline of 3.2% and industrial production in China is echoing the slowdown. However, despite all of the negativity, the S&P still made a strong statement on Tuesday which can’t be ignored. The only question becomes whether Tuesday was a dead cat bounce or the beginning of something more substantial. Since Tuesday’s surge was based on positive news from one bank and little else, we are settling on a dead cat bounce until the S&P futures can prove otherwise. The futures still face our 2nd and 3rd tier downtrend lines, not to mention the psychological 800 barrier is a lot further away than the psychological 700 cushion. Correlation wise, crude futures have posted large losses this week and the 30 Year future logged solid gains yesterday despite an up-day in equities. Additionally, Gold is recovering, showing us the precious metal can continue its uptrend. Hence, the equity correlations still aren’t buying a recovery in the S&P. Fundamentally, we maintain our resistance of 722.75 with additional resistances hanging at 732.75, 740, and 750. The 700 level becomes a key psychological cushion in the near-term. To the downside, we hold our support of 710.25 with additional supports sitting at 703.25, 693.25, and 685.75. The S&P futures are currently trading at 722.00.

30 Year

The 30 Year T-Bond futures certainly recovered yesterday, putting on an impressive show. The 30 Year futures shot back above our uptrend line, logging huge gains despite slight gains in the S&P. However, the 30 Year futures are turning back from our 2nd tier downtrend line on Thursday. Therefore, the futures may bobble between our uptrend and 2nd tier downtrend lines until the S&P futures make up their mind. Investors are uncertain whether to commit to the rally taking place on Wall Street. If equities should head south we could see the 30 Year futures pop above the 2nd tier downtrend line and test March highs. However, the downtrend is certainly proving to be a formidable foe and the battle to the upside has its challenges. Fundamentally, we see resistance of 127.91 with 2nd tier and top-end hanging at 128.562 and 129.172, respectively. To the downside, we find supports of 127.422, 127.016, 126.641, and 126.078. The 30 Year Treasury Bond futures are currently trading at 127 14.5.

Published on  Thu, Mar 12 2009, 14:20 GMT