GBP/USD
The Cable continued its rise yesterday, testing our 2nd tier downtrend line with little success, and is selling off Thursday after the BOE lowered interest rates by 50 basis points. The monetary shock was in line with analyst expectations. Even though the rate cut has been priced into the GBP/USD, investors are more focused on the BOE’s planned use of quantitative easing, or printing money to buy government bonds. Quantitative easing has shown little success in the past, turning Japan into a so-called ‘zombie economy’ for nearly a decade. Quantitative easing could result in a deflationary cycle, hammering the GBP/USD. However, in the big picture, the U.S. could implement quantitative easing itself, offsetting the move by the BOE. Regardless, the GBP/USD remains in a clear downtrend with little sign of a substantial turnaround. With U.S. equities in a free-fall, and positive correlation between the Cable and equities isn’t encouraging. On the positive side, the GBP/USD still has the 3/2-3/4 trading base to rely upon as support in the near-term. If things get worse, then the Cable will still need to retest 2009 lows, and that’s quite a process. Fundamentally, we maintain our resistances of 1.4119, 1.4173, and 1.4219 with fresh top-end resistance of 1.4292. To the downside, we hold our supports of 1.4078, 1.4023, 1.3964, and 1.3905. 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 1.4102.
EUR/USD
The Euro appreciated against the Dollar yesterday as the EUR/USD flexed its positive correlation with U.S. equities. However, the EUR/USD couldn’t keep its head above our uptrend line, and is dropping Thursday with investors highly anticipating the upcoming rate decision from the ECB. The ECB is expected to lower its benchmark by 50 basis points to 1.50%. Though the monetary shock is likely to come in line with analyst expectations, investors will be paying closer attention to the tone coming from ECB President Trichet. If Trichet leaves the door open to more rate cuts in the near future due to a weakening EU economy, then we could see a selloff in the EUR/USD. On the other hand, if the rate cut comes in line and Trichet provides a neutral stance, we could see a rally on the news in the EUR/USD. Meanwhile, the EUR/USD is trying to hang in the 2/27-3/3 trading range. If the EUR/USD can continue to stabilize, then we can see a retest of our uptrend line and possibly our 1st tier downtrend line. Despite the recent stability in the major currency pair, the medium-term downtrend still holds precedence. Therefore, there is little reason to expect a huge surge to the upside for the time being. Fundamentally, we find support of 1.2555 with 2nd tier and bottom end resting at 1.2514 and 1.2458, respectively. To the topside, we find resistance of 1.2634 with 2nd tier and top-end hanging at 1.2677 and 1.2725, respectively. The EUR/USD is currently exchanging at 1.2560.
USD/JPY
The USD/JPY continues its awesome run after Japan announced Capital Spending declined by more than expected. The Japanese economy is deteriorating at a rapid state, and faster than analysts anticipated. Therefore, the Yen continues to lose its luster as a safe haven currency with the Japanese economy faring the worst amidst the global economic crisis. Meanwhile, the USD/JPY is edging ever so closely to the highly anticipated 100 mark. While USD/JPY exudes incredible strength, we expect a struggle at 100 due the psychological value of the level. Furthermore, our 3rd tier downtrend line is approaching, bearing down on the currency pair. Thus, while we may see some more near-term gains, we expect some profit taking and retraction soon. Fundamentally, we maintain our resistances of 99.64, 100.30, 100.80 and 101.58. To the downside, we hold our supports of 99.05, 98.25, 97.66, and 97.22. The USD/JPY is currently exchanging at 99.27.
S&P
The S&P futures posted solid gains yesterday after the government unleashed details of its housing rescue plan and Obama called stocks a good buy. However, investors had little to cheer about data-wise with the ADP Non-Farm Employment change number coming in much lower than expected. Although the ISM Non-Manufacturing PMI was slightly better than expectated, the number was below that of the previous release and still signals economic contraction. Hence, the rally in the S&P futures faded, and the U.S. markets are looking to open lower Thursday morning. Investors are waiting on monetary actions from both the ECB and BOE today with both central banks expected to lower their benchmark rates further. If either should lower interest rates more than expected or use extremely negative language in their policy statements, then U.S. equities could react negatively at the prospect of weakening European economies. The S&P is finding unsubstantial optimism in the positive economic language emitting from the meeting of China’s National Congress. Premier Wen Jiabao’s speech yesterday noted China’s goal of 8% annual GDP growth is attainable despite a weakening global economy. Therefore, U.S. investors aren’t biting will need concrete data backing up the optimism. Japan’s Capital Spending decreased at an even lower rate than expected. Therefore, the tailspin of the Japanese economy continues. With capital expenditure on the decline, future productivity will wane and Japanese corporations will be in for a world of pain. The U.S. will release more key economic data today including Unemployment Claims, Revised Nonfarm Productivity, and Factory Orders. If the S&P futures fall below March lows we anticipate another heightened selloff as equities search for a bottom. We maintain our negative stance on the S&P futures with little positive news to back an uptrend. Fundamentally, we find resistances of 701.75, 709.25, 717.25, and 725.5. To the downside, we see support of 696with 2nd tier and bottom-end sitting at 688 and 682, respectively. The S&P futures are currently trading at 696.25.
Crude Oil
Crude futures continued their rise on large volume Wednesday after Crude Oil Inventories shrank. Investors ignored the potential impact of the discouraging jobs data on the demand side, sending crude futures past February 27 highs. However, crude futures are forming a peak on Thursday and the futures are trading back below the psychological $45/bbl level. While crude remains well above our previous near-term downtrend lines, we must not forget there is a larger medium-term downtrend at play. Therefore, crude futures will continue to face considerable setbacks to the upside, particularly if U.S. equities underperform. With the S&P futures looking to open weak Thursday morning, we foresee more near-term profit taking in crude towards our previous uptrend line. We placed a fresh 2nd tier downtrend line running through Wednesday high to give us a better idea of future resistance. Fundamentally, we find supports of $43.99/bbl, $43.39/bbl, $42.77/bbl, and $42.22/bbl. The $40/bbl area remains a reliable psychological cushion for the near-term, while the $45/bbl area acts as a psychological barrier. To the topside, we see resistances of $44.68/bbl, $45.13/bbl, $45.68/bbl, and $46.38/bbl. Crude futures are currently trading at $44.26/bbl.
Gold
Gold dipped yesterday, yet found strength in the highly psychological $900/oz level. The precious metal is rising as U.S. equities look to open in the red Thursday morning. Hence, we could see a return to the negative correlation between gold and equities today with a bounce in gold long overdue. Though we are positive on gold in the near-term, the precious metal needs to deal with our 2nd tier uptrend line before it can log any sizeable gains. Volatility has decreased over the last couple sessions, showing investors aren’t quite sure whether to continue the uptrend or send gold tumbling into the black hole. We maintain our positive stance trend-wise on gold until it closes well-below $900/oz and our 1st tier uptrend line. Fundamentally, we hold our resistances of $922.49/oz, $930.76, $937.81/oz, and $945.57/oz. To the downside, we maintain our supports of $911.60/oz, $903.29/oz., $895.12/oz., and $889.48/oz. Gold is currently trading at $915.85/oz.
30 Year
The 30 Year T-Bond futures manage to stay above February lows yesterday and are strengthening Thursday morning as U.S. equities look to open the session lower. Surprisingly, the 30 Year futures remained afloat on Wednesday despite surging equities. One may have expected the opposite considering the usual negative correlation between the two investment vehicles. Hence, the 30 Year futures may be oversold, and are consequently due for a near-term rally. Therefore, we are positive on the 30 Year right now with a possible retest of our 2nd tier downtrend line. On the flipside, if the futures do in fact drop beneath February lows, we anticipate a heightened near-term selloff. Fundamentally, we hold our resistance of 125.75 with 2nd tier and bottom-end hanging at 126.64 and 127.25, respectively. To the downside, we maintain supports of 124.98 and 124.36. The 30 Year Treasury Bond futures are currently trading at 125 27.0.
The Cable continued its rise yesterday, testing our 2nd tier downtrend line with little success, and is selling off Thursday after the BOE lowered interest rates by 50 basis points. The monetary shock was in line with analyst expectations. Even though the rate cut has been priced into the GBP/USD, investors are more focused on the BOE’s planned use of quantitative easing, or printing money to buy government bonds. Quantitative easing has shown little success in the past, turning Japan into a so-called ‘zombie economy’ for nearly a decade. Quantitative easing could result in a deflationary cycle, hammering the GBP/USD. However, in the big picture, the U.S. could implement quantitative easing itself, offsetting the move by the BOE. Regardless, the GBP/USD remains in a clear downtrend with little sign of a substantial turnaround. With U.S. equities in a free-fall, and positive correlation between the Cable and equities isn’t encouraging. On the positive side, the GBP/USD still has the 3/2-3/4 trading base to rely upon as support in the near-term. If things get worse, then the Cable will still need to retest 2009 lows, and that’s quite a process. Fundamentally, we maintain our resistances of 1.4119, 1.4173, and 1.4219 with fresh top-end resistance of 1.4292. To the downside, we hold our supports of 1.4078, 1.4023, 1.3964, and 1.3905. 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 1.4102.
EUR/USD
The Euro appreciated against the Dollar yesterday as the EUR/USD flexed its positive correlation with U.S. equities. However, the EUR/USD couldn’t keep its head above our uptrend line, and is dropping Thursday with investors highly anticipating the upcoming rate decision from the ECB. The ECB is expected to lower its benchmark by 50 basis points to 1.50%. Though the monetary shock is likely to come in line with analyst expectations, investors will be paying closer attention to the tone coming from ECB President Trichet. If Trichet leaves the door open to more rate cuts in the near future due to a weakening EU economy, then we could see a selloff in the EUR/USD. On the other hand, if the rate cut comes in line and Trichet provides a neutral stance, we could see a rally on the news in the EUR/USD. Meanwhile, the EUR/USD is trying to hang in the 2/27-3/3 trading range. If the EUR/USD can continue to stabilize, then we can see a retest of our uptrend line and possibly our 1st tier downtrend line. Despite the recent stability in the major currency pair, the medium-term downtrend still holds precedence. Therefore, there is little reason to expect a huge surge to the upside for the time being. Fundamentally, we find support of 1.2555 with 2nd tier and bottom end resting at 1.2514 and 1.2458, respectively. To the topside, we find resistance of 1.2634 with 2nd tier and top-end hanging at 1.2677 and 1.2725, respectively. The EUR/USD is currently exchanging at 1.2560.
USD/JPY
The USD/JPY continues its awesome run after Japan announced Capital Spending declined by more than expected. The Japanese economy is deteriorating at a rapid state, and faster than analysts anticipated. Therefore, the Yen continues to lose its luster as a safe haven currency with the Japanese economy faring the worst amidst the global economic crisis. Meanwhile, the USD/JPY is edging ever so closely to the highly anticipated 100 mark. While USD/JPY exudes incredible strength, we expect a struggle at 100 due the psychological value of the level. Furthermore, our 3rd tier downtrend line is approaching, bearing down on the currency pair. Thus, while we may see some more near-term gains, we expect some profit taking and retraction soon. Fundamentally, we maintain our resistances of 99.64, 100.30, 100.80 and 101.58. To the downside, we hold our supports of 99.05, 98.25, 97.66, and 97.22. The USD/JPY is currently exchanging at 99.27.
S&P
The S&P futures posted solid gains yesterday after the government unleashed details of its housing rescue plan and Obama called stocks a good buy. However, investors had little to cheer about data-wise with the ADP Non-Farm Employment change number coming in much lower than expected. Although the ISM Non-Manufacturing PMI was slightly better than expectated, the number was below that of the previous release and still signals economic contraction. Hence, the rally in the S&P futures faded, and the U.S. markets are looking to open lower Thursday morning. Investors are waiting on monetary actions from both the ECB and BOE today with both central banks expected to lower their benchmark rates further. If either should lower interest rates more than expected or use extremely negative language in their policy statements, then U.S. equities could react negatively at the prospect of weakening European economies. The S&P is finding unsubstantial optimism in the positive economic language emitting from the meeting of China’s National Congress. Premier Wen Jiabao’s speech yesterday noted China’s goal of 8% annual GDP growth is attainable despite a weakening global economy. Therefore, U.S. investors aren’t biting will need concrete data backing up the optimism. Japan’s Capital Spending decreased at an even lower rate than expected. Therefore, the tailspin of the Japanese economy continues. With capital expenditure on the decline, future productivity will wane and Japanese corporations will be in for a world of pain. The U.S. will release more key economic data today including Unemployment Claims, Revised Nonfarm Productivity, and Factory Orders. If the S&P futures fall below March lows we anticipate another heightened selloff as equities search for a bottom. We maintain our negative stance on the S&P futures with little positive news to back an uptrend. Fundamentally, we find resistances of 701.75, 709.25, 717.25, and 725.5. To the downside, we see support of 696with 2nd tier and bottom-end sitting at 688 and 682, respectively. The S&P futures are currently trading at 696.25.
Crude Oil
Crude futures continued their rise on large volume Wednesday after Crude Oil Inventories shrank. Investors ignored the potential impact of the discouraging jobs data on the demand side, sending crude futures past February 27 highs. However, crude futures are forming a peak on Thursday and the futures are trading back below the psychological $45/bbl level. While crude remains well above our previous near-term downtrend lines, we must not forget there is a larger medium-term downtrend at play. Therefore, crude futures will continue to face considerable setbacks to the upside, particularly if U.S. equities underperform. With the S&P futures looking to open weak Thursday morning, we foresee more near-term profit taking in crude towards our previous uptrend line. We placed a fresh 2nd tier downtrend line running through Wednesday high to give us a better idea of future resistance. Fundamentally, we find supports of $43.99/bbl, $43.39/bbl, $42.77/bbl, and $42.22/bbl. The $40/bbl area remains a reliable psychological cushion for the near-term, while the $45/bbl area acts as a psychological barrier. To the topside, we see resistances of $44.68/bbl, $45.13/bbl, $45.68/bbl, and $46.38/bbl. Crude futures are currently trading at $44.26/bbl.
Gold
Gold dipped yesterday, yet found strength in the highly psychological $900/oz level. The precious metal is rising as U.S. equities look to open in the red Thursday morning. Hence, we could see a return to the negative correlation between gold and equities today with a bounce in gold long overdue. Though we are positive on gold in the near-term, the precious metal needs to deal with our 2nd tier uptrend line before it can log any sizeable gains. Volatility has decreased over the last couple sessions, showing investors aren’t quite sure whether to continue the uptrend or send gold tumbling into the black hole. We maintain our positive stance trend-wise on gold until it closes well-below $900/oz and our 1st tier uptrend line. Fundamentally, we hold our resistances of $922.49/oz, $930.76, $937.81/oz, and $945.57/oz. To the downside, we maintain our supports of $911.60/oz, $903.29/oz., $895.12/oz., and $889.48/oz. Gold is currently trading at $915.85/oz.
30 Year
The 30 Year T-Bond futures manage to stay above February lows yesterday and are strengthening Thursday morning as U.S. equities look to open the session lower. Surprisingly, the 30 Year futures remained afloat on Wednesday despite surging equities. One may have expected the opposite considering the usual negative correlation between the two investment vehicles. Hence, the 30 Year futures may be oversold, and are consequently due for a near-term rally. Therefore, we are positive on the 30 Year right now with a possible retest of our 2nd tier downtrend line. On the flipside, if the futures do in fact drop beneath February lows, we anticipate a heightened near-term selloff. Fundamentally, we hold our resistance of 125.75 with 2nd tier and bottom-end hanging at 126.64 and 127.25, respectively. To the downside, we maintain supports of 124.98 and 124.36. The 30 Year Treasury Bond futures are currently trading at 125 27.0.
