EUR/USD Forms a Head & Shoulders Pattern
The EUR/USD registered rising volume to the downside again, showing there is more interest on the sell-side these days. The currency pair managed to bounce off our 1st tier downtrend line, and is presently hovering just above 1.40 while knocking at our 2nd tier uptrend line. We notice a head a shoulders pattern forming, with yesterday’s highs possibly serving as the peak of the right shoulder. Therefore, our 1st tier uptrend line takes on greater responsibility since it forms the neckline of the pattern. If the neckline breaks, we could witness accelerated losses to the downside. As for the upside, the 2nd tier downtrend line appears to present the most formidable obstacle to a reactivation of the uptrend. Unfortunately for bulls, the 2nd tier downtrend line hangs far in the distance, meaning we would likely see quite a bit of consolidation before a collision.
Speaking of collisions, if the EUR/USD continues to gravitate around our 2nd tier uptrend line, the inflection point of our 2nd tier uptrend and downtrend lines could serve as a breakout point. Once again, we are speaking of the distant future. As for now, the currency pair is exhibiting inconsistent behavior as the S&P inches up slowly. It seems the EUR/USD may remain within a wide trading zone until either key resistances or supports are broken. While there is a near-term downtrend tendency in the currency pair, the medium-term uptrend has much more foundation at this time.
The EU will release its industrial production number tomorrow. Since both German and French industrial production releases were well below analyst expectations this week, we wouldn’t be surprised to see a similar showing in the EU’s number. Hence, investors probably won’t react too strongly if the data misses expectations. That being said, the data from the EU continues to come in mixed, resulting in a relative weakness in the Euro. Losses accelerated in the EUR/GBP as we anticipated, and the downturn in this currency pair should carry on as long as Britain’s economic data outperforms the EU’s.
Present Price: 1.4072
Resistances: 1.4105, 1.4139, 1.4185, 1.4220, 1.4249
Supports: 1.4056, 1.4020, 1.3964, 1.3921, 1.3862.
Psychological: 1.40, 1.45
GBP/USD Rises to the Challenge of our 3rd Tier Downtrend Line
The Cable continues its brisk climb, forming a v-shaped recovery from last week’s pullback. The currency pair is making the most of yesterday’s manufacturing production report and the fact that we’re witnessing a broad depreciation of the Dollar. Britain’s data has continued to recover well as compared to the U.S. and EU, giving a relative strength to the Pound. However, there is still a force acting to the downside, and the Cable will need to overcome our 3rd tier downtrend line and previous June highs before we feel comfortable again with a bullish stance.
Some analysts predict we may see a sizeable pullback in U.S. equities soon due to the fact that the present run may be overextended. This would likely imply a deflection from our 3rd tier downtrend line and an ensuing pullback in the Cable due to their positive correlation. The currency pair did register noticeable volume to the downside last week, but this doesn’t necessarily imply a protracted downturn. In fact, we should note that the volume we saw on June 4th was the most action the currency pair has registered since mid-December of 2008. The market could be sending us a message, and volatility should ensue for the near-term.
An interesting conversation these days involves U.S. Treasuries and the response of equities. If Treasury yields continue to climb and this has a large, negative impact on equities, there’s the possibility of the GBP/USD and EUR/USD changing their positive correlation with the S&P as investors lose confidence in the Dollar. However, this is merely speculation and the positive correlation should be intact for the foreseeable future, just something to keep an eye on. The medium-term uptrend of the Cable is alive and well, and the currency pair should continue to exhibit relative strength since its economic data is out of the way for the week. If the GBP/USD can get above our top-end resistance near-term gains could accelerate.
Present Price: 1.6542
Resistances: 1.6574, 1.6626, 1.6686, 1.6723
Supports: 1.6497, 1.6458, 1.6412, 1.6371, 1.6315
Psychological: 1.65, 1.70
USD/JPY Blocked by our 3rd Tier Downtrend Line
The USD/JPY continues to hit a brick wall at our 3rd tier downtrend line, revealing the significance of the obstacle. Investors were ambivalent about a better than expected Final GDP from Japan, and the USD/JPY is creeping back into its downtrend as U.S. equities rise. Hence, we are witnessing the theme of a broad based depreciation of the Dollar once again. Though movement in the USD/JPY is less extreme, its recent tendency to have a negative correlation with the GBP/USD and EUR/USD says wonders. Hypothetically, the USD/JPY should be rising with equities due to the global economic recovery taking place. However, the USD/JPY’s tendency to head south with rising equities shows us there is rampant concern surrounding the greenback. Furthermore, the longer the Yen trades at a relatively appreciated level, the longer Japanese exporters and manufacturers will struggle. We could see the USD/JPY remain within its trading range developed over the past few months until our downtrend lines finally collide with price. By then, the USD/JPY will likely be forced to make another directional decision. As for now, the medium-term downtrend is in place and will remain so until we see a game-changing move to the upside.
Present Price: 97.85
Resistances: 97.98, 98.66, 99.49, 100.06, 100.74
Supports: 97.45, 96.90, 96.33, 95.82, 95.20
Psychological: 95, 100
Crude Looks to Leave $70/bbl Behind
Crude futures continue their climb towards $75/bbl after the futures experienced a pop in positive volume yesterday. The buying interest came in reaction to lower than expected weekly inventories and better than expected manufacturing production from the UK. Crude is leaving behind our 2nd tier uptrend line in the process. Normally, crude futures would likely skyrocket after yesterday’s inventory shortfall, yet gains have been tempered by sideways movement in U.S. equities.
Many analysts are anticipating a pullback in the S&P, which would have a negative impact on crude due to their positive correlation. However, crude is experiencing relative strength since the global economic stimulus packages coupled with production cuts from OPEC continue to send price higher. Therefore, it seems the occurrences that would knock crude out of its upward trajectory would be a slowdown in the recovery of global production/manufacturing economic data or a production increase from OPEC. Meanwhile, the Dollar is depreciating again today, giving a little more energy to crude’s uptrend since the dollar-denominated commodity becomes a more attractive import.
Crude futures are receiving increased interest to the upside and there is little reason to be negative on crude technically or fundamentally. The only question we have is ‘where is fair value?’ Regardless, bulls are back on attack and there is not much else to say.
Price: $72.73/bbl
Resistances: $75/bbl
Supports: $71.78/bbl, $71.43/bbl, $70.72/bbl, $69.59/bbl, $68.68/bbl
Psychological: $70/bbl, $75/bbl
Gold Fights Back Above Its Neckline
Gold retested June lows today after the precious metal experienced a pullback yesterday on rising volume. Gold is presently filling out its right shoulder in what we view as a head and shoulders pattern. Our 2nd tier uptrend line serves as the neckline, so the precious metal is certainly testing the waters to the downside. The EUR/USD is exhibiting a similar head and shoulders pattern, making gold’s all the more relevant due to the positive correlation between the two. Meanwhile, gold registered larger volume to the downside for the 2nd time in a week, showing bears are making a push for a downtrend. However, the bulls have come to the rescue again. The precious metal is climbing back above its neckline with crude and the S&P futures trading in positive territory.
Gold continues to take its lead from the Dollar. A depreciating greenback makes the precious metal a desirable safe haven, especially as Russia, China, and Brazil plan to diversify their reserves. China revealed it has increased its precious metal stock piles over the past couple years, and we wouldn’t be surprised if they’re ramping up this operation right now. Therefore, there are still many fundamentals in favor of gold’s medium-term uptrend despite the near-term downtrend tendencies.
Present Price: $956.65/oz
Resistances: $957.11/oz, $960.47/oz, $963.45/oz, $965.98/oz, $968.77/oz
Supports: $954.32/oz, $951.79/oz, $948.13/oz, $945.67/oz, $942.36/oz
Psychological: $950/oz, $1000/oz
S&P Futures Take 2nd Swing at 2009 Highs
Bulls entered the market to post a late session rally for the 2nd day in a row, showing buyers are not backing down from adversity. The S&P futures are back in positive territory today after the U.S. released better than expected retail sales and weekly unemployment claims data. The positive retail sales number shows U.S. consumers are gaining confidence as uncertainty over the state of the economy may be easing. Though the decline in unemployment claims is encouraging, we saw a report of 601k in May only to have claims rise again. Additionally, 600k is still an abnormal level. We would like to see unemployment claims drop to the 400k area before we get optimistic concerning employment. Regardless, the bulls may have gotten the backing they need to send the S&P futures to new 2009 highs.
The S&P’s correlations are certainly helping the cause today. The Dollar is depreciating across the board and gold is popping while crude climbs toward $75/bbl. Therefore, it seems the S&P futures have the green light, so to speak. The futures just need a confirmation in volume and a jump past our 2nd tier uptrend line to make today’s move truly explosive. However, the GBP/USD, EUR/USD, and gold are all facing some near-term resistances. Hence, gains in the S&P may be limited should these correlations not make fundamental moves themselves.
Rising Treasury yields are another factor tempering gains in U.S. equities. Negatively correlated, gains in equities correspond with a decline in price/rise in yield of Treasuries. Investors are worried climbing interest rates may suffocate the economic recovery taking place. The question is whether the U.S. economy and its consumers are stable enough to deal with higher rates. Mortgage applications are dropping again in reaction, and it remains to be seen what impact this has on the balance sheets of banks. In other words, we are not out of the woods yet, and this is probably why we have seen the S&P futures move sideways lately.
Meanwhile, the S&P futures are separating themselves from our near-term downtrend line. Therefore, as long as the futures remain above the downtrend line, 900, and our 2nd tier uptrend line the medium-term uptrend is safe.
Present Price: 951.50
Resistances: 952, 958.25
Supports: 945.75, 939.5, 933.75, 927, 918
Psychological: 950
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 registered rising volume to the downside again, showing there is more interest on the sell-side these days. The currency pair managed to bounce off our 1st tier downtrend line, and is presently hovering just above 1.40 while knocking at our 2nd tier uptrend line. We notice a head a shoulders pattern forming, with yesterday’s highs possibly serving as the peak of the right shoulder. Therefore, our 1st tier uptrend line takes on greater responsibility since it forms the neckline of the pattern. If the neckline breaks, we could witness accelerated losses to the downside. As for the upside, the 2nd tier downtrend line appears to present the most formidable obstacle to a reactivation of the uptrend. Unfortunately for bulls, the 2nd tier downtrend line hangs far in the distance, meaning we would likely see quite a bit of consolidation before a collision.
Speaking of collisions, if the EUR/USD continues to gravitate around our 2nd tier uptrend line, the inflection point of our 2nd tier uptrend and downtrend lines could serve as a breakout point. Once again, we are speaking of the distant future. As for now, the currency pair is exhibiting inconsistent behavior as the S&P inches up slowly. It seems the EUR/USD may remain within a wide trading zone until either key resistances or supports are broken. While there is a near-term downtrend tendency in the currency pair, the medium-term uptrend has much more foundation at this time.
The EU will release its industrial production number tomorrow. Since both German and French industrial production releases were well below analyst expectations this week, we wouldn’t be surprised to see a similar showing in the EU’s number. Hence, investors probably won’t react too strongly if the data misses expectations. That being said, the data from the EU continues to come in mixed, resulting in a relative weakness in the Euro. Losses accelerated in the EUR/GBP as we anticipated, and the downturn in this currency pair should carry on as long as Britain’s economic data outperforms the EU’s.
Present Price: 1.4072
Resistances: 1.4105, 1.4139, 1.4185, 1.4220, 1.4249
Supports: 1.4056, 1.4020, 1.3964, 1.3921, 1.3862.
Psychological: 1.40, 1.45
GBP/USD Rises to the Challenge of our 3rd Tier Downtrend Line
The Cable continues its brisk climb, forming a v-shaped recovery from last week’s pullback. The currency pair is making the most of yesterday’s manufacturing production report and the fact that we’re witnessing a broad depreciation of the Dollar. Britain’s data has continued to recover well as compared to the U.S. and EU, giving a relative strength to the Pound. However, there is still a force acting to the downside, and the Cable will need to overcome our 3rd tier downtrend line and previous June highs before we feel comfortable again with a bullish stance.
Some analysts predict we may see a sizeable pullback in U.S. equities soon due to the fact that the present run may be overextended. This would likely imply a deflection from our 3rd tier downtrend line and an ensuing pullback in the Cable due to their positive correlation. The currency pair did register noticeable volume to the downside last week, but this doesn’t necessarily imply a protracted downturn. In fact, we should note that the volume we saw on June 4th was the most action the currency pair has registered since mid-December of 2008. The market could be sending us a message, and volatility should ensue for the near-term.
An interesting conversation these days involves U.S. Treasuries and the response of equities. If Treasury yields continue to climb and this has a large, negative impact on equities, there’s the possibility of the GBP/USD and EUR/USD changing their positive correlation with the S&P as investors lose confidence in the Dollar. However, this is merely speculation and the positive correlation should be intact for the foreseeable future, just something to keep an eye on. The medium-term uptrend of the Cable is alive and well, and the currency pair should continue to exhibit relative strength since its economic data is out of the way for the week. If the GBP/USD can get above our top-end resistance near-term gains could accelerate.
Present Price: 1.6542
Resistances: 1.6574, 1.6626, 1.6686, 1.6723
Supports: 1.6497, 1.6458, 1.6412, 1.6371, 1.6315
Psychological: 1.65, 1.70
USD/JPY Blocked by our 3rd Tier Downtrend Line
The USD/JPY continues to hit a brick wall at our 3rd tier downtrend line, revealing the significance of the obstacle. Investors were ambivalent about a better than expected Final GDP from Japan, and the USD/JPY is creeping back into its downtrend as U.S. equities rise. Hence, we are witnessing the theme of a broad based depreciation of the Dollar once again. Though movement in the USD/JPY is less extreme, its recent tendency to have a negative correlation with the GBP/USD and EUR/USD says wonders. Hypothetically, the USD/JPY should be rising with equities due to the global economic recovery taking place. However, the USD/JPY’s tendency to head south with rising equities shows us there is rampant concern surrounding the greenback. Furthermore, the longer the Yen trades at a relatively appreciated level, the longer Japanese exporters and manufacturers will struggle. We could see the USD/JPY remain within its trading range developed over the past few months until our downtrend lines finally collide with price. By then, the USD/JPY will likely be forced to make another directional decision. As for now, the medium-term downtrend is in place and will remain so until we see a game-changing move to the upside.
Present Price: 97.85
Resistances: 97.98, 98.66, 99.49, 100.06, 100.74
Supports: 97.45, 96.90, 96.33, 95.82, 95.20
Psychological: 95, 100
Crude Looks to Leave $70/bbl Behind
Crude futures continue their climb towards $75/bbl after the futures experienced a pop in positive volume yesterday. The buying interest came in reaction to lower than expected weekly inventories and better than expected manufacturing production from the UK. Crude is leaving behind our 2nd tier uptrend line in the process. Normally, crude futures would likely skyrocket after yesterday’s inventory shortfall, yet gains have been tempered by sideways movement in U.S. equities.
Many analysts are anticipating a pullback in the S&P, which would have a negative impact on crude due to their positive correlation. However, crude is experiencing relative strength since the global economic stimulus packages coupled with production cuts from OPEC continue to send price higher. Therefore, it seems the occurrences that would knock crude out of its upward trajectory would be a slowdown in the recovery of global production/manufacturing economic data or a production increase from OPEC. Meanwhile, the Dollar is depreciating again today, giving a little more energy to crude’s uptrend since the dollar-denominated commodity becomes a more attractive import.
Crude futures are receiving increased interest to the upside and there is little reason to be negative on crude technically or fundamentally. The only question we have is ‘where is fair value?’ Regardless, bulls are back on attack and there is not much else to say.
Price: $72.73/bbl
Resistances: $75/bbl
Supports: $71.78/bbl, $71.43/bbl, $70.72/bbl, $69.59/bbl, $68.68/bbl
Psychological: $70/bbl, $75/bbl
Gold Fights Back Above Its Neckline
Gold retested June lows today after the precious metal experienced a pullback yesterday on rising volume. Gold is presently filling out its right shoulder in what we view as a head and shoulders pattern. Our 2nd tier uptrend line serves as the neckline, so the precious metal is certainly testing the waters to the downside. The EUR/USD is exhibiting a similar head and shoulders pattern, making gold’s all the more relevant due to the positive correlation between the two. Meanwhile, gold registered larger volume to the downside for the 2nd time in a week, showing bears are making a push for a downtrend. However, the bulls have come to the rescue again. The precious metal is climbing back above its neckline with crude and the S&P futures trading in positive territory.
Gold continues to take its lead from the Dollar. A depreciating greenback makes the precious metal a desirable safe haven, especially as Russia, China, and Brazil plan to diversify their reserves. China revealed it has increased its precious metal stock piles over the past couple years, and we wouldn’t be surprised if they’re ramping up this operation right now. Therefore, there are still many fundamentals in favor of gold’s medium-term uptrend despite the near-term downtrend tendencies.
Present Price: $956.65/oz
Resistances: $957.11/oz, $960.47/oz, $963.45/oz, $965.98/oz, $968.77/oz
Supports: $954.32/oz, $951.79/oz, $948.13/oz, $945.67/oz, $942.36/oz
Psychological: $950/oz, $1000/oz
S&P Futures Take 2nd Swing at 2009 Highs
Bulls entered the market to post a late session rally for the 2nd day in a row, showing buyers are not backing down from adversity. The S&P futures are back in positive territory today after the U.S. released better than expected retail sales and weekly unemployment claims data. The positive retail sales number shows U.S. consumers are gaining confidence as uncertainty over the state of the economy may be easing. Though the decline in unemployment claims is encouraging, we saw a report of 601k in May only to have claims rise again. Additionally, 600k is still an abnormal level. We would like to see unemployment claims drop to the 400k area before we get optimistic concerning employment. Regardless, the bulls may have gotten the backing they need to send the S&P futures to new 2009 highs.
The S&P’s correlations are certainly helping the cause today. The Dollar is depreciating across the board and gold is popping while crude climbs toward $75/bbl. Therefore, it seems the S&P futures have the green light, so to speak. The futures just need a confirmation in volume and a jump past our 2nd tier uptrend line to make today’s move truly explosive. However, the GBP/USD, EUR/USD, and gold are all facing some near-term resistances. Hence, gains in the S&P may be limited should these correlations not make fundamental moves themselves.
Rising Treasury yields are another factor tempering gains in U.S. equities. Negatively correlated, gains in equities correspond with a decline in price/rise in yield of Treasuries. Investors are worried climbing interest rates may suffocate the economic recovery taking place. The question is whether the U.S. economy and its consumers are stable enough to deal with higher rates. Mortgage applications are dropping again in reaction, and it remains to be seen what impact this has on the balance sheets of banks. In other words, we are not out of the woods yet, and this is probably why we have seen the S&P futures move sideways lately.
Meanwhile, the S&P futures are separating themselves from our near-term downtrend line. Therefore, as long as the futures remain above the downtrend line, 900, and our 2nd tier uptrend line the medium-term uptrend is safe.
Present Price: 951.50
Resistances: 952, 958.25
Supports: 945.75, 939.5, 933.75, 927, 918
Psychological: 950
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.
