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Technical Research

Comprehensive FX and Futures Daily Research

Mon, Jun 29 2009, 15:35 GMT
by FastBrokers Research Team

FastBrokersFX

EUR/USD Bounces Back Above 1.40


The EUR/USD’s upswing on Friday fell short of 6/24 highs as we anticipated since volume wasn’t strong enough to create a more significant movement to the upside. The currency pair is propelling from our 2nd tier uptrend line on Monday after the EU reported a better than expected consumer sentiment and economic confidence numbers. However, despite the improvement, the -31 consumer sentiment number is still a far cry from 2005 lows of -15. Additionally, the economic confidence number is quite a ways from 2007 highs. Therefore, we don’t believe the sentiment data should have too large of an impact on the Euro today.

Meanwhile, the EUR/USD is recovering above the psychological 1.40 level, an encouraging technical development. June 24 highs remain the main barrier in regards to a near-term pop, but our 3rd tier downtrend line is approaching. Therefore, any near-term breakout may not have too much room to run. Despite recent improvement in the EUR/USD since 6/15 lows, the currency pair is still stuck under the lid of its trading range and our 3rd tier downtrend line. Investors remain skeptical in regards to the sustainability of a global economic recovery after central banks issued wary forecasts. Furthermore, investors are taking note of the $615 billion window of liquidity the ECB is providing for EU banks at a 1% interest rate. Encouragingly, the EUR/USD has reliable supports to the downside, beginning with 1.40 and our uptrend lines. Hence, it seems the EUR/USD will be mired in its present trading range until there is a technical breakout in either direction backed by substantial news and volume. However, it only seems like a matter of time, something’s gotta give.

The EUR/USD’s jolt from relative tranquility may come later this week with key unemployment, housing, and manufacturing data coming from both the U.S. and Britain followed by the ECB’s monetary policy decision on Thursday. The ECB is expected to keep its minimum bid rate unchanged at 1%, yet investors will be interested in how the central bank addresses its present alternative liquidity measures. As for the immediate-term we don’t anticipate any trend-setting movements from the EUR/USD until the data and central bank meetings roll around.


Present Price: 1.4071
Resistances: 1.4097, 1.4141, 1.4167, 1.4191, 1.4229
Supports: 1.4061, 1.4024, 1.3978, 1.3928, 1.3894
Psychological: 1.45, 1.40







GBP/USD Knocks on the Door of our 3rd Tier Trend Lines


The GBP/USD is knocking on the door of our 3rd tier downtrend line once again as it reaches an inflection point with our 3rd tier downtrend line. While the Cable is in the position to make a technical breakout today, the behavior of the GBP/USD’s correlations aren’t supportive of such a movement. Therefore, we wouldn’t be surprised to see the currency pair duck back towards our 2nd tier uptrend line as investors await Britain’s release of its nationwide home price index and current account data points tomorrow. Regardless, the GBP/USD is in the midst of several inflection points with key economic data and central bank announcements pouring in later this week. Hence, the ingredients are on the table for both the Cable and EUR/USD to break from their trading ranges. While the Cable is gaining some upward momentum and seems more poised to break up than down, the table can quickly turn as we’ve seen in the past. Since the Dollar has been moving under more of a psychological than fundamental influence over the past couple weeks, we believe incoming data and earnings reports could be the force the GBP/USD needs to dislodge from its tight range.

Volatility has increased slightly over the past few sessions with volume declining. The declining volume certainly isn’t helpful for a currency pair trying to make technical gains, which further supports our anticipation of an immediate-term retracement towards our 2nd tier uptrend line. We’ve yet to see the S&P make a concrete near-term directional decision with crude floating around $70/bbl. While we believe a breakout to the upside is more likely than a large pullback in the Cable, anything is possible in this market.

Present Price: 1.6537
Resistances: 1.6538, 1.6580, 1.66627, 1.6702, 1.6768
Supports: 1.6472, 1.6412, 1.6371, 1.6315, 1.6241
Psychological: 1.65, 1.60







USD/JPY Continues to Drift Sideways


The USD/JPY continues to tease investors as it fails to follow through on its threats of a large pullback. We’ve seen rising volume to the upside followed by climbing volume to the downside, hence the relatively tight trading range. Despite being in the position drop towards our 1st tier uptrend line, the USD/JPY continually experiences support at just the right moment. Therefore, the USD/JPY seems to exemplify the investor indecisiveness present across the marketplace as a whole. The USD/JPY may wait for the market to make its broad-based direction decision before the currency pair makes a game-changing movement of its own. The data and news coming this week has the potential to jolt the FX markets since investors will receive heavily-weighted data from across the globe. Japan will get the ball rolling with average cash earnings late Monday followed by the Tankan number on Tuesday. Investors are expecting an improvement to -43 in the Tankan since last week’s BSI manufacturing index and Japan’s trade balance were slightly better than expected.

Despite its relative stability over the past couple months, the USD/JPY remains in a vulnerable position. The probability of a retracement to our 1st tier uptrend line becomes more probable by the day as the trend line creeps towards price. Any technical failure of our 1st tier uptrend line could imply the beginning of a new leg down in the USD/JPY, which would inflict considerable damage upon Japan’s already fragile economy. Furthermore, there are several strong downtrend lines and the highly psychological 100 level the currency pair must brave through, no easy feat. Regardless, the USD/JPY’s supports are in place and it is difficult to pass judgment on the currency pair until it sends a clear directional message.

Present Price: 95.38
Resistances: 95.73, 96.33, 96.90, 97.45, 98.05
Supports: 94.99, 94.45, 93.76, 93.32, 92.46
Psychological: 90, 95, 100






Crude Rises after More Nigerian Militant Attacks


Crude futures are ignoring the negative report from the IEA regarding demand after Nigerian militants attacked and forced the closure of Shell production wells. Militant attacks are on the rise again in Nigeria, and are countering any negative news investors receive regarding demand. However, the militant attacks are a near-term shock, whereas the IEA’s report describes a long-term slowdown in demand. The IEA released a report lowering their growth expectations regarding consumption of oil over the next 5 years, and the agency doesn’t expect crude demand to return to 2008 levels until 2012. However, regardless of the consumption slowdown resulting from the global economic contraction, U.S. weekly crude inventories have come in shallow six out of the last seven weeks. Therefore, cuts in production from OPEC are having their desired effect on price. Crude is back above the psychological $70/bbl Monday and is presently battling our 2nd tier downtrend line.

Despite the resilience of crude, the commodity’s medium-term fate ultimately relies upon the performance of U.S. equities and the greenback. Should U.S. equities make another leg down and the greenback appreciate in succession, crude could find itself following suit due to positive correlations. Meanwhile, the S&P futures and major Dollar pairs find themselves at a critical juncture directionally. Investors are waiting for more concrete data before making a commitment. Momentum is in favor of the upside since investment vehicles have shown encouraging resilience to the downside lately. However, the tide can change quickly, so we will need to see how the data turns out this week before feeling comfortable with position trend-wise. That being said, investors shouldn’t get too carried away with crude’s pop today. We still see two downtrend lines bearing down on price, and the militant attacks should only result in a temporary shock. The kicker will be the economic data beginning Tuesday with America’s consumer confidence and PMI numbers along with Japan’s Tankan manufacturing index.


Present Price: $71.13/bbl
Resistances: $71.07/bbl, $71.57/bbl, $71.86/bbl, $72.25/bbl, $72.86/bbl
Supports: $70.57/bbl, $70.05/bbl, $69.59/bbl, $68.92/bbl, $68.42/bbl
Psychological: $70/bbl






S&P Post Solid Gains Out of the Gate


The S&P futures are performing nicely Monday morning as they attempt to create separation between price and our near-term downtrend lines. The S&P futures could have a little upward mobility today should they clear our 1st tier resistance. The next pit-stop would likely be near our 3rd tier uptrend line and our 935.5 resistance. We are uncertain where the S&P is getting its positive momentum from today other than China’s sudden reaffirmation that it plans no immediate, large-scale exit from the Dollar. This rhetoric is a complete reversal from last week’s call for a new global monetary standard. Sifting through the confusion, it seems China is saying it’s sticking with the Dollar for the near-term, yet is planning to diversify its longer-term reserve composition.

Regardless, China’s newest statement is having a stabilizing effect on U.S. Treasuries, which is comforting to inventors. Speaking of Treasuries, the 30 Year T-Bond futures have posted encouraging gains over the past 10 days in reaction to substantial demand at recent auctions. As a result, yields have declined to more respectable levels, temporarily easing investor concerns surrounding the impact of rising rates on a fragile U.S. economy. Therefore, rising/stable Treasury prices are having a positive impact on equities, a 360 from the pre-crisis days.

Putting this week’s positive start aside, the real game changer will be the flood of economic data beginning with tomorrow’s consumer confidence and Chicago PMI data points along with Japan’s Tankan manufacturing index. Investors are still attempting to gauge where the economic recovery stands while trying to set a bar for future corporate performance. Although current moment lies in the bulls’ corner, there’s a new downward force holding down price. Hence, the markets may continue their relative sideways movements until investors get more concrete economic data and corporate earnings. With important economic data on the way, the ingredients are on the table for investors to finally make a new directional commitment. We recognize the same indecisiveness in the GBP/USD, EUR/USD, USD/JPY, gold and crude. Therefore, we will monitor the performance of the S&P’s correlations for any directional indication.


Present Price: 922.25
Resistances: 923, 931, 935.5, 941.5, 947
Supports: 918.75, 910.75, 902, 895.25, 888.75
Psychological: 900


Gold Consolidates as Investors Await Global Data

Gold is following the consolidation of the Dollar and U.S. equities while ignoring the pop in crude. The precious metal seems range bound for the immediate-term as investors await the heavily-weighted economic data coming later in the week. Gold has logged larger volume on its down-bars than up-bars on the 1-hour during its upswing beginning dating 6/23, while volume on the 4-hour has been rather tame. Therefore, the present upturn of gold has been limited to a sub-$950/oz reality. As a result, the near-term momentum is tilted in favor of the bears as the GBP/USD and EUR/USD fight near-term downtrends of their own. The overall behavior of gold reflects that of the market as a whole with investors uncertain whether to bank on a global economic recovery or a new leg down. We expect volatility to pick-up beginning late Tuesday/Wednesday with key unemployment, housing, and manufacturing data pouring in from around the globe along. Additionally, the ECB will make a monetary policy decision on Thursday. Hence, while gold may be subdued for the immediate-term, investors shouldn’t get too complacent. The near-term key for gold to the downside will be holding 6/15 and 6/16 lows. Important near-term barriers to the upside are our 1st and 2nd tier downtrend lines along with 6/26 highs.

Present Price: $935.60/oz
Resistances: $936.01/oz, $939.02/oz, $941.85/oz, $943.88/oz, $945.75/oz
Supports: $932.48/oz, $929.77/oz, $927.98/oz, $$925.24/oz, $923.59/oz
Psychological: $900/oz, $950/oz







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Published on  Mon, Jun 29 2009, 15:48 GMT