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Technical Research

Comprehensive FX and Futures Daily Research

Thu, Jun 25 2009, 15:27 GMT
by FastBrokers Research Team

FastBrokersFX

EUR/USD Retreats on Considerable Volume


The EUR/USD is continuing its streak of unpredictable behavior. A day after the EUR/USD got back above 1.40 on increasing volume, the currency pair retreats on even larger volume the next session. We believe this pattern is a result of heightened investor anxiety, indicating the Dollar is at a critical point trend-wise. While the Dollar still has a tendency to depreciate due to negative psychological momentum in the market, the bulls aren’t ready to sacrifice the medium-term uptrend so easily, hence Tuesday’s considerable volume to the upside. We don’t expect volatility to cool today since the U.S. just released final GDP and weekly unemployment claims. Though final GDP came in two basis points above analyst expectations, unemployment claims posted a surprising increase today.

In addition to the negative unemployment claims number for America, the EU released a disappointing industrial new orders figure. The industrial orders number supports a fear that the data we saw improving over the past few months may retreat as national stimulus measures are blunted by a harsh global economic reality. Therefore, we’ll have to keep a close eye on upcoming economic data releases to see if they support this viewpoint.

U.S. equities are reacting negatively pre-market to the jobs data, meaning the EUR/USD could add onto today’s losses. The S&P futures continue to hover around 900, reflecting the indecisiveness of the greenback across the board. Even though present losses in the EUR/USD are discouraging, the currency pair remains above our 2nd tier uptrend line. The GBP/USD has been swinging between a trading range as well, indicating the Dollar is experiencing a battle between trends. Therefore, outlook is a bit tricky until investors commit to a trend. We will take a wait and see approach until the market makes a more concrete directional decision.


Present Price: 1.3909
Resistances: 1.3928, 1.3978, 1.4024, 1.4052, 1.4097
Supports: 1.3894, 1.3863, 1.3825, 1.3803, 1.3757
Psychological: 1.40, 1.35








GBP/USD Reverses Towards Tuesday Lows


The Cable failed to tackle June highs and proceeded to reverse course on comparable volume to the downside. We notice a similar price/volume pattern in the EUR/USD, indicating investors are very indecisive right now. Investors aren’t sure whether to fully commit to an economic recovery, so the bulls and bears are engaging in a head-on battle. The Cable has ducked back down towards June 23rd lows. Investors are defending this level for the 6th time this month, developing a consistent trading range in the process. Bulls have come to the rescue time and again in June since Britain’s economic data has been more optimistic than that of the U.S. and EU. Indecisiveness and yo-yoing is prevalent across the marketplace. Therefore, the Cable is not alone in its behavior.

Meanwhile, the GBP/USD is building up a nice base to build from should the uptrend kick back in. Speaking of trends, our 3rd tier uptrend and downtrend lines are reaching an inflection point today, supporting our prediction of heightened volatility. Investors should keep an eye on the S&P futures and their ability to hold the 870-890 area to the downside. Should U.S. equities make a game-changing break to the south, the GBP/USD and EUR/USD would likely be inclined to follow suit due to positive correlations. Due to the mixed behavior exhibited by the Dollar as of late, we are in a neutral stance as we wait for investors to make a directional decision. Regardless, the GBP/USD should maintain an overall relative strength as long as British economic data impresses analysts. Even if the Cable should drop beneath June 23rd low, the currency pair has several medium-term uptrend lines and the psychological 1.60 level for support. As for the upside, we will need to see the GBP/USD clear our trend lines and previous June lows on considerable volume for us to reactive our bullish outlook.

Present Price: 1.6275
Resistances: 1.6315, 1.6371, 1.6412, 1.6472, 1.6538
Supports: 1.6263, 1.6210, 1.6148, 1.6104, 1.6006
Psychological: 1.65, 1.60








USD/JPY Hovers between Trends


The USD/JPY made a positive recovery from Tuesday lows, though the small pop was backed by declining volume. Hence, there remains an increasing interest to the downside in the currency pair. The USD/JPY has climbed back above our important 2nd tier uptrend line, and is currently being squeezed between our 2nd tier downtrend line as the trend lines reach an inflection point. Volatility didn’t rise in the USD/JPY as we anticipated. Instead, the currency pair is opting to continue its gradual crawl towards the middle. If this process continues, then we’d expect to see another slight pop towards our 3rd tier uptrend line. The consistent balancing act exhibited by the USD/JPY reflects the investor indecisiveness prevalent in the market as a whole. Therefore, as far as the USD/JPY is concerned, its next major trend-decision seems to rest on the shoulders on U.S. equities. Are we witnessing a true economic recovery, or a head-fake created by global stimulus packages? The USD/JPY is telling us that we will have to wait and see.

Present Price: 95.12
Resistances: 96.33, 96.90, 97.45, 98.05, 98.74
Supports: 95.68, 94.99, 94.45, 93.76, 93.32
Psychological: 95, 100








Crude Looks to Retest $70/bbl as Inventories Decline


Crude oil inventories came in shallow yesterday for the 6th time in 7 weeks, giving a boost to the futures despite the mixed performances of equities and the greenback. Crude continues to log larger volume on the 1-hour up-bars, and the upside is gaining momentum as the futures look to retest $70/bbl. It seems the reduction in production by OPEC is more than compensating for the perceived decline in consumption due to mixed economic data reports from the U.S. and EU. As a result, crude is building up quite a bit up upward mobility, particularly if U.S. equities turn around and the Dollar depreciates.

The tests beyond the psychological $70/bbl will be our downtrend line and 2nd tier uptrend line. If Crude can climb beyond these obstacles on considerable volume, the commodity’s uptrend could come back alive. However, the directional performance of crude should ultimately depend on the fate of equities and the Dollar. Crude may have to give into the bears if the S&P buckles under the pressure of present negative market psychology and the EUR/USD and GBP/USD follow suit. Negative performance in equities implies lower expectations of corporate performance, higher unemployment, and consequently a lower rate of consumption of crude. Speaking of unemployment, weekly unemployment claims showed a surprise rise, making crude’s current positive performance all the more impressive.

Overall, investors should watch the techincals and fundamentals of the S&P futures, GBP/USD, and EUR/USD. All three indicate a heated battle between the bulls and the bears. Crude should exhibit a positive correlation with these other investment vehicles once investors do make a directional decision. We anticipate volatility to remain elevated for the near-term as investors make up their minds.


Present Price: $69.40/bbl
Resistances: $69.83/bbl, $70.37/bbl, $71.07/bbl, $71.78/bbl, $72.54/bbl
Supports: $69.16/bbl, $68.70/bbl, $68.09/bbl, $67.68/bbl, $67.03/bbl
Psychological: $65/bbl, $70/bbl, $75/bbl







S&P Futures Battle 900 as Investors Remain Indecisive


The battle between the bulls and the bears continues in the S&P, and 900 is proving to be as psychological as we imagined. Investors are uncertain whether to bank on the continuation of the present economic recovery or do further technical damage to the S&P futures. The U.S. unemployment problem persists as weekly unemployment claims came in higher than analyst expectations. Our concept of a possible head-fake in economic data may be materializing as we’ve seen several figures in both the U.S. and EU revert towards negative territory. The mixed behavior of economic data makes investors uneasy while investment gurus such as Warren Buffet and Jim Rogers maintain their cautious outlook concerning the state of the U.S. economy. Despite the negativity creeping back into the marketplace, bulls aren’t will to give up on all of the progress made thus far this year. As we explained previously, the S&P built up a solid foundation between 880-900 and it will take a large shift in momentum to break through this consolidation zone. Meanwhile, the S&P futures are being squeezed between our 1st and 2nd tier near-term downtrend lines. We have yet to see a decisive move in either direction. Until we do, we will maintain a neutral stance on the S&P futures.

Consolidation wise, the erratic consolidation of the GBP/USD and EUR/USD reflect the indecisiveness present in the S&P. However, we notice that the 30 Year T-Bond futures continue to strengthen. Normally, this would be a negative indicator for the S&P since the two are negatively correlated. On the other hand, investors have been concerned about the impact of higher yields on the economic recovery as a whole. Hence, the S&P futures may actually find comfort in declining Treasury yields for the time being. As for crude, the futures are rallying on yesterday’s report showing yet another decline in inventory. Hence, it is unreliable right now to evaluate the S&P based on the performance of crude since the drop in inventory is likely a result of lower OPEC production. Overall, the correlations show that the S&P futures are at an intersection.


Present Price: 902.25
Resistances: 909.5, 917.75, 923, 932, 941.5
Supports: 899.25, 895.25, 888.75, 881, 873







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Published on  Thu, Jun 25 2009, 15:31 GMT