EUR/USD
The EUR/USD is rallying strongly in reaction to today’s decision by the ECB. Trichet announced the ECB is lowering its benchmark rate to 1%, in-line with analyst expectations. In addition to the interest rate cut, the ECB has decided to move forward with quantitative easing-like measures. The ECB will use roughly $80 billion to purchase Euro denominated bonds while extending maturities to 12 months. The EUR/USD is reacting positively to quantitative easing, as we witnessed previously with the GBP/USD after the BOE launched its own quantitative easing operation. Investors believe ‘alternative’ liquidity measures will help the EU economy recover more quickly while counterbalancing deflationary pressures. Furthermore, it’s encouraging to see the ECB being a little more proactive after providing mixed opinions which heightened uncertainty.
We notice a pickup in volume on the EUR/USD’s up-bars as the currency pair retests May highs. If the EUR/USD receives some strong volume to the upside over the next 4 hours, the momentum could be enough to send the currency pair beyond its present right shoulder. Technically speaking, this could be a sign of a near-term breakout to the upside. However, the EUR/USD may not be able to enjoy its upward momentum for too long since our two key barriers are approaching, 1.35 and our 3rd tier downtrend line. Also, keep in mind the EUR/USD ultimately falls in line with its positive correlation with U.S. equities. Therefore, if investors take profits in equities and sell on the news, the EUR/USD’s rally could cool as well. On the other hand, if the currency pair can manage to climb over these barriers, particularly the downtrend line, near-term gains could really accelerate. With the S&P futures breaking free of their own restraints, the correlations are playing in favor of a broad based depreciation of the Dollar. We maintain our bullish outlook for the aforementioned reasons.
Fundamentally, we find resistances of 1.3442, 1.3474, 1.3497, 1.3536, and 1.3573. To the downside, we see supports of 1.3420, 1.3389, 1.3359, 1.3322, and 1.3292. The 1.30 area serves as a psychological cushion with 1.35 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3413.
GBP/USD
The Pound is experienced relative weakness across the board after the BOE announced it will add $50 billion to its present quantitative easing operation to make a grand total of $125 billion. While analysts expected the BOE to keep its benchmark rate unchanged at .50%, the additional funds for quantitative easing caught investors a bit off-guard. Boosting quantitative easing could indicate that deflationary pressures are stronger than expected, meaning the British economy is still facing some unforeseen difficulties. The Cable pulled back from its rally on strong volume in response to the news.
Despite today’s downturn, the Cable has found reliable support once again at 1.50, showing the bulls aren’t ready to call it quits. The resilience of the GBP/USD stems from the consistent, positive economic data coming from Britain over the past two weeks. Additionally, the S&P futures have seemingly broken free of their 900 psychological level, so the Cable is receiving help from its positive correlation with U.S. equities. However, the large volume down-bar is disconcerting. Therefore, if U.S. equities experience profit-taking today, the GBP/USD could be under substantial selling pressure. The 1.50 level and our 3rd tier uptrend line with be key for the near-term. Regardless of the present pullback, we maintain our bullish outlook on the GBP/USD given positive global economic data and the current strength of U.S. equities.
Fundamentally, we maintain resistances of 1.5059, 1.5114, 1.5158, 1.5213, and 1.5257. To the downside, we hold 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 1.5051.
USD/JPY
The USD/JPY is trying to wrestle free of its right shoulder with the S&P running past 900. While the USD/JPY has managed to stay above our 2nd tier uptrend line, the currency pair continues to have issues with our 3rd tier downtrend line. The USD/JPY is exhibiting a textbook, upward sloping head and shoulders pattern, meaning it will need significant volume to climb past May highs towards the highly psychological 100 level. 100 remains a heavy burden on the bull trend, showing investors will need to be certain of an economic recovery if they are to send the USD/JPY beyond this level and 2009 highs. That being said, our critical 5th tier downtrend line is slowly creeping towards present price. If the USD/JPY can hold on and climb above the 5th tier, near-term gains could accelerate. However, a lot can happen between now and then. We maintain our positive outlook on the USD/JPY since the momentum remains to the upside while the currency pair only has a couple barriers standing between it and large gains. Japan will release its monetary policy meeting minutes late in Thursday’s session, giving investors a peak at the BOJ’s view of the state of Japan’s economy.
Fundamentally, we maintain resistances of 99.20, 99.79, 100.56, and 101.43 with fresh top-end hanging at 102.14. To the downside, we see supports of 98.67, 97.98, 97.32, 96.33, and 95.58. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 99.13.
Crude Oil
Crude leapt past everything over the past 24 hours on significant volume. Crude passed previous 2009 highs and our 3rd tier uptrend and downtrend lines. The combination of lower than expected weekly inventories and ADP Non-Farm Employment change data provided the bull catalyst we were anticipating. Crude’s charge finally topped out around $58.50, forgoing a test of $60/bbl as investors take profits. Crude is quickly climbing back to a respectable level on the belief that the global economy is rebounding and demand will rebound with production and consumption. A negative repercussion of crude’s recovery is that it reignites the possibility of rapid inflation impacting economies as central banks pass record stimulus packages while participating in alternative liquidity operations.
While crude could continue to experience more near-term downward pressure as investors take profits, the futures have taken another large step forward technically. The bull trend remains in the driver’s seat unless we get negative news from financials or a stream of disappointing economic data. Additionally, the volume is there to back crude’s action, showing the upward movement was made with conviction.
Though we can provide only near-term technical guidance until crude futures calm, we can tell you that $60/bbl should serve as a psychological barrier. We find additional resistances of $58.01/bbl and $58.57/bbl. To the downside, we see supports of $56.84/bbl, $56.61/bbl, $56.34/bbl, $55.90/bbl, and $55.58/bbl. Crude is presently trading at $57.23/bbl.
Gold
Gold has surged higher in reaction to the surprise addition of funds to the BOE’s quantitative easing operation. In addition to the BOE’s decision, the ECB has announced the implementation of alternative liquidity measures of its own. The ramp up in liquidity around the globe is creating fear of future inflation, which in turn is boosting the price of gold. However, if the rampant inflation does incur, it may not be recognized in CPI data for quite some time. Hence, we believe the run up in gold may be a speculative over-reaction. Investor uncertainty concerning gold’s recent jump is represented in the lighter volume backing the up-bar in comparison to 5/5’s down-bar. As a result, the precious metal is pulling back from our 2nd tier downtrend line. Hence, we will hold our bearish outlook trend-wise for the time being.
Regardless, gold has made some impressive strides to the upside in the near-term. The precious metal logged some solid volume to the upside yesterday despite rising U.S. equities. Furthermore, gold continues to fight back above the highly psychological $900/oz level, showing the precious metal has a path not entirely related to the direction of equities. Gold’s the correlations have certainly been exhibiting odd behavior as of late. Therefore, it may be unwise to rely upon its normal negative correlation with equities. Investors may want to keep a closer eye on upcoming CPI data when analyzing gold. If we do realize the anticipated surge in inflation, gold may be have the ammunition to charge ahead.
Fundamentally we find supports of $913.15/oz, $910.98/oz, $908.37/oz, $905.98/oz, and $903.59/oz. To the topside, we see resistances of $915.76/oz, $917.71/oz, $920.75/oz, $920.75/oz, and $925.31/oz. Gold is currently trading at $913.35/oz.
S&P
The S&P futures are under some selling pressure Thursday despite better than expected weekly Unemployment Claims data. The weakness comes after the S&P’s surge past 900 in reaction to a much better than expected ADP Non-Farm Employment change number. Investors are encouraged by the news, and are hoping an upward slope is forming in this data point accompanied by a downward slope in Unemployment Claims. Today’s Unemployment Claims number did come in better than expected today with an uptick in Prelim Unit Labor Cost, implying consumer sentiment and consumption should continue to rebound. As a result of the positive developments data wise, we view the S&P’s current weakness as a sign of profit taking. The S&P futures have been on an incredible run, and investors could continue to close some positions as they sell on the news of stress test results. However, the stress test results should still be approached with a bit of caution. One never knows what the results could show, and there is always the possibility that the news leaks over the past week could have been used to soften the blow of negative stress test results. Keep in mind this is pure speculation and we will have to wait and see. Market bears such as Roubini are already discounting the stress test results due to inefficiency. Therefore, even if the stress test results are positive, investors could react with cautious optimism.
Despite the pockets of uncertainty deflating optimism, the S&P futures continue to confirm their bull trend from a technical standpoint. The futures are in the process of building the foundation for a 900+ future and the near-term downtrend lines were eclipsed some time ago. Therefore, we could see the S&P futures climb to the high 900s before they encounter their next significant downtrend barrier, most notably 1000. Before we get ahead of ourselves, we haven’t seen the large volume up-bar confirmation above 900. Until this happens, we could see the S&P futures retrace towards the 900 area. After all, 900 is a psychologically significant barrier. On the other hand, if we do receive that large volume confirmation, it could be off to the races for the near-term.
The S&P’s correlations are backing its ascent, particularly crude and the EUR/USD. Crude futures logged huge gains on very large volume yesterday, sprinting to fresh 2009 highs while quickly making $60/bbl its next psychological obstacle. Meanwhile, the EUR/USD poke through May highs on large volume as the ECB announced its plan to use alternative liquidity measures to counter deflation. Therefore, the correlations are supporting the S&P’s uptrend for the most part.
Fundamentally, we find resistances of 918.25, 925.25, and 929.5. To the downside, we see supports of 910.75, 907, 901.75, and 893.75. Naturally, 900 serves as a key psychological cushion. The S&P futures are currently trading at 910.25.
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 is rallying strongly in reaction to today’s decision by the ECB. Trichet announced the ECB is lowering its benchmark rate to 1%, in-line with analyst expectations. In addition to the interest rate cut, the ECB has decided to move forward with quantitative easing-like measures. The ECB will use roughly $80 billion to purchase Euro denominated bonds while extending maturities to 12 months. The EUR/USD is reacting positively to quantitative easing, as we witnessed previously with the GBP/USD after the BOE launched its own quantitative easing operation. Investors believe ‘alternative’ liquidity measures will help the EU economy recover more quickly while counterbalancing deflationary pressures. Furthermore, it’s encouraging to see the ECB being a little more proactive after providing mixed opinions which heightened uncertainty.
We notice a pickup in volume on the EUR/USD’s up-bars as the currency pair retests May highs. If the EUR/USD receives some strong volume to the upside over the next 4 hours, the momentum could be enough to send the currency pair beyond its present right shoulder. Technically speaking, this could be a sign of a near-term breakout to the upside. However, the EUR/USD may not be able to enjoy its upward momentum for too long since our two key barriers are approaching, 1.35 and our 3rd tier downtrend line. Also, keep in mind the EUR/USD ultimately falls in line with its positive correlation with U.S. equities. Therefore, if investors take profits in equities and sell on the news, the EUR/USD’s rally could cool as well. On the other hand, if the currency pair can manage to climb over these barriers, particularly the downtrend line, near-term gains could really accelerate. With the S&P futures breaking free of their own restraints, the correlations are playing in favor of a broad based depreciation of the Dollar. We maintain our bullish outlook for the aforementioned reasons.
Fundamentally, we find resistances of 1.3442, 1.3474, 1.3497, 1.3536, and 1.3573. To the downside, we see supports of 1.3420, 1.3389, 1.3359, 1.3322, and 1.3292. The 1.30 area serves as a psychological cushion with 1.35 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3413.
GBP/USD
The Pound is experienced relative weakness across the board after the BOE announced it will add $50 billion to its present quantitative easing operation to make a grand total of $125 billion. While analysts expected the BOE to keep its benchmark rate unchanged at .50%, the additional funds for quantitative easing caught investors a bit off-guard. Boosting quantitative easing could indicate that deflationary pressures are stronger than expected, meaning the British economy is still facing some unforeseen difficulties. The Cable pulled back from its rally on strong volume in response to the news.
Despite today’s downturn, the Cable has found reliable support once again at 1.50, showing the bulls aren’t ready to call it quits. The resilience of the GBP/USD stems from the consistent, positive economic data coming from Britain over the past two weeks. Additionally, the S&P futures have seemingly broken free of their 900 psychological level, so the Cable is receiving help from its positive correlation with U.S. equities. However, the large volume down-bar is disconcerting. Therefore, if U.S. equities experience profit-taking today, the GBP/USD could be under substantial selling pressure. The 1.50 level and our 3rd tier uptrend line with be key for the near-term. Regardless of the present pullback, we maintain our bullish outlook on the GBP/USD given positive global economic data and the current strength of U.S. equities.
Fundamentally, we maintain resistances of 1.5059, 1.5114, 1.5158, 1.5213, and 1.5257. To the downside, we hold 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 1.5051.
USD/JPY
The USD/JPY is trying to wrestle free of its right shoulder with the S&P running past 900. While the USD/JPY has managed to stay above our 2nd tier uptrend line, the currency pair continues to have issues with our 3rd tier downtrend line. The USD/JPY is exhibiting a textbook, upward sloping head and shoulders pattern, meaning it will need significant volume to climb past May highs towards the highly psychological 100 level. 100 remains a heavy burden on the bull trend, showing investors will need to be certain of an economic recovery if they are to send the USD/JPY beyond this level and 2009 highs. That being said, our critical 5th tier downtrend line is slowly creeping towards present price. If the USD/JPY can hold on and climb above the 5th tier, near-term gains could accelerate. However, a lot can happen between now and then. We maintain our positive outlook on the USD/JPY since the momentum remains to the upside while the currency pair only has a couple barriers standing between it and large gains. Japan will release its monetary policy meeting minutes late in Thursday’s session, giving investors a peak at the BOJ’s view of the state of Japan’s economy.
Fundamentally, we maintain resistances of 99.20, 99.79, 100.56, and 101.43 with fresh top-end hanging at 102.14. To the downside, we see supports of 98.67, 97.98, 97.32, 96.33, and 95.58. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 99.13.
Crude Oil
Crude leapt past everything over the past 24 hours on significant volume. Crude passed previous 2009 highs and our 3rd tier uptrend and downtrend lines. The combination of lower than expected weekly inventories and ADP Non-Farm Employment change data provided the bull catalyst we were anticipating. Crude’s charge finally topped out around $58.50, forgoing a test of $60/bbl as investors take profits. Crude is quickly climbing back to a respectable level on the belief that the global economy is rebounding and demand will rebound with production and consumption. A negative repercussion of crude’s recovery is that it reignites the possibility of rapid inflation impacting economies as central banks pass record stimulus packages while participating in alternative liquidity operations.
While crude could continue to experience more near-term downward pressure as investors take profits, the futures have taken another large step forward technically. The bull trend remains in the driver’s seat unless we get negative news from financials or a stream of disappointing economic data. Additionally, the volume is there to back crude’s action, showing the upward movement was made with conviction.
Though we can provide only near-term technical guidance until crude futures calm, we can tell you that $60/bbl should serve as a psychological barrier. We find additional resistances of $58.01/bbl and $58.57/bbl. To the downside, we see supports of $56.84/bbl, $56.61/bbl, $56.34/bbl, $55.90/bbl, and $55.58/bbl. Crude is presently trading at $57.23/bbl.
Gold
Gold has surged higher in reaction to the surprise addition of funds to the BOE’s quantitative easing operation. In addition to the BOE’s decision, the ECB has announced the implementation of alternative liquidity measures of its own. The ramp up in liquidity around the globe is creating fear of future inflation, which in turn is boosting the price of gold. However, if the rampant inflation does incur, it may not be recognized in CPI data for quite some time. Hence, we believe the run up in gold may be a speculative over-reaction. Investor uncertainty concerning gold’s recent jump is represented in the lighter volume backing the up-bar in comparison to 5/5’s down-bar. As a result, the precious metal is pulling back from our 2nd tier downtrend line. Hence, we will hold our bearish outlook trend-wise for the time being.
Regardless, gold has made some impressive strides to the upside in the near-term. The precious metal logged some solid volume to the upside yesterday despite rising U.S. equities. Furthermore, gold continues to fight back above the highly psychological $900/oz level, showing the precious metal has a path not entirely related to the direction of equities. Gold’s the correlations have certainly been exhibiting odd behavior as of late. Therefore, it may be unwise to rely upon its normal negative correlation with equities. Investors may want to keep a closer eye on upcoming CPI data when analyzing gold. If we do realize the anticipated surge in inflation, gold may be have the ammunition to charge ahead.
Fundamentally we find supports of $913.15/oz, $910.98/oz, $908.37/oz, $905.98/oz, and $903.59/oz. To the topside, we see resistances of $915.76/oz, $917.71/oz, $920.75/oz, $920.75/oz, and $925.31/oz. Gold is currently trading at $913.35/oz.
S&P
The S&P futures are under some selling pressure Thursday despite better than expected weekly Unemployment Claims data. The weakness comes after the S&P’s surge past 900 in reaction to a much better than expected ADP Non-Farm Employment change number. Investors are encouraged by the news, and are hoping an upward slope is forming in this data point accompanied by a downward slope in Unemployment Claims. Today’s Unemployment Claims number did come in better than expected today with an uptick in Prelim Unit Labor Cost, implying consumer sentiment and consumption should continue to rebound. As a result of the positive developments data wise, we view the S&P’s current weakness as a sign of profit taking. The S&P futures have been on an incredible run, and investors could continue to close some positions as they sell on the news of stress test results. However, the stress test results should still be approached with a bit of caution. One never knows what the results could show, and there is always the possibility that the news leaks over the past week could have been used to soften the blow of negative stress test results. Keep in mind this is pure speculation and we will have to wait and see. Market bears such as Roubini are already discounting the stress test results due to inefficiency. Therefore, even if the stress test results are positive, investors could react with cautious optimism.
Despite the pockets of uncertainty deflating optimism, the S&P futures continue to confirm their bull trend from a technical standpoint. The futures are in the process of building the foundation for a 900+ future and the near-term downtrend lines were eclipsed some time ago. Therefore, we could see the S&P futures climb to the high 900s before they encounter their next significant downtrend barrier, most notably 1000. Before we get ahead of ourselves, we haven’t seen the large volume up-bar confirmation above 900. Until this happens, we could see the S&P futures retrace towards the 900 area. After all, 900 is a psychologically significant barrier. On the other hand, if we do receive that large volume confirmation, it could be off to the races for the near-term.
The S&P’s correlations are backing its ascent, particularly crude and the EUR/USD. Crude futures logged huge gains on very large volume yesterday, sprinting to fresh 2009 highs while quickly making $60/bbl its next psychological obstacle. Meanwhile, the EUR/USD poke through May highs on large volume as the ECB announced its plan to use alternative liquidity measures to counter deflation. Therefore, the correlations are supporting the S&P’s uptrend for the most part.
Fundamentally, we find resistances of 918.25, 925.25, and 929.5. To the downside, we see supports of 910.75, 907, 901.75, and 893.75. Naturally, 900 serves as a key psychological cushion. The S&P futures are currently trading at 910.25.
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.
