EUR/USD Moves Higher Despite Weak French Industrial Production
The EUR/USD is rebounding past 1.40 despite weaker than expected industrial production numbers from both Germany and France over the past two sessions. Therefore, the EUR/USD is taking its cue from rising crude and S&P futures along with an appreciating Pound following Britain’s positive manufacturing production release. In fact, the EUR/GBP is falling beneath key lows meaning there could be accelerated losses in the near-term, exemplifying the relative weakness of the Euro. Even though volume to the upside has been weaker than to the downside over the past week, the EUR/USD is back above the psychological 1.40 level. This is an important step in the uptrend regaining its footing. However, the large volume we saw to the downside is still a bit disconcerting. We are not fazed by the volatility and will need a fundamental confirmation to the upside to feel comfortable with an optimistic outlook on the EUR/USD. The key test will be our 2nd tier downtrend line. If the EUR/USD can climb over the 2nd tier, we may see near-term gains accelerate past previous June highs. However, there is quite a ways to go.
While EU economic data continues to come in mixed, the S&P futures are knocking at 2009 highs. Therefore, despite the current negative tendency of the Euro, the EUR/USD is inclined to follow U.S. equities higher due to their positive correlation. Improvement in U.S. equities implies a recovery in the global economy, and consequently stabilization in the Euro zone’s economy. We may just not see as large of movements from the Euro to the upside for the time being.
Fundamentally, we find resistances of 1.4139, 1.4185, 1.4220, 1.4242, 1.4286, and 1.4325. To the downside, we see supports of 1.4105, 1.4056, 1.4020, 1.3964, and 1.3921. The 1.40 area serves as a psychological support with 1.45 acting as a psychological cushion. The EUR/USD is currently exchanging at 1.4110.
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GBP/USD Continues its Recovery after Positive Manufacturing Production
The Cable has jumped over our 2nd tier downtrend line as investors celebrate a better than expected manufacturing production number, accompanied by an upward revision of the previous release. Meanwhile, investors seem to be ignoring the declining trade balance, signifying a rise in imports and/or decrease in exports. Since recent data shows consumption is improving in Britain, we assume the declining trade balance indicates a rise in imports. Overall, we continue to see positive progression in Britain’s economy.
Despite the GBP/USD’s encouraging recovery on climbing volume, we haven’t seen volume to the upside match the volume during last week’s pullback. Therefore, we are still cautious and waiting to see how the GBP/USD behaves should it approach our 3rd tier downtrend line. If the Cable can get past our 3rd tier on rising volume, then we will be comfortable re-activating our positive outlook on the currency pair. Meanwhile, the S&P futures are rallying, trading just beneath 2009 highs. If U.S. equities breakout to the upside, the Cable might find the strength to get past our 3rd tier downtrend line and previous June highs. The EUR/USD is facing a similar obstacle to the upside, showing we haven’t eclipsed the impact from last week’s downturn yet. Hence, we are sticking to the evaluation that we may be heading into a new near-term downtrend unless the Cable overcomes the aforementioned barriers to the upside. Britain will be pretty quiet for the remainder of the week news-wise, seemingly leaving its immediate-term performance in the hands of U.S. equities.
Fundamentally, we find resistances of 1.6371, 1.6412, 1.6458, 1.6497, and 1.6574. To the downside, we see supports of 1.6315, 1.6270, 1.6219, 1.6111, and 1.6054. The 1.60 level acts as a psychological cushion with 1.65 serving as a psychological barrier. The GBP/USD is currently exchanging at 1.6386.
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USD/JPY Rises after Disappointing Core Machinery Orders Data
The USD/JPY is rising back towards our 3rd tier downtrend line after the weaker than expected showing from Japan’s Core Machinery Orders. Though the CMO is normally volatile, today’s report was not the solid improvement in capital expenditure investors were hoping for. As a result, the Dollar is experiencing a little strength against the Yen. However, today’s rise of the USD/JPY is not eye-popping since our 3rd tier downtrend line and May highs are still intact with volume subsiding. Therefore, even though the USD/JPY has made a few hints towards an uptrend, we still haven’t witnessed a clarifying move to the upside. Meanwhile, investors are waiting upon the release of Japan’s Final GDP later today. If the GDP data is weaker than expected, we may see some more strength in the Dollar due to the outperformance of America’s economy as compared to Japan’s. We maintain our negative outlook on the USD/JPY trend-wise until we see a game-changing move to the upside.
Fundamentally, we maintain our resistances of 97.98, 98.66, 99.49, 100.06, and 100.74. To the downside, we hold our supports of 97.45, 96.90, 96.33, 95.82, and 95.20. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 97.90.
Crude Strengthens Above $70/bbl on Declining Inventories
Weekly crude oil inventories came in much lower than analyst expectations, and this could be enough to help crude futures solidify at $70/bbl+ with the possibility of a substantial rally. Last week’s inventory release threw investors off-guard since it was far above expectations, so today’s number should only reinforce the bulls. Meanwhile, crude futures are distancing themselves from our 2nd tier uptrend line, so price has a lot of near-term room to the upside. Counteractive forces at this time would be declining equities and/or an appreciating Dollar. Both are occurring at the moment, so gains in crude may be relatively tempered should its correlations not participate. The next foreseeable barrier for crude should prove to be the psychological $75/bbl.
British Manufacturing Production came in above expectations, and this could be driving crude futures higher. A ramp up in manufacturing normally results in the direct consumption of crude while implying an improvement in domestic and global consumption. Additionally, we read a report stating that Chinese vehicle purchases have catapulted past expectations as consumers take advantage of government subsidies. More cars on the road imply a greater demand for crude, having another positive impact on price. To counteract the bullish news on the tape, we saw a 2nd disappointing industrial production release from the EU region in as many days. French Industrial Production declined at a -1.4% rate, disappointing a forecast of -0.3%. Furthermore, we must consider the incredible run crude has made and the psychological impact $70/bb+ crude may have on buyers. Is the price justifiable? We will have to see how crude behaves fundamentally from here.
Meanwhile, investors should keep a close eye on volume. The volume in crude futures continues to drop off from June 3rd’s pullback. If we volume continues to decline we may see crude top-off and retrace towards our 2nd tier uptrend line. On the other hand, if volume increases to the upside we could see a nice near-term run. We maintain our bullish outlook on crude trend wise since there is little reason to adjust it technically or fundamentally.
We find supports of $70.59/bbl, $69.63/bbl, $68.63/bbl, $67.91/bbl, and $67.29/bbl. To the topside, we see resistances of $71.66/bbl. $70/bbl becomes a psychological cushion with $75/bbl serving as a psychological barrier. The crude futures are currently trading at $71.30/bbl.
Gold Continues its Gradual Climb on Declining Volume
Gold has risen back above our 3rd tier uptrend line on lackluster volume as the precious metal grudgingly participates in a weakening Dollar and rising equities. We’re still holding our negative near-term outlook on gold as with the GBP/USD and EUR/USD due to the large volume the precious metal experienced to the downside last week. Volume to the upside has been relatively weak, and we are not comfortable reinstating our bullish outlook on gold until we see a large, fundamental movement to the upside backed by considerable volume. With EU and Britain economic data on the light side for the remainder of the week, all eyes turn to the U.S. If retail sales come in strong on Thursday and the S&P futures breakout to the upside, gold may follow suit with a weakening Dollar due to their positive correlation. The near-term key to gold’s uptrend will be getting past our 2nd tier downtrend line. If this happens, near-term gains could accelerate.
Fundamentally we find resistances of $963.45/oz, $965.98/oz, $968.77/oz, and $972.32/oz with fresh top-end of $976.74/oz. To the downside, we see supports of $960.47/oz, $957.11/oz, $954.32/oz, $951.79/oz, and $948.13/oz. Gold is currently trading at $961.35/oz.
S&P Pulls Back from our 2nd tier Uptrend Line
The S&P futures are reversing course from our 2nd tier uptrend line after U.S. equities appeared poised for a breakout in the pre-market. We notice a corresponding appreciation of the Dollar coupled with a swift pullback in gold. Investors seem to be reacting to the news that Russia plans on diversifying some of its reserves from U.S. Treasuries to begin purchasing IMF bonds. China is echoing the same sentiment, and the idea is scaring investors since this could drive Treasuries prices lower and yields higher. Investors are concerned because the fragile U.S. consumer may be dissuaded by rising interest rates, dampening the economic recovery taking place. Additionally, the Federal Reserve may be forced to ramp up quantitative easing to satisfy the large supply of Treasuries. Speaking of economic recovery, Goldman’s CEO spoke at a conference in Israel and stated he believes the recession will be long, and we may not be witnessing the recovery right now. These two pieces of news are rattling investors a bit, though the futures haven’t experienced technically significant losses at this point.
Investors should keep an eye on June lows and our 2nd tier uptrend line. If the S&P futures drop beneath these cushions on rising volume, we could witness a sharp, near-term pullback. Despite the present weakness in the S&P, the uptrend is still alive and well unless we see a game-changing move to the downside. However, the large pullback in the EUR/USD, GBP/USD, and gold last week on large volume has us a bit uneasy concerning the downside potential of the S&P, so investors should be wary.
Fundamentally, we maintain resistances of 945.75, 952 and 958.25. To the downside we find supports of 939.5, 931.5, 927, 917.25 and 908. The S&P futures are currently trading at 939.25.
The EUR/USD is rebounding past 1.40 despite weaker than expected industrial production numbers from both Germany and France over the past two sessions. Therefore, the EUR/USD is taking its cue from rising crude and S&P futures along with an appreciating Pound following Britain’s positive manufacturing production release. In fact, the EUR/GBP is falling beneath key lows meaning there could be accelerated losses in the near-term, exemplifying the relative weakness of the Euro. Even though volume to the upside has been weaker than to the downside over the past week, the EUR/USD is back above the psychological 1.40 level. This is an important step in the uptrend regaining its footing. However, the large volume we saw to the downside is still a bit disconcerting. We are not fazed by the volatility and will need a fundamental confirmation to the upside to feel comfortable with an optimistic outlook on the EUR/USD. The key test will be our 2nd tier downtrend line. If the EUR/USD can climb over the 2nd tier, we may see near-term gains accelerate past previous June highs. However, there is quite a ways to go.
While EU economic data continues to come in mixed, the S&P futures are knocking at 2009 highs. Therefore, despite the current negative tendency of the Euro, the EUR/USD is inclined to follow U.S. equities higher due to their positive correlation. Improvement in U.S. equities implies a recovery in the global economy, and consequently stabilization in the Euro zone’s economy. We may just not see as large of movements from the Euro to the upside for the time being.
Fundamentally, we find resistances of 1.4139, 1.4185, 1.4220, 1.4242, 1.4286, and 1.4325. To the downside, we see supports of 1.4105, 1.4056, 1.4020, 1.3964, and 1.3921. The 1.40 area serves as a psychological support with 1.45 acting as a psychological cushion. The EUR/USD is currently exchanging at 1.4110.
.
GBP/USD Continues its Recovery after Positive Manufacturing Production
The Cable has jumped over our 2nd tier downtrend line as investors celebrate a better than expected manufacturing production number, accompanied by an upward revision of the previous release. Meanwhile, investors seem to be ignoring the declining trade balance, signifying a rise in imports and/or decrease in exports. Since recent data shows consumption is improving in Britain, we assume the declining trade balance indicates a rise in imports. Overall, we continue to see positive progression in Britain’s economy.
Despite the GBP/USD’s encouraging recovery on climbing volume, we haven’t seen volume to the upside match the volume during last week’s pullback. Therefore, we are still cautious and waiting to see how the GBP/USD behaves should it approach our 3rd tier downtrend line. If the Cable can get past our 3rd tier on rising volume, then we will be comfortable re-activating our positive outlook on the currency pair. Meanwhile, the S&P futures are rallying, trading just beneath 2009 highs. If U.S. equities breakout to the upside, the Cable might find the strength to get past our 3rd tier downtrend line and previous June highs. The EUR/USD is facing a similar obstacle to the upside, showing we haven’t eclipsed the impact from last week’s downturn yet. Hence, we are sticking to the evaluation that we may be heading into a new near-term downtrend unless the Cable overcomes the aforementioned barriers to the upside. Britain will be pretty quiet for the remainder of the week news-wise, seemingly leaving its immediate-term performance in the hands of U.S. equities.
Fundamentally, we find resistances of 1.6371, 1.6412, 1.6458, 1.6497, and 1.6574. To the downside, we see supports of 1.6315, 1.6270, 1.6219, 1.6111, and 1.6054. The 1.60 level acts as a psychological cushion with 1.65 serving as a psychological barrier. The GBP/USD is currently exchanging at 1.6386.
.
USD/JPY Rises after Disappointing Core Machinery Orders Data
The USD/JPY is rising back towards our 3rd tier downtrend line after the weaker than expected showing from Japan’s Core Machinery Orders. Though the CMO is normally volatile, today’s report was not the solid improvement in capital expenditure investors were hoping for. As a result, the Dollar is experiencing a little strength against the Yen. However, today’s rise of the USD/JPY is not eye-popping since our 3rd tier downtrend line and May highs are still intact with volume subsiding. Therefore, even though the USD/JPY has made a few hints towards an uptrend, we still haven’t witnessed a clarifying move to the upside. Meanwhile, investors are waiting upon the release of Japan’s Final GDP later today. If the GDP data is weaker than expected, we may see some more strength in the Dollar due to the outperformance of America’s economy as compared to Japan’s. We maintain our negative outlook on the USD/JPY trend-wise until we see a game-changing move to the upside.
Fundamentally, we maintain our resistances of 97.98, 98.66, 99.49, 100.06, and 100.74. To the downside, we hold our supports of 97.45, 96.90, 96.33, 95.82, and 95.20. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 97.90.
Crude Strengthens Above $70/bbl on Declining Inventories
Weekly crude oil inventories came in much lower than analyst expectations, and this could be enough to help crude futures solidify at $70/bbl+ with the possibility of a substantial rally. Last week’s inventory release threw investors off-guard since it was far above expectations, so today’s number should only reinforce the bulls. Meanwhile, crude futures are distancing themselves from our 2nd tier uptrend line, so price has a lot of near-term room to the upside. Counteractive forces at this time would be declining equities and/or an appreciating Dollar. Both are occurring at the moment, so gains in crude may be relatively tempered should its correlations not participate. The next foreseeable barrier for crude should prove to be the psychological $75/bbl.
British Manufacturing Production came in above expectations, and this could be driving crude futures higher. A ramp up in manufacturing normally results in the direct consumption of crude while implying an improvement in domestic and global consumption. Additionally, we read a report stating that Chinese vehicle purchases have catapulted past expectations as consumers take advantage of government subsidies. More cars on the road imply a greater demand for crude, having another positive impact on price. To counteract the bullish news on the tape, we saw a 2nd disappointing industrial production release from the EU region in as many days. French Industrial Production declined at a -1.4% rate, disappointing a forecast of -0.3%. Furthermore, we must consider the incredible run crude has made and the psychological impact $70/bb+ crude may have on buyers. Is the price justifiable? We will have to see how crude behaves fundamentally from here.
Meanwhile, investors should keep a close eye on volume. The volume in crude futures continues to drop off from June 3rd’s pullback. If we volume continues to decline we may see crude top-off and retrace towards our 2nd tier uptrend line. On the other hand, if volume increases to the upside we could see a nice near-term run. We maintain our bullish outlook on crude trend wise since there is little reason to adjust it technically or fundamentally.
We find supports of $70.59/bbl, $69.63/bbl, $68.63/bbl, $67.91/bbl, and $67.29/bbl. To the topside, we see resistances of $71.66/bbl. $70/bbl becomes a psychological cushion with $75/bbl serving as a psychological barrier. The crude futures are currently trading at $71.30/bbl.
Gold Continues its Gradual Climb on Declining Volume
Gold has risen back above our 3rd tier uptrend line on lackluster volume as the precious metal grudgingly participates in a weakening Dollar and rising equities. We’re still holding our negative near-term outlook on gold as with the GBP/USD and EUR/USD due to the large volume the precious metal experienced to the downside last week. Volume to the upside has been relatively weak, and we are not comfortable reinstating our bullish outlook on gold until we see a large, fundamental movement to the upside backed by considerable volume. With EU and Britain economic data on the light side for the remainder of the week, all eyes turn to the U.S. If retail sales come in strong on Thursday and the S&P futures breakout to the upside, gold may follow suit with a weakening Dollar due to their positive correlation. The near-term key to gold’s uptrend will be getting past our 2nd tier downtrend line. If this happens, near-term gains could accelerate.
Fundamentally we find resistances of $963.45/oz, $965.98/oz, $968.77/oz, and $972.32/oz with fresh top-end of $976.74/oz. To the downside, we see supports of $960.47/oz, $957.11/oz, $954.32/oz, $951.79/oz, and $948.13/oz. Gold is currently trading at $961.35/oz.
S&P Pulls Back from our 2nd tier Uptrend Line
The S&P futures are reversing course from our 2nd tier uptrend line after U.S. equities appeared poised for a breakout in the pre-market. We notice a corresponding appreciation of the Dollar coupled with a swift pullback in gold. Investors seem to be reacting to the news that Russia plans on diversifying some of its reserves from U.S. Treasuries to begin purchasing IMF bonds. China is echoing the same sentiment, and the idea is scaring investors since this could drive Treasuries prices lower and yields higher. Investors are concerned because the fragile U.S. consumer may be dissuaded by rising interest rates, dampening the economic recovery taking place. Additionally, the Federal Reserve may be forced to ramp up quantitative easing to satisfy the large supply of Treasuries. Speaking of economic recovery, Goldman’s CEO spoke at a conference in Israel and stated he believes the recession will be long, and we may not be witnessing the recovery right now. These two pieces of news are rattling investors a bit, though the futures haven’t experienced technically significant losses at this point.
Investors should keep an eye on June lows and our 2nd tier uptrend line. If the S&P futures drop beneath these cushions on rising volume, we could witness a sharp, near-term pullback. Despite the present weakness in the S&P, the uptrend is still alive and well unless we see a game-changing move to the downside. However, the large pullback in the EUR/USD, GBP/USD, and gold last week on large volume has us a bit uneasy concerning the downside potential of the S&P, so investors should be wary.
Fundamentally, we maintain resistances of 945.75, 952 and 958.25. To the downside we find supports of 939.5, 931.5, 927, 917.25 and 908. The S&P futures are currently trading at 939.25.
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