EUR/USD
The EUR/USD is cooling off after propelling past the psychological 1.35 level and our critical 3rd tier downtrend line. Built off of 12/18/08 highs, our 3rd tier downtrend line represents our final downtrend line for the time being. We believe the defeat of our 3rd tier downtrend line is a key development fundamentally and sends a loud bull message. The burst of energy to the upside in the EUR/USD came after a better than expected German Industrial Production number in conjunction with continued optimism over the EU’s use of alternative liquidity measures. However, the EUR/USD is heading south Monday after both French and Italian Industrial Production data came in below analyst expectations. Therefore, the dynamic EU economy is sending a mixed message. Despite today’s pullback, the EUR/USD made a very bullish move last week. If the currency pair can manage to stabilize above our 3rd tier downtrend line and head north again, we could see more large gains in the near-future.
Meanwhile, the S&P futures are trying to build a new foundation above 900 to create a reliable defense to the downside in the event of future gains. The health of U.S. equities is always vital for the EUR/USD since the two are positively correlated. Therefore, if the S&P continues its ascent, then the EUR/USD could gain some nice momentum to the upside. Thursday and Friday’s gains were backed by substantial volume, giving validity to the currency pair’s present outbreak to the upside. March highs should provide a near-term obstacle to the topside. An eclipse of these highs could excite near term gains. As for the downside, keep an eye on our 3rd tier downtrend line. For if it doesn’t hold, the EUR/USD’s breakout could be compromised. We maintain our bullish outlook on the EUR/USD due to its positive fundamental progress in conjunction with the strong performance of U.S. equities. It appears we could be discussing the approach of December 08’ highs in the medium term.
Fundamentally, we find resistances of 1.3592, 1.3617, 1.3652, 1.3680, and 1.3702. To the downside, we see supports of 1.3573, 1.3545, 1.3519, 1.3492, and 1.3455. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3580.
GBP/USD
The Cable’s key 1.50 survived a 2nd retest on Friday and passed with flying colors. 1.50 withstood a high volume sell-off and bounced off our 3rd tier downtrend lines, sending a strong message that the bulls are in the driver’s seat. The Cable is coming off Friday’s highs after France and Italy released weaker than expected Industrial Production data. Additionally, U.S. equities are under a bit of selling pressure as investors take profits. Despite today’s weakness on light volume, the GBP/USD is distancing itself from our 2nd tier downtrend line while keeping above 1.50. We previously set these as our benchmark barriers to the upside. Therefore, we believe the fundamentals are still in place for more substantial games in the near to medium term.
The EUR/USD made a similar fundamental achievement on Friday by jumping past its 3rd tier downtrend line. Therefore, since the two are ultimately positively correlated, the argument for an uptrend in the Cable is more convincing. Naturally, the fate of the Cable relies heavily on the performance of U.S. equities. Hence, investors should keep a watch on the S&P futures to make sure they hold 900. We maintain our bullish outlook on the GBP/USD for the aforementioned reasons. Our 3rd tier uptrend line should continue to act as a line of defense in the face of any near-term weakness. However, if our 3rd tier and 1.50 don’t hold, then the validity of the uptrend could be thrown into question.
Britain will release its BRC Retail Sales Monitor and RICS House Price Balance late in Monday’s session followed by Manufacturing Production and Trade Balance on Tuesday. Therefore, we could see some reasonable volatility over the next 24 hours.
Fundamentally, we find resistances of 1.5114, 1.5158, 1.5213, 1.5256, and 1.5256. To the downside, we see supports of 1.5059, 1.5017, 1.4988, 1.4946, and 1.4902. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5109.
USD/JPY
The USD/JPY continues to fill out its right shoulder on discouraging volume. The fact volume hasn’t picked up is limiting the ability of the USD/JPY to propel through the top of its right shoulder towards 100. Meanwhile, the currency pair is struggling to stay above our 2nd tier uptrend line as it reaches an inflection point with our 2nd tier downtrend line. The USD/JPY still isn’t participating in the broad equity rally, serving as the cautionary flag among economic recovery optimists. Normally positively correlated, the fact the USD/JPY hasn’t followed suit is disconcerting. However, we recognize the significance of 100, and putting this level in the rear-view mirror would symbolize full investor confidence in a broad, global economic recovery. Due to the mixed performance of the USD/JPY, we have a neutral stance.
Japan has a couple news events this week, including BOJ Governor Shirakawa addressing the public on Wednesday followed by Core Machinery Orders on Thursday. Core Machinery Orders showed significant improvement with a surprise to the upside last month, so it will be interesting to see if the data point can continue to show improvement. Since Core Machinery Orders are forward-looking and indicative of the outlook of Japanese exporters and manufacturers, this release could be a market-mover.
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 rally curved back on Friday as volume peaked. Despite any near-term weakness on profit taking, crude’s statement has been received loud and clear. After rising in the face of flooding inventories for weeks, crude futures catapulted as inventories finally came in below expectations last week. Investors are showing resilience in their confidence concerning an economic turnaround. Improvements in broad based manufacturing and production numbers encourage bulls that demand for crude will pick up substantially as countries enact respective their economic stimulus plans. Meanwhile, the Dollar has been depreciating quickly against the Euro and Pound, suggesting global demand for the Dollar-denominated commodity will pick up with an improvement in purchasing power.
Some analysts are forewarning of a sell-off in U.S. equities claiming valuations have gotten ahead of themselves. Due to the positive correlation between crude and equities, investors should keep a close eye on the S&P futures and their ability to hold above 900. Any significant decline in equities would likely result in a corresponding downturn in crude. Regardless of the near-term skepticism, the uptrend is clearly in play for crude. Crude futures have catapulted past $50/bbl without looking back, quickly making $60/bbl the next psychological landmark. However, any retreat back below May lows could result in some near-term difficultly. Our 3rd tier uptrend line should serve as a reliable defense in the face of near-term weakness. We maintain our bullish outlook on Crude until further notice.
We find resistances of $57.76/bbl, $58.13/bbl, $58.39/bbl, and $58.64/bbl. To the downside, we see supports of $57.20/bbl, $56.82/bbl, and $56.45/bbl. Crude is presently trading at $57.65/bbl.
Gold
Gold is turning back from our 2nd tier uptrend line after the precious metal was unable to power through our 2nd tier downtrend line. Gold continues to experience an odd, positive correlation with U.S. equities. Despite Monday’s weakness, our 1st tier uptrend line is intact, and momentum is still in favor of the bulls. Meanwhile, gold remains comfortably above the highly psychological $900/oz level. The performance of gold has been very unpredictable lately since it is difficult to decipher the driving force behind gains. Could it be the fear of future in inflation in the wake of unprecedented amounts of quantitative easing, or are bulls riding on the fact that China is using the pressure metal as a way to diversify its reserves from the U.S. Dollar? Regardless, the positive correlation with U.S. equities lives on. Therefore, reference the S&P futures.
Fundamentally we find supports of $908.37/oz, $905.98/oz, $903.59/oz, $905.98/oz, $903.59/oz, and $901.35/oz. To the topside, we see resistances of $910.98/oz, $913.15/oz, $915.76/oz, $917.71/oz, and $920.75/oz. Gold is currently trading at $911.40/oz.
S&P
The S&P futures are under some selling pressure pre-market Monday as investors cash in on recent gains. There seems to be not game-changing news behind Monday’s early weakness, indicating that market bulls are merely running low on energy. Investor uncertainty seems to be calming with the LIBOR rate dropping as the S&P futures attempt to form a new, post-900 foundation from which to build. The S&P futures should continue to stabilize and outperform so long as economic data stays in an uptrend. Last week’s unemployment data points were encouragingly above analyst expectations, showing the labor market may begin to bottom out. Due to today’s lack of economic data we wouldn’t be surprised to witness a little more profit taking accompanied by consolidation with little reason to let go of 900+. Therefore, any additional weakness from present level should experience considerable defense from the highly psychological 900 cushion and our uptrend line. Regardless, we maintain our positive outlook on U.S. equities with little going against them at present besides oversold conditions.
Fundamentally, we find resistances of 915.50, 919.25, 924.25, and 929.50. To the downside, we see supports of 910.75, 907, 901.75, and 889.25. The S&P futures are currently trading at 912.25.
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 cooling off after propelling past the psychological 1.35 level and our critical 3rd tier downtrend line. Built off of 12/18/08 highs, our 3rd tier downtrend line represents our final downtrend line for the time being. We believe the defeat of our 3rd tier downtrend line is a key development fundamentally and sends a loud bull message. The burst of energy to the upside in the EUR/USD came after a better than expected German Industrial Production number in conjunction with continued optimism over the EU’s use of alternative liquidity measures. However, the EUR/USD is heading south Monday after both French and Italian Industrial Production data came in below analyst expectations. Therefore, the dynamic EU economy is sending a mixed message. Despite today’s pullback, the EUR/USD made a very bullish move last week. If the currency pair can manage to stabilize above our 3rd tier downtrend line and head north again, we could see more large gains in the near-future.
Meanwhile, the S&P futures are trying to build a new foundation above 900 to create a reliable defense to the downside in the event of future gains. The health of U.S. equities is always vital for the EUR/USD since the two are positively correlated. Therefore, if the S&P continues its ascent, then the EUR/USD could gain some nice momentum to the upside. Thursday and Friday’s gains were backed by substantial volume, giving validity to the currency pair’s present outbreak to the upside. March highs should provide a near-term obstacle to the topside. An eclipse of these highs could excite near term gains. As for the downside, keep an eye on our 3rd tier downtrend line. For if it doesn’t hold, the EUR/USD’s breakout could be compromised. We maintain our bullish outlook on the EUR/USD due to its positive fundamental progress in conjunction with the strong performance of U.S. equities. It appears we could be discussing the approach of December 08’ highs in the medium term.
Fundamentally, we find resistances of 1.3592, 1.3617, 1.3652, 1.3680, and 1.3702. To the downside, we see supports of 1.3573, 1.3545, 1.3519, 1.3492, and 1.3455. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3580.
GBP/USD
The Cable’s key 1.50 survived a 2nd retest on Friday and passed with flying colors. 1.50 withstood a high volume sell-off and bounced off our 3rd tier downtrend lines, sending a strong message that the bulls are in the driver’s seat. The Cable is coming off Friday’s highs after France and Italy released weaker than expected Industrial Production data. Additionally, U.S. equities are under a bit of selling pressure as investors take profits. Despite today’s weakness on light volume, the GBP/USD is distancing itself from our 2nd tier downtrend line while keeping above 1.50. We previously set these as our benchmark barriers to the upside. Therefore, we believe the fundamentals are still in place for more substantial games in the near to medium term.
The EUR/USD made a similar fundamental achievement on Friday by jumping past its 3rd tier downtrend line. Therefore, since the two are ultimately positively correlated, the argument for an uptrend in the Cable is more convincing. Naturally, the fate of the Cable relies heavily on the performance of U.S. equities. Hence, investors should keep a watch on the S&P futures to make sure they hold 900. We maintain our bullish outlook on the GBP/USD for the aforementioned reasons. Our 3rd tier uptrend line should continue to act as a line of defense in the face of any near-term weakness. However, if our 3rd tier and 1.50 don’t hold, then the validity of the uptrend could be thrown into question.
Britain will release its BRC Retail Sales Monitor and RICS House Price Balance late in Monday’s session followed by Manufacturing Production and Trade Balance on Tuesday. Therefore, we could see some reasonable volatility over the next 24 hours.
Fundamentally, we find resistances of 1.5114, 1.5158, 1.5213, 1.5256, and 1.5256. To the downside, we see supports of 1.5059, 1.5017, 1.4988, 1.4946, and 1.4902. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5109.
USD/JPY
The USD/JPY continues to fill out its right shoulder on discouraging volume. The fact volume hasn’t picked up is limiting the ability of the USD/JPY to propel through the top of its right shoulder towards 100. Meanwhile, the currency pair is struggling to stay above our 2nd tier uptrend line as it reaches an inflection point with our 2nd tier downtrend line. The USD/JPY still isn’t participating in the broad equity rally, serving as the cautionary flag among economic recovery optimists. Normally positively correlated, the fact the USD/JPY hasn’t followed suit is disconcerting. However, we recognize the significance of 100, and putting this level in the rear-view mirror would symbolize full investor confidence in a broad, global economic recovery. Due to the mixed performance of the USD/JPY, we have a neutral stance.
Japan has a couple news events this week, including BOJ Governor Shirakawa addressing the public on Wednesday followed by Core Machinery Orders on Thursday. Core Machinery Orders showed significant improvement with a surprise to the upside last month, so it will be interesting to see if the data point can continue to show improvement. Since Core Machinery Orders are forward-looking and indicative of the outlook of Japanese exporters and manufacturers, this release could be a market-mover.
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 rally curved back on Friday as volume peaked. Despite any near-term weakness on profit taking, crude’s statement has been received loud and clear. After rising in the face of flooding inventories for weeks, crude futures catapulted as inventories finally came in below expectations last week. Investors are showing resilience in their confidence concerning an economic turnaround. Improvements in broad based manufacturing and production numbers encourage bulls that demand for crude will pick up substantially as countries enact respective their economic stimulus plans. Meanwhile, the Dollar has been depreciating quickly against the Euro and Pound, suggesting global demand for the Dollar-denominated commodity will pick up with an improvement in purchasing power.
Some analysts are forewarning of a sell-off in U.S. equities claiming valuations have gotten ahead of themselves. Due to the positive correlation between crude and equities, investors should keep a close eye on the S&P futures and their ability to hold above 900. Any significant decline in equities would likely result in a corresponding downturn in crude. Regardless of the near-term skepticism, the uptrend is clearly in play for crude. Crude futures have catapulted past $50/bbl without looking back, quickly making $60/bbl the next psychological landmark. However, any retreat back below May lows could result in some near-term difficultly. Our 3rd tier uptrend line should serve as a reliable defense in the face of near-term weakness. We maintain our bullish outlook on Crude until further notice.
We find resistances of $57.76/bbl, $58.13/bbl, $58.39/bbl, and $58.64/bbl. To the downside, we see supports of $57.20/bbl, $56.82/bbl, and $56.45/bbl. Crude is presently trading at $57.65/bbl.
Gold
Gold is turning back from our 2nd tier uptrend line after the precious metal was unable to power through our 2nd tier downtrend line. Gold continues to experience an odd, positive correlation with U.S. equities. Despite Monday’s weakness, our 1st tier uptrend line is intact, and momentum is still in favor of the bulls. Meanwhile, gold remains comfortably above the highly psychological $900/oz level. The performance of gold has been very unpredictable lately since it is difficult to decipher the driving force behind gains. Could it be the fear of future in inflation in the wake of unprecedented amounts of quantitative easing, or are bulls riding on the fact that China is using the pressure metal as a way to diversify its reserves from the U.S. Dollar? Regardless, the positive correlation with U.S. equities lives on. Therefore, reference the S&P futures.
Fundamentally we find supports of $908.37/oz, $905.98/oz, $903.59/oz, $905.98/oz, $903.59/oz, and $901.35/oz. To the topside, we see resistances of $910.98/oz, $913.15/oz, $915.76/oz, $917.71/oz, and $920.75/oz. Gold is currently trading at $911.40/oz.
S&P
The S&P futures are under some selling pressure pre-market Monday as investors cash in on recent gains. There seems to be not game-changing news behind Monday’s early weakness, indicating that market bulls are merely running low on energy. Investor uncertainty seems to be calming with the LIBOR rate dropping as the S&P futures attempt to form a new, post-900 foundation from which to build. The S&P futures should continue to stabilize and outperform so long as economic data stays in an uptrend. Last week’s unemployment data points were encouragingly above analyst expectations, showing the labor market may begin to bottom out. Due to today’s lack of economic data we wouldn’t be surprised to witness a little more profit taking accompanied by consolidation with little reason to let go of 900+. Therefore, any additional weakness from present level should experience considerable defense from the highly psychological 900 cushion and our uptrend line. Regardless, we maintain our positive outlook on U.S. equities with little going against them at present besides oversold conditions.
Fundamentally, we find resistances of 915.50, 919.25, 924.25, and 929.50. To the downside, we see supports of 910.75, 907, 901.75, and 889.25. The S&P futures are currently trading at 912.25.
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.
