GBP/USD
The Cable is selling off sharply on Monday in reaction to a terrible earnings report from HSBC. Additionally, the major London bank will need to raise cash to stay afloat, showing a second wave of contraction is washing through the global financial industry. Since Britain’s GDP is highly reliant on the financial sector, the Cable is getting knocked with the currency pair heading back towards the psychological 1.40 level. The relative weakness of the Pound is reflected in the EUR/GBP as the Euro looks to break out against the Pound again. Therefore, it seems it is the Cable’s turn to make a large leg down. We must not forget both the EUR/USD and GBP/USD are positively correlated to U.S. equities and the S&P futures are crashing below their 2008 lows. Therefore, we find little reason to be positive on the Cable trend wise. Although Britain’s Manufacturing PMI came in line today, Net Spending and Mortgage Approvals continue their decline, showing consumer confidence is deteriorating. Fundamentally, we find resistances of 1.4078, 1.4119, 1.4173, and 1.4219. To the downside, we see supports of 1.4023, 1.3964, 1.3905, and 1.3841. The 1.45 level still serves as a psychological barrier to the upside with 1.40 serving as a cushion to the downside. The GBP/USD is currently exchanging at 1.4060.
EUR/USD
The EUR/USD has fallen below all of our supports and our relatively flat medium-term uptrend. Fortunately for the bulls, the EUR/USD has found temporary support just above February lows, preventing the currency pair from retesting 2008 lows for the time being. However, the EUR/USD is in dangerous territory, for if the currency pair should crash below 2008 lows, we could see a heightened near-term selloff. Considering the S&P shares a positive correlation with the EUR/USD and the S&P has fallen below its own 2008 lows, then it is difficult to be positive on the EUR/USD trend wise. Germany’s 2nd largest bank, Commerzbank AG, posted significant losses today after its CEO said the bank may need to attain more cash to maintain operations in the futures. Furthermore, France’s largest bank, BNP Paribas, dropped roughly 8% in European trading. Eastern Europe continues its rapid contraction, harming all of the EU banks with significant exposure to the area. Eastern Europe’s decline coupled with a faulting U.S. economy is a substantial reason for the Euro to depreciate against the Dollar since the ECB may need to increase the potency of its upcoming monetary shock. Fundamentally, we find support of 1.2555 with 2nd tier and bottom-end supports resting at 1.2514 and 1.2458, respectively. To the topside, we see resistances of 1.2634, 1.2690, 1.2761, and 1.2822. The EUR/USD is currently exchanging at 1.2605.
USD/JPY
The USD/JPY is weakening back towards our 2nd tier downtrend line after it failed to reach the psychological 100 level. The movement comes in reaction to a withering U.S. economy. Investors are now bouncing back and forth between using the Yen and the Dollar as a safe haven. Should the U.S. economy release more highly negative economic data coupled with discouraging news, then we could see a retreat towards the Dollar and considerable profit taking in the USD/JPY. However, this development would have to come sans equally negative news from Japan. Therefore, the direction of the USD/JPY is turning into a guessing game for the near-term. However, the 100 area will continue to serve as a critical psychological barrier to the upside. Should the USD/JPY happen to close comfortably above 100, then we could see the continuation of its impressive near-term surge. On the other hand, there are several downtrend weights bearing down on the USD/JPY and the currency pair could easily duck back into its medium-term downtrend. Fundamentally, we maintain our resistance of 98.25 with fresh resistances of 99.05, 99.64, and 100.30. To the downside, we find supports of 97.66, 97.22, 96.56, and 95.96. The USD/JPY is currently exchanging at 97.62.
S&P 500
The S&P futures were slammed on Friday as Prelim GDP came in far below analyst expectations. To make matters worse, Citigroup crashed nearly 40% on the news the U.S. government will convert most of its preferred shares to common stock, thereby diluting shareholder equity. Bank of America followed suit, falling a whopping 26%. Even though Bank of America remains afloat, the nationalization of Citigroup seems imminent. With its stock trading at $1.50/share, investors are pricing the company for bankruptcy. Seeing as the bankruptcy of Lehman Brothers resulted in a catastrophic freeze in the credit markets, the government will likely need to step in and finish the job as far as nationalization is concerned. With the S&P futures closing beneath 2008 lows, we could witness a massive selloff to the downside in the near-term. The futures are already trading down 2.2% in Monday’s pre-market. The U.S. economy is slowing faster than expected, and the global economy is following suit. Due to the interconnectivity of the global economy, as one domino drops the rest come crashing down, perpetuating the economic contraction in the around the world. The EU and Britain are experiencing another wave of troubles in their respective financial industries with their largest banks reporting disappointing earnings and searching for ways to raise fresh capital. Furthermore, the major economies of Eastern Europe continue their rapid deterioration, pulling down the EU banks with them. It’s hard to find a bright spot in the U.S. However, data released this morning showed U.S. spending increased while the Core PCE Price Index came in line. Investors are now waiting on the ISM Manufacturing PMI to get an idea of how bad America’s manufacturing sector is. With the other major economies contracting, it’s hard to believe demand for exports will provide any boost for U.S. manufacturing. Correlation wise, Crude futures are dropping below our 2nd tier downtrend line as our uptrend line meets an inflection point. Additionally, the 30 Year T-Bond futures are walking upwards while Gold bounces off our 1st tier uptrend line. Hence, all of our correlations are pointing towards a continued selloff in U.S. equities. Meanwhile, the S&P futures remain well below our near-term downtrend line, giving us little reason to be positive trend wise. However, there is a positive note in the fact the S&P futures should find near-term psychological support at the 700 level. Fundamentally, we find resistance of 724 with fresh 2nd tier and top-end hanging at 731.75 and 738.75, respectively. To the downside, we see support of 716.75 with 2nd tier and bottom-end sitting at 711 and 700, respectively. The S&P futures are currently trading at 718.75.
Gold
Gold is bouncing off our 1st tier downtrend line after posting losses on Friday despite the substantial selloff in U.S. equities. We view Friday’s losses as investor hesitation since analysts are forewarning a new bubble in precious metals. However, the negative correlation should hold true between Gold and equities as far as we are concerned. With S&P futures sinking below 2008 lows on Friday, we anticipate a heightened selloff in equities. Therefore, we could very well see a solid rise in Gold with a retest of the highly psychological $1000/oz barrier. Fundamentally, we find resistances of $951.92, $961.79/oz, $970.96/oz and $977.31/oz. To the downside, we hold our supports of $945.57/oz, $937.81/oz and $930.76/oz. Gold is currently trading at $949.40/oz.
30 Year T-Bond
The 30 Year T-Bond futures are fighting back above our 2nd tier downtrend line and February lows as the U.S. equities prepare to open with steep losses. The 30 Year futures have shown a muted reaction to the upside considering the significant selloff taking place in the S&P on Friday. Therefore, investors are showing concern over the massive increase in supply of long-term treasuries to fund the government’s new stimulus packages. With most of the world’s economies hurting in the global contraction and state of the U.S. economy thrown into doubt, the U.S. is finding fewer buyers interested in its debt. As a result, yields are rising and price falling, keeping the 30 Year T-Bond futures artificially constrained considering the usual positive correlation they have with U.S. equities. With our uptrend rising out of reach, we may see only modest gains and even losses in the 30 Year T-Bond futures should U.S. equities crumble. Fundamentally, we find resistance of 126.64 with 2nd tier and bottom-end hanging at 127.25 and 128, respectively. To the downside, we see support of 125.75 with 2nd tier and bottom-end resting at 124.98 and 124.36, respectively. The 30 Year Treasury Bond futures are currently trading at 125 28.5.
Corn
Corn futures continue their rapid selloff, dropping below our 1st tier uptrend line and are now testing our near-term downtrend line. If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows. Corn futures are following the path of U.S. equities. With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further. As the U.S. economy grinds to a halt, food consumption should decline. Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed. Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning. Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit. Fundamentally, see resistance at $3.51/bshl, with 2nd tier and top-end resistances hanging at $3.56/bshl and $3.6025/bshl, respectively. To the downside, we find support of $3.4525/bshl with additional supports resting at $3.415/bshl, $3.365/bshl, and $3.3325/bshl. The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl. Corn futures are currently trading at $3.46/bshl.
Crude
Crude futures are weakening considerably below our uptrend line as U.S. equities look to add onto Friday’s significant losses. With the S&P futures closing below 2008 lows, we anticipate a heightened selloff in equities. Therefore, despite aggressive supply cuts from OPEC, it appears declining demand will have its way with price for the time being. However, if the price of Crude futures should continue to drop, we wouldn’t be surprised to see OPEC make further cuts in supply to buoy price. As a result, Crude futures could be comparatively stable compared to equities to the downside in the near-term. This stability will depend on Crude Oil Inventories continuing their weekly rise. Crude futures are bouncing off of our 2nd tier downtrend line while remaining above our relatively flat uptrend line. Fundamentally, we find supports of $42.23/bbl, $41.48/bbl and $40.65/bbl. The $40/bbl area turns into a reliable psychological cushion for the near-term. To the topside, we see resistances of $42.93/bbl, $44.05/bbl and $45.12/bbl. Meanwhile, the $45/bbl area will serve as a psychological barrier. Crude futures are currently trading at $42.68/bbl.
The Cable is selling off sharply on Monday in reaction to a terrible earnings report from HSBC. Additionally, the major London bank will need to raise cash to stay afloat, showing a second wave of contraction is washing through the global financial industry. Since Britain’s GDP is highly reliant on the financial sector, the Cable is getting knocked with the currency pair heading back towards the psychological 1.40 level. The relative weakness of the Pound is reflected in the EUR/GBP as the Euro looks to break out against the Pound again. Therefore, it seems it is the Cable’s turn to make a large leg down. We must not forget both the EUR/USD and GBP/USD are positively correlated to U.S. equities and the S&P futures are crashing below their 2008 lows. Therefore, we find little reason to be positive on the Cable trend wise. Although Britain’s Manufacturing PMI came in line today, Net Spending and Mortgage Approvals continue their decline, showing consumer confidence is deteriorating. Fundamentally, we find resistances of 1.4078, 1.4119, 1.4173, and 1.4219. To the downside, we see supports of 1.4023, 1.3964, 1.3905, and 1.3841. The 1.45 level still serves as a psychological barrier to the upside with 1.40 serving as a cushion to the downside. The GBP/USD is currently exchanging at 1.4060.
EUR/USD
The EUR/USD has fallen below all of our supports and our relatively flat medium-term uptrend. Fortunately for the bulls, the EUR/USD has found temporary support just above February lows, preventing the currency pair from retesting 2008 lows for the time being. However, the EUR/USD is in dangerous territory, for if the currency pair should crash below 2008 lows, we could see a heightened near-term selloff. Considering the S&P shares a positive correlation with the EUR/USD and the S&P has fallen below its own 2008 lows, then it is difficult to be positive on the EUR/USD trend wise. Germany’s 2nd largest bank, Commerzbank AG, posted significant losses today after its CEO said the bank may need to attain more cash to maintain operations in the futures. Furthermore, France’s largest bank, BNP Paribas, dropped roughly 8% in European trading. Eastern Europe continues its rapid contraction, harming all of the EU banks with significant exposure to the area. Eastern Europe’s decline coupled with a faulting U.S. economy is a substantial reason for the Euro to depreciate against the Dollar since the ECB may need to increase the potency of its upcoming monetary shock. Fundamentally, we find support of 1.2555 with 2nd tier and bottom-end supports resting at 1.2514 and 1.2458, respectively. To the topside, we see resistances of 1.2634, 1.2690, 1.2761, and 1.2822. The EUR/USD is currently exchanging at 1.2605.
USD/JPY
The USD/JPY is weakening back towards our 2nd tier downtrend line after it failed to reach the psychological 100 level. The movement comes in reaction to a withering U.S. economy. Investors are now bouncing back and forth between using the Yen and the Dollar as a safe haven. Should the U.S. economy release more highly negative economic data coupled with discouraging news, then we could see a retreat towards the Dollar and considerable profit taking in the USD/JPY. However, this development would have to come sans equally negative news from Japan. Therefore, the direction of the USD/JPY is turning into a guessing game for the near-term. However, the 100 area will continue to serve as a critical psychological barrier to the upside. Should the USD/JPY happen to close comfortably above 100, then we could see the continuation of its impressive near-term surge. On the other hand, there are several downtrend weights bearing down on the USD/JPY and the currency pair could easily duck back into its medium-term downtrend. Fundamentally, we maintain our resistance of 98.25 with fresh resistances of 99.05, 99.64, and 100.30. To the downside, we find supports of 97.66, 97.22, 96.56, and 95.96. The USD/JPY is currently exchanging at 97.62.
S&P 500
The S&P futures were slammed on Friday as Prelim GDP came in far below analyst expectations. To make matters worse, Citigroup crashed nearly 40% on the news the U.S. government will convert most of its preferred shares to common stock, thereby diluting shareholder equity. Bank of America followed suit, falling a whopping 26%. Even though Bank of America remains afloat, the nationalization of Citigroup seems imminent. With its stock trading at $1.50/share, investors are pricing the company for bankruptcy. Seeing as the bankruptcy of Lehman Brothers resulted in a catastrophic freeze in the credit markets, the government will likely need to step in and finish the job as far as nationalization is concerned. With the S&P futures closing beneath 2008 lows, we could witness a massive selloff to the downside in the near-term. The futures are already trading down 2.2% in Monday’s pre-market. The U.S. economy is slowing faster than expected, and the global economy is following suit. Due to the interconnectivity of the global economy, as one domino drops the rest come crashing down, perpetuating the economic contraction in the around the world. The EU and Britain are experiencing another wave of troubles in their respective financial industries with their largest banks reporting disappointing earnings and searching for ways to raise fresh capital. Furthermore, the major economies of Eastern Europe continue their rapid deterioration, pulling down the EU banks with them. It’s hard to find a bright spot in the U.S. However, data released this morning showed U.S. spending increased while the Core PCE Price Index came in line. Investors are now waiting on the ISM Manufacturing PMI to get an idea of how bad America’s manufacturing sector is. With the other major economies contracting, it’s hard to believe demand for exports will provide any boost for U.S. manufacturing. Correlation wise, Crude futures are dropping below our 2nd tier downtrend line as our uptrend line meets an inflection point. Additionally, the 30 Year T-Bond futures are walking upwards while Gold bounces off our 1st tier uptrend line. Hence, all of our correlations are pointing towards a continued selloff in U.S. equities. Meanwhile, the S&P futures remain well below our near-term downtrend line, giving us little reason to be positive trend wise. However, there is a positive note in the fact the S&P futures should find near-term psychological support at the 700 level. Fundamentally, we find resistance of 724 with fresh 2nd tier and top-end hanging at 731.75 and 738.75, respectively. To the downside, we see support of 716.75 with 2nd tier and bottom-end sitting at 711 and 700, respectively. The S&P futures are currently trading at 718.75.
Gold
Gold is bouncing off our 1st tier downtrend line after posting losses on Friday despite the substantial selloff in U.S. equities. We view Friday’s losses as investor hesitation since analysts are forewarning a new bubble in precious metals. However, the negative correlation should hold true between Gold and equities as far as we are concerned. With S&P futures sinking below 2008 lows on Friday, we anticipate a heightened selloff in equities. Therefore, we could very well see a solid rise in Gold with a retest of the highly psychological $1000/oz barrier. Fundamentally, we find resistances of $951.92, $961.79/oz, $970.96/oz and $977.31/oz. To the downside, we hold our supports of $945.57/oz, $937.81/oz and $930.76/oz. Gold is currently trading at $949.40/oz.
30 Year T-Bond
The 30 Year T-Bond futures are fighting back above our 2nd tier downtrend line and February lows as the U.S. equities prepare to open with steep losses. The 30 Year futures have shown a muted reaction to the upside considering the significant selloff taking place in the S&P on Friday. Therefore, investors are showing concern over the massive increase in supply of long-term treasuries to fund the government’s new stimulus packages. With most of the world’s economies hurting in the global contraction and state of the U.S. economy thrown into doubt, the U.S. is finding fewer buyers interested in its debt. As a result, yields are rising and price falling, keeping the 30 Year T-Bond futures artificially constrained considering the usual positive correlation they have with U.S. equities. With our uptrend rising out of reach, we may see only modest gains and even losses in the 30 Year T-Bond futures should U.S. equities crumble. Fundamentally, we find resistance of 126.64 with 2nd tier and bottom-end hanging at 127.25 and 128, respectively. To the downside, we see support of 125.75 with 2nd tier and bottom-end resting at 124.98 and 124.36, respectively. The 30 Year Treasury Bond futures are currently trading at 125 28.5.
Corn
Corn futures continue their rapid selloff, dropping below our 1st tier uptrend line and are now testing our near-term downtrend line. If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows. Corn futures are following the path of U.S. equities. With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further. As the U.S. economy grinds to a halt, food consumption should decline. Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed. Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning. Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit. Fundamentally, see resistance at $3.51/bshl, with 2nd tier and top-end resistances hanging at $3.56/bshl and $3.6025/bshl, respectively. To the downside, we find support of $3.4525/bshl with additional supports resting at $3.415/bshl, $3.365/bshl, and $3.3325/bshl. The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl. Corn futures are currently trading at $3.46/bshl.
Crude
Crude futures are weakening considerably below our uptrend line as U.S. equities look to add onto Friday’s significant losses. With the S&P futures closing below 2008 lows, we anticipate a heightened selloff in equities. Therefore, despite aggressive supply cuts from OPEC, it appears declining demand will have its way with price for the time being. However, if the price of Crude futures should continue to drop, we wouldn’t be surprised to see OPEC make further cuts in supply to buoy price. As a result, Crude futures could be comparatively stable compared to equities to the downside in the near-term. This stability will depend on Crude Oil Inventories continuing their weekly rise. Crude futures are bouncing off of our 2nd tier downtrend line while remaining above our relatively flat uptrend line. Fundamentally, we find supports of $42.23/bbl, $41.48/bbl and $40.65/bbl. The $40/bbl area turns into a reliable psychological cushion for the near-term. To the topside, we see resistances of $42.93/bbl, $44.05/bbl and $45.12/bbl. Meanwhile, the $45/bbl area will serve as a psychological barrier. Crude futures are currently trading at $42.68/bbl.
