EUR/USD
The EUR/USD is popping up towards March highs, exploding from our 3rd tier downtrend line as anticipated. As we explained in our previous post, breaking through the 3rd tier was a key fundamental move. Therefore, the EUR/USD should continue enjoy its upward momentum, at least until the psychological 1.40 area. We wouldn’t be surprised to see the currency pair peak outside of March highs only to retrace in hesitation as bulls run out of steam. In fact, the present leg up isn’t enjoying the strong volume we saw before, meaning investors could take some profits soon, indicating a pullback with congestion.
The EU has no economic releases today, so the EUR/USD is feeding off of the Cable’s positive energy. The better than expected Manufacturing Production number out of Britain is exciting bulls, leading to a pop in both the EUR/USD and the S&P futures. The fact that the EUR/USD is tagging along for the ride is revealed by a sharp pullback in the EUR/GBP. Both the EUR/USD and GBP/USD have broken free of our last-resort downtrend lines, further supporting our bullish outlook. The EU region will remain relatively quiet on the news front until Friday, when it releases German Prelim GDP. Until then, the EUR/USD should tag along with the Cable and U.S. equities in a positive correlation while registering comparatively muted gains should all move to the upside.
Fundamentally, we find resistances of 1.3735, 1.3777, 1.3837, 1.3868, and 1.3918. To the downside, we see supports of 1.3702, 1.3674, 1.3646, 1.3626, and 1.3598. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3695.
GBP/USD
The Cable is climbing higher with a purpose, leaving 1.50 in its past as it takes full advantage of its upward momentum. Bulls are encouraged as positive data continues to roll in from Britain. Yesterday’s RICS House Price Balance release only reconfirmed what we saw the last two weeks, a stabilization in home prices. Since the economic crisis began in the housing sector, an upward slope in prices gives hope that the worst may be behind us. The key for the GBP/USD’s rally today is the much better than expected Manufacturing Production number. Manufacturing Production has recovered to its highest level since June 2008 and in the process reached a respectable, pre-crisis level. Meanwhile, the Cable has blown by our key, last defense downtrend line while leaving 1.50 behind. Therefore, we maintain our medium-term bullish outlook for the aforementioned reasons.
While we maintain bullish on the Cable, the currency pair could encounter some headwinds in the near-term as it approaches January 09’ highs. Though this barrier isn’t likely to kill the Cable’s uptrend, it could stall the rally temporarily should the bulls run out of energy. Therefore keep a close eye on volume. If action should die down, the GBP/USD could experience a near-term pullback and consolidation.
The BOE will keep the news flowing this week with Claimant Count Change (CCC), Average Earnings Index, and the BOE Inflation Report hitting the newswires in Wednesday’s trading session. The CCC will be watched closely since April’s number revealed a surprisingly swift drop, indicating an improving employment market. Therefore, volatility could easily pick up should the numbers surprise analysts in either direction.
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 1.5322, 1.5374, 1.5438, 1.5526, and 1.5576. To the downside, we see supports of 1.5256, 1.5213, 1.5158, 1.5114, and 1.5059. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5295
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. The USD/JPY is mysterious since it still hasn’t participated 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. The USD/JPY snuck below our 2nd tier downtrend line and is playing with fire. If April lows don’t hold then we could see a sizeable near-term selloff. 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 97.32, 97.98, 98.67, 99.20, and 99.79. To the downside, we see supports of 96.33, 95.58, 95.12, 94.50, and 93.66. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 97.09.
Crude Oil
Crude continues its near-term explosion, reaching the $60/bbl much quicker than we anticipated. Crude futures are flying high off of the improvement in economic data showing no borders. All-around weakness in the Dollar is only inflating the price of oil as the Dollar-based commodity becomes a more attractive purchase. While the precipitous rise of crude is encouraging for the near-term upside in equities, it does raise a red flag as far as inflation is concerned. The free flow of liquidity gushing from government pocket-books brings the fear of rapid inflation, which could result in stagflation, or rising prices in conjunction with climbing unemployment. Stagflation places cash-strapped consumers in a tight corner, causing the economic recovery to overheat. Therefore, from an economic standpoint, skyrocketing crude prices could do more harm than good should they get out of control. Macro-economic concern aside, the bull trend is clearly in full swing as the futures trade comfortably above our 2nd tier uptrend line while the S&P futures hold strong above 900.
Despite the optimism fundamentally, we’ve noticed a drop-off in volume the last couple sessions. Therefore, if activity doesn’t pickup in the near-term, we could see another pullback as bulls run out of gas and lock in some profits. Additionally, investors may choose to wait on retail sales and weekly inventories tomorrow to see if the surprise decline in inventories last week was a head-fake, or the start of a downtrend in supply. Meanwhile, we maintain our bullish outlook on crude trend-wise unless U.S. equities should collapse and make a strong reversal directionally.
We find resistances of $59.68/bbl and $60.12/bbl. To the downside, we see supports of $59.10/bbl, $58.61/bbl, $58.10/bbl, $57.73/bbl, and $57.20/bbl. Crude is presently trading at $59.21/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. Tuesday’s initial pop came on a 4th straight session of declining volume, showing bulls could be running out of steam for the near-term. Gold continues to experience an odd, positive correlation with U.S. equities. Analysts have been cautioning that the equity rally has overheated, meaning a pullback is overdue. If this happens, gold may be inclined to follow suit. 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 $917.65/oz, $915.94/oz, $914.35/oz, $912.02/oz, and $910.22/oz. To the topside, we see resistances of $920.75/oz, $922.49/oz, $925.30/oz, $928.10/oz, and $931.99/oz. Gold is currently trading at $918.20/oz.
S&P
The S&P futures are wavering early Monday despite better than expected Trade Balance numbers from both the U.S. and Britain, including positive British Manufacturing Production data. The weakness in equities comes as analysts caution that the rally may have gotten ahead of itself with stocks reach fair or over-valuations. A cautionary flag came from China after it reported a 22.6% decline in exports yoy, over 4 percentage points worse than expected. The drop-off in Chinese exports indicates consumption in the West may not be as solid as anticipated. Another sign the rally may be overdue for a pullback is the fact that Crude futures touched $60/bbl, an astonishing 50% appreciation since February lows. High flying crude places added pressure on the bottom-line of producers and the bank accounts of consumers, adding pressure to a fragile economic situation.
Therefore, the weakness thus far this week is understandable. It’s encouraging that the S&P futures have remained above their highly psychological 900 level and our uptrend line. However, trend line is drawing in close. Any movement below this line could result in a retracement below 900 with a retest of May 6 lows. If these lows don’t hold, then the pullback could pick up momentum towards May 4 lows. Meanwhile, volume has been tailing off, meaning another sizeable pullback is certainly plausible.
Despite the near-term warnings, the momentum is still clearly in the corner of the bulls trend wise. Economic data has been showing all-around improvement across the board over the past month while the S&P surpassed one fundamental barrier after another. Therefore, the futures would likely need to experience a sharp selloff backed by large volume to alter its path. Volatility should pick-up tomorrow with the U.S. releasing retail sales and import prices. We maintain our bullish outlook trend wise until further notice.
Fundamentally, we find resistances of 907, 910.75, 915.5, 919.25 and 924.25. To the downside, we see supports of 903.75, 898.75, 893.5, 890, and 879. The S&P futures are currently trading at 906.25.
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 popping up towards March highs, exploding from our 3rd tier downtrend line as anticipated. As we explained in our previous post, breaking through the 3rd tier was a key fundamental move. Therefore, the EUR/USD should continue enjoy its upward momentum, at least until the psychological 1.40 area. We wouldn’t be surprised to see the currency pair peak outside of March highs only to retrace in hesitation as bulls run out of steam. In fact, the present leg up isn’t enjoying the strong volume we saw before, meaning investors could take some profits soon, indicating a pullback with congestion.
The EU has no economic releases today, so the EUR/USD is feeding off of the Cable’s positive energy. The better than expected Manufacturing Production number out of Britain is exciting bulls, leading to a pop in both the EUR/USD and the S&P futures. The fact that the EUR/USD is tagging along for the ride is revealed by a sharp pullback in the EUR/GBP. Both the EUR/USD and GBP/USD have broken free of our last-resort downtrend lines, further supporting our bullish outlook. The EU region will remain relatively quiet on the news front until Friday, when it releases German Prelim GDP. Until then, the EUR/USD should tag along with the Cable and U.S. equities in a positive correlation while registering comparatively muted gains should all move to the upside.
Fundamentally, we find resistances of 1.3735, 1.3777, 1.3837, 1.3868, and 1.3918. To the downside, we see supports of 1.3702, 1.3674, 1.3646, 1.3626, and 1.3598. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3695.
GBP/USD
The Cable is climbing higher with a purpose, leaving 1.50 in its past as it takes full advantage of its upward momentum. Bulls are encouraged as positive data continues to roll in from Britain. Yesterday’s RICS House Price Balance release only reconfirmed what we saw the last two weeks, a stabilization in home prices. Since the economic crisis began in the housing sector, an upward slope in prices gives hope that the worst may be behind us. The key for the GBP/USD’s rally today is the much better than expected Manufacturing Production number. Manufacturing Production has recovered to its highest level since June 2008 and in the process reached a respectable, pre-crisis level. Meanwhile, the Cable has blown by our key, last defense downtrend line while leaving 1.50 behind. Therefore, we maintain our medium-term bullish outlook for the aforementioned reasons.
While we maintain bullish on the Cable, the currency pair could encounter some headwinds in the near-term as it approaches January 09’ highs. Though this barrier isn’t likely to kill the Cable’s uptrend, it could stall the rally temporarily should the bulls run out of energy. Therefore keep a close eye on volume. If action should die down, the GBP/USD could experience a near-term pullback and consolidation.
The BOE will keep the news flowing this week with Claimant Count Change (CCC), Average Earnings Index, and the BOE Inflation Report hitting the newswires in Wednesday’s trading session. The CCC will be watched closely since April’s number revealed a surprisingly swift drop, indicating an improving employment market. Therefore, volatility could easily pick up should the numbers surprise analysts in either direction.
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 1.5322, 1.5374, 1.5438, 1.5526, and 1.5576. To the downside, we see supports of 1.5256, 1.5213, 1.5158, 1.5114, and 1.5059. 1.50 serves as a key psychological cushion with 1.55 acting as a psychological barrier. The GBP/USD is currently exchanging at 1.5295
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. The USD/JPY is mysterious since it still hasn’t participated 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. The USD/JPY snuck below our 2nd tier downtrend line and is playing with fire. If April lows don’t hold then we could see a sizeable near-term selloff. 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 97.32, 97.98, 98.67, 99.20, and 99.79. To the downside, we see supports of 96.33, 95.58, 95.12, 94.50, and 93.66. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 97.09.
Crude Oil
Crude continues its near-term explosion, reaching the $60/bbl much quicker than we anticipated. Crude futures are flying high off of the improvement in economic data showing no borders. All-around weakness in the Dollar is only inflating the price of oil as the Dollar-based commodity becomes a more attractive purchase. While the precipitous rise of crude is encouraging for the near-term upside in equities, it does raise a red flag as far as inflation is concerned. The free flow of liquidity gushing from government pocket-books brings the fear of rapid inflation, which could result in stagflation, or rising prices in conjunction with climbing unemployment. Stagflation places cash-strapped consumers in a tight corner, causing the economic recovery to overheat. Therefore, from an economic standpoint, skyrocketing crude prices could do more harm than good should they get out of control. Macro-economic concern aside, the bull trend is clearly in full swing as the futures trade comfortably above our 2nd tier uptrend line while the S&P futures hold strong above 900.
Despite the optimism fundamentally, we’ve noticed a drop-off in volume the last couple sessions. Therefore, if activity doesn’t pickup in the near-term, we could see another pullback as bulls run out of gas and lock in some profits. Additionally, investors may choose to wait on retail sales and weekly inventories tomorrow to see if the surprise decline in inventories last week was a head-fake, or the start of a downtrend in supply. Meanwhile, we maintain our bullish outlook on crude trend-wise unless U.S. equities should collapse and make a strong reversal directionally.
We find resistances of $59.68/bbl and $60.12/bbl. To the downside, we see supports of $59.10/bbl, $58.61/bbl, $58.10/bbl, $57.73/bbl, and $57.20/bbl. Crude is presently trading at $59.21/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. Tuesday’s initial pop came on a 4th straight session of declining volume, showing bulls could be running out of steam for the near-term. Gold continues to experience an odd, positive correlation with U.S. equities. Analysts have been cautioning that the equity rally has overheated, meaning a pullback is overdue. If this happens, gold may be inclined to follow suit. 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 $917.65/oz, $915.94/oz, $914.35/oz, $912.02/oz, and $910.22/oz. To the topside, we see resistances of $920.75/oz, $922.49/oz, $925.30/oz, $928.10/oz, and $931.99/oz. Gold is currently trading at $918.20/oz.
S&P
The S&P futures are wavering early Monday despite better than expected Trade Balance numbers from both the U.S. and Britain, including positive British Manufacturing Production data. The weakness in equities comes as analysts caution that the rally may have gotten ahead of itself with stocks reach fair or over-valuations. A cautionary flag came from China after it reported a 22.6% decline in exports yoy, over 4 percentage points worse than expected. The drop-off in Chinese exports indicates consumption in the West may not be as solid as anticipated. Another sign the rally may be overdue for a pullback is the fact that Crude futures touched $60/bbl, an astonishing 50% appreciation since February lows. High flying crude places added pressure on the bottom-line of producers and the bank accounts of consumers, adding pressure to a fragile economic situation.
Therefore, the weakness thus far this week is understandable. It’s encouraging that the S&P futures have remained above their highly psychological 900 level and our uptrend line. However, trend line is drawing in close. Any movement below this line could result in a retracement below 900 with a retest of May 6 lows. If these lows don’t hold, then the pullback could pick up momentum towards May 4 lows. Meanwhile, volume has been tailing off, meaning another sizeable pullback is certainly plausible.
Despite the near-term warnings, the momentum is still clearly in the corner of the bulls trend wise. Economic data has been showing all-around improvement across the board over the past month while the S&P surpassed one fundamental barrier after another. Therefore, the futures would likely need to experience a sharp selloff backed by large volume to alter its path. Volatility should pick-up tomorrow with the U.S. releasing retail sales and import prices. We maintain our bullish outlook trend wise until further notice.
Fundamentally, we find resistances of 907, 910.75, 915.5, 919.25 and 924.25. To the downside, we see supports of 903.75, 898.75, 893.5, 890, and 879. The S&P futures are currently trading at 906.25.
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.
