EUR/USD Pulls Back With Conviction
The EUR/USD is selling off again today following yesterday’s pullback on substantial volume. Rising volume to the downside is an indicator that the pullback may carry some weight. With our 1.4117 support being tested, we could see further retracement towards the psychological 1.40 level. However, the EUR/USD also has our 1st and 2nd tier uptrend lines to the downside. Therefore, the present pullback could still be a pattern of healthy behavior. Although, the rising volume on weakness is certainly a cause for concern, and raises a red flag. Hence, we recommend investors maintain a neutral stance until we see whether present supports can hold.
The current selloff comes in reaction to weaker than expected employment and services PMI data from the U.S. More importantly, Fed Chairman Bernanke stressed the fact that the U.S. will need to limit further debt-creation and unwind the injections of liquidity as soon as possible to prevent the Dollar from experiencing a major destabilization. In other words, the U.S. may tighten its monetary policy sooner than investors expect. Bernanke is successfully changing the psychology of a rapidly depreciating Dollar, at least in the near term since we have seen the Dollar strengthen strongly across the board.
Speaking of central banks, the ECB met today and kept its benchmark rate unchanged at 1%. The ECB is also standing pat on its level of liquidity injections including the 60 billion Euro purchase of covered bonds. However, the ECB is chaotic as usual, with dissenting viewpoints surfacing from its governors concerning future monetary policy. Therefore, the ECB meeting has left the EUR/USD with a tinge of uncertainty as always. The EU is done with economic releases for the week, meaning the performance of the EUR/USD will likely rely heavily on the U.S. equities. We’ll get some more important unemployment data over the next two sessions. If the numbers disappoint, the EUR/USD’s retracement could pick up speed rather quickly. We have a negative outlook on the EUR/USD in the near-term due to the large volume to the downside. However, the medium-term uptrend is still alive and well.
Fundamentally, we find resistances of 1.4187, 1.4222, 1.4290, 1.4325, and 1.4374. To the downside, we see supports of 1.4117, 1.4078, 1.4024, 1.3987, and 1.3941. The 1.40 area serves as a psychological cushion with 1.45 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4118.
.
GBP/USD Drops on Rising Volume
The Cable is pulling back on rising volume along with the EUR/USD, raising a red flag as far as the uptrend is concerned. Hence, we could see a retracement back towards our 2nd tier uptrend line and the 1.60 level shortly. The GBP/USD was also batted away by our 2nd tier uptrend line intraday, a negative sign fundamentally. Weakness in the Pound comes despite a much better than expected Halifax HPI reading, not to mention the better than expected PMI reports throughout the week. Therefore, it wouldn’t be surprising if the Cable’s weakness was short-lived. As with the EUR/USD, the large volume to the downside is very disconcerting. However, we should continue to witness relative strength in the Pound as long as GBP data outperforms.
The Pound has been hit along with the other major Dollar pairs after Fed Chairman Bernanke made a heavy-handed speech regarding America’s intention to protect the Dollar and unwind its aggressive monetary policy as soon as possible. Bernanke’s rhetoric echoes that of Treasury Secretary Geithner during his visit to China. It appears the U.S. is trying to change the psychology of investors concerning the rapid depreciation of the Dollar. Their speeches have had a noticeable near-term impact, appreciating the Dollar across the board. However, whether the declaration is able to dislodge the medium-term uptrend of the Cable is another question. The current downward movement is certainly worth keeping an eye on, and investors should monitor the ability of our trend lines and psychological levels to hold. That being said, we have a negative outlook on the Cable in the near-term, yet maintain our medium-term bullish outlook trend-wise. If the Cable continues to pullback investors should watch for volume to dwindle before testing the waters.
Fundamentally, we find resistances of 1.6306, 1.6347, 1.6403, 1.6479 and 1.6581. To the downside, we see supports of 1.6233, 1.6159, 1.6077, 1.6006, and 1.5950. The 1.65 level acts as a psychological resistance with 1.60 serving as a psychological cushion. The GBP/USD is currently exchanging at 1.6212.
.
USD/JPY Perks Up as the Dollar Appreciates Across the Board
The USD/JPY continues its gradual ascent as it gives what it can to the broad appreciation of the Dollar taking place. Meanwhile, our 2nd tier uptrend line and 1st tier downtrend line are reaching an inflection point today. However, we feel the inflection point with our 2nd tier downtrend line will have a more prominent impact on the currency pair since the USD/JPY continues to bounce between these trend lines. Volume is increasing to the upside on the 4-hour, meaning we could have a retest of our 2nd tier downtrend line shortly. As with the rest of the major Dollar pairs, investors are reacting to both a slower improvement in U.S. economic data and aggressive language from Bernanke concerning the Fed pulling in the reins on monetary policy. Therefore, the U.S. may attempt to put a cap on debt creation and let the cards fall where they may, giving near-term strength the Dollar. Japan released some data late Wednesday showing capital spending declined less than anticipated, though the reading was still much lower than March’s. The better than expected capital spending number may be limiting gains in the USD/JPY today. Regardless, we still haven’t seen a substantial breakout in the USD/JPY to the upside, giving us little reason to change our bear trend outlook. On the other hand, the currency pair hasn’t collapsed either, giving the uptrend a glimmer of hope.
Fundamentally, we maintain resistances of 96.33, 96.90, 97.45, 97.98, and 98.66. To the downside, we find supports of 95.82, 95.12, 94.43, 93.77, and 93.11. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 96.40.
Crude Recovers After Large Decline on Significant Volume
Crude futures are posting some encouraging gains Thursday after large losses on significant volume yesterday. Crude futures were struck by a surprise rise in weekly crude inventories after disappointing employment and services PMI releases. Crude proceeded to crash below our 2nd tier uptrend line before finding support at the psychological $65/bbl level. Yesterday’s losses were certainly discouraging considering the volume, indicating we could witness more near-term losses should the S&P futures continue their decline as we anticipate.
We notice corresponding, fundamental pullbacks in both the EUR/USD and GBP/USD, a bearish indicator for crude futures due to their positive correlation. A strengthening Dollar makes the Dollar-based commodity a less attractive buy to European countries. To make matters worse, the ECB lowered its projection of yearly GDP growth, showing the recession is worse than expected in the EU. Lower forecasts for production and manufacturing in the EU dents the optimism over better the than expected PMI data from Britain this week. Truth be told, the EU has a greater influence over consumption of crude due than Britain due to its heavy reliance on exports.
While psychology seems to be shifting to the negative side in the market, crude futures have built up a solid foundation over the past few months. In fact, a sizeable pullback in crude may be overdue considering the amazing run as of late. Meanwhile, crude futures are trading back above our 2nd tier uptrend, an encouraging sign fundamentally. Keep an eye on the S&P futures, for if they retrace crude futures could follow suit. Despite our projected near-term weakness in crude, we maintain our medium-term bullish outlook on the futures until further notice.
Fundamentally, we maintain our supports of $67.23/bbl, $66.78/bbl, $66.18/bbl, $65.49/bbl, and $64.76/bbl. To the topside, we find resistances of $68.02/bbl, $68.63/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 $67.50/bbl.
Gold Drops Beneath our 2nd Tier Downtrend Line
Gold fell sharply yesterday, crashing below our 2nd tier downtrend line on rising volume as the Dollar appreciated strongly across the board. However, although the losses in gold were large, the volume didn’t reach too significant of levels on our 4 hour chart. Regardless, investors should take note and adjust their strategies accordingly. The precious metal is presently being denied by our 2nd tier downtrend line as price tries to recover Wednesday’s losses. With the GBP/USD and EUR/USD both declining on large volume, we wouldn’t be surprised to see more near-term losses in gold. On the bright side, the precious metal has our 1st tier uptrend line and the $950/oz psychological level to fall back on, meaning the medium-term uptrend is certainly intact. The question becomes whether the S&P futures can hold onto their 2nd tier uptrend line. If not, we could witness another near-term contraction in U.S. equities. Investors should keep in mind gold and equities are exhibiting a positive correlation these days. In all, gold’s bullish psychology has been dented, but the medium-term uptrend is far from lost even if we see more near-term losses.
Fundamentally we find resistances of $972.34/oz, $975.81/oz, $978.11/oz, $980.56/oz, and $984.51/oz. To the downside, we see supports of $970.35/oz, $967.81/oz, $964.89/oz, $962.50/oz, and $960.47/oz. Gold is currently trading at $972.30/oz.
S&P Futures Drag Along Our 2nd Tier Uptrend Line
The S&P futures dipped below May 7 highs yesterday before recovering to our 2nd tier uptrend line. Sellers entered the market after weaker than expected services PMI and employment data. In addition, investors saw higher than expected weekly crude inventories. Though Thursday’s weekly unemployment claims release was in line with analyst expectations, the figure is still at an abnormal 600k+ level. Regardless of the gloomy unemployment picture, the S&P futures are holding onto the 2nd tier uptrend line while yesterday’s losses weren’t backed by significant volume like in the S&P’s correlations.
Crude, gold, EUR/USD, and GBP/USD all posted large losses yesterday on climbing volume. Therefore, U.S. equities could be in for further near-term weakness due to the strong positive correlation the S&P normally exhibits with these investment vehicles. These correlations forecast the recent breakout to the upside in the S&P, and they could be predicting an upcoming pullback as well.
Currencies and gold gave a strong reaction to Fed Chairman Bernanke’s speech yesterday. Bernanke expressed the Fed’s concern regarding the escalating U.S. debt and rising Treasury yields, which in turn has resulted in a rapid depreciation of the Dollar. As a result, Bernanke explained that the U.S. government will make a concerted effort to cap U.S. debt and tighten the historically loose monetary policy as soon as possible. The issue becomes whether the Fed must choose whether to defend the future of the Dollar in exchange for lower corporate earnings and consequently higher unemployment rate.
With more unemployment data coming on Friday and currency markets exhibiting large volatility, the volatility in U.S. equities could pick up as well over the remainder of the week. Therefore, we advise investors exert near-term caution should the volume rise and the S&P futures drop back below May 7 highs. Conversely, near-term gains could accelerate should the futures tackle June highs. Although we have a negative outlook on the S&P in the near-term due to the disconcerting performance of its correlations, the medium-term uptrend is safe for the time being.
Fundamentally, we maintain resistances of 942.75 and 950. To the downside we hold our supports of 931, 924.75, 915.5, and 905.5. The S&P futures are currently trading at 933.75.
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 selling off again today following yesterday’s pullback on substantial volume. Rising volume to the downside is an indicator that the pullback may carry some weight. With our 1.4117 support being tested, we could see further retracement towards the psychological 1.40 level. However, the EUR/USD also has our 1st and 2nd tier uptrend lines to the downside. Therefore, the present pullback could still be a pattern of healthy behavior. Although, the rising volume on weakness is certainly a cause for concern, and raises a red flag. Hence, we recommend investors maintain a neutral stance until we see whether present supports can hold.
The current selloff comes in reaction to weaker than expected employment and services PMI data from the U.S. More importantly, Fed Chairman Bernanke stressed the fact that the U.S. will need to limit further debt-creation and unwind the injections of liquidity as soon as possible to prevent the Dollar from experiencing a major destabilization. In other words, the U.S. may tighten its monetary policy sooner than investors expect. Bernanke is successfully changing the psychology of a rapidly depreciating Dollar, at least in the near term since we have seen the Dollar strengthen strongly across the board.
Speaking of central banks, the ECB met today and kept its benchmark rate unchanged at 1%. The ECB is also standing pat on its level of liquidity injections including the 60 billion Euro purchase of covered bonds. However, the ECB is chaotic as usual, with dissenting viewpoints surfacing from its governors concerning future monetary policy. Therefore, the ECB meeting has left the EUR/USD with a tinge of uncertainty as always. The EU is done with economic releases for the week, meaning the performance of the EUR/USD will likely rely heavily on the U.S. equities. We’ll get some more important unemployment data over the next two sessions. If the numbers disappoint, the EUR/USD’s retracement could pick up speed rather quickly. We have a negative outlook on the EUR/USD in the near-term due to the large volume to the downside. However, the medium-term uptrend is still alive and well.
Fundamentally, we find resistances of 1.4187, 1.4222, 1.4290, 1.4325, and 1.4374. To the downside, we see supports of 1.4117, 1.4078, 1.4024, 1.3987, and 1.3941. The 1.40 area serves as a psychological cushion with 1.45 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4118.
.
GBP/USD Drops on Rising Volume
The Cable is pulling back on rising volume along with the EUR/USD, raising a red flag as far as the uptrend is concerned. Hence, we could see a retracement back towards our 2nd tier uptrend line and the 1.60 level shortly. The GBP/USD was also batted away by our 2nd tier uptrend line intraday, a negative sign fundamentally. Weakness in the Pound comes despite a much better than expected Halifax HPI reading, not to mention the better than expected PMI reports throughout the week. Therefore, it wouldn’t be surprising if the Cable’s weakness was short-lived. As with the EUR/USD, the large volume to the downside is very disconcerting. However, we should continue to witness relative strength in the Pound as long as GBP data outperforms.
The Pound has been hit along with the other major Dollar pairs after Fed Chairman Bernanke made a heavy-handed speech regarding America’s intention to protect the Dollar and unwind its aggressive monetary policy as soon as possible. Bernanke’s rhetoric echoes that of Treasury Secretary Geithner during his visit to China. It appears the U.S. is trying to change the psychology of investors concerning the rapid depreciation of the Dollar. Their speeches have had a noticeable near-term impact, appreciating the Dollar across the board. However, whether the declaration is able to dislodge the medium-term uptrend of the Cable is another question. The current downward movement is certainly worth keeping an eye on, and investors should monitor the ability of our trend lines and psychological levels to hold. That being said, we have a negative outlook on the Cable in the near-term, yet maintain our medium-term bullish outlook trend-wise. If the Cable continues to pullback investors should watch for volume to dwindle before testing the waters.
Fundamentally, we find resistances of 1.6306, 1.6347, 1.6403, 1.6479 and 1.6581. To the downside, we see supports of 1.6233, 1.6159, 1.6077, 1.6006, and 1.5950. The 1.65 level acts as a psychological resistance with 1.60 serving as a psychological cushion. The GBP/USD is currently exchanging at 1.6212.
.
USD/JPY Perks Up as the Dollar Appreciates Across the Board
The USD/JPY continues its gradual ascent as it gives what it can to the broad appreciation of the Dollar taking place. Meanwhile, our 2nd tier uptrend line and 1st tier downtrend line are reaching an inflection point today. However, we feel the inflection point with our 2nd tier downtrend line will have a more prominent impact on the currency pair since the USD/JPY continues to bounce between these trend lines. Volume is increasing to the upside on the 4-hour, meaning we could have a retest of our 2nd tier downtrend line shortly. As with the rest of the major Dollar pairs, investors are reacting to both a slower improvement in U.S. economic data and aggressive language from Bernanke concerning the Fed pulling in the reins on monetary policy. Therefore, the U.S. may attempt to put a cap on debt creation and let the cards fall where they may, giving near-term strength the Dollar. Japan released some data late Wednesday showing capital spending declined less than anticipated, though the reading was still much lower than March’s. The better than expected capital spending number may be limiting gains in the USD/JPY today. Regardless, we still haven’t seen a substantial breakout in the USD/JPY to the upside, giving us little reason to change our bear trend outlook. On the other hand, the currency pair hasn’t collapsed either, giving the uptrend a glimmer of hope.
Fundamentally, we maintain resistances of 96.33, 96.90, 97.45, 97.98, and 98.66. To the downside, we find supports of 95.82, 95.12, 94.43, 93.77, and 93.11. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 96.40.
Crude Recovers After Large Decline on Significant Volume
Crude futures are posting some encouraging gains Thursday after large losses on significant volume yesterday. Crude futures were struck by a surprise rise in weekly crude inventories after disappointing employment and services PMI releases. Crude proceeded to crash below our 2nd tier uptrend line before finding support at the psychological $65/bbl level. Yesterday’s losses were certainly discouraging considering the volume, indicating we could witness more near-term losses should the S&P futures continue their decline as we anticipate.
We notice corresponding, fundamental pullbacks in both the EUR/USD and GBP/USD, a bearish indicator for crude futures due to their positive correlation. A strengthening Dollar makes the Dollar-based commodity a less attractive buy to European countries. To make matters worse, the ECB lowered its projection of yearly GDP growth, showing the recession is worse than expected in the EU. Lower forecasts for production and manufacturing in the EU dents the optimism over better the than expected PMI data from Britain this week. Truth be told, the EU has a greater influence over consumption of crude due than Britain due to its heavy reliance on exports.
While psychology seems to be shifting to the negative side in the market, crude futures have built up a solid foundation over the past few months. In fact, a sizeable pullback in crude may be overdue considering the amazing run as of late. Meanwhile, crude futures are trading back above our 2nd tier uptrend, an encouraging sign fundamentally. Keep an eye on the S&P futures, for if they retrace crude futures could follow suit. Despite our projected near-term weakness in crude, we maintain our medium-term bullish outlook on the futures until further notice.
Fundamentally, we maintain our supports of $67.23/bbl, $66.78/bbl, $66.18/bbl, $65.49/bbl, and $64.76/bbl. To the topside, we find resistances of $68.02/bbl, $68.63/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 $67.50/bbl.
Gold Drops Beneath our 2nd Tier Downtrend Line
Gold fell sharply yesterday, crashing below our 2nd tier downtrend line on rising volume as the Dollar appreciated strongly across the board. However, although the losses in gold were large, the volume didn’t reach too significant of levels on our 4 hour chart. Regardless, investors should take note and adjust their strategies accordingly. The precious metal is presently being denied by our 2nd tier downtrend line as price tries to recover Wednesday’s losses. With the GBP/USD and EUR/USD both declining on large volume, we wouldn’t be surprised to see more near-term losses in gold. On the bright side, the precious metal has our 1st tier uptrend line and the $950/oz psychological level to fall back on, meaning the medium-term uptrend is certainly intact. The question becomes whether the S&P futures can hold onto their 2nd tier uptrend line. If not, we could witness another near-term contraction in U.S. equities. Investors should keep in mind gold and equities are exhibiting a positive correlation these days. In all, gold’s bullish psychology has been dented, but the medium-term uptrend is far from lost even if we see more near-term losses.
Fundamentally we find resistances of $972.34/oz, $975.81/oz, $978.11/oz, $980.56/oz, and $984.51/oz. To the downside, we see supports of $970.35/oz, $967.81/oz, $964.89/oz, $962.50/oz, and $960.47/oz. Gold is currently trading at $972.30/oz.
S&P Futures Drag Along Our 2nd Tier Uptrend Line
The S&P futures dipped below May 7 highs yesterday before recovering to our 2nd tier uptrend line. Sellers entered the market after weaker than expected services PMI and employment data. In addition, investors saw higher than expected weekly crude inventories. Though Thursday’s weekly unemployment claims release was in line with analyst expectations, the figure is still at an abnormal 600k+ level. Regardless of the gloomy unemployment picture, the S&P futures are holding onto the 2nd tier uptrend line while yesterday’s losses weren’t backed by significant volume like in the S&P’s correlations.
Crude, gold, EUR/USD, and GBP/USD all posted large losses yesterday on climbing volume. Therefore, U.S. equities could be in for further near-term weakness due to the strong positive correlation the S&P normally exhibits with these investment vehicles. These correlations forecast the recent breakout to the upside in the S&P, and they could be predicting an upcoming pullback as well.
Currencies and gold gave a strong reaction to Fed Chairman Bernanke’s speech yesterday. Bernanke expressed the Fed’s concern regarding the escalating U.S. debt and rising Treasury yields, which in turn has resulted in a rapid depreciation of the Dollar. As a result, Bernanke explained that the U.S. government will make a concerted effort to cap U.S. debt and tighten the historically loose monetary policy as soon as possible. The issue becomes whether the Fed must choose whether to defend the future of the Dollar in exchange for lower corporate earnings and consequently higher unemployment rate.
With more unemployment data coming on Friday and currency markets exhibiting large volatility, the volatility in U.S. equities could pick up as well over the remainder of the week. Therefore, we advise investors exert near-term caution should the volume rise and the S&P futures drop back below May 7 highs. Conversely, near-term gains could accelerate should the futures tackle June highs. Although we have a negative outlook on the S&P in the near-term due to the disconcerting performance of its correlations, the medium-term uptrend is safe for the time being.
Fundamentally, we maintain resistances of 942.75 and 950. To the downside we hold our supports of 931, 924.75, 915.5, and 905.5. The S&P futures are currently trading at 933.75.
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.
