Crude Oil
Crude futures continue their incredible ascent with OPEC likely to keep their production level unchanged. Volume managed to rise yesterday despite a mixed session, indicating a bit of uncertainty in the market as U.S. equities battle their highly psychological 900 level. We don’t expect volume to abate today after better than expected durable goods orders with new home sales and weekly crude oil inventories on the way. The improvement in durable goods orders implies automobile purchases, a stabilizing consumer, and consequently an increase in the consumption of crude. Investors are ignoring large U.S. inventory levels week in and week out while banking on a global economic recovery. If inventories should come in shallower than expected, then we could see crude futures continue their impressive rally today.
Technically, it is difficult not to be bullish on crude futures with no near-term significant barriers in sight coupled with large upward movements backed by considerable volume. On the other hand, the overwhelming optimism surrounding crude could be a sign of overbought conditions. Is it possible crude has risen too far too quickly? Then again, we are not in normal times. The liquidity injections and quantitative easing taking place globally is stoking fears of inflation, implying rising CPI and PPI with oil leading the way. Therefore, although some near-term consolidation/pullback is possible, we maintain our bullish stance trend-wise until further notice.
Fundamentally, we find supports of $62.93/bbl, $62.42/bbl, $61.98/bbl, $61.40/bbl, and $60.78/bbl. To the topside we see resistances of $63.03/bbl, $63.45/bbl, and $64.00/bbl. $60/bbl becomes a psychological cushion with $65/bbl serving as a psychological barrier. The crude futures are currently trading at $63.42/bbl.
Gold
Gold continues its stabilization, balancing along the highly psychological $950/oz level. Our resistance and support levels are fairly tight as the S&P battles its demons at 900, meaning consolidation could continue for the immediate-term. Meanwhile, gold is building a new base which can serve as solid support in the future. Our 2nd and 3rd tier uptrend and downtrend lines reached an inflection point today, highlighting the relative importance of present levels. Gold continues to exhibit a positive correlation with U.S. equities. The recovery in global equity markets is sending oil sky high while the Dollar depreciates across the board, sparking fear of inflation. Gold has served as a reliable hedge against inflation in the past. As a result, investors are fleeing to the precious metal. Additionally, we wouldn’t be surprised if China is aggressively purchasing the precious metal to diversify its reserves.
While momentum is in favor of the uptrend, the downtrend still has several upcoming barriers preventing gold from a large breakout to the upside. To give you a better idea of the limitations to the upside trend-wise, create layers of downtrends beginning from March 2008 highs and connecting through February 2009 highs. If the precious metal can manage to rally above these potential downtrend lines, then we may witness an all-out bull trend. The fact that gold is stabilizing around $950/oz is a positive sign indicating bulls could be preparing to take the next step to the upside.
Fundamentally we maintain our resistances of $950.87/oz, $953.40/oz, and $955.66/oz with fresh top-ends resting at $959.24/oz and $961.45/oz. To the downside, we see supports of $948.96/oz, $946.33/oz, $944.48/oz, $942.45/oz, and $940.45/oz. Gold is currently trading at $950.50/oz.
EUR/USD
The EUR/USD is recovering some of yesterday’s losses incurred from the selloff in U.S. equities. The currency pair is re-approaching our 1st tier uptrend line after Germany’s unemployment change number came in much better than expected. The fact unemployment change has exited the 40k-60k range is very encouraging for the EU and creates a sense of normalcy in the employment market. Today’s release tags onto the positive current account data we saw yesterday, and the PMI and economic sentiment numbers from last week. Therefore, economic data continues its upward trend for the most part, encouraging investors the global economy is stabilizing. Recent economic data highlights our belief that the EUR/USD’s present pullback as a result of overbought conditions combined with a hesitation at the psychological 1.40 level. Therefore, the EUR/USD could experience a solid rally today if America’s durable goods orders and new home sales numbers exceed expectations.
The EUR/USD remains in a bullish trend with the next natural obstacles being previous May highs and 1.40. If the currency pair can climb past these obstacles, we could see a solid near-term pop towards the 1.43 area. However, the EUR/USD has its work cut out for it as our trend lines crawl towards their inflection point, which will likely be reached before week’s end. Therefore, we anticipate further consolidation until our trend lines collide followed by a strong directional move. Despite our bullish outlook, yesterday’s solid volume on a down-bar is a disconcerting, and makes us a little wary. Additionally, the inconsistent performance of the S&P has cast a shadow of a doubt on present equity valuations. Therefore, if U.S. equities should falter, the EUR/USD would likely exercise its positive correlation and follow suit. If the EUR/USD should continue its decline, May 21 lows serve as an important support area. Regardless of the near-term uncertainty, we maintain our bullish outlook trend wise until further notice.
Fundamentally, we find resistances of 1.3899, 1.3922, 1.3958, 1.3991, and 1.4024. To the downside, we see supports of 1.3847, 1.3807, 1.3756, 1.3732, and 1.3659. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3889.
GBP/USD
The Cable weakened with U.S. equities yesterday, exercising its positive correlation with the S&P futures as investors locked in gains at the highly psychological 1.60 level. Today’s CBI realized sales number was a little disappointing, as was yesterday’s BBA mortgage approvals. Therefore, the optimism surrounding a recovery in consumption and housing has been dented. Regardless, all-around economic data from Britain remains on the upswing until we see significant drawbacks across the board. Hence, the Cable remains in a bullish trend, although it may experience relative weakness as compared to its European counterpart, reflected by a stabilizing EUR/GBP.
Our 2nd tier downtrend line is a critical obstacle since it stretches back to July 2008 highs, forming our last foreseeable blockade for the medium-term. Hence, even though the Cable’s near-term gains have been impressive, we could witness even more exciting movements to the upside if the currency pair can clear the 2nd tier. Due to the significance of present levels, we wouldn’t be surprised to experience continued hesitation around 1.60 as investors debate leaving the key resistance behind. Meanwhile, the GBP/USD is building up a solid base between 1.5822 and 1.5988, which could serve as a reliable defense should the currency leap above 1.60. We advise keeping a close eye on volume over the next couple sessions. A large up-bar backed by considerable volume could indicate a forthcoming breakout.
All eyes will be on U.S. equity markets and their reaction to incoming economic data and Treasury bill auctions. As with the EUR/USD, the inconsistent performance of the S&P serves as a negative counterpunch to the optimistic fundamentals exhibited by the Cable. However, if the S&P can manage to shake loose of 900 and make a fundamental move to the upside this would likely push both the GBP/USD and the EUR/USD beyond their respective barriers. We maintain our bullish outlook on the GBP/USD trend-wise until further notice.
Fundamentally, we find resistances of 1.5988, 1.6062, 1.6129, 1.6233, and 1.6307. To the downside, we see supports of 1.5988, 1.5899, 1.5822, 1.5727, and 1.5662. The GBP/USD is currently exchanging at 1.5953.
USD/JPY
The USD/JPY is making an encouraging move to the upside, running past our 1st tier downtrend line after Japan announced an asset deficit of roughly $6.61 billion. In other words, domestic investors purchased an excess of $6.61 worth of foreign assets, likely participating in the large U.S. Treasury auctions. This news indicates a boost in supply of the Yen, and is weakening the Japanese currency against equal interest bearing currencies such as the Dollar. In addition to the asset purchase news, Japan reported a retail sales number 3 basis points above analyst expectations. Therefore, consumption of retail goods continues to climb back towards reasonable levels, showing consumer confidence is on the rise with the employment market stabilizing.
It will be interesting to see if today’s pop in the USD/JPY receives significant volume. The currency pair faces several downtrend lines to the upside and will need considerable momentum to piece together a fundamental move. We can’t forget that Tuesday’s trade balance was far below analyst expectations, painting a mixed picture of the Japanese economy. Considering the downward forces bearing down on price, we maintain our bearish outlook on the USD/JPY until we witness a fundamental shift to the upside. One thing is for certain, today’s move is encouraging and brushes aside the topic of a rapidly appreciating Yen for the time being.
Fundamentally, we find resistances of 96.90, 97.45, 97.98, 98.59, and 99.25. To the downside, we see supports of 96.33, 95.82, 95.12, 94.43, and 93.77. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 96.84.
S&P
The S&P futures are recovering nicely from yesterday’s selloff, bottoming out well above Tuesday’s lows after the U.S. released better than expected durable goods orders and weekly unemployment claims data. Investors are now waiting on new home sales and weekly crude oil inventory numbers. The durable goods data was the most encouraging out of the lot, showing consumers are regaining confidence with purchases of big ticket items. Even though unemployment claims beat expectations, they remain at an abnormally elevated level. The fact we haven’t seen a sizable drop-off in unemployment claims like we saw from Germany earlier today is a disconcerting. Since unemployment claims remain at a lofty level, they have the potential to gain speed again, leaving an air of uncertainty in the investment world. Regardless, we continue to see the bright spots in economic data globally, comforting investors that the worst of the economic crisis could be behind us. Meanwhile, investors will keep a close eye on upcoming Treasury auctions to see if demand can keep up with supply. Treasury yields are rising quickly, worrying investors that higher interest rates on mortgages and automobile purchases could deter cash-strapped consumers and damage the ongoing economic recovery. Furthermore, least we mention the rising interest payment the U.S. government must make to owners of government paper. In all, the Fed may need to step up its quantitative easing program to cool rising yields, placing the U.S. government in a difficult situation.
Despite high volatility, the S&P futures continue to exhibit resilience by fighting back to the highly psychological 900 level. The sideways movement of the S&P is creating an incredible base around 900 to fall back on should the futures continue their uptrend. Crude, gold, EUR/USD, GBP/USD, and the USD/JPY are all pointing towards another breakout in the S&P futures, showing the bull-trend is alive and well. Therefore, despite the uncertainty swirling around the investment community, we maintain our bullish outlook trend wise unless the futures should make a fundamental move to the downside.
Fundamentally, we find resistances of 903.75, 910.75, 915.5, 919.75, and 926. To the downside we see supports of 898.25, 893.5, 889, 882.75 and 877.75. The S&P futures are currently trading at 900.25.
30 Year
U.S. Treasuries were the talk of the town yesterday after the 30 Year T-Bond futures experienced another large downward movement on significant volume. Concern is rising over the ability of the Fed’s quantitative easing package to counter the enormous supply of government paper being issued to fund America’s economic stimulus measures. As a result, investors are worried climbing Treasury yields could place unwanted pressure on a fragile U.S. economy. However, as we discussed previously, Treasury yields were already at deflated levels due to their normal positive correlation with U.S. equities. We recognize a medium-term downtrend line in the 30 Year yield, meaning we could reach a bottom soon in the 30 Year T-Bond futures. In fact, the futures are popping nicely today as investors bite on oversold conditions. That being said, the 30 Year yield is at a critical juncture. If the 30 Year futures don’t make a fundamental shift to the upside soon, we could continue to see a large rise in the yield. The pressure is still to the downside in the 30 Year with multiple downtrend lines bearing on price and large volume confirming the validity of the downturn. Hence, the 30 Year futures need a real game changer to turn to the tide. A note of interest is the present positive correlation between the 30 Year futures and U.S. equities. Since rising Treasury yields are worrying investors, climbing 30 Year futures are actually an encouraging sign for U.S. equities these days.
Fundamentally, we find support of 117.20, 116.75, 116.14, and 115.81. To the topside we see resistances hanging at 117.55, 117.98, 118.53, and 119.34. The 30 Year T-Bond futures are currently trading at 117 15.0.
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.
Crude futures continue their incredible ascent with OPEC likely to keep their production level unchanged. Volume managed to rise yesterday despite a mixed session, indicating a bit of uncertainty in the market as U.S. equities battle their highly psychological 900 level. We don’t expect volume to abate today after better than expected durable goods orders with new home sales and weekly crude oil inventories on the way. The improvement in durable goods orders implies automobile purchases, a stabilizing consumer, and consequently an increase in the consumption of crude. Investors are ignoring large U.S. inventory levels week in and week out while banking on a global economic recovery. If inventories should come in shallower than expected, then we could see crude futures continue their impressive rally today.
Technically, it is difficult not to be bullish on crude futures with no near-term significant barriers in sight coupled with large upward movements backed by considerable volume. On the other hand, the overwhelming optimism surrounding crude could be a sign of overbought conditions. Is it possible crude has risen too far too quickly? Then again, we are not in normal times. The liquidity injections and quantitative easing taking place globally is stoking fears of inflation, implying rising CPI and PPI with oil leading the way. Therefore, although some near-term consolidation/pullback is possible, we maintain our bullish stance trend-wise until further notice.
Fundamentally, we find supports of $62.93/bbl, $62.42/bbl, $61.98/bbl, $61.40/bbl, and $60.78/bbl. To the topside we see resistances of $63.03/bbl, $63.45/bbl, and $64.00/bbl. $60/bbl becomes a psychological cushion with $65/bbl serving as a psychological barrier. The crude futures are currently trading at $63.42/bbl.
Gold
Gold continues its stabilization, balancing along the highly psychological $950/oz level. Our resistance and support levels are fairly tight as the S&P battles its demons at 900, meaning consolidation could continue for the immediate-term. Meanwhile, gold is building a new base which can serve as solid support in the future. Our 2nd and 3rd tier uptrend and downtrend lines reached an inflection point today, highlighting the relative importance of present levels. Gold continues to exhibit a positive correlation with U.S. equities. The recovery in global equity markets is sending oil sky high while the Dollar depreciates across the board, sparking fear of inflation. Gold has served as a reliable hedge against inflation in the past. As a result, investors are fleeing to the precious metal. Additionally, we wouldn’t be surprised if China is aggressively purchasing the precious metal to diversify its reserves.
While momentum is in favor of the uptrend, the downtrend still has several upcoming barriers preventing gold from a large breakout to the upside. To give you a better idea of the limitations to the upside trend-wise, create layers of downtrends beginning from March 2008 highs and connecting through February 2009 highs. If the precious metal can manage to rally above these potential downtrend lines, then we may witness an all-out bull trend. The fact that gold is stabilizing around $950/oz is a positive sign indicating bulls could be preparing to take the next step to the upside.
Fundamentally we maintain our resistances of $950.87/oz, $953.40/oz, and $955.66/oz with fresh top-ends resting at $959.24/oz and $961.45/oz. To the downside, we see supports of $948.96/oz, $946.33/oz, $944.48/oz, $942.45/oz, and $940.45/oz. Gold is currently trading at $950.50/oz.
EUR/USD
The EUR/USD is recovering some of yesterday’s losses incurred from the selloff in U.S. equities. The currency pair is re-approaching our 1st tier uptrend line after Germany’s unemployment change number came in much better than expected. The fact unemployment change has exited the 40k-60k range is very encouraging for the EU and creates a sense of normalcy in the employment market. Today’s release tags onto the positive current account data we saw yesterday, and the PMI and economic sentiment numbers from last week. Therefore, economic data continues its upward trend for the most part, encouraging investors the global economy is stabilizing. Recent economic data highlights our belief that the EUR/USD’s present pullback as a result of overbought conditions combined with a hesitation at the psychological 1.40 level. Therefore, the EUR/USD could experience a solid rally today if America’s durable goods orders and new home sales numbers exceed expectations.
The EUR/USD remains in a bullish trend with the next natural obstacles being previous May highs and 1.40. If the currency pair can climb past these obstacles, we could see a solid near-term pop towards the 1.43 area. However, the EUR/USD has its work cut out for it as our trend lines crawl towards their inflection point, which will likely be reached before week’s end. Therefore, we anticipate further consolidation until our trend lines collide followed by a strong directional move. Despite our bullish outlook, yesterday’s solid volume on a down-bar is a disconcerting, and makes us a little wary. Additionally, the inconsistent performance of the S&P has cast a shadow of a doubt on present equity valuations. Therefore, if U.S. equities should falter, the EUR/USD would likely exercise its positive correlation and follow suit. If the EUR/USD should continue its decline, May 21 lows serve as an important support area. Regardless of the near-term uncertainty, we maintain our bullish outlook trend wise until further notice.
Fundamentally, we find resistances of 1.3899, 1.3922, 1.3958, 1.3991, and 1.4024. To the downside, we see supports of 1.3847, 1.3807, 1.3756, 1.3732, and 1.3659. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3889.
GBP/USD
The Cable weakened with U.S. equities yesterday, exercising its positive correlation with the S&P futures as investors locked in gains at the highly psychological 1.60 level. Today’s CBI realized sales number was a little disappointing, as was yesterday’s BBA mortgage approvals. Therefore, the optimism surrounding a recovery in consumption and housing has been dented. Regardless, all-around economic data from Britain remains on the upswing until we see significant drawbacks across the board. Hence, the Cable remains in a bullish trend, although it may experience relative weakness as compared to its European counterpart, reflected by a stabilizing EUR/GBP.
Our 2nd tier downtrend line is a critical obstacle since it stretches back to July 2008 highs, forming our last foreseeable blockade for the medium-term. Hence, even though the Cable’s near-term gains have been impressive, we could witness even more exciting movements to the upside if the currency pair can clear the 2nd tier. Due to the significance of present levels, we wouldn’t be surprised to experience continued hesitation around 1.60 as investors debate leaving the key resistance behind. Meanwhile, the GBP/USD is building up a solid base between 1.5822 and 1.5988, which could serve as a reliable defense should the currency leap above 1.60. We advise keeping a close eye on volume over the next couple sessions. A large up-bar backed by considerable volume could indicate a forthcoming breakout.
All eyes will be on U.S. equity markets and their reaction to incoming economic data and Treasury bill auctions. As with the EUR/USD, the inconsistent performance of the S&P serves as a negative counterpunch to the optimistic fundamentals exhibited by the Cable. However, if the S&P can manage to shake loose of 900 and make a fundamental move to the upside this would likely push both the GBP/USD and the EUR/USD beyond their respective barriers. We maintain our bullish outlook on the GBP/USD trend-wise until further notice.
Fundamentally, we find resistances of 1.5988, 1.6062, 1.6129, 1.6233, and 1.6307. To the downside, we see supports of 1.5988, 1.5899, 1.5822, 1.5727, and 1.5662. The GBP/USD is currently exchanging at 1.5953.
USD/JPY
The USD/JPY is making an encouraging move to the upside, running past our 1st tier downtrend line after Japan announced an asset deficit of roughly $6.61 billion. In other words, domestic investors purchased an excess of $6.61 worth of foreign assets, likely participating in the large U.S. Treasury auctions. This news indicates a boost in supply of the Yen, and is weakening the Japanese currency against equal interest bearing currencies such as the Dollar. In addition to the asset purchase news, Japan reported a retail sales number 3 basis points above analyst expectations. Therefore, consumption of retail goods continues to climb back towards reasonable levels, showing consumer confidence is on the rise with the employment market stabilizing.
It will be interesting to see if today’s pop in the USD/JPY receives significant volume. The currency pair faces several downtrend lines to the upside and will need considerable momentum to piece together a fundamental move. We can’t forget that Tuesday’s trade balance was far below analyst expectations, painting a mixed picture of the Japanese economy. Considering the downward forces bearing down on price, we maintain our bearish outlook on the USD/JPY until we witness a fundamental shift to the upside. One thing is for certain, today’s move is encouraging and brushes aside the topic of a rapidly appreciating Yen for the time being.
Fundamentally, we find resistances of 96.90, 97.45, 97.98, 98.59, and 99.25. To the downside, we see supports of 96.33, 95.82, 95.12, 94.43, and 93.77. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 96.84.
S&P
The S&P futures are recovering nicely from yesterday’s selloff, bottoming out well above Tuesday’s lows after the U.S. released better than expected durable goods orders and weekly unemployment claims data. Investors are now waiting on new home sales and weekly crude oil inventory numbers. The durable goods data was the most encouraging out of the lot, showing consumers are regaining confidence with purchases of big ticket items. Even though unemployment claims beat expectations, they remain at an abnormally elevated level. The fact we haven’t seen a sizable drop-off in unemployment claims like we saw from Germany earlier today is a disconcerting. Since unemployment claims remain at a lofty level, they have the potential to gain speed again, leaving an air of uncertainty in the investment world. Regardless, we continue to see the bright spots in economic data globally, comforting investors that the worst of the economic crisis could be behind us. Meanwhile, investors will keep a close eye on upcoming Treasury auctions to see if demand can keep up with supply. Treasury yields are rising quickly, worrying investors that higher interest rates on mortgages and automobile purchases could deter cash-strapped consumers and damage the ongoing economic recovery. Furthermore, least we mention the rising interest payment the U.S. government must make to owners of government paper. In all, the Fed may need to step up its quantitative easing program to cool rising yields, placing the U.S. government in a difficult situation.
Despite high volatility, the S&P futures continue to exhibit resilience by fighting back to the highly psychological 900 level. The sideways movement of the S&P is creating an incredible base around 900 to fall back on should the futures continue their uptrend. Crude, gold, EUR/USD, GBP/USD, and the USD/JPY are all pointing towards another breakout in the S&P futures, showing the bull-trend is alive and well. Therefore, despite the uncertainty swirling around the investment community, we maintain our bullish outlook trend wise unless the futures should make a fundamental move to the downside.
Fundamentally, we find resistances of 903.75, 910.75, 915.5, 919.75, and 926. To the downside we see supports of 898.25, 893.5, 889, 882.75 and 877.75. The S&P futures are currently trading at 900.25.
30 Year
U.S. Treasuries were the talk of the town yesterday after the 30 Year T-Bond futures experienced another large downward movement on significant volume. Concern is rising over the ability of the Fed’s quantitative easing package to counter the enormous supply of government paper being issued to fund America’s economic stimulus measures. As a result, investors are worried climbing Treasury yields could place unwanted pressure on a fragile U.S. economy. However, as we discussed previously, Treasury yields were already at deflated levels due to their normal positive correlation with U.S. equities. We recognize a medium-term downtrend line in the 30 Year yield, meaning we could reach a bottom soon in the 30 Year T-Bond futures. In fact, the futures are popping nicely today as investors bite on oversold conditions. That being said, the 30 Year yield is at a critical juncture. If the 30 Year futures don’t make a fundamental shift to the upside soon, we could continue to see a large rise in the yield. The pressure is still to the downside in the 30 Year with multiple downtrend lines bearing on price and large volume confirming the validity of the downturn. Hence, the 30 Year futures need a real game changer to turn to the tide. A note of interest is the present positive correlation between the 30 Year futures and U.S. equities. Since rising Treasury yields are worrying investors, climbing 30 Year futures are actually an encouraging sign for U.S. equities these days.
Fundamentally, we find support of 117.20, 116.75, 116.14, and 115.81. To the topside we see resistances hanging at 117.55, 117.98, 118.53, and 119.34. The 30 Year T-Bond futures are currently trading at 117 15.0.
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.
