EUR/USD
The EUR/USD’s rally topped out yesterday as we expected, with the S&P futures hesitating at 900 while investors await Thursday’s flood of stress test news and economic data. Yesterday’s decline came on minimal volume, showing there is presently insufficient conviction behind the pullback to send the currency pair tumbling. The EUR/USD is stabilizing above Monday’s lows, and could bounce back a bit and trade sideway’s between now and the ECB’s meeting on Thursday. We maintain our bullish outlook on the EUR/USD since no key fundamentals were broken and the momentum remains to the upside with the currency pair trading comfortably above our uptrend lines.
The two key barriers to a large ascent in the EUR/USD are the psychological 1.35 level and our 3rd tier downtrend line. If the currency pair can brave above our 3rd tier downtrend line in particular, there will be little downtrend pressure left to hold back large gains. The EU will release Retail Sales data today, which should receive limited reaction in the FX markets. However, America’s ADP Non-Farm Employment change number could be a market move if it comes in far above/below analyst expectations. Therefore, we expect the EUR/USD to move in lock-step with the S&P futures over the next 24 hours, exercising its positive correlation.
Thursday’s ECB meeting will be critical since the ECB governors have offered various opinions as to the direction of the central bank’s monetary policy. The ECB has maintained its benchmark rate at a respectable level while avoiding liquidity measures such as quantitative easing. The uncertainty among investors could keep any uptrend in check as investors eagerly await results from the meeting. The ECB’s announcement will come on the same day as America’s stress test results, meaning we expect to see a large spike in volatility on Thursday.
Fundamentally, we find resistances of 1.3329, 1.3359, 1.3389, 1.3420, and 1.3442. To the downside, we see supports of 1.3283, 1.3241, 1.3211, 1.3179, and 1.3143. The 1.30 area serves as a psychological cushion with 1.35 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3280.
GBP/USD
The Cable did top out yesterday at our 1.5158 resistance as volume tapered out. However, we view the decline as profit taking since the Cable has had such an impressive run as of late. The GBP/USD is encouragingly finding stability at the highly psychological 1.50 mark, showing the investors are getting comfortable with a 1.50+ future. The Cable is experiencing relative strength after yesterday’s impressive showing in Britain’s Construction PMI. Britain has stringed together a couple weeks of encouraging data, keeping the ball in the bull’s court. While yesterday’s retracement to 1.50 was expected, the Cable remains above all of our uptrend and downtrend lines. Therefore, if the next 24-48 hours go well data and news wise, the Cable could receive the high volume boost we’ve been waiting for, and the currency pair would be off to the races. As a result, we maintain our bullish outlook trend wise. The GBP/USD continues to surpass key technical barriers and is leaving our downtrend lines behind, meaning the uptrend should have considerable room to grow.
Britain’s Nationwide Consumer Confidence number came in better than expected earlier today, keeping the data winning streak alive. However, the resilience of Britain’s economic recovery could be tested today with the release of its Halifax HPI and Services PMI data points. Last week’s Nationwide HPI came in well above analyst expectations, so it will be interesting to see if tomorrow’s Halifax number relays the same message of stabilization in home prices. America’s Pending Home Sales blew by expectations Monday, so a resounding message of recovery in housing builds a solid foundation for the uptrend to spring from. We will also see America’s ADP Non-Farm Employment Change later today, meaning activity in the GBP/USD should pick up from yesterday’s session.
Fundamentally, we find resistances of 1.5059, 1.5114, 1.5158, 1.5213, and 1.5257. To the downside, we see supports of 1.5017, 1.4988, 1.4946, 1.4902, and 1.4869. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5028.
USD/JPY
The USD/JPY is filling out the right shoulder of the head and shoulders pattern we pointed out on Monday. The light volume has disabled the currency pair from climbing past our 3rd tier downtrend line. However, our 2nd tier uptrend line is still in place, and should remain so until we see a pickup in activity in U.S. equities with important economic data and stress test Thursday on the way. Therefore, the USD/JPY is waiting for the S&P to make its first move. If U.S. markets react positively to the next 48 hours of news and the S&P can distance itself from 900, we could see the USD/JPY exercise its positive correlation and re-approach 100 on heavy volume. To the downside, our 97.11 support and April lows serve as key supports. If these cushions don’t hold, then we could witness the pullback accelerate. In all, investors should keep a close eye on U.S. equities to see if they can follow through on their rally. We maintain our bullish stance trend wise on the USD/JPY unless the aforementioned cushions give way.
Fundamentally, we find resistances of 98.76, 99.20, 99.79, 100.56, and 101.43. To the downside, we see supports of 97.98, 97.32, 96.33, 95.58, and 94.97. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 98.26.
Gold
Gold fell sharply on slightly stronger volume than Monday’s session in what is becoming a wild circus act for the precious metal. Gold dropped through all of our previous supports but has recovered above its highly psychological $900/oz level. The positive correlation between gold and U.S. equities continued for the second straight session. Gold may exhibit erratic behavior until the S&P commits to either a 900 + or – reality. We have seen misleading behavior from the precious metal before, so we will stick to the concept that gold will follow its negative correlation with equities during key fundamental movements. Therefore, we wouldn’t be surprised to see the high volatility last throughout the week with important economic data and stress test Thursday on the way. This also leads us to maintain our bearish outlook on gold since we have a bullish outlook on equities trend wise. However, with the correlation out of sync, gold is presently a tough read.
Gold continues to bounce around the critical $900/oz level. Could it be that investors aren’t quite sold yet on an economic recovery, and are covering their bases until Thursday’s stress test? Another reason behind gold’s relative strength could be a sign that China is adding more gold to its reserves in an effort to diversify from the Dollar. However, these explanations are merely speculation until we receive some definitive evidence.
Fundamentally we find supports of $897.73/oz, $895.34/oz, $893.61/oz, $891.87/oz, and $889.04/oz. To the topside, we see resistances of $904.46/oz, $906.42/oz, $908.81/oz, $910.98/oz, and $913.15/oz. Gold is currently trading at $902.05/oz.
Crude Oil
Crude futures continued their consolidation yesterday on marginal volume. However, yesterday’s volume was substantially higher than Monday’s meaning we could see large activity and volatility today. The futures are attempting to position themselves for a rally as they realize April highs suddenly aren’t so far away. If the ADP Non-Farm Employment Change and crude inventories each beat analyst expectations, crude futures could push nicely above May highs towards our 3rd tier uptrend line. Meanwhile, crude should exhibit a positive correlation with U.S. equities until stress test Thursday. Regardless of near-term activity, crude has made statement after statement concerning a commitment to its uptrend. The last tests seem to be our 3rd tier uptrend line and April highs. If crude can climb above these two obstacles, its gains could really accelerate. Meanwhile, a drop beneath our 3rd tier downtrend line could result in sharp near-term losses.
Volatility should pick up with the U.S. releasing its ADP Non-Farm Employment Change data followed by weekly inventories. Crude inventories continue to come in far above analyst expectations, but the rise in supply doesn’t seem to bother investors as they hone in on a global economic recovery. Appreciation of the Pound and Euro should help international crude demand for the dollar denominated commodity. Additionally, improvements in production and consumption data points around the globe are very encouraging signs for crude’s uptrend.
Fundamentally, we maintain our supports of $53.97/bbl, $53.63/bbl, $53.19/bbl, $52.80/bbl, and $52.29/bbl. To the topside, we hold our resistances of $54.34/bbl, $54.77/bbl, $55.24/bbl, $55.58/bbl, and $55.94/bbl. $50/bbl turns becomes a key psychological cushion again while $55/bbl serves as a psychological cushion. Crude is presently trading at $54.02/bbl.
Disclaimer: FastBrokers' market commentary is provided for information purposes only and under no circumstances should be regarded neither as investment advice or as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. All materials are property of Fast Trading services, LLC and unless otherwise indicated, any unauthorized reproduction is prohibited.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
The EUR/USD’s rally topped out yesterday as we expected, with the S&P futures hesitating at 900 while investors await Thursday’s flood of stress test news and economic data. Yesterday’s decline came on minimal volume, showing there is presently insufficient conviction behind the pullback to send the currency pair tumbling. The EUR/USD is stabilizing above Monday’s lows, and could bounce back a bit and trade sideway’s between now and the ECB’s meeting on Thursday. We maintain our bullish outlook on the EUR/USD since no key fundamentals were broken and the momentum remains to the upside with the currency pair trading comfortably above our uptrend lines.
The two key barriers to a large ascent in the EUR/USD are the psychological 1.35 level and our 3rd tier downtrend line. If the currency pair can brave above our 3rd tier downtrend line in particular, there will be little downtrend pressure left to hold back large gains. The EU will release Retail Sales data today, which should receive limited reaction in the FX markets. However, America’s ADP Non-Farm Employment change number could be a market move if it comes in far above/below analyst expectations. Therefore, we expect the EUR/USD to move in lock-step with the S&P futures over the next 24 hours, exercising its positive correlation.
Thursday’s ECB meeting will be critical since the ECB governors have offered various opinions as to the direction of the central bank’s monetary policy. The ECB has maintained its benchmark rate at a respectable level while avoiding liquidity measures such as quantitative easing. The uncertainty among investors could keep any uptrend in check as investors eagerly await results from the meeting. The ECB’s announcement will come on the same day as America’s stress test results, meaning we expect to see a large spike in volatility on Thursday.
Fundamentally, we find resistances of 1.3329, 1.3359, 1.3389, 1.3420, and 1.3442. To the downside, we see supports of 1.3283, 1.3241, 1.3211, 1.3179, and 1.3143. The 1.30 area serves as a psychological cushion with 1.35 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3280.
GBP/USD
The Cable did top out yesterday at our 1.5158 resistance as volume tapered out. However, we view the decline as profit taking since the Cable has had such an impressive run as of late. The GBP/USD is encouragingly finding stability at the highly psychological 1.50 mark, showing the investors are getting comfortable with a 1.50+ future. The Cable is experiencing relative strength after yesterday’s impressive showing in Britain’s Construction PMI. Britain has stringed together a couple weeks of encouraging data, keeping the ball in the bull’s court. While yesterday’s retracement to 1.50 was expected, the Cable remains above all of our uptrend and downtrend lines. Therefore, if the next 24-48 hours go well data and news wise, the Cable could receive the high volume boost we’ve been waiting for, and the currency pair would be off to the races. As a result, we maintain our bullish outlook trend wise. The GBP/USD continues to surpass key technical barriers and is leaving our downtrend lines behind, meaning the uptrend should have considerable room to grow.
Britain’s Nationwide Consumer Confidence number came in better than expected earlier today, keeping the data winning streak alive. However, the resilience of Britain’s economic recovery could be tested today with the release of its Halifax HPI and Services PMI data points. Last week’s Nationwide HPI came in well above analyst expectations, so it will be interesting to see if tomorrow’s Halifax number relays the same message of stabilization in home prices. America’s Pending Home Sales blew by expectations Monday, so a resounding message of recovery in housing builds a solid foundation for the uptrend to spring from. We will also see America’s ADP Non-Farm Employment Change later today, meaning activity in the GBP/USD should pick up from yesterday’s session.
Fundamentally, we find resistances of 1.5059, 1.5114, 1.5158, 1.5213, and 1.5257. To the downside, we see supports of 1.5017, 1.4988, 1.4946, 1.4902, and 1.4869. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5028.
USD/JPY
The USD/JPY is filling out the right shoulder of the head and shoulders pattern we pointed out on Monday. The light volume has disabled the currency pair from climbing past our 3rd tier downtrend line. However, our 2nd tier uptrend line is still in place, and should remain so until we see a pickup in activity in U.S. equities with important economic data and stress test Thursday on the way. Therefore, the USD/JPY is waiting for the S&P to make its first move. If U.S. markets react positively to the next 48 hours of news and the S&P can distance itself from 900, we could see the USD/JPY exercise its positive correlation and re-approach 100 on heavy volume. To the downside, our 97.11 support and April lows serve as key supports. If these cushions don’t hold, then we could witness the pullback accelerate. In all, investors should keep a close eye on U.S. equities to see if they can follow through on their rally. We maintain our bullish stance trend wise on the USD/JPY unless the aforementioned cushions give way.
Fundamentally, we find resistances of 98.76, 99.20, 99.79, 100.56, and 101.43. To the downside, we see supports of 97.98, 97.32, 96.33, 95.58, and 94.97. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 98.26.
Gold
Gold fell sharply on slightly stronger volume than Monday’s session in what is becoming a wild circus act for the precious metal. Gold dropped through all of our previous supports but has recovered above its highly psychological $900/oz level. The positive correlation between gold and U.S. equities continued for the second straight session. Gold may exhibit erratic behavior until the S&P commits to either a 900 + or – reality. We have seen misleading behavior from the precious metal before, so we will stick to the concept that gold will follow its negative correlation with equities during key fundamental movements. Therefore, we wouldn’t be surprised to see the high volatility last throughout the week with important economic data and stress test Thursday on the way. This also leads us to maintain our bearish outlook on gold since we have a bullish outlook on equities trend wise. However, with the correlation out of sync, gold is presently a tough read.
Gold continues to bounce around the critical $900/oz level. Could it be that investors aren’t quite sold yet on an economic recovery, and are covering their bases until Thursday’s stress test? Another reason behind gold’s relative strength could be a sign that China is adding more gold to its reserves in an effort to diversify from the Dollar. However, these explanations are merely speculation until we receive some definitive evidence.
Fundamentally we find supports of $897.73/oz, $895.34/oz, $893.61/oz, $891.87/oz, and $889.04/oz. To the topside, we see resistances of $904.46/oz, $906.42/oz, $908.81/oz, $910.98/oz, and $913.15/oz. Gold is currently trading at $902.05/oz.
Crude Oil
Crude futures continued their consolidation yesterday on marginal volume. However, yesterday’s volume was substantially higher than Monday’s meaning we could see large activity and volatility today. The futures are attempting to position themselves for a rally as they realize April highs suddenly aren’t so far away. If the ADP Non-Farm Employment Change and crude inventories each beat analyst expectations, crude futures could push nicely above May highs towards our 3rd tier uptrend line. Meanwhile, crude should exhibit a positive correlation with U.S. equities until stress test Thursday. Regardless of near-term activity, crude has made statement after statement concerning a commitment to its uptrend. The last tests seem to be our 3rd tier uptrend line and April highs. If crude can climb above these two obstacles, its gains could really accelerate. Meanwhile, a drop beneath our 3rd tier downtrend line could result in sharp near-term losses.
Volatility should pick up with the U.S. releasing its ADP Non-Farm Employment Change data followed by weekly inventories. Crude inventories continue to come in far above analyst expectations, but the rise in supply doesn’t seem to bother investors as they hone in on a global economic recovery. Appreciation of the Pound and Euro should help international crude demand for the dollar denominated commodity. Additionally, improvements in production and consumption data points around the globe are very encouraging signs for crude’s uptrend.
Fundamentally, we maintain our supports of $53.97/bbl, $53.63/bbl, $53.19/bbl, $52.80/bbl, and $52.29/bbl. To the topside, we hold our resistances of $54.34/bbl, $54.77/bbl, $55.24/bbl, $55.58/bbl, and $55.94/bbl. $50/bbl turns becomes a key psychological cushion again while $55/bbl serves as a psychological cushion. Crude is presently trading at $54.02/bbl.
Disclaimer: FastBrokers' market commentary is provided for information purposes only and under no circumstances should be regarded neither as investment advice or as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. All materials are property of Fast Trading services, LLC and unless otherwise indicated, any unauthorized reproduction is prohibited.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
