EUR/USD
The consolidation of the EUR/USD continues while the currency pair weakens Monday due to a much weaker than expected Trade Balance combined with a downward revision of the last release. A declining Trade Balance reflects the weakness in Germany’s production and manufacturing as exports decline and imports rise. Despite the seesaw behavior over the last few sessions, we anticipate the return to volatility shortly. Last week’s movement was historical and should result in refractions for the days/weeks ahead. Last week’s flurry of news from the Federal Reserve greatly distracted investors from the underlying economic fundamentals. The distraction will continue today as Treasury Secretary Geithner reveals America’s plan for dealing with toxic assets. However, investors’ sights are returning to the state of the EU economy. The shape of the EU economy will come back into focus Tuesday with the EU releasing a concoction of PMI and trade data. While we may witness some more near-term consolidation to the downside today, the EUR/USD remains comfortably above our 1st tier uptrend line and downtrend lines. Therefore, the momentum has clearly shifted to the upside, and we anticipate this trend to continue until the currency pair reaches the psychological 1.40 level. Fundamentally, we maintain our supports of 1.3554, 1.3494, 1.3427, and 1.3371. To the topside, we hold our resistances of 1.3624, 1.3688, 1.3724, 1.3800, and 1.3848. The 1.35 area becomes a psychological cushion with 1.40 serving as a highly psychological barrier. The EUR/USD is currently exchanging at 1.3586.
GBP/USD
The Cable is strengthening from our uptrend line as the Pound shows relative strength against both the Dollar and Euro after the EU released a highly negative Trade Balance. However, the rally is stalling as investors await the speech from Geithner outlining America’s plan to deal with the toxic assets on bank balance sheets. Regardless of the market reaction, the GBP/USD should hold up relatively well since no significant news will come from Britain until tomorrow’s CPI release. If the Cable should break above February 23 highs, we anticipate large near-term gains as the currency pair runs towards 2009 highs and the highly psychological 1.50 level. Despite the progress made by the Cable, the medium-term downtrend will hold precedence until the GBP/USD can eclipse the aforementioned barriers. Since both Britain and the U.S. are using quantitative easing to hydrate their economies, a battle surely lies ahead for the Cable to the upside. Discounting the obstacles in the distance, the near-term momentum is pointing to the upside for the GBP/USD. Fundamentally, we find resistances of 1.4617, 1.4655, 1.4707, and 1.4781. The 1.45 area will serve as a psychological cushion with 1.50 acting as a highly psychological barrier. To the downside, we see supports of 1.4554, 1.4505, 1.4424 and 1.4370. The GBP/USD is currently exchanging at 1.4573.
USD/JPY
The USD/JPY has bounced back above our 1st tier downtrend and uptrend lines in reaction to a very negative Business Survey Index from Japan. The Survey indicates the Japanese economy continues to fall off a cliff, weakening relative to the U.S. economy. As a result, America takes another step ahead in the battle of the comparative health of the two economies. Both Japan and America are implementing quantitative easing, though America’s is more extreme in relation to GDP. However, the USD/JPY is showing investors believe Japan may need to commit more funds to quantitative easing in order to counter the country’s severe economic contraction. On the other hand, the U.S. will release its Final GDP number this week and who knows what other trick cards the government will pull from its sleeve. Therefore, we may witness the continuation of an indecisive USD/JPY with such high uncertainty in both countries concerning economic performance and monetary/fiscal policy policies. The USD/JPY is presently sitting right at our 2nd tier downtrend line with the 3rd tier hanging in the distance. Hence, the downtrend holds the upper hand until the currency pair can eclipse March highs and re-approach the critical 100 level. Fundamentally, we find resistances of 96.65, 97.49, 98.11, and 99.00. To the downside, our 95.92 resistance turns support while we hold our supports of 95.08, 94.57, and 93.73. The USD/JPY is currently exchanging at 96.66.
Crude Oil
Crude futures are consolidating just above January 26 highs as investors await the market reaction to Treasury Geithner’s speech. Now that we’re past the March 15 OPEC meeting, crude will rely on U.S. equities and economic data for direction. Furthermore, crude futures should exhibit a positive correlation with the EUR/USD and GBP/USD since the Dollar-based commodity becomes more a more desirable import globally as the Dollar weakens. However, we must not forget crude oil inventories have risen three weeks in a row, and investors will not ignore this trend if it should continue. As for today, if U.S. equities react positively to Geithner’s plan to rid toxic assets from bank balance sheets, crude futures will follow suit since a positive reaction would deem a hope that the U.S. economy is turning around. Crude futures remain comfortably above our near-term uptrend and downtrend lines. Therefore, crude is still in a positive trend with January highs hanging in the distance. It would take a major retraction in the futures to knock crude back into its near-term downtrend. Fundamentally, we find supports of $52.09/bbl, $51.56/bbl, $50.98/bbl, and $50.45/bbl. The $50/bbl is a psychological cushion while $55/bbl serves a psychological barrier. To the topside, we see resistances of $53.18/bbl, $53.77/bbl, $54.52/bbl, and $54.9/bbl. Crude futures are currently trading at $52.46/bbl.
Gold
Gold failed to close above our near-term downtrend line on the 4-hour and are weakening back to the psychological $950/oz area as investors away in the U.S. government’s plan to deal with toxic assets. The correlation between gold and equities is a mess, and it will be interesting to see how the two interact in the near-term. Regardless, we’re going to stick with the precedent that gold ultimately has a negative correlation with equities. However, we’re approaching precious metals with a wait and see attitude since America’s use of quantitative easing is changing the layout of the playing field. That being said, there’s the possibility gold could exhibit a negative correlation with the Dollar as America’s currency loses its status as a safe haven. Even though the precious metal failed to close above our downtrend, it remains above our 1st tier uptrend line while hugging the 2nd tier. Hence, gold is holding onto its uptrend for the time being even if we witness some more near-term profit taking. Fundamentally we maintain our resistances of $951.43/oz, $955.34/oz, $959.90/oz, and $962.51/oz. To the downside, hold our supports of $948.17/oz, $945.88/oz, $942.62/oz, and $940.67/oz. Gold is currently trading at $950.20/oz.
S&P
The S&P futures are posting solid gains after the government released the details of its much anticipated plan to deal with toxic assets. However, the futures are presently showing some hesitation as investors await the Existing Home Sales data. Despite current gains, the S&P futures are still below March 19 highs, our 3rd tier downtrend line, and the highly psychological 800 level. Hence, there are several near-term landmines lying in the path of the S&P’s trajectory upwards. The futures are at a pivot point considering they could easily duck back into their incessant downtrend tendency or catapult above 800. As a result, we expect high volatility in the coming trading sessions especially with the U.S. revealing its Final GDP later this week. As a result, despite the rampant optimism in equity markets, we are not out of the woods yet. Correlation wise, crude futures are edging down while the 30 Year T-Bond futures are strengthening, both negative signs for the daily performance of the S&P futures. It will be interest to see how U.S. equities finish the session. Analysts will sift through the toxic asset plan while looking for faults. At first glance, the plan appears complex and exposes the U.S. to greater losses as far as toxic assets are concerned. Therefore, there could be increasing uncertainty over whether the plan will be successful, and we may need to see concrete results in economic data and bank earnings for investors to buy into the plan. Fundamentally, we find resistance of 782.5 with additional resistances hanging at 789.25, 794.5, 804, 812.75 and 818.75. To the downside, we see supports of 775, 765.25, 758.25, and 748. The 800 level serves as a psychological barrier and 750 as a cushion. The S&P futures are currently trading at 782.75.
30 Year
The 30 Year T-Bond futures have calmed down after their historical run last week. We’re witnessing consolidation as investors await results from upcoming Treasury auctions to see whether yields really fall as much as anticipated. China announced it will continue to hold confidence in U.S. Treasuries, most likely due to the U.S. government’s defense of its debt via quantitative easing. However, there are rumblings China plans to diversify its foreign exchange reserves, implying the Chinese government may slow down its purchase rate of U.S assets. The confusion is halting the rise of U.S. Treasuries since it is uncertain whether America’s funds designated for quantitative easing will be able to counter the declining demand globally. As a result, the 30 Year futures remain below our near-term uptrend and downtrend lines, implying the futures still have work to do as far as developing a lasting uptrend is concerned. Regardless, the movement last week was significant, and we should see the return of volatility this week with our trend lines reaching an inflection point while U.S. government reveals its plans for dealing with toxic assets and financial regulations. Fundamentally, we see resistance of 132.39 with additional resistances hanging at 132.98 and 133.36. To the downside, we find supports of 131.34, 130.95, 130.53, and 130.11. The 30 Year Treasury Bond futures are currently trading at 131 17.5.
The consolidation of the EUR/USD continues while the currency pair weakens Monday due to a much weaker than expected Trade Balance combined with a downward revision of the last release. A declining Trade Balance reflects the weakness in Germany’s production and manufacturing as exports decline and imports rise. Despite the seesaw behavior over the last few sessions, we anticipate the return to volatility shortly. Last week’s movement was historical and should result in refractions for the days/weeks ahead. Last week’s flurry of news from the Federal Reserve greatly distracted investors from the underlying economic fundamentals. The distraction will continue today as Treasury Secretary Geithner reveals America’s plan for dealing with toxic assets. However, investors’ sights are returning to the state of the EU economy. The shape of the EU economy will come back into focus Tuesday with the EU releasing a concoction of PMI and trade data. While we may witness some more near-term consolidation to the downside today, the EUR/USD remains comfortably above our 1st tier uptrend line and downtrend lines. Therefore, the momentum has clearly shifted to the upside, and we anticipate this trend to continue until the currency pair reaches the psychological 1.40 level. Fundamentally, we maintain our supports of 1.3554, 1.3494, 1.3427, and 1.3371. To the topside, we hold our resistances of 1.3624, 1.3688, 1.3724, 1.3800, and 1.3848. The 1.35 area becomes a psychological cushion with 1.40 serving as a highly psychological barrier. The EUR/USD is currently exchanging at 1.3586.
GBP/USD
The Cable is strengthening from our uptrend line as the Pound shows relative strength against both the Dollar and Euro after the EU released a highly negative Trade Balance. However, the rally is stalling as investors await the speech from Geithner outlining America’s plan to deal with the toxic assets on bank balance sheets. Regardless of the market reaction, the GBP/USD should hold up relatively well since no significant news will come from Britain until tomorrow’s CPI release. If the Cable should break above February 23 highs, we anticipate large near-term gains as the currency pair runs towards 2009 highs and the highly psychological 1.50 level. Despite the progress made by the Cable, the medium-term downtrend will hold precedence until the GBP/USD can eclipse the aforementioned barriers. Since both Britain and the U.S. are using quantitative easing to hydrate their economies, a battle surely lies ahead for the Cable to the upside. Discounting the obstacles in the distance, the near-term momentum is pointing to the upside for the GBP/USD. Fundamentally, we find resistances of 1.4617, 1.4655, 1.4707, and 1.4781. The 1.45 area will serve as a psychological cushion with 1.50 acting as a highly psychological barrier. To the downside, we see supports of 1.4554, 1.4505, 1.4424 and 1.4370. The GBP/USD is currently exchanging at 1.4573.
USD/JPY
The USD/JPY has bounced back above our 1st tier downtrend and uptrend lines in reaction to a very negative Business Survey Index from Japan. The Survey indicates the Japanese economy continues to fall off a cliff, weakening relative to the U.S. economy. As a result, America takes another step ahead in the battle of the comparative health of the two economies. Both Japan and America are implementing quantitative easing, though America’s is more extreme in relation to GDP. However, the USD/JPY is showing investors believe Japan may need to commit more funds to quantitative easing in order to counter the country’s severe economic contraction. On the other hand, the U.S. will release its Final GDP number this week and who knows what other trick cards the government will pull from its sleeve. Therefore, we may witness the continuation of an indecisive USD/JPY with such high uncertainty in both countries concerning economic performance and monetary/fiscal policy policies. The USD/JPY is presently sitting right at our 2nd tier downtrend line with the 3rd tier hanging in the distance. Hence, the downtrend holds the upper hand until the currency pair can eclipse March highs and re-approach the critical 100 level. Fundamentally, we find resistances of 96.65, 97.49, 98.11, and 99.00. To the downside, our 95.92 resistance turns support while we hold our supports of 95.08, 94.57, and 93.73. The USD/JPY is currently exchanging at 96.66.
Crude Oil
Crude futures are consolidating just above January 26 highs as investors await the market reaction to Treasury Geithner’s speech. Now that we’re past the March 15 OPEC meeting, crude will rely on U.S. equities and economic data for direction. Furthermore, crude futures should exhibit a positive correlation with the EUR/USD and GBP/USD since the Dollar-based commodity becomes more a more desirable import globally as the Dollar weakens. However, we must not forget crude oil inventories have risen three weeks in a row, and investors will not ignore this trend if it should continue. As for today, if U.S. equities react positively to Geithner’s plan to rid toxic assets from bank balance sheets, crude futures will follow suit since a positive reaction would deem a hope that the U.S. economy is turning around. Crude futures remain comfortably above our near-term uptrend and downtrend lines. Therefore, crude is still in a positive trend with January highs hanging in the distance. It would take a major retraction in the futures to knock crude back into its near-term downtrend. Fundamentally, we find supports of $52.09/bbl, $51.56/bbl, $50.98/bbl, and $50.45/bbl. The $50/bbl is a psychological cushion while $55/bbl serves a psychological barrier. To the topside, we see resistances of $53.18/bbl, $53.77/bbl, $54.52/bbl, and $54.9/bbl. Crude futures are currently trading at $52.46/bbl.
Gold
Gold failed to close above our near-term downtrend line on the 4-hour and are weakening back to the psychological $950/oz area as investors away in the U.S. government’s plan to deal with toxic assets. The correlation between gold and equities is a mess, and it will be interesting to see how the two interact in the near-term. Regardless, we’re going to stick with the precedent that gold ultimately has a negative correlation with equities. However, we’re approaching precious metals with a wait and see attitude since America’s use of quantitative easing is changing the layout of the playing field. That being said, there’s the possibility gold could exhibit a negative correlation with the Dollar as America’s currency loses its status as a safe haven. Even though the precious metal failed to close above our downtrend, it remains above our 1st tier uptrend line while hugging the 2nd tier. Hence, gold is holding onto its uptrend for the time being even if we witness some more near-term profit taking. Fundamentally we maintain our resistances of $951.43/oz, $955.34/oz, $959.90/oz, and $962.51/oz. To the downside, hold our supports of $948.17/oz, $945.88/oz, $942.62/oz, and $940.67/oz. Gold is currently trading at $950.20/oz.
S&P
The S&P futures are posting solid gains after the government released the details of its much anticipated plan to deal with toxic assets. However, the futures are presently showing some hesitation as investors await the Existing Home Sales data. Despite current gains, the S&P futures are still below March 19 highs, our 3rd tier downtrend line, and the highly psychological 800 level. Hence, there are several near-term landmines lying in the path of the S&P’s trajectory upwards. The futures are at a pivot point considering they could easily duck back into their incessant downtrend tendency or catapult above 800. As a result, we expect high volatility in the coming trading sessions especially with the U.S. revealing its Final GDP later this week. As a result, despite the rampant optimism in equity markets, we are not out of the woods yet. Correlation wise, crude futures are edging down while the 30 Year T-Bond futures are strengthening, both negative signs for the daily performance of the S&P futures. It will be interest to see how U.S. equities finish the session. Analysts will sift through the toxic asset plan while looking for faults. At first glance, the plan appears complex and exposes the U.S. to greater losses as far as toxic assets are concerned. Therefore, there could be increasing uncertainty over whether the plan will be successful, and we may need to see concrete results in economic data and bank earnings for investors to buy into the plan. Fundamentally, we find resistance of 782.5 with additional resistances hanging at 789.25, 794.5, 804, 812.75 and 818.75. To the downside, we see supports of 775, 765.25, 758.25, and 748. The 800 level serves as a psychological barrier and 750 as a cushion. The S&P futures are currently trading at 782.75.
30 Year
The 30 Year T-Bond futures have calmed down after their historical run last week. We’re witnessing consolidation as investors await results from upcoming Treasury auctions to see whether yields really fall as much as anticipated. China announced it will continue to hold confidence in U.S. Treasuries, most likely due to the U.S. government’s defense of its debt via quantitative easing. However, there are rumblings China plans to diversify its foreign exchange reserves, implying the Chinese government may slow down its purchase rate of U.S assets. The confusion is halting the rise of U.S. Treasuries since it is uncertain whether America’s funds designated for quantitative easing will be able to counter the declining demand globally. As a result, the 30 Year futures remain below our near-term uptrend and downtrend lines, implying the futures still have work to do as far as developing a lasting uptrend is concerned. Regardless, the movement last week was significant, and we should see the return of volatility this week with our trend lines reaching an inflection point while U.S. government reveals its plans for dealing with toxic assets and financial regulations. Fundamentally, we see resistance of 132.39 with additional resistances hanging at 132.98 and 133.36. To the downside, we find supports of 131.34, 130.95, 130.53, and 130.11. The 30 Year Treasury Bond futures are currently trading at 131 17.5.
