EUR/USD Retreats towards its Neckline
The EUR/USD topped-out yesterday and is heading back towards our 1st tier uptrend line, or the neck of its head and shoulders pattern. Gold just collapsed beneath its own neckline, which could be foreboding of a similar occurrence in the EUR/USD due to their strong positive correlation. Therefore, investors should keep a close eye on our 1st tier uptrend line, which just reached an inflection point with our 1st tier downtrend line. Meanwhile, the currency pair is trading back below the psychological 1.40 level. We can’t forget how we’ve seen stronger volume to the downside than the upside over the past week. Additionally, analysts are voicing their belief that U.S. equities are due for a healthy pullback themselves. In all, we have little reason to alter our negative near-term outlook on the EUR/USD since there aren’t any positive indicators we can find out there at present. If our 1st uptrend line doesn’t hold, we believe there could be a brisk pullback.
Meanwhile, investors should keep a close eye on the S&P futures. The S&P futures are testing their own 1st tier downtrend line. A break beneath here and May 7 highs could be accompanied by a hurried appreciation of the greenback across the board. Regardless of the near-term downward pressure, the EUR/USD’s medium-term uptrend line is safe for now. There are plenty of safety nets we can map out on the way down, so we aren’t overly concerned at the moment. As for the upside, if the 1st tier uptrend line can hold this would be a definite plus. After all, the EU had a light week news-wise, so the currency pair could hold on to see how next week pans out. Speaking of data, the EU industrial production number came in well below expectations. However, we saw that one coming and investors shouldn’t be surprised since both Germany and France reported released disappointing industrial production data earlier this week.
Present Price: 1.3975
Resistances: 1.4020, 1.4056, 1.4105, 1.4139, 1.4175
Supports: 1.3964, 1.3921, 1.3860, 1.3807, 1.3759.
Psychological: 1.40, 1.45
GBP/USD Deflects Off our 3rd Tier Trend Lines
The Cable is deflecting off our 3rd tier uptrend and downtrend lines as the S&P futures battle their 1st tier uptrend line. Weakness in the GBP/USD also comes in reaction to a large pullback in gold. Since Britain is quiet on the economic data front, the Cable is taking its cue from correlations. Meanwhile, the Cable continues to flex its relative strength as anticipated. Since we’ve seen a little more data from the rest of the world this week, investors are eating off of the plate of outperforming data we’ve seen from Britain over the past 5 or 6 weeks. However, investors should take note of the fundamental downward movement in gold today. The precious metal is normally positively correlated with the EUR/USD and GBP/USD, so the pullback in gold could be indicating further strength in the Dollar.
The key for relative stability in the Cable will likely be the ability for the S&P and crude futures to hold onto their positive momentum. For if these investment vehicles make sizable movements to the downside, the GBP/USD would likely be inclined to follow suit, though to a lesser degree. Meanwhile, the GBP/USD has plenty of uptrend lines and the psychological 1.60 level to rely upon to the downside. Therefore, the medium-term uptrend is padded and investors should be too concerned about near-term weakness. The only thing that could knock the GBP/USD off its horse would likely be a large, consistent contraction in future economic data.
Present Price: 1.6395
Resistances: 1.6412, 1.6498, 1.6572, 1.6631
Supports: 1.6371, 1.6315, 1.6263, 1.6210, 1.6141
Psychological: 1.65, 1.60
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: 98.18
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
Gold Leads the Way Down
Gold broke beneath the neckline today, or our previous 2nd tier uptrend line, and is collapsing down towards our new 2nd tier uptrend line. Though the EUR/USD’s neckline is intact, gold’s fundamental move could be warning us of a sizable appreciation in the Dollar coupled with a pullback in U.S. equities and crude due to present positive correlations. There is always the possibility of a head-fake. However, it does appear today’s movement in gold is a fundamental one. On an encouraging note, the pullback isn’t registering substantial volume, meaning our new 2nd tier uptrend line may hold for the time being should volume continue to decline. We were warning of near-term downward pressure in gold, and it finally hit. Fortunately for bulls, gold has built up several safety nets over the first half of the year during past periods of consolidation. Therefore, it will take more than today’s pullback to counter the medium-term uptrend in place.
Present Price: $938.10/oz
Resistances: $939.82/oz, $941.94/oz, $945.67/oz, $949.34/oz, $953.31/oz
Supports: $935.06/oz, $931.41/oz, $927.40/oz, $923.96/oz, $920.95/oz
Psychological: $950/oz, $900/oz
S&P Futures Move Sideways, Investors Await Next Week’s Data
The S&P futures failed in their attempt to retest 2009 highs yesterday, opting to continue along their sideways path instead. The S&P futures are retesting our 1st tier uptrend line as volume dissipates due to the lack of significant economic data. Investors did see the Prelim Univ. of Michigan consumer sentiment number today, which came in around analyst expectations. Markets experienced a small pop in reaction to the data, but we aren’t placing much weight on the slight rise in consumer confidence. The consumer sentiment number is still at a relatively deflated level, and it could just as easily turn south in the future. We feel we need to see a substantial climb in consumer sentiment towards the 75 level to buck the downtrend. However, the improvement in consumer sentiment does coincide with the climb in retail sales the U.S. released yesterday, an encouraging development.
Meanwhile, the S&P futures remain stuck in their tight wedge despite the volatility in currency and the precious metal markets. In fact, gold just made a swift break below the neckline in our head and shoulders pattern. While the movement could prove to be a head-fake, the present decline in gold could also be indicative of an oncoming pullback in the S&P futures due to the recent positive correlation between the two investment vehicles. The EUR/USD is also trading within a close range of its own neckline, meaning investors could be flirting with the idea of taking profits in the S&P futures. Therefore, investors should keep a close eye on these two correlations to see how they behave with their respective head and shoulders patterns.
Speaking of correlations, the 30 Year T-Bond futures have made a much needed pop in the past 48 hours. Yesterday’s Treasury auctions went well, cooling fears that the Fed may need to fast track its quantitative easing program. However, the Treasury yields are still at uncomfortable levels, so the recent decline in yield may only allay investor concern for the immediate term. As for the immediate term, we wouldn’t be surprised to see the S&P futures close out the week within the June trading range. We’ve had a light week of news and investors will likely rest up for the busy week ahead.
Overall, there is still a near-term downward pressure at work as indicated by the uncertainty in the Dollar and gold. If the S&P drops below our 1st tier trend line we could witness a brisk near-term selloff towards June lows and possibly May 7 highs. Therefore, it seems the S&P futures are reaching a crossroads so to speak, and we expect volatility to increase next week as investors make more directional decisions.
Present Price: 939.50
Resistances: 945.75, 952, 958.25
Supports: 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 topped-out yesterday and is heading back towards our 1st tier uptrend line, or the neck of its head and shoulders pattern. Gold just collapsed beneath its own neckline, which could be foreboding of a similar occurrence in the EUR/USD due to their strong positive correlation. Therefore, investors should keep a close eye on our 1st tier uptrend line, which just reached an inflection point with our 1st tier downtrend line. Meanwhile, the currency pair is trading back below the psychological 1.40 level. We can’t forget how we’ve seen stronger volume to the downside than the upside over the past week. Additionally, analysts are voicing their belief that U.S. equities are due for a healthy pullback themselves. In all, we have little reason to alter our negative near-term outlook on the EUR/USD since there aren’t any positive indicators we can find out there at present. If our 1st uptrend line doesn’t hold, we believe there could be a brisk pullback.
Meanwhile, investors should keep a close eye on the S&P futures. The S&P futures are testing their own 1st tier downtrend line. A break beneath here and May 7 highs could be accompanied by a hurried appreciation of the greenback across the board. Regardless of the near-term downward pressure, the EUR/USD’s medium-term uptrend line is safe for now. There are plenty of safety nets we can map out on the way down, so we aren’t overly concerned at the moment. As for the upside, if the 1st tier uptrend line can hold this would be a definite plus. After all, the EU had a light week news-wise, so the currency pair could hold on to see how next week pans out. Speaking of data, the EU industrial production number came in well below expectations. However, we saw that one coming and investors shouldn’t be surprised since both Germany and France reported released disappointing industrial production data earlier this week.
Present Price: 1.3975
Resistances: 1.4020, 1.4056, 1.4105, 1.4139, 1.4175
Supports: 1.3964, 1.3921, 1.3860, 1.3807, 1.3759.
Psychological: 1.40, 1.45
GBP/USD Deflects Off our 3rd Tier Trend Lines
The Cable is deflecting off our 3rd tier uptrend and downtrend lines as the S&P futures battle their 1st tier uptrend line. Weakness in the GBP/USD also comes in reaction to a large pullback in gold. Since Britain is quiet on the economic data front, the Cable is taking its cue from correlations. Meanwhile, the Cable continues to flex its relative strength as anticipated. Since we’ve seen a little more data from the rest of the world this week, investors are eating off of the plate of outperforming data we’ve seen from Britain over the past 5 or 6 weeks. However, investors should take note of the fundamental downward movement in gold today. The precious metal is normally positively correlated with the EUR/USD and GBP/USD, so the pullback in gold could be indicating further strength in the Dollar.
The key for relative stability in the Cable will likely be the ability for the S&P and crude futures to hold onto their positive momentum. For if these investment vehicles make sizable movements to the downside, the GBP/USD would likely be inclined to follow suit, though to a lesser degree. Meanwhile, the GBP/USD has plenty of uptrend lines and the psychological 1.60 level to rely upon to the downside. Therefore, the medium-term uptrend is padded and investors should be too concerned about near-term weakness. The only thing that could knock the GBP/USD off its horse would likely be a large, consistent contraction in future economic data.
Present Price: 1.6395
Resistances: 1.6412, 1.6498, 1.6572, 1.6631
Supports: 1.6371, 1.6315, 1.6263, 1.6210, 1.6141
Psychological: 1.65, 1.60
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: 98.18
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
Gold Leads the Way Down
Gold broke beneath the neckline today, or our previous 2nd tier uptrend line, and is collapsing down towards our new 2nd tier uptrend line. Though the EUR/USD’s neckline is intact, gold’s fundamental move could be warning us of a sizable appreciation in the Dollar coupled with a pullback in U.S. equities and crude due to present positive correlations. There is always the possibility of a head-fake. However, it does appear today’s movement in gold is a fundamental one. On an encouraging note, the pullback isn’t registering substantial volume, meaning our new 2nd tier uptrend line may hold for the time being should volume continue to decline. We were warning of near-term downward pressure in gold, and it finally hit. Fortunately for bulls, gold has built up several safety nets over the first half of the year during past periods of consolidation. Therefore, it will take more than today’s pullback to counter the medium-term uptrend in place.
Present Price: $938.10/oz
Resistances: $939.82/oz, $941.94/oz, $945.67/oz, $949.34/oz, $953.31/oz
Supports: $935.06/oz, $931.41/oz, $927.40/oz, $923.96/oz, $920.95/oz
Psychological: $950/oz, $900/oz
S&P Futures Move Sideways, Investors Await Next Week’s Data
The S&P futures failed in their attempt to retest 2009 highs yesterday, opting to continue along their sideways path instead. The S&P futures are retesting our 1st tier uptrend line as volume dissipates due to the lack of significant economic data. Investors did see the Prelim Univ. of Michigan consumer sentiment number today, which came in around analyst expectations. Markets experienced a small pop in reaction to the data, but we aren’t placing much weight on the slight rise in consumer confidence. The consumer sentiment number is still at a relatively deflated level, and it could just as easily turn south in the future. We feel we need to see a substantial climb in consumer sentiment towards the 75 level to buck the downtrend. However, the improvement in consumer sentiment does coincide with the climb in retail sales the U.S. released yesterday, an encouraging development.
Meanwhile, the S&P futures remain stuck in their tight wedge despite the volatility in currency and the precious metal markets. In fact, gold just made a swift break below the neckline in our head and shoulders pattern. While the movement could prove to be a head-fake, the present decline in gold could also be indicative of an oncoming pullback in the S&P futures due to the recent positive correlation between the two investment vehicles. The EUR/USD is also trading within a close range of its own neckline, meaning investors could be flirting with the idea of taking profits in the S&P futures. Therefore, investors should keep a close eye on these two correlations to see how they behave with their respective head and shoulders patterns.
Speaking of correlations, the 30 Year T-Bond futures have made a much needed pop in the past 48 hours. Yesterday’s Treasury auctions went well, cooling fears that the Fed may need to fast track its quantitative easing program. However, the Treasury yields are still at uncomfortable levels, so the recent decline in yield may only allay investor concern for the immediate term. As for the immediate term, we wouldn’t be surprised to see the S&P futures close out the week within the June trading range. We’ve had a light week of news and investors will likely rest up for the busy week ahead.
Overall, there is still a near-term downward pressure at work as indicated by the uncertainty in the Dollar and gold. If the S&P drops below our 1st tier trend line we could witness a brisk near-term selloff towards June lows and possibly May 7 highs. Therefore, it seems the S&P futures are reaching a crossroads so to speak, and we expect volatility to increase next week as investors make more directional decisions.
Present Price: 939.50
Resistances: 945.75, 952, 958.25
Supports: 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.
