EUR/USD
The EUR/USD kept steamrolling through May 22 highs on increasing volume, and is distancing itself from the psychological 1.40 level on Monday. It appears the action may not slow today with the 8:00 bar on the 4 hour registering a higher volume than the previous 5 sessions. Additionally, our trend lines are reaching their much anticipated inflection point. With the EUR/USD making a key fundamental move to the upside, it appears investors are choosing to go the way of the uptrend. That being said, investors should keep a close eye on volume, because as soon as it tails off, the EUR/USD should reach a near-term peak. We’re already witnessing a slight pullback after the run higher earlier this session. If Friday wasn’t the peak in volume, then it seems today may be the top with the bulls running out of energy.
Regardless of any near-term peak, the EUR/USD remains in great shape. The currency pair continues its bull run with all foreseeable medium-term downtrend line pressures fading into the distance. Even though the EUR/USD’s uptrend has played out beautifully, the currency pair is approaching some near-term obstacles which could result in some consolidation. These obstacles include 12/29 and 12/18 highs. Therefore, the 1.43-1.47 area could prove to be a bit challenging in the near-term. While a wide 10% range, 1.43-1.47 gives you an idea of where the EUR/USD might bounce around. 1.43 would naturally serve as the 1st consolidation point with investors awaiting the results of the ECB meeting on Thursday. We won’t see too much data from the EU until then, giving all the more reason to anticipate an incoming period of consolidation. If the EUR/USD can manage to pop above 1.4432 then the currency pair may ignore 1.43 consolidation and accelerate near-term gains.
Meanwhile, economic data around the globe continues to improve. Investors are shrugging off the GM bankruptcy in what appears to be a buy on the news. While investors are anticipating the ECB to keep its benchmark rate at 1%, the central bank pulled a trick card last meeting by announcing the purchase of covered bonds. As a result, investors will be paying more attention to the ECB’s action and if inaction language concerning their alternative monetary policy actions. The EUR/USD should continue to benefit as long as the global economy recovers and investors exit the dollar from fear of inflation in the U.S. Therefore, it appears we are returning to pre-crisis norms of a weak dollar and pricey oil.
Looking over the EUR/GBP, this currency pair is threatening to making a very bearish move beneath December 08’ lows. Therefore, we could continue to see relative weakness in the Euro as compared to the Pound, making the GBP/USD a stronger currency for the time being. Despite our anticipation of upcoming consolidation EUR/USD, we maintain our bullish outlook trend wise due to the fundamental and technical moves made over the past few weeks.
Fundamentally, we find resistances of 1.4222, 1.4290, 1.4325, 1.4374, and 1.4432. To the downside, we see supports of 1.4187, 1.4117, 1.4078, 1.4024, and 1.3987. The 1.40 area serves as a psychological cushion with 1.45 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4208.
GBP/USD
The Cable exploded from our 2nd tier downtrend line and the psychological 1.60 level, darting to new annual highs on impressive volume. In fact, the volume compares to the action we saw during the bottom of the selloff in mid-January. Therefore, the GBP/USD is making a loud statement for its bull trend both fundamentally and technically. Meanwhile, the EUR/GBP is threatening to make a key bearish technical move, exemplifying the relative strength of the Pound right now. Britain’s PMI came in better than expected, continuing the theme of an overall uptrend in manufacturing and production. Britain’s economic data has outpaced both the EU and the U.S. over the past month and a half, and the Cable has reacted accordingly.
Meanwhile, the S&P futures are breaking out to new yearly highs, adding fuel to the fire of the uptrend of both the Cable and the EUR/USD due to their positive correlation with U.S. equities. However, as with the EUR/USD, we notice an upcoming zone of technical resistance which may result in some near-term consolidation. For the Cable, the next obstacle becomes October 30 highs, making the psychological 1.65-1.66 zone a possible area of consolidation. The GBP/USD has made quite a run as of late, and it wouldn’t be surprising to see some bulls cash in profits.
We’re going to see some more important economic data surface from Britain over the next few days leading up to Thursday’s interest rate decision. With the EU pretty quiet until Thursday, we could see the GBP/USD exert higher comparative volatility for the time being. Investors will watch for continued confirmation of a recovery in British economic data along with good news from the U.S. economy. Despite our anticipation of approaching consolidation, we maintain our bullish outlook on the Cable trend wise due to the incredible progress made fundamentally over the past week. The GBP/USD has left behind our key 2nd tier downtrend, meaning there is quite a bit of room to work with to the upside.
Fundamentally, we find resistances of 1.6388, 1.6462, 1.6522, 1.6587, and 1.6679. To the downside, we see supports of 1.6343, 1.6307 1.6233, 1.6170, and 1.6073. The GBP/USD is currently exchanging at 1.6386.
USD/JPY
The USD/JPY is fighting back above our 2nd tier uptrend line again after U.S. Personal Spending came in slightly above analyst expectations. U.S. equity markets are reacting positively, giving USD/JPY bulls an incentive to hold on. Additionally, U.S. Treasuries are attempting to stabilize while Geithner reassured the Chinese that U.S. debt is still a safe investment.
Why is this important for the USD/JPY? Well, investors have been selling the currency pair despite the uptrend in U.S. equities, showing a loss of confidence in the Dollar. The USD/JPY is normally positively correlated with the S&P. With the Carry Trade burnt, investors are moving the currency based on more comparative economic fundamentals. The U.S. is making a concerted effort to restore faith in the Dollar, which is keeping the USD/JPY afloat above our 2nd tier uptrend line. For if this trend line doesn’t hold, we could witness a sharp reversal towards our 1st tier uptrend line as the currency pair buckles under the pressure of its downtrend.
Action in the USD/JPY serves as an important gauge as far as the Dollar is concerned. If the Yen continues to appreciate against the Dollar despite rising U.S. equities, this could be a sign of a loss of confidence in America’s ability to balance its budget in the future. Therefore, it will be interesting to see if the USD/JPY can rise should U.S. equities continue their breakout to the upside.
On another note, Japan reported an encouraging improvement in Average Cash Earnings, another indicator that business is picking up. Therefore, all signs continue to point towards a global economic recovery/stabilization. China’s Manufacturing PMI is still showing expansion, which bodes well for Japanese exports due to the economic coupling of the two nations.
Despite the USD/JPY finding near-term support, we maintain our bearish outlook on the USD/JPY trend wise. We haven’t seen any game-changing, fundamental moves to the upside to swing the momentum. There are still 5 downtrend lines bearing down on price with the highly psychological 100 level hanging in the distance. However, the USD/JPY may begin to wake from its sideways action as our trend lines collide.
Fundamentally, we find resistances of 95.82, 96.33, 96.90, 97.45, and 97.98. To the downside, we see supports of 95.12, 94.43, 93.77, 93.11, and 92.65. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 95.72.
Crude Oil
Crude continues its climb to the sky, surging from our 2nd tier uptrend line towards the psychological $70/bbl level. However, we take note volume began to decline on Friday, indicating crude futures could finally experience some near-term consolidation. Crude has been on such a tear lately it wouldn’t be surprising to see investors take a breather as they begin to debate fair valuation. Last week’s declining crude inventories tied with a plummeting Dollar and rising U.S. equities only fueled crude’s uptrend, dismantling bull skeptics.
China’s Manufacturing PMI indicated expansion for the 2nd straight release while both U.S. and British Manufacturing PMIs rise towards 50. Therefore, manufacturing is clearly picking up globally, indicating increasing consumption of crude. However, the question becomes whether crude futures have already priced in the news and if the bull-run is sustainable for the near-term. Meanwhile, the S&P futures have finally broken out to new yearly highs, meaning crude futures may be inclined to participate since an improving U.S. economy only means greater consumption of crude. With OPEC keeping production unchanged at relatively constricted levels, there could in fact be more juice to crude’s current surge. It seems $70/bbl should at least act as an interim psychological barrier resulting in a consolidation zone.
Regardless, the crude’s uptrend is clearly alive and well. There haven’t been any fundamental setbacks or pullbacks on high volume. We will have to see a game-changing pullback or considerable consolidation to begin to question the sustainability of crude’s medium-term uptrend. Economic data will roll in throughout the week with the ECB and BOE meetings on Thursday, meaning volatility should remain at a heighted level for the time being.
Fundamentally, we find supports of $67.23/bbl, $66.78/bbl, $66.18/bbl, $65.49/bbl, and $63.45/bbl. To the topside we see resistances of $68.02/bbl, $68.41/bbl, and naturally $70/bbl. $65/bbl becomes a psychological cushion with $70/bbl serving as a psychological barrier. The crude futures are currently trading at $67.66/bbl.
Gold
Gold is topping out after making an incredible bull move on Friday. The precious metal seemed to have overextended itself by re-approaching the critical $1000/oz level rather quickly. Gold is now turning back from our 2nd tier downtrend line as volume falls off, a sign that bulls have overextended themselves. Gold continues to exert its strong positive correlation with crude and tends to serve as a leading indicator for U.S. equities. Investors are using it as a hedge for inflation as they exit the U.S. Dollar. Gold has made bull move after bull move on considerable volume during its present uptrend past $900/oz, making a retest of $1000/oz seem likely. There are 3 obstacles in the uptrend’s path, with the final test being $1000/oz. Our next two downtrend lines should prove to be power forces and act as consolidation zones. The 3rd tier downtrend line is critical since it connects through February 20, or 2009 highs. A strong, fundamental bull move through our 3rd tier on large volume could be an indication that $1000/+ may finally become a reality. The S&P futures have inched above their own yearly highs. Considering the positive correlation between the two investment vehicles, the pieces are falling into place for Gold’s uptrend. We maintain our bullish outlook trend wise for gold despite the upcoming challenges as the fundamentals and momentum remain in favor of the bulls.
Fundamentally we find resistances of $983.25/oz, $985.33/oz, $987.29/oz, $989.03/oz and $992.23/oz. To the downside, we see supports of $980.56/oz, $978.11/oz, $975.81/oz, $972.59/oz, and $970.35/oz. Gold is currently trading at $981.05/oz.
S&P
The S&P futures are setting fresh 2009 highs after ISM Manufacturing PMI data showed continual improvement in the U.S. economy with the number approaching 50, or the level of expansion. We saw improvements in Britain’s Manufacturing PMI number as well with China’s indicating expansion for the 2nd straight release. Therefore, manufacturing is picking up globally as economic stimulus packages take effect. Meanwhile, investors are buying on the news of GM filing for bankruptcy as the U.S. seemingly puts one more nagging issue behind its economy.
The U.S. Dollar has depreciated rapidly against most major currency pairs with crude and gold making bold bull moves. Hence, the S&P’s correlations pointed out today’s breakout in advance. Investors should take note that the 30 Year T-Bond futures are dropping sharply, albeit on light volume. Investors may grow concerned with rising Treasury yields constricting the U.S. economy. Higher interest rates and their impact on a damaged consumer may become a heated topic for discussion again. However, the 30 Year T-Bond future’s lows are intact, so they appear safe from a near-term collapse.
With the S&P futures breaking out to new highs, the question becomes how far they will run before a retracement. Since the S&P’s correlations have surged while U.S. equities dragged along, we feel the rally in the S&P has legs for the immediate term. It would be encouraging to see large volume to the upside in the futures today so that the rally may carry through. We do notice upcoming barriers in the EUR/USD, GBP/USD and gold, indicating upcoming consolidation in the correlations. Therefore, even though there appears to be a lag between the correlations and the S&P, keep a look out for consolidation in these investment vehicles. We maintain our bullish outlook trend wise on the S&P due to the aforementioned analysis.
Fundamentally, we find resistances of 942.75 and 950. To the downside we see supports of 931, 924.75, 915.5, and 905.5. The S&P futures are currently trading at 940.00.
30 Year
The 30 Year T-Bond futures have dropped beneath our 2nd tier downtrend line again as the S&P futures set new yearly highs. The negative correlation between Treasuries and equities is in full effect, for better or worse. The debate continues whether the rise of Treasury yields compromises the economic recovery in the U.S. Is the U.S. economy and its consumers in good enough shape to handle rising interest on mortgage rates? On the other side of the argument there is the belief that there just isn’t enough demand to satisfy the supply of Treasuries needed to fund America’s economic initiates. However, recent bond auctions have gone well, and international central banks have stepped up their purchases. Hence, the rapid decline of the 30 Year futures may just be indicating a normalization of global markets and a continual recovery in U.S. equities.
May lows are holding on for now, and it will be interesting to see how the 30 Year futures behave should U.S. equities add onto their gains. If the 30 Year’s pullback picks up speed on large volume and May lows don’t hold, expect the debate concerning Treasuries to take center stage. As we explained before, the 30 Year yield is at key resistance. Therefore, there is the possibility of a sharp reversal in yield and hence a bottom in the 30 Year futures. However, we have seen no action in the futures to indicate a bottom, so we maintain our bearish outlook on the 30 Year futures trend wise until further notice.
Fundamentally, we find supports of 116.75, 116.10, and 115.67. To the topside we see resistances hanging at 117.20, 117.69, 118.36, and 118.83. The 30 Year T-Bond futures are currently trading at 117 00.5.
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 kept steamrolling through May 22 highs on increasing volume, and is distancing itself from the psychological 1.40 level on Monday. It appears the action may not slow today with the 8:00 bar on the 4 hour registering a higher volume than the previous 5 sessions. Additionally, our trend lines are reaching their much anticipated inflection point. With the EUR/USD making a key fundamental move to the upside, it appears investors are choosing to go the way of the uptrend. That being said, investors should keep a close eye on volume, because as soon as it tails off, the EUR/USD should reach a near-term peak. We’re already witnessing a slight pullback after the run higher earlier this session. If Friday wasn’t the peak in volume, then it seems today may be the top with the bulls running out of energy.
Regardless of any near-term peak, the EUR/USD remains in great shape. The currency pair continues its bull run with all foreseeable medium-term downtrend line pressures fading into the distance. Even though the EUR/USD’s uptrend has played out beautifully, the currency pair is approaching some near-term obstacles which could result in some consolidation. These obstacles include 12/29 and 12/18 highs. Therefore, the 1.43-1.47 area could prove to be a bit challenging in the near-term. While a wide 10% range, 1.43-1.47 gives you an idea of where the EUR/USD might bounce around. 1.43 would naturally serve as the 1st consolidation point with investors awaiting the results of the ECB meeting on Thursday. We won’t see too much data from the EU until then, giving all the more reason to anticipate an incoming period of consolidation. If the EUR/USD can manage to pop above 1.4432 then the currency pair may ignore 1.43 consolidation and accelerate near-term gains.
Meanwhile, economic data around the globe continues to improve. Investors are shrugging off the GM bankruptcy in what appears to be a buy on the news. While investors are anticipating the ECB to keep its benchmark rate at 1%, the central bank pulled a trick card last meeting by announcing the purchase of covered bonds. As a result, investors will be paying more attention to the ECB’s action and if inaction language concerning their alternative monetary policy actions. The EUR/USD should continue to benefit as long as the global economy recovers and investors exit the dollar from fear of inflation in the U.S. Therefore, it appears we are returning to pre-crisis norms of a weak dollar and pricey oil.
Looking over the EUR/GBP, this currency pair is threatening to making a very bearish move beneath December 08’ lows. Therefore, we could continue to see relative weakness in the Euro as compared to the Pound, making the GBP/USD a stronger currency for the time being. Despite our anticipation of upcoming consolidation EUR/USD, we maintain our bullish outlook trend wise due to the fundamental and technical moves made over the past few weeks.
Fundamentally, we find resistances of 1.4222, 1.4290, 1.4325, 1.4374, and 1.4432. To the downside, we see supports of 1.4187, 1.4117, 1.4078, 1.4024, and 1.3987. The 1.40 area serves as a psychological cushion with 1.45 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4208.
GBP/USD
The Cable exploded from our 2nd tier downtrend line and the psychological 1.60 level, darting to new annual highs on impressive volume. In fact, the volume compares to the action we saw during the bottom of the selloff in mid-January. Therefore, the GBP/USD is making a loud statement for its bull trend both fundamentally and technically. Meanwhile, the EUR/GBP is threatening to make a key bearish technical move, exemplifying the relative strength of the Pound right now. Britain’s PMI came in better than expected, continuing the theme of an overall uptrend in manufacturing and production. Britain’s economic data has outpaced both the EU and the U.S. over the past month and a half, and the Cable has reacted accordingly.
Meanwhile, the S&P futures are breaking out to new yearly highs, adding fuel to the fire of the uptrend of both the Cable and the EUR/USD due to their positive correlation with U.S. equities. However, as with the EUR/USD, we notice an upcoming zone of technical resistance which may result in some near-term consolidation. For the Cable, the next obstacle becomes October 30 highs, making the psychological 1.65-1.66 zone a possible area of consolidation. The GBP/USD has made quite a run as of late, and it wouldn’t be surprising to see some bulls cash in profits.
We’re going to see some more important economic data surface from Britain over the next few days leading up to Thursday’s interest rate decision. With the EU pretty quiet until Thursday, we could see the GBP/USD exert higher comparative volatility for the time being. Investors will watch for continued confirmation of a recovery in British economic data along with good news from the U.S. economy. Despite our anticipation of approaching consolidation, we maintain our bullish outlook on the Cable trend wise due to the incredible progress made fundamentally over the past week. The GBP/USD has left behind our key 2nd tier downtrend, meaning there is quite a bit of room to work with to the upside.
Fundamentally, we find resistances of 1.6388, 1.6462, 1.6522, 1.6587, and 1.6679. To the downside, we see supports of 1.6343, 1.6307 1.6233, 1.6170, and 1.6073. The GBP/USD is currently exchanging at 1.6386.
USD/JPY
The USD/JPY is fighting back above our 2nd tier uptrend line again after U.S. Personal Spending came in slightly above analyst expectations. U.S. equity markets are reacting positively, giving USD/JPY bulls an incentive to hold on. Additionally, U.S. Treasuries are attempting to stabilize while Geithner reassured the Chinese that U.S. debt is still a safe investment.
Why is this important for the USD/JPY? Well, investors have been selling the currency pair despite the uptrend in U.S. equities, showing a loss of confidence in the Dollar. The USD/JPY is normally positively correlated with the S&P. With the Carry Trade burnt, investors are moving the currency based on more comparative economic fundamentals. The U.S. is making a concerted effort to restore faith in the Dollar, which is keeping the USD/JPY afloat above our 2nd tier uptrend line. For if this trend line doesn’t hold, we could witness a sharp reversal towards our 1st tier uptrend line as the currency pair buckles under the pressure of its downtrend.
Action in the USD/JPY serves as an important gauge as far as the Dollar is concerned. If the Yen continues to appreciate against the Dollar despite rising U.S. equities, this could be a sign of a loss of confidence in America’s ability to balance its budget in the future. Therefore, it will be interesting to see if the USD/JPY can rise should U.S. equities continue their breakout to the upside.
On another note, Japan reported an encouraging improvement in Average Cash Earnings, another indicator that business is picking up. Therefore, all signs continue to point towards a global economic recovery/stabilization. China’s Manufacturing PMI is still showing expansion, which bodes well for Japanese exports due to the economic coupling of the two nations.
Despite the USD/JPY finding near-term support, we maintain our bearish outlook on the USD/JPY trend wise. We haven’t seen any game-changing, fundamental moves to the upside to swing the momentum. There are still 5 downtrend lines bearing down on price with the highly psychological 100 level hanging in the distance. However, the USD/JPY may begin to wake from its sideways action as our trend lines collide.
Fundamentally, we find resistances of 95.82, 96.33, 96.90, 97.45, and 97.98. To the downside, we see supports of 95.12, 94.43, 93.77, 93.11, and 92.65. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 95.72.
Crude Oil
Crude continues its climb to the sky, surging from our 2nd tier uptrend line towards the psychological $70/bbl level. However, we take note volume began to decline on Friday, indicating crude futures could finally experience some near-term consolidation. Crude has been on such a tear lately it wouldn’t be surprising to see investors take a breather as they begin to debate fair valuation. Last week’s declining crude inventories tied with a plummeting Dollar and rising U.S. equities only fueled crude’s uptrend, dismantling bull skeptics.
China’s Manufacturing PMI indicated expansion for the 2nd straight release while both U.S. and British Manufacturing PMIs rise towards 50. Therefore, manufacturing is clearly picking up globally, indicating increasing consumption of crude. However, the question becomes whether crude futures have already priced in the news and if the bull-run is sustainable for the near-term. Meanwhile, the S&P futures have finally broken out to new yearly highs, meaning crude futures may be inclined to participate since an improving U.S. economy only means greater consumption of crude. With OPEC keeping production unchanged at relatively constricted levels, there could in fact be more juice to crude’s current surge. It seems $70/bbl should at least act as an interim psychological barrier resulting in a consolidation zone.
Regardless, the crude’s uptrend is clearly alive and well. There haven’t been any fundamental setbacks or pullbacks on high volume. We will have to see a game-changing pullback or considerable consolidation to begin to question the sustainability of crude’s medium-term uptrend. Economic data will roll in throughout the week with the ECB and BOE meetings on Thursday, meaning volatility should remain at a heighted level for the time being.
Fundamentally, we find supports of $67.23/bbl, $66.78/bbl, $66.18/bbl, $65.49/bbl, and $63.45/bbl. To the topside we see resistances of $68.02/bbl, $68.41/bbl, and naturally $70/bbl. $65/bbl becomes a psychological cushion with $70/bbl serving as a psychological barrier. The crude futures are currently trading at $67.66/bbl.
Gold
Gold is topping out after making an incredible bull move on Friday. The precious metal seemed to have overextended itself by re-approaching the critical $1000/oz level rather quickly. Gold is now turning back from our 2nd tier downtrend line as volume falls off, a sign that bulls have overextended themselves. Gold continues to exert its strong positive correlation with crude and tends to serve as a leading indicator for U.S. equities. Investors are using it as a hedge for inflation as they exit the U.S. Dollar. Gold has made bull move after bull move on considerable volume during its present uptrend past $900/oz, making a retest of $1000/oz seem likely. There are 3 obstacles in the uptrend’s path, with the final test being $1000/oz. Our next two downtrend lines should prove to be power forces and act as consolidation zones. The 3rd tier downtrend line is critical since it connects through February 20, or 2009 highs. A strong, fundamental bull move through our 3rd tier on large volume could be an indication that $1000/+ may finally become a reality. The S&P futures have inched above their own yearly highs. Considering the positive correlation between the two investment vehicles, the pieces are falling into place for Gold’s uptrend. We maintain our bullish outlook trend wise for gold despite the upcoming challenges as the fundamentals and momentum remain in favor of the bulls.
Fundamentally we find resistances of $983.25/oz, $985.33/oz, $987.29/oz, $989.03/oz and $992.23/oz. To the downside, we see supports of $980.56/oz, $978.11/oz, $975.81/oz, $972.59/oz, and $970.35/oz. Gold is currently trading at $981.05/oz.
S&P
The S&P futures are setting fresh 2009 highs after ISM Manufacturing PMI data showed continual improvement in the U.S. economy with the number approaching 50, or the level of expansion. We saw improvements in Britain’s Manufacturing PMI number as well with China’s indicating expansion for the 2nd straight release. Therefore, manufacturing is picking up globally as economic stimulus packages take effect. Meanwhile, investors are buying on the news of GM filing for bankruptcy as the U.S. seemingly puts one more nagging issue behind its economy.
The U.S. Dollar has depreciated rapidly against most major currency pairs with crude and gold making bold bull moves. Hence, the S&P’s correlations pointed out today’s breakout in advance. Investors should take note that the 30 Year T-Bond futures are dropping sharply, albeit on light volume. Investors may grow concerned with rising Treasury yields constricting the U.S. economy. Higher interest rates and their impact on a damaged consumer may become a heated topic for discussion again. However, the 30 Year T-Bond future’s lows are intact, so they appear safe from a near-term collapse.
With the S&P futures breaking out to new highs, the question becomes how far they will run before a retracement. Since the S&P’s correlations have surged while U.S. equities dragged along, we feel the rally in the S&P has legs for the immediate term. It would be encouraging to see large volume to the upside in the futures today so that the rally may carry through. We do notice upcoming barriers in the EUR/USD, GBP/USD and gold, indicating upcoming consolidation in the correlations. Therefore, even though there appears to be a lag between the correlations and the S&P, keep a look out for consolidation in these investment vehicles. We maintain our bullish outlook trend wise on the S&P due to the aforementioned analysis.
Fundamentally, we find resistances of 942.75 and 950. To the downside we see supports of 931, 924.75, 915.5, and 905.5. The S&P futures are currently trading at 940.00.
30 Year
The 30 Year T-Bond futures have dropped beneath our 2nd tier downtrend line again as the S&P futures set new yearly highs. The negative correlation between Treasuries and equities is in full effect, for better or worse. The debate continues whether the rise of Treasury yields compromises the economic recovery in the U.S. Is the U.S. economy and its consumers in good enough shape to handle rising interest on mortgage rates? On the other side of the argument there is the belief that there just isn’t enough demand to satisfy the supply of Treasuries needed to fund America’s economic initiates. However, recent bond auctions have gone well, and international central banks have stepped up their purchases. Hence, the rapid decline of the 30 Year futures may just be indicating a normalization of global markets and a continual recovery in U.S. equities.
May lows are holding on for now, and it will be interesting to see how the 30 Year futures behave should U.S. equities add onto their gains. If the 30 Year’s pullback picks up speed on large volume and May lows don’t hold, expect the debate concerning Treasuries to take center stage. As we explained before, the 30 Year yield is at key resistance. Therefore, there is the possibility of a sharp reversal in yield and hence a bottom in the 30 Year futures. However, we have seen no action in the futures to indicate a bottom, so we maintain our bearish outlook on the 30 Year futures trend wise until further notice.
Fundamentally, we find supports of 116.75, 116.10, and 115.67. To the topside we see resistances hanging at 117.20, 117.69, 118.36, and 118.83. The 30 Year T-Bond futures are currently trading at 117 00.5.
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.
