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Technical Research

Comprehensive FX and Futures Daily Research

Tue, Jun 30 2009, 15:10 GMT
by FastBrokers Research Team

FastBrokersFX

Daily Market Commentary


EUR/USD Climbs after Better than Expected Unemployment Change


The EUR/USD is knocking on the door of our 3rd tier uptrend line after Germany’s unemployment change came in lower than analyst expectations. Despite today’s pop in the currency pair, the movement comes on declining volume, giving us little reason to believe the EUR/USD can push through our 3rd tier uptrend and downtrend lines today. Additionally, our optimism is muted by the lower than anticipated M3 money supply along with the EU’s CPI turning negative. Both of these figures indicate that the ECB should be more concerned about deflation rather than inflation, dashing any hope the central bank will tighten its monetary policy in the near-future. Therefore, the ECB’s benchmark rate could remain at 1% for quite some time, while we wouldn’t be surprised to see further injections of alternative liquidity to bolster consumer and producer prices. With today’s EU data out of the way, investors will turn their attention to home prices, PMI, and consumer confidence data coming from the U.S. If America’s economic data raises a cautionary flag as well, the rally in the EUR/USD will likely stall.

The key barriers to the upside for the EUR/USD remain our 3rd tier uptrend and downtrend lines along with June 11 highs. We’ve yet to see large volume to the upside, showing investors aren’t motivated to send the EUR/USD through important technical barriers. As for the downside, we recognize two worthy uptrend lines along with the psychological 1.40 level serving as defenses. Therefore, it would take quite a dramatic drop on considerable volume to dislodge these supports. Meanwhile, the EUR/USD remains wedged within the confines of our 3rd tier downtrend and 1st tier uptrend lines. If the rest of this week’s economic data comes in mixed, we may see the currency pair float within this trading zone until these trend lines reach their inflection point.

Investors should fasten their seatbelts because the newswires are just getting warmed up. Tomorrow we’ll receive important housing, manufacturing and employment data from the U.S. and Britain. On Thursday the ECB will outline its newest stance on monetary policy while America releases more important unemployment data. Due to all of the news we expect volatility to pick up as the week progresses, meaning the EUR/USD’s trading range may be broken sooner than we anticipate.


Present Price: 1.4133
Resistances: 1.4141, 1.4167, 1.4191, 1.4229, 1.4246
Supports: 1.4097, 1.4061, 1.4024, 1.3978, 1.3928
Psychological: 1.45, 1.40







GBP/USD Pops & Drops on Mixed Data


It’s been a volatile session thus far for the Cable and it seems the currency pair is in for a high volume day. The GBP/USD started the session fresh by climbing from our 3rd tier uptrend line, eclipsing previous June highs after much better than expected home price data. However, the party was busted by much lower than anticipated current account and final GDP numbers. It seems a troubled global economy coupled with an appreciating Pound spells bad news for British exports, exemplified by a discouraging current account deficit. The final GDP data is the more discouraging of the two since it is at its lowest level in 50 years. The continual drag on the financial services industry doesn’t bode well for Britain’s domestic production. The mixed data from Britain is a change of pace from the past couple months of improving figures. Therefore, the GBP/USD may find its near-term movements to the upside a bit constrained.

Naturally, investors reacted negatively to the current account and GDP news. Volume increased to the downside and Cable has reversed back below previous June highs and our 3rd tier uptrend line. However, regardless of current hesitation, the currency pair has multiple forms of support to the downside beginning with the psychological 1.65 level and our 2nd tier uptrend line. Near-term momentum remains to the upside, and the Cable will have to experience a large, technical contraction to counteract the progress it has made this month.

The news only picks up pace from here. The U.S. will release consumer confidence and Chicago PMI data today followed by Japan’s TMI tonight. Britain will reveal further housing price data tomorrow along with its manufacturing PMI number. Additionally, the U.S. will release manufacturing, housing, and employment data of its own. Hence, we expect volatility to escalate. If the data rolls in better than analyst expectations, the Cable could get the boost it needs to launch a new leg up. On the other hand, more mixed numbers would likely send the GBP/USD towards the bottom end of its trading range.

Present Price: 1.6545
Resistances: 1.6580, 1.6627, 1.6702, 1.6768, 1.6851
Supports: 1.6538, 1.6472, 1.6412, 1.6371, 1.6315
Psychological: 1.65







USD/JPY Awaits TMI Data


The USD/JPY’s volume is declining as the currency pair edges up towards the inflection point of our 3rd tier uptrend line and 2nd tier downtrend line. The dwindling volume is a discouraging development for the USD/JPY’s upside, though we could see a near-term pop towards our 3rd tier downtrend line. 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 to drop towards our 1st tier uptrend line, the USD/JPY continually experiences support at 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 directional 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. 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 is in a vulnerable position. The probability of a retracement towards 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 likely 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: 96.33
Resistances: 96.33, 96.90, 97.45, 98.05, 98.66
Supports: 95.73, 94.99, 94.45, 93.76, 93.32
Psychological: 95, 100






Gold Pulls Back with Appreciating Dollar


Gold has backed away from our 1st tier downtrend line, and is dropping below our previous 1st tier uptrend line despite a slightly better than expected HPI number. Even though the decline in home prices improved slightly, the abnormal negative growth rate ensues. The mixed economic data from both the EU and Britain earlier today is having a positive impact on the Dollar as some investors divest from risk. The appreciation of the Greenback creates a drag on gold due to the negative correlation between the two. In coordination with the Dollar’s strength, U.S. equity and crude futures are weakening in the open market. Therefore, the correlations are in place today, and gold’s immediate-term fate rests on the outcome of upcoming consumer confidence and Chicago PMI data.

Investors shouldn’t forget we’ve seen more sell-side than buy-side in interest gold this month even though the precious metal has a medium-term uptrend in place. Hence, investors shouldn’t rule out another near-term leg down with a retest of June lows. Once again, the performance of gold relies upon the outcome of this week’s flood of economic data. If the rest of the economic data this week outperforms, gold could climb back above the psychological $950/oz level. Regardless, we anticipate an increase in volatility over the next few trading sessions.

Present Price: $935.25/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






Crude Sinks Following Disappointing Consumer Confidence Number


Crude futures have dipped back beneath our 2nd tier downtrend line after CB consumer confidence came in roughly 10% below analyst expectations. The negative showing in consumer confidence overpowers the slightly better than anticipated housing and PMI data. Crude is influenced more by consumption rather than the other figures, and the futures are reacting accordingly. The militant attacks are proving to be a temporary shock as we anticipated, and we believe the demand side of the equation will return to focus rather quickly. Investors should remember the IEA lowered its five-year projection for growth in consumption of crude yesterday. The mixed data points today are reigniting concern regarding the global demand for crude. Flying under the radar is the news that China is raising the price for gasoline and diesel fuel to try and keep pace with crude’s ascent. China’s action has a negative impact on demand, creating further downward pressure on price.

Meanwhile, the Greenback is appreciating across the board and gold is dropping like a rock in reaction to the negative consumer confidence data. Crude is positively correlated with these investment vehicles, indicating we could see crude’s pullback pick up pace towards $70/bbl and our 1st and 2nd tier uptrend lines. We expect volume to increase as the week progresses due to the plethora of data investors will receive from around the globe. While the decline in consumer confidence certainly creates an immediate-term drag on crude, our uptrend lines should hold until investors see how Wednesday’s data fares.


Present Price: $70.27/bbl
Resistances: $70.57/bbl, $71.07/bbl, $71.57/bbl, $72.25/bbl, $72.87/bbl
Supports: $70.05/bbl, $69.51/bbl, $68.92/bbl, $68.42/bbl, $68.03/bbl
Psychological: $70/bbl






S&P Futures Slide with Consumer Confidence


The S&P futures are heading south Tuesday morning after CB consumer confidence came in roughly 10% below analyst expectations. Lower consumer confidence shows the unemployment data investors will receive later this week could be weak as well. Investors are setting aside the slight improvements in home prices and Chicago PMI since the CB number was so far off. The S&P futures have dropped back between our downtrend lines, while the uptrend has suffered a substantial setback. However, the futures should hold above the highly psychological 900 level and/or our 1st and 2nd tier uptrend lines as investors will likely prevent a technically significant selloff before seeing how tomorrow’s data fares. Tomorrow the U.S. will release the ADP non-farm employment change, ISM manufacturing PMI, and pending home sales. Hence, we believe investors could be in for a volatile week.

The S&P’s correlations are logging more substantial declines today in reaction to the mixed economic data from around the globe. Not only did America’s consumer confidence come in light, but Britain’s GDP and current account data also failed to meet analyst expectations. The Dollar is strengthening across the board with the Cable and EUR/USD registering substantial losses. Meanwhile, both crude and gold are in the midst of large down-bars on climbing volume with investors trading the news. Hence, a dent has been made in the market’s uptrend and the concept of a global economic recovery has encountered another setback.

Investors haven’t been able to fully commit to the concept of a quick economic recovery, resulting in the sideways activity in the S&P futures over the past two months. Investors find themselves at a crossroads with the first half of the trading year coming to a close today. Our 1st and 2nd tier uptrend and downtrend lines are approaching their respective inflection points, magnifying the significance of the moment trend-wise. With plentiful economic data surfacing and earnings season on the way, we feel something’s gotta give. We maintain our neutral outlook on the S&P until investors can commit to a direction as opposed to the flip-flopping as of late.


Present Price: 912.75
Resistances: 918.75, 923, 931, 935.5, 941.5
Supports: 910.75, 902, 895, 888.75, 881.5
Psychological: 900






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Published on  Tue, Jun 30 2009, 15:14 GMT