EUR/USD
The EUR/USD has pushed through March 30 highs, rallying before the ECB announces its monetary policy decision. While the 50 basis point cut analyst expect is likely, investors will be more interested in what Claude Trichet has to say about the ECB’s potential use of quantitative easing. Trichet will likely say the ECB doesn’t need to cut the benchmark rate further. However, this is what the ECB has said after each of their other rate reductions. As a result of investor apprehension, the EUR/USD is showing limited gains as compared to other major Dollar pairs such as the GBP/USD and AUD/USD. Nevertheless, the EUR/USD will likely follow its positive correlation with U.S. equities. Therefore, if the S&P futures can manage to blow through 2009 highs, the EUR/USD should eagerly follow suit. However, if Claude Trichet indicates the ECB intends to use quantitative easing to loosen EU credit markets, we could witness a sharp reversal in the EUR/USD. The EUR/USD still has to contend with our 2nd tier uptrend line as it reaches an inflection point with our medium-term downtrend line. Therefore, we expect high volatility throughout the rest of today’s trading session. If the EUR/USD can climb above both of the aforementioned trend lines, expect a sharp movement upwards. Fundamentally, we find supports of 1.3334, 1.3291, 1.3253, and 1.3205. To the topside, we see resistances of 1.3366, 1.3409, 1.3442, 1.3476 and 1.3505. The 1.35 area serves as a psychological barrier with 1.30 acting as a heavily-weighted psychological cushion. The EUR/USD is currently exchanging at 1.3352.
GBP/USD
The GBP/USD catapulted after rising above our 2nd tier uptrend line, surging well beyond the psychological 1.45 barrier. In fact, the Cable peaked past our 3rd tier trend line before retreating as investors take profits before challenging March highs. Britain continues to receive good economic data including yesterdays Manufacturing PMI and today’s Construction PMI and Nationwide HPI numbers. In other words, the manufacturing and construction industries are looking up in Britain while home prices are actually on the rise. Therefore, the quantitative easing is having its desired impact on credit markets as lower interest rates lure home buyers, soaking up some of the excess supply. As a result, the Cable is making an obvious statement in its inclination to follow the uptrend, leaving our downtrend line in its dust. The rally taking place in U.S. equities is only fueling the fire considering the tight correlation between the GBP/USD and S&P futures. Investors expect a recovery in Europe to follow stabilization in the U.S. Hence, the positive housing and manufacturing data surfacing from America is encouraging for those long the Cable. If the GBP/USD can climb past March highs, we anticipate more large gains to the upside as the currency pair heads towards 2009 highs. That being said, our 3rd tier trend line should be a challenge, and bears will not let March highs go easily. Therefore, expect a battle in the near-term. Fundamentally, we find resistance of 1.4644 with additional resistances hanging at 1.4683, 1.4728, 1.4774 and 1.4820. The 1.50 level serves as a key psychological barrier while the 1.45 area becomes a psychological cushion. To the downside, we see supports of 1.4601, 1.4573, 1.4541, 1.4506 and 1.4474. The GBP/USD is currently exchanging at 1.4646.
USD/JPY
The USD/JPY is so close to breaking out February highs investors can taste it. The long-fought battle may come to a conclusion today. The USD/JPY is finally building up some nice momentum, albeit slow. The significance of these levels is displayed by the heavy consolidation taking place over the last 4 or 5 weeks. The currency pair is strengthening from our 2rd tier downtrend line with confidence. However, before we get ahead of ourselves, we need to keep in mind the USD/JPY has given several head fakes in its return to 100. Investors are still hesitating sending the USD/JPY much higher because it would likely imply large near-term gains. The U.S. is clearly in the lead when comparing the two economies. The U.S. is reporting stabilization and improvement in some of its data points while economic data being emitted from Japan continues to disappoint even reduced expectations. Since both countries have set their interest rates close to zero, the Carry Trade is unwound. Additionally, both Japan and America are participating in quantitative easing. Therefore, America’s economy outperforming Japan’s creates a convincing argument for a weaker Yen. A stronger Dollar is music to the ears of Japanese manufacturers and exports being crushed by such a strong Yen. We placed two new downtrend lines on our chart to give investors an idea of where future confrontations lie. Fundamentally, we find resistances of 99.79, 100.28, 100.71, 101.44, and 101.98. To the downside, we see supports of 99.06, 98.16, 97.66, 97.14, and 96.66. The USD/JPY is currently exchanging at 99.48.
Crude Oil
Crude futures are soaring higher from our 1st tier uptrend after weekly inventories came in lower than analyst expectations. Yesterday’s improvement in U.S. housing and manufacturing data is exciting the rally as investors shrug off disappointing unemployment numbers. Of most interest to crude traders was the news that auto sales this month did not decline as much as analysts had feared. Greater incentives and special deals offered by auto retailers are finally attracting new buyers as the U.S. Treasury fights to keep interest rates at a reasonable level. Crude futures catapulted through the psychological $50/bbl without flinching. Therefore, the futures are setting the stage for a massive rally and a reinstatement of the uptrend. The performance of crude will now look to U.S. equities to see if the S&P futures can break through March highs. If they can, which seems likely at present, crude futures should follow suit to the upside. The next challenge for crude is our 1st tier downtrend line followed by our 2nd tier and 2009 highs. Therefore, crude futures aren’t out of the woods. Now that the futures have made their move, we wouldn’t be surprised to see some near-term profit taking and consolidation. In the big picture, rising unemployment should be a cause for concern since it implies less consumption and demand for crude. However, for the time being, the picture is looking better for crude. Fundamentally, we find resistances of $51.28/bbl, $51.73/bbl, $52.05/bbl, $52.46/bbl and $52.86/bbl. To the downside, we see supports of $50.80/bbl, $50.38/bbl, $49.97/bbl, and $49.49/bbl. Crude futures are presently trading at $51.04/bbl.
Gold
Gold threw us another curveball yesterday, reversing back to a negative correlation with the EUR/USD and GBP/USD. Is it possible the precious metal’s normal negative correlation with U.S. equities is coming back into play? The price of Gold deteriorated over the last 24 hours before testing March lows and our 1st tier uptrend line. As we stated previously, we believe our 1st tier uptrend line to be the final straw for Gold’s uptrend. If this trend line can’t hold, we could witness a rapid selloff. The S&P futures reflect the significance of the moment as the knock on the door of 2009 highs. If the S&P futures leap through their highs, we expect Gold to fall through its March lows and possibly the highly psychological $900/oz level. Therefore, if Gold were to recover and reinstate its uptrend, now would be the time. However, since we’re seeing some improvement in economic data globally and political leaders are pushing an optimistic attitude at the G20 Summit, it’s hard to believe we’ll see U.S. equities nosedive in the near-term. On the other hand, investors could be waiting for America’s release of its official Unemployment Rate on Friday before deciding whether to test $900/oz. Fundamentally we see resistances of $914.54/oz, $916.98/oz, $919.32/oz, $922.45/oz, and $924.92/oz. To the downside, find supports of $910.61/oz, $908.36/oz, $905.56/oz, $902.42, and $898.54/oz. Gold is currently trading at $913.00/oz.
S&P
The S&P futures brushed aside negative unemployment data, piecing together an impressive rally on the back of better than expected existing home sales and manufacturing data. The economic crisis began with the collapse of America’s housing market, so stabilization in housing gives investors hope the worst of the economic crisis may be behind us. Furthermore, improvement in the housing market gives investors confidence that the stimulus initiatives enacted by the U.S. government will be successful. In addition to the positively-mixed economic data, investors found comfort in a constructive meeting between America and China at the G20. Dubbed the G2, the relationship and cooperation between China and America are of the upmost importance in the recovery of the global economy. Lastly, financials are experiencing considerable strength Thursday morning as the FASB plans to vote on a revision of U.S. accounting standards. The revision should help financial institutions value some of the toxic assets on their balance sheets, giving investors a better picture as to the extent of the damage caused by the credit crunch. The S&P futures are reacting favorably to all of the news and data flooding the news wires, sprinting through the psychological 800 level towards 2009 highs. The EUR/USD, GBP/USD, and crude futures are following suit, giving an indication that the S&P futures may have what it takes to set new 2009 highs. If this is the case, we see some tight consolidation in the near-term with investors cashing in some profits as the futures approach the psychological 850 barrier. Despite any near-term barriers, the S&P futures are proving this rally has legs by rising through all of our downtrend lines. Therefore, it appears the rally could take another step forward. However, the futures still need to brave through 2009 highs, and until they do, all bets are off. That being said, investors could wait for tomorrow’s Unemployment Rate release along with ISM Non-Manufacturing PMI and Non-Farm Employment Change. Fundamentally, we find resistances of 829.5, 834.75, 840.25, 845.25, and 850.5. To the downside, we see supports of 821.5, 815, 809.25, 804.25, and 799.75. 800 becomes a psychological cushion again with 850 serving as a psychological barrier. The S&P futures are currently trading at 825.25.
30 Year
The rally in the 30 Year T-Bond futures faded yesterday after the U.S. released better than expected housing and manufacturing data, sending equities higher and treasury futures lower. However, the 30 Year futures are recovering Thursday after the U.S. released more negative unemployment data. Hence, with the U.S. taking care of the excess supply of treasuries via quantitative easing, the 30 Year futures are falling in line with their ordinary negative correlation with the S&P futures. The futures are struggling with the concept of retesting March highs. There’s certainly a wide range the 30 Year futures have to deal with to the upside. Therefore, the futures have their work cut out for them. Investors will wait to see if the S&P futures can climb through their 2009 highs. If so, we can see the reversal in the 30 Year futures pick up speed to the downside. Fundamentally, we maintain our resistances of 130.047, 130.563, 130.969, and 131.547. To the downside, we hold our supports of 129.406, 128.984, 128.516, and 128.063. The 30 Year T-Bond futures are presently trading at 129 31.0.
The EUR/USD has pushed through March 30 highs, rallying before the ECB announces its monetary policy decision. While the 50 basis point cut analyst expect is likely, investors will be more interested in what Claude Trichet has to say about the ECB’s potential use of quantitative easing. Trichet will likely say the ECB doesn’t need to cut the benchmark rate further. However, this is what the ECB has said after each of their other rate reductions. As a result of investor apprehension, the EUR/USD is showing limited gains as compared to other major Dollar pairs such as the GBP/USD and AUD/USD. Nevertheless, the EUR/USD will likely follow its positive correlation with U.S. equities. Therefore, if the S&P futures can manage to blow through 2009 highs, the EUR/USD should eagerly follow suit. However, if Claude Trichet indicates the ECB intends to use quantitative easing to loosen EU credit markets, we could witness a sharp reversal in the EUR/USD. The EUR/USD still has to contend with our 2nd tier uptrend line as it reaches an inflection point with our medium-term downtrend line. Therefore, we expect high volatility throughout the rest of today’s trading session. If the EUR/USD can climb above both of the aforementioned trend lines, expect a sharp movement upwards. Fundamentally, we find supports of 1.3334, 1.3291, 1.3253, and 1.3205. To the topside, we see resistances of 1.3366, 1.3409, 1.3442, 1.3476 and 1.3505. The 1.35 area serves as a psychological barrier with 1.30 acting as a heavily-weighted psychological cushion. The EUR/USD is currently exchanging at 1.3352.
GBP/USD
The GBP/USD catapulted after rising above our 2nd tier uptrend line, surging well beyond the psychological 1.45 barrier. In fact, the Cable peaked past our 3rd tier trend line before retreating as investors take profits before challenging March highs. Britain continues to receive good economic data including yesterdays Manufacturing PMI and today’s Construction PMI and Nationwide HPI numbers. In other words, the manufacturing and construction industries are looking up in Britain while home prices are actually on the rise. Therefore, the quantitative easing is having its desired impact on credit markets as lower interest rates lure home buyers, soaking up some of the excess supply. As a result, the Cable is making an obvious statement in its inclination to follow the uptrend, leaving our downtrend line in its dust. The rally taking place in U.S. equities is only fueling the fire considering the tight correlation between the GBP/USD and S&P futures. Investors expect a recovery in Europe to follow stabilization in the U.S. Hence, the positive housing and manufacturing data surfacing from America is encouraging for those long the Cable. If the GBP/USD can climb past March highs, we anticipate more large gains to the upside as the currency pair heads towards 2009 highs. That being said, our 3rd tier trend line should be a challenge, and bears will not let March highs go easily. Therefore, expect a battle in the near-term. Fundamentally, we find resistance of 1.4644 with additional resistances hanging at 1.4683, 1.4728, 1.4774 and 1.4820. The 1.50 level serves as a key psychological barrier while the 1.45 area becomes a psychological cushion. To the downside, we see supports of 1.4601, 1.4573, 1.4541, 1.4506 and 1.4474. The GBP/USD is currently exchanging at 1.4646.
USD/JPY
The USD/JPY is so close to breaking out February highs investors can taste it. The long-fought battle may come to a conclusion today. The USD/JPY is finally building up some nice momentum, albeit slow. The significance of these levels is displayed by the heavy consolidation taking place over the last 4 or 5 weeks. The currency pair is strengthening from our 2rd tier downtrend line with confidence. However, before we get ahead of ourselves, we need to keep in mind the USD/JPY has given several head fakes in its return to 100. Investors are still hesitating sending the USD/JPY much higher because it would likely imply large near-term gains. The U.S. is clearly in the lead when comparing the two economies. The U.S. is reporting stabilization and improvement in some of its data points while economic data being emitted from Japan continues to disappoint even reduced expectations. Since both countries have set their interest rates close to zero, the Carry Trade is unwound. Additionally, both Japan and America are participating in quantitative easing. Therefore, America’s economy outperforming Japan’s creates a convincing argument for a weaker Yen. A stronger Dollar is music to the ears of Japanese manufacturers and exports being crushed by such a strong Yen. We placed two new downtrend lines on our chart to give investors an idea of where future confrontations lie. Fundamentally, we find resistances of 99.79, 100.28, 100.71, 101.44, and 101.98. To the downside, we see supports of 99.06, 98.16, 97.66, 97.14, and 96.66. The USD/JPY is currently exchanging at 99.48.
Crude Oil
Crude futures are soaring higher from our 1st tier uptrend after weekly inventories came in lower than analyst expectations. Yesterday’s improvement in U.S. housing and manufacturing data is exciting the rally as investors shrug off disappointing unemployment numbers. Of most interest to crude traders was the news that auto sales this month did not decline as much as analysts had feared. Greater incentives and special deals offered by auto retailers are finally attracting new buyers as the U.S. Treasury fights to keep interest rates at a reasonable level. Crude futures catapulted through the psychological $50/bbl without flinching. Therefore, the futures are setting the stage for a massive rally and a reinstatement of the uptrend. The performance of crude will now look to U.S. equities to see if the S&P futures can break through March highs. If they can, which seems likely at present, crude futures should follow suit to the upside. The next challenge for crude is our 1st tier downtrend line followed by our 2nd tier and 2009 highs. Therefore, crude futures aren’t out of the woods. Now that the futures have made their move, we wouldn’t be surprised to see some near-term profit taking and consolidation. In the big picture, rising unemployment should be a cause for concern since it implies less consumption and demand for crude. However, for the time being, the picture is looking better for crude. Fundamentally, we find resistances of $51.28/bbl, $51.73/bbl, $52.05/bbl, $52.46/bbl and $52.86/bbl. To the downside, we see supports of $50.80/bbl, $50.38/bbl, $49.97/bbl, and $49.49/bbl. Crude futures are presently trading at $51.04/bbl.
Gold
Gold threw us another curveball yesterday, reversing back to a negative correlation with the EUR/USD and GBP/USD. Is it possible the precious metal’s normal negative correlation with U.S. equities is coming back into play? The price of Gold deteriorated over the last 24 hours before testing March lows and our 1st tier uptrend line. As we stated previously, we believe our 1st tier uptrend line to be the final straw for Gold’s uptrend. If this trend line can’t hold, we could witness a rapid selloff. The S&P futures reflect the significance of the moment as the knock on the door of 2009 highs. If the S&P futures leap through their highs, we expect Gold to fall through its March lows and possibly the highly psychological $900/oz level. Therefore, if Gold were to recover and reinstate its uptrend, now would be the time. However, since we’re seeing some improvement in economic data globally and political leaders are pushing an optimistic attitude at the G20 Summit, it’s hard to believe we’ll see U.S. equities nosedive in the near-term. On the other hand, investors could be waiting for America’s release of its official Unemployment Rate on Friday before deciding whether to test $900/oz. Fundamentally we see resistances of $914.54/oz, $916.98/oz, $919.32/oz, $922.45/oz, and $924.92/oz. To the downside, find supports of $910.61/oz, $908.36/oz, $905.56/oz, $902.42, and $898.54/oz. Gold is currently trading at $913.00/oz.
S&P
The S&P futures brushed aside negative unemployment data, piecing together an impressive rally on the back of better than expected existing home sales and manufacturing data. The economic crisis began with the collapse of America’s housing market, so stabilization in housing gives investors hope the worst of the economic crisis may be behind us. Furthermore, improvement in the housing market gives investors confidence that the stimulus initiatives enacted by the U.S. government will be successful. In addition to the positively-mixed economic data, investors found comfort in a constructive meeting between America and China at the G20. Dubbed the G2, the relationship and cooperation between China and America are of the upmost importance in the recovery of the global economy. Lastly, financials are experiencing considerable strength Thursday morning as the FASB plans to vote on a revision of U.S. accounting standards. The revision should help financial institutions value some of the toxic assets on their balance sheets, giving investors a better picture as to the extent of the damage caused by the credit crunch. The S&P futures are reacting favorably to all of the news and data flooding the news wires, sprinting through the psychological 800 level towards 2009 highs. The EUR/USD, GBP/USD, and crude futures are following suit, giving an indication that the S&P futures may have what it takes to set new 2009 highs. If this is the case, we see some tight consolidation in the near-term with investors cashing in some profits as the futures approach the psychological 850 barrier. Despite any near-term barriers, the S&P futures are proving this rally has legs by rising through all of our downtrend lines. Therefore, it appears the rally could take another step forward. However, the futures still need to brave through 2009 highs, and until they do, all bets are off. That being said, investors could wait for tomorrow’s Unemployment Rate release along with ISM Non-Manufacturing PMI and Non-Farm Employment Change. Fundamentally, we find resistances of 829.5, 834.75, 840.25, 845.25, and 850.5. To the downside, we see supports of 821.5, 815, 809.25, 804.25, and 799.75. 800 becomes a psychological cushion again with 850 serving as a psychological barrier. The S&P futures are currently trading at 825.25.
30 Year
The rally in the 30 Year T-Bond futures faded yesterday after the U.S. released better than expected housing and manufacturing data, sending equities higher and treasury futures lower. However, the 30 Year futures are recovering Thursday after the U.S. released more negative unemployment data. Hence, with the U.S. taking care of the excess supply of treasuries via quantitative easing, the 30 Year futures are falling in line with their ordinary negative correlation with the S&P futures. The futures are struggling with the concept of retesting March highs. There’s certainly a wide range the 30 Year futures have to deal with to the upside. Therefore, the futures have their work cut out for them. Investors will wait to see if the S&P futures can climb through their 2009 highs. If so, we can see the reversal in the 30 Year futures pick up speed to the downside. Fundamentally, we maintain our resistances of 130.047, 130.563, 130.969, and 131.547. To the downside, we hold our supports of 129.406, 128.984, 128.516, and 128.063. The 30 Year T-Bond futures are presently trading at 129 31.0.
