EUR/USD
The EUR/USD recovered from intraday losses yesterday after balancing along our 1.2971 support. The relative strength of the Euro is reflected in the EUR/GBP and came despite a late selloff in the U.S. equity markets. Investors took kindly to the public address by the ECB yesterday. The ECB explained there is little room for further interest rate reductions, implying the central bank may cut one more time and keep the benchmark rate steady. However, the wording is not definite and gives the ECB leverage to alter their monetary stance if deemed necessary. The EUR/USD also found strength in the fact that the IMF aims to double its account balance to aid emerging economies. Since the Eastern European economies have been weighing down on the EUR/USD this year, the planned action by the IMF provides a little more breathing room. Although investors continue to dabble in risk-oriented investments such as the EUR/USD, the weakness of the German Economy sticks out like a sore thumb. Germany will release its economic sentiment data this afternoon, giving investors a rounder picture of the depth of the extent of the downturn in the EU’s largest economy. If the economic sentiment in Germany is worse than expected, we foresee further consolidation due to the psychological role of 1.30. Regardless, the momentum still lies in the corner of the bulls with the EUR/USD edging above our 3rd tier downtrend and the breeding ground for a large near-term breakout within reach. Fundamentally, we maintain support of 1.2971 with additional supports resting at 1.2934, 1.2910, and 1.2871. To the topside, see resistance at 1.2991 with additional resistances hanging at 1.3022, 1.3058, 1.3086, and 1.3120. The EUR/USD is currently exchanging at 1.2993.
GBP/USD
The Cable continues its downturn after the S&P experienced a late-session tumble. However, the GBP/USD is finding support on our 2nd tier downtrend line and the key psychological 1.40 level. Given that Britain won’t release any noteworthy economic data until tomorrow, we expect the Cable to rely on its positive correlation with U.S. equities until then. Therefore, the GBP/USD is presently implying the currency pair is waiting to see if the selloff in U.S. equities yesterday carries over into today’s trading session. Meanwhile, the U.S. will release Building Permits, Housing Starts, and PPI this morning, which will surely be market movers. Hence, we expect high volatility in all major Dollar crosses. The Cable remains locked into its downtrend after failing to climb back above March highs and our 3rd tier downtrend sits far out in the distance. If the GBP/USD dips reasonable below 1.40 we anticipate a heightened near-term selloff. Fundamentally, we find resistances of 1.4047, 1.4112, 1.4156, and 1.4199. To the downside, we see supports of 1.4008, 1.3957, 1.3910 and 1.3856. The GBP/USD is currently exchanging at 1.2986.
USD/JPY
Not much has changed in the USD/JPY with the consolidation process dragging on. The sideways movement of the USD/JPY over the last three weeks signifies the relevance of the psychological 100 level. Investors are still reluctant to test it, indicating they haven’t bought into a bottom in U.S. equities yet. While the Japanese economy is incredibly weak, America’s certainly isn’t putting on a stellar performance. Therefore, if the U.S. economy continues to shell out more negative economic data the USD/JPY should continue its consolidation or possibly make a large movement south. The driving forces shooting the currency pair above 100 will surprisingly positive economic data from the U.S. or devastating news out of Japan. However, we caution investors not to grow complacent during consolidation, for when the directional decision is made the movement will be quick and sharp. Fundamentally, we maintain our resistance of 99.05 with additional resistances hanging at 99.96, 100.69, and 101.53. To the downside, we hold our 98.25 support with additional supports sitting at 97.66, 97.22, and 96.59. The USD/JPY is currently exchanging at 98.57.
Crude Oil
Crude futures leapt from our 2nd tier downtrend line yesterday, logging impressive gains considering U.S. equities ended Monday’s session with a brisk selloff. The futures are presently struggling with our 2nd tier uptrend line, but seem tempted to jump out to fresh gains on Tuesday. It also seems a retest of the much anticipated $50/bbl level is imminent. If the crude futures can creep out of March highs and $50/bbl successively, we anticipate large near-term gains. However, disregarding the optimism of present, we believe crude futures could be getting ahead of themselves. The previous supply cuts from OPEC are being priced in, implying we’d need a pickup in demand to send crude to new heights. Seeing as production and consumption levels in the U.S. are still freefalling, crude futures need an uptick in economic data to keep the run going barring plans of a future OPEC cut. Nevertheless, the near-term appears sunny for crude futures with a hard-fought battle waiting at $50/bbl. Fundamentally, we find supports of $47.41/bbl, $46.74bbl, $46.23/bbl, and $45.53/bbl. To the topside, we see resistances of $48.23/bbl, $48.59/bbl, $49.09/bbl, and $49.57/bbl. Crude futures are currently trading at $47.80/bbl.
Gold
Gold continues its relative consolidation while sitting right above our 2nd tier uptrend line right now. The fact the precious metal hasn’t made a large step downward in the last 24 hours is a positive development as far as the uptrend is concerned. Gold bugs are waiting to see how the significant U.S. economic data pans out today. The direction of Gold seems to be a coin flip, and will depend on the direction of U.S. equities. We expect the negative correlation between the two to hold true during fundamentally meaningful moments such as these. The downtrend is still in control of the S&P futures until they can break through heavily-weighted psychological and fundamental resistances. This belief is upheld by the fact Gold has our 1st tier uptrend line waiting for it to the downside should the precious metal experience a near-term selloff. Therefore, we maintain our positive outlook on Gold for the time being. Fundamentally, our $922.92/oz support turns resistance while we hold our resistances of $928.57/oz, $932.04/oz, and $932.42/oz. To the downside, we maintain our supports of $919.01/oz, $913.80/oz., $909.89/oz. with fresh bottom-end support of $905.52/oz. The $900/oz level serves as a psychological cushion to the downside. Gold is currently trading at $919.70/oz.
S&P
The S&P futures logged a sharp late session selloff on Monday to end the day on a negative note. The downturn came in reaction to news that American Express is experiencing a rising delinquency rate on its consumer credit cards. This news reflects the worry that the debt of U.S. consumers is rising in the face of higher unemployment coupled with skyrocketing foreclosure rates. Furthermore, all of the U.S. data released yesterday came in below expectations. The Empire Index number was the worst on record while Industrial Production and foreigner purchases of U.S. securities are on the decline. Therefore, Monday provided ample evidence to reignite investor concern after last week’s impressive rally. The U.S. will release more significant economic data on Tuesday morning, so we expect the rising volatility to continue. America will announce Building Permits, Housing Starts, and PPI. If all of the data points are worse than expected like yesterday, we could see equities head south in a hurry. As we mentioned in yesterday’s analysis, don’t forget the rally last week was based on psychological encouragement from bank CEOs and global leaders in an effort to boost investor and consumer confidence. However, bank CEOs are providing guidance based on the first two months of 2009, before the latest leg down took place in the stock market. As we know, a quarter consists of four months, not two, so these words of encouragement should be taken with apprehension right now. Correlation wise, crude and U.S. treasury bonds are unreliable at present due to the different forces taking hold of the supply side of the equation. However, gold and all of the major Dollar crosses reflect a slight hesitation and unwillingness to fully commit to a bottom in U.S. equities until further confirmation from the S&P futures. The S&P futures are presently battling with our 2nd tier downtrend line as all eyes are on the ticker waiting for the pending economic data releases. Fundamentally, we find resistance of 761.5 with additional resistances hanging at 765.5, 772.25, and 776.75. To the downside, we see support of 755.5 with additional supports sitting at751.75, 748, and 744. The S&P futures are currently trading at 757.25.
30 Year
The 30 Year T-Bond futures continue to weaken after reaching our inflection point yesterday. The downward movement came despite a late session selloff in U.S. equities. The 30 Year futures are showing us time and again their normal negative correlation with the S&P futures is out of sync due to outside market forces. The combination of the large increase in supply of government debt coupled with China losing its appetite for U.S. Treasuries is raising yields and lowering price. Due to the mass confusion and uncertainty swirling around U.S. Treasuries, the 30 Year futures remained locked within the trading range beginning in early February. Yesterday’s lows were above previous March lows, maintaining a near-term situation in which the futures can bounce around. On the other hand, once the 30 Year futures do break out in one direction or the other, we anticipate large volatility in the near-term. Fundamentally, we see resistance of 126.64 with 2nd tier and top-end hanging at 127.02 and 127.42, respectively. To the downside, we find support of 126.078 with additional supports sitting at 125.75, 125.34, and 124.98. The 30 Year Treasury Bond futures are currently trading at 126 02.5.
The EUR/USD recovered from intraday losses yesterday after balancing along our 1.2971 support. The relative strength of the Euro is reflected in the EUR/GBP and came despite a late selloff in the U.S. equity markets. Investors took kindly to the public address by the ECB yesterday. The ECB explained there is little room for further interest rate reductions, implying the central bank may cut one more time and keep the benchmark rate steady. However, the wording is not definite and gives the ECB leverage to alter their monetary stance if deemed necessary. The EUR/USD also found strength in the fact that the IMF aims to double its account balance to aid emerging economies. Since the Eastern European economies have been weighing down on the EUR/USD this year, the planned action by the IMF provides a little more breathing room. Although investors continue to dabble in risk-oriented investments such as the EUR/USD, the weakness of the German Economy sticks out like a sore thumb. Germany will release its economic sentiment data this afternoon, giving investors a rounder picture of the depth of the extent of the downturn in the EU’s largest economy. If the economic sentiment in Germany is worse than expected, we foresee further consolidation due to the psychological role of 1.30. Regardless, the momentum still lies in the corner of the bulls with the EUR/USD edging above our 3rd tier downtrend and the breeding ground for a large near-term breakout within reach. Fundamentally, we maintain support of 1.2971 with additional supports resting at 1.2934, 1.2910, and 1.2871. To the topside, see resistance at 1.2991 with additional resistances hanging at 1.3022, 1.3058, 1.3086, and 1.3120. The EUR/USD is currently exchanging at 1.2993.
GBP/USD
The Cable continues its downturn after the S&P experienced a late-session tumble. However, the GBP/USD is finding support on our 2nd tier downtrend line and the key psychological 1.40 level. Given that Britain won’t release any noteworthy economic data until tomorrow, we expect the Cable to rely on its positive correlation with U.S. equities until then. Therefore, the GBP/USD is presently implying the currency pair is waiting to see if the selloff in U.S. equities yesterday carries over into today’s trading session. Meanwhile, the U.S. will release Building Permits, Housing Starts, and PPI this morning, which will surely be market movers. Hence, we expect high volatility in all major Dollar crosses. The Cable remains locked into its downtrend after failing to climb back above March highs and our 3rd tier downtrend sits far out in the distance. If the GBP/USD dips reasonable below 1.40 we anticipate a heightened near-term selloff. Fundamentally, we find resistances of 1.4047, 1.4112, 1.4156, and 1.4199. To the downside, we see supports of 1.4008, 1.3957, 1.3910 and 1.3856. The GBP/USD is currently exchanging at 1.2986.
USD/JPY
Not much has changed in the USD/JPY with the consolidation process dragging on. The sideways movement of the USD/JPY over the last three weeks signifies the relevance of the psychological 100 level. Investors are still reluctant to test it, indicating they haven’t bought into a bottom in U.S. equities yet. While the Japanese economy is incredibly weak, America’s certainly isn’t putting on a stellar performance. Therefore, if the U.S. economy continues to shell out more negative economic data the USD/JPY should continue its consolidation or possibly make a large movement south. The driving forces shooting the currency pair above 100 will surprisingly positive economic data from the U.S. or devastating news out of Japan. However, we caution investors not to grow complacent during consolidation, for when the directional decision is made the movement will be quick and sharp. Fundamentally, we maintain our resistance of 99.05 with additional resistances hanging at 99.96, 100.69, and 101.53. To the downside, we hold our 98.25 support with additional supports sitting at 97.66, 97.22, and 96.59. The USD/JPY is currently exchanging at 98.57.
Crude Oil
Crude futures leapt from our 2nd tier downtrend line yesterday, logging impressive gains considering U.S. equities ended Monday’s session with a brisk selloff. The futures are presently struggling with our 2nd tier uptrend line, but seem tempted to jump out to fresh gains on Tuesday. It also seems a retest of the much anticipated $50/bbl level is imminent. If the crude futures can creep out of March highs and $50/bbl successively, we anticipate large near-term gains. However, disregarding the optimism of present, we believe crude futures could be getting ahead of themselves. The previous supply cuts from OPEC are being priced in, implying we’d need a pickup in demand to send crude to new heights. Seeing as production and consumption levels in the U.S. are still freefalling, crude futures need an uptick in economic data to keep the run going barring plans of a future OPEC cut. Nevertheless, the near-term appears sunny for crude futures with a hard-fought battle waiting at $50/bbl. Fundamentally, we find supports of $47.41/bbl, $46.74bbl, $46.23/bbl, and $45.53/bbl. To the topside, we see resistances of $48.23/bbl, $48.59/bbl, $49.09/bbl, and $49.57/bbl. Crude futures are currently trading at $47.80/bbl.
Gold
Gold continues its relative consolidation while sitting right above our 2nd tier uptrend line right now. The fact the precious metal hasn’t made a large step downward in the last 24 hours is a positive development as far as the uptrend is concerned. Gold bugs are waiting to see how the significant U.S. economic data pans out today. The direction of Gold seems to be a coin flip, and will depend on the direction of U.S. equities. We expect the negative correlation between the two to hold true during fundamentally meaningful moments such as these. The downtrend is still in control of the S&P futures until they can break through heavily-weighted psychological and fundamental resistances. This belief is upheld by the fact Gold has our 1st tier uptrend line waiting for it to the downside should the precious metal experience a near-term selloff. Therefore, we maintain our positive outlook on Gold for the time being. Fundamentally, our $922.92/oz support turns resistance while we hold our resistances of $928.57/oz, $932.04/oz, and $932.42/oz. To the downside, we maintain our supports of $919.01/oz, $913.80/oz., $909.89/oz. with fresh bottom-end support of $905.52/oz. The $900/oz level serves as a psychological cushion to the downside. Gold is currently trading at $919.70/oz.
S&P
The S&P futures logged a sharp late session selloff on Monday to end the day on a negative note. The downturn came in reaction to news that American Express is experiencing a rising delinquency rate on its consumer credit cards. This news reflects the worry that the debt of U.S. consumers is rising in the face of higher unemployment coupled with skyrocketing foreclosure rates. Furthermore, all of the U.S. data released yesterday came in below expectations. The Empire Index number was the worst on record while Industrial Production and foreigner purchases of U.S. securities are on the decline. Therefore, Monday provided ample evidence to reignite investor concern after last week’s impressive rally. The U.S. will release more significant economic data on Tuesday morning, so we expect the rising volatility to continue. America will announce Building Permits, Housing Starts, and PPI. If all of the data points are worse than expected like yesterday, we could see equities head south in a hurry. As we mentioned in yesterday’s analysis, don’t forget the rally last week was based on psychological encouragement from bank CEOs and global leaders in an effort to boost investor and consumer confidence. However, bank CEOs are providing guidance based on the first two months of 2009, before the latest leg down took place in the stock market. As we know, a quarter consists of four months, not two, so these words of encouragement should be taken with apprehension right now. Correlation wise, crude and U.S. treasury bonds are unreliable at present due to the different forces taking hold of the supply side of the equation. However, gold and all of the major Dollar crosses reflect a slight hesitation and unwillingness to fully commit to a bottom in U.S. equities until further confirmation from the S&P futures. The S&P futures are presently battling with our 2nd tier downtrend line as all eyes are on the ticker waiting for the pending economic data releases. Fundamentally, we find resistance of 761.5 with additional resistances hanging at 765.5, 772.25, and 776.75. To the downside, we see support of 755.5 with additional supports sitting at751.75, 748, and 744. The S&P futures are currently trading at 757.25.
30 Year
The 30 Year T-Bond futures continue to weaken after reaching our inflection point yesterday. The downward movement came despite a late session selloff in U.S. equities. The 30 Year futures are showing us time and again their normal negative correlation with the S&P futures is out of sync due to outside market forces. The combination of the large increase in supply of government debt coupled with China losing its appetite for U.S. Treasuries is raising yields and lowering price. Due to the mass confusion and uncertainty swirling around U.S. Treasuries, the 30 Year futures remained locked within the trading range beginning in early February. Yesterday’s lows were above previous March lows, maintaining a near-term situation in which the futures can bounce around. On the other hand, once the 30 Year futures do break out in one direction or the other, we anticipate large volatility in the near-term. Fundamentally, we see resistance of 126.64 with 2nd tier and top-end hanging at 127.02 and 127.42, respectively. To the downside, we find support of 126.078 with additional supports sitting at 125.75, 125.34, and 124.98. The 30 Year Treasury Bond futures are currently trading at 126 02.5.
