EUR/USD Backs Away from 1.40
The EUR/USD popped slightly yesterday as Tuesday’s positive economic sentiment data carried over into Wednesday’s session. However, Wednesday’s rise failed to touch 1.40 and the EUR/USD is consolidating around our 3rd tier uptrend line right now. When viewing the 1-hour, we notice the currency pair continues to register larger volume to the downside than the upside. Therefore, we believe considerable momentum to the downside remains. The near-term test will be the ability of the EUR/USD to stay above our 2nd tier downtrend and uptrend lines. These two trend lines are reaching an inflection point within the next 24-48 hours, highlighting the importance of the moment.
Meanwhile, the S&P futures are drifting lower with a retest of 900 in the making. Even though the psychological 900 level should prove to be a reliable near-term cushion, a sizeable pullback could be approaching. Due to the positive correlation between the EUR/USD and U.S. equities, the fact that the S&P’s fundamentals are deteriorating certainly doesn’t bode well for the EUR/USD’s upside, particularly at a T-Junction like now. If the EUR/USD’s 2nd trend lines don’t hold, we could witness another hefty pullback towards 1.35. While we have a negative mentality in regards to our near-term outlook for the EUR/USD trend-wise, the uptrend beginning in October 2008 still has quite a few lines of defense to rely upon. As for the upside, if the EUR/USD can climb above 1.40 we could see a near-term pop towards our 3rd tier downtrend line.
The EU won’t release any more economic data until Friday’s German PPI. Data from the EU continues to be mixed, yet has come in positively lately, giving the EUR/GBP a bit of a pop. Investors will be paying more attention to the behavior of U.S. equities over the remainder of the week as they watch the S&P’s reaction to 900 should it be reached.
Present Price: 1.3856
Resistances: 1.3954, 1.4019, 1.4052, 1.4111, 1.4148
Supports: 1.3894, 1.3847, 1.3807, 1.3759, 1.3724
Psychological: 1.40, 1.35
GBP/USD Weakens After Disappointing CBI Data
The Cable has pulled back to our 3rd tier uptrend line after investors reacted negatively to today’s data from Britain. Most analysts are highlighting the report showing negative growth in retail sales over the past month. However, viewing the data from a more historical perspective, British retail sales tend to deviate from 0% in both directions during good and bad economic times. Additionally, the -0.6% decline we saw today is certainly a negative indicator, but nothing too abnormal. The more disconcerting data releases today were the M4 money supply and CBI industrial order expectations. The less than anticipated growth in the M4 money supply supports the concept of deflationary pressures, taking a bite out of corporate earnings in the process. Additionally, the industrial order expectations number is still at a shockingly low level. Therefore, orders aren’t picking up as quickly as manufacturers would have hoped, indicating the global economy is recovering at a slow pace.
Despite Thursday’s disappointing showing so far, yesterday’s releases showed considerable progress concerning Britain’s fight against unemployment. The CCC is falling at an encouraging rate while average earnings are back in the green. If we continue to see a downtrend in CCC and uptrend in average earnings then retail sales should trend upwards as well. Therefore, even though the Cable is weakening today, we believe that Britain remains in an advantageous position economically as compared to the U.S. and EU. Even though we’ve seen some negative pressure on the GBP/USD lately, bulls continue to come to the defense of the currency pair, preventing the Cable from retesting 1.60 for the time being.
However, should the S&P futures pull back further, the GBP/USD would likely participate to a certain degree due to their positive correlation. Should near-term weakness in the Cable continue, the currency pair has considerable support between1.5850-1.60. Therefore, there would need to be a decisive turn to the downside in U.S. equities for the Cable to leave behind this trading range. This line of defense is represented by our 2nd tier uptrend line. The GBP/USD is getting squeezed between our 3rd tier uptrend and 2nd tier downtrend lines as they approach their inflection point. We notice a similar inflection point in the EUR/USD. If the Cable reacts negatively to the collision, we could view a pullback towards our 2nd tier uptrend line.
That being said, we believe there is still a reasonable downward pressure on the Cable due to the present weakness in U.S. equities. Therefore, a retracement towards 1.60 would not be surprising. Regardless, the medium-term uptrend is in good shape due to the progress the GBP/USD has made since January lows. With Britain’s economic data out of the way for the week, movement in the Cable will likely rely more upon its positive correlation with U.S. equities. Hence, investors should keep a close eye on the S&P and its ability to hold 900 should it be tested.
Present Price: 1.6299
Resistances: 1.6315, 1.6371, 1.6412, 1.6498, 1.6574, 1.6620
Supports: 1.6263, 1.6210, 1.6141, 1.6080, 1.6013
Psychological: 1.65, 1.60
USD/JPY Drops to our 2nd Tier Uptrend Line
The USD/JPY finally yielded to our 3rd tier downtrend line after knocking on the door for several days. The currency pair proceeded to drop through our 3rd tier uptrend line without hesitation on rising volume. However, volume did not reach an abnormal level, and the USD/JPY is finding support once again at our 2nd tier uptrend line. Our 2nd tier uptrend line continues to be a reliable defense, and the USD/JPY may very well bobble between our trend lines as they reach their respective inflection points. Though the currency pair is trending up at a crawl pace, the medium-term downtrend continues to bear down on price. Our 5th tier downtrend and 1st tier uptrend lines should prove to be the true tests as far as a longer-term trend is concerned. Meanwhile, the USD/JPY remains in its indecisive state, apparently waiting to see whether the global economic recovery is for real. A significant break to the downside could cripple Japanese manufacturers and the nation’s economy, whereas a breakout to the upside would likely indicate comfort in the concept of stability and future growth in the U.S. Meanwhile, if our 2nd tier uptrend line doesn’t hold, the pullback could pick up momentum towards our 1st tier uptrend line with a retest of May 22 lows. A contraction such as this would likely require a sizeable drop in U.S. equities, and the ability of the S&P to hold 900 remains to be seen.
Present Price: 96.02
Resistances: 96.33, 96.90, 97.45, 97.58, 98.66
Supports: 95.82, 95.20, 94.45, 93.76, 93.32
Psychological: 95, 100
Crude Finds Strength in Shallow Inventories
Crude futures caught themselves after dipping below the psychological $70/bbl level yesterday. Bulls came to the rescue in reaction to the second straight shallow weekly inventory report, and the futures are skating along our 2nd tier uptrend line. In fact, it is the 5th time in six weeks crude inventories have declined. The steady drop in inventories has allowed crude futures to exert a relative strength in contrast to the recent weakness in U.S. and appreciation of the U.S. Dollar. However, the fact that crude fell below $70/bbl yesterday could be a negative indicator, foreboding of a steeper pullback on the horizon.
Meanwhile, the S&P futures are flirting with the idea of a retest of their highly psychological 900 level. Any sizeable drop below 900 in the S&P could force crude lower since they are ultimately positively correlated. Any aggregate weakness in U.S. corporate performance would suggest a discouraged consumer, and consequently lower demand for crude. However, OPEC maintains a tight control on supply, and the group of major oil producers hasn’t indicated an increase in production any time soon. Hence, should demand slip, OPEC will do what it can to keep supply constrained and price high.
Regardless, we see a downtrend forming, creating a short term squeeze between our new downtrend line and our 2nd tier uptrend line. If our 2nd tier uptrend line doesn’t hold, we could see a pullback towards our 1st tier uptrend line. Investors should keep an eye on volume. A decline on rising volume could provide the kick to send crude tumbling towards $67/bbl. Since we have a negative near-term outlook on equities and a positive one on the greenback, crude’s correlations show there is certainly a downward force at work. Therefore, we maintain our negative outlook on crude, though we suspect any declines should be muted as long as inventories are dropping.
Present Price: $71.07/bbl
Resistances: $71.56/bbl, $72.37/bbl, $72.98/bbl, $75/bbl
Supports: $70.72/bbl, $69.65/bbl, $68.69/bbl, $67.14/bbl
Psychological: $75/bbl, $70/bbl, $65/bbl.
Gold Consolidates While the S&P Flirts With 900
Gold is consolidating just above our 2nd and 3rd uptrend lines while encouragingly experiencing a little volume to the upside yesterday. The positive volume is encouraging since we’ve seen more interest to the downside lately. The present consolidation of gold reflects the S&P’s hesitation at its highly psychological 900 level. Since gold is positively correlation with U.S. equities now, a fundamental breakdown in one could coincide with or be followed by a similar pullback in the other. Therefore, investors should be watching gold’s 2nd and 3rd tier uptrend lines closely. For if these trend lines down hold, we could witness another near-term pullback towards our 1st tier downtrend line and the $907/oz area. The near-term momentum still sides with the downside since a majority of the volume over the past couple weeks has come from the bears. As for the upside, gold has to deal with our 1st tier downtrend line and the psychological $950/oz level. The precious metal still has reliable defenses intact to the downside, protecting the precious metal’s medium-term uptrend line.
Present Price: $938.90/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 Trend Downward in Reaction to Overbought Conditions
The S&P futures continue to creep further away from our uptrend lines as the bulls fight to avoid a retest of 900. The further our uptrend lines drift away, the more likely we are to see a sizeable pullback. On a positive note, buyers were able to keep the S&P at a reasonable level despite a report showing a decline in consumer prices in addition to Standard and Poors slashing its ratings on 22 U.S. banks. While considerable hope remains that the U.S. economy is on the path to recovery, investors can’t ignore that equities have made an incredible run thus far this year. Therefore, the question becomes whether U.S. equities are trading at fair value. We believe the impact of the economic crisis on future corporate earnings hasn’t been fully realized. As a result, investors may be pricing in a recovery based on historical precedents rather than reality. Hence, the debate among investors continues, creating the relatively narrow trading range we’ve witnessed over the past 10 weeks. Meanwhile, the 900 area should prove to be a worthy battle ground. Investors should keep an eye on the S&P’s interaction with our newly formed 2nd tier downtrend line along with our 1st tier downtrend line. Any decline beneath our 1st tier downtrend line could result in considerable losses. Luckily for bulls, today’s Philly manufacturing index came in well above analyst expectations, reinforcing the viability of an economic recovery.
Indicator wise, all of the S&P’s correlations are recovering or consolidating while maintaining their near-term downward pressure. The correlations show investors are considering sending U.S. equities into another leg down, yet investors aren’t ready to commit since a medium-term uptrend is in play. However, inflection points are approaching in both the EUR/USD and GBP/USD while gold trades just above important uptrend lines. Hence, even though the market may choose to consolidate over the immediate term, it seems a breakout point is approaching. Therefore, investors shouldn’t get too comfortable since we believe volatility could pick up shortly.
Present Price: 919.00
Resistances: 918, 927, 933.75, 939.50, 945.75, 952
Supports: 914, 906.75, 897.50, 890, 878
Psychological: 900, 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 popped slightly yesterday as Tuesday’s positive economic sentiment data carried over into Wednesday’s session. However, Wednesday’s rise failed to touch 1.40 and the EUR/USD is consolidating around our 3rd tier uptrend line right now. When viewing the 1-hour, we notice the currency pair continues to register larger volume to the downside than the upside. Therefore, we believe considerable momentum to the downside remains. The near-term test will be the ability of the EUR/USD to stay above our 2nd tier downtrend and uptrend lines. These two trend lines are reaching an inflection point within the next 24-48 hours, highlighting the importance of the moment.
Meanwhile, the S&P futures are drifting lower with a retest of 900 in the making. Even though the psychological 900 level should prove to be a reliable near-term cushion, a sizeable pullback could be approaching. Due to the positive correlation between the EUR/USD and U.S. equities, the fact that the S&P’s fundamentals are deteriorating certainly doesn’t bode well for the EUR/USD’s upside, particularly at a T-Junction like now. If the EUR/USD’s 2nd trend lines don’t hold, we could witness another hefty pullback towards 1.35. While we have a negative mentality in regards to our near-term outlook for the EUR/USD trend-wise, the uptrend beginning in October 2008 still has quite a few lines of defense to rely upon. As for the upside, if the EUR/USD can climb above 1.40 we could see a near-term pop towards our 3rd tier downtrend line.
The EU won’t release any more economic data until Friday’s German PPI. Data from the EU continues to be mixed, yet has come in positively lately, giving the EUR/GBP a bit of a pop. Investors will be paying more attention to the behavior of U.S. equities over the remainder of the week as they watch the S&P’s reaction to 900 should it be reached.
Present Price: 1.3856
Resistances: 1.3954, 1.4019, 1.4052, 1.4111, 1.4148
Supports: 1.3894, 1.3847, 1.3807, 1.3759, 1.3724
Psychological: 1.40, 1.35
GBP/USD Weakens After Disappointing CBI Data
The Cable has pulled back to our 3rd tier uptrend line after investors reacted negatively to today’s data from Britain. Most analysts are highlighting the report showing negative growth in retail sales over the past month. However, viewing the data from a more historical perspective, British retail sales tend to deviate from 0% in both directions during good and bad economic times. Additionally, the -0.6% decline we saw today is certainly a negative indicator, but nothing too abnormal. The more disconcerting data releases today were the M4 money supply and CBI industrial order expectations. The less than anticipated growth in the M4 money supply supports the concept of deflationary pressures, taking a bite out of corporate earnings in the process. Additionally, the industrial order expectations number is still at a shockingly low level. Therefore, orders aren’t picking up as quickly as manufacturers would have hoped, indicating the global economy is recovering at a slow pace.
Despite Thursday’s disappointing showing so far, yesterday’s releases showed considerable progress concerning Britain’s fight against unemployment. The CCC is falling at an encouraging rate while average earnings are back in the green. If we continue to see a downtrend in CCC and uptrend in average earnings then retail sales should trend upwards as well. Therefore, even though the Cable is weakening today, we believe that Britain remains in an advantageous position economically as compared to the U.S. and EU. Even though we’ve seen some negative pressure on the GBP/USD lately, bulls continue to come to the defense of the currency pair, preventing the Cable from retesting 1.60 for the time being.
However, should the S&P futures pull back further, the GBP/USD would likely participate to a certain degree due to their positive correlation. Should near-term weakness in the Cable continue, the currency pair has considerable support between1.5850-1.60. Therefore, there would need to be a decisive turn to the downside in U.S. equities for the Cable to leave behind this trading range. This line of defense is represented by our 2nd tier uptrend line. The GBP/USD is getting squeezed between our 3rd tier uptrend and 2nd tier downtrend lines as they approach their inflection point. We notice a similar inflection point in the EUR/USD. If the Cable reacts negatively to the collision, we could view a pullback towards our 2nd tier uptrend line.
That being said, we believe there is still a reasonable downward pressure on the Cable due to the present weakness in U.S. equities. Therefore, a retracement towards 1.60 would not be surprising. Regardless, the medium-term uptrend is in good shape due to the progress the GBP/USD has made since January lows. With Britain’s economic data out of the way for the week, movement in the Cable will likely rely more upon its positive correlation with U.S. equities. Hence, investors should keep a close eye on the S&P and its ability to hold 900 should it be tested.
Present Price: 1.6299
Resistances: 1.6315, 1.6371, 1.6412, 1.6498, 1.6574, 1.6620
Supports: 1.6263, 1.6210, 1.6141, 1.6080, 1.6013
Psychological: 1.65, 1.60
USD/JPY Drops to our 2nd Tier Uptrend Line
The USD/JPY finally yielded to our 3rd tier downtrend line after knocking on the door for several days. The currency pair proceeded to drop through our 3rd tier uptrend line without hesitation on rising volume. However, volume did not reach an abnormal level, and the USD/JPY is finding support once again at our 2nd tier uptrend line. Our 2nd tier uptrend line continues to be a reliable defense, and the USD/JPY may very well bobble between our trend lines as they reach their respective inflection points. Though the currency pair is trending up at a crawl pace, the medium-term downtrend continues to bear down on price. Our 5th tier downtrend and 1st tier uptrend lines should prove to be the true tests as far as a longer-term trend is concerned. Meanwhile, the USD/JPY remains in its indecisive state, apparently waiting to see whether the global economic recovery is for real. A significant break to the downside could cripple Japanese manufacturers and the nation’s economy, whereas a breakout to the upside would likely indicate comfort in the concept of stability and future growth in the U.S. Meanwhile, if our 2nd tier uptrend line doesn’t hold, the pullback could pick up momentum towards our 1st tier uptrend line with a retest of May 22 lows. A contraction such as this would likely require a sizeable drop in U.S. equities, and the ability of the S&P to hold 900 remains to be seen.
Present Price: 96.02
Resistances: 96.33, 96.90, 97.45, 97.58, 98.66
Supports: 95.82, 95.20, 94.45, 93.76, 93.32
Psychological: 95, 100
Crude Finds Strength in Shallow Inventories
Crude futures caught themselves after dipping below the psychological $70/bbl level yesterday. Bulls came to the rescue in reaction to the second straight shallow weekly inventory report, and the futures are skating along our 2nd tier uptrend line. In fact, it is the 5th time in six weeks crude inventories have declined. The steady drop in inventories has allowed crude futures to exert a relative strength in contrast to the recent weakness in U.S. and appreciation of the U.S. Dollar. However, the fact that crude fell below $70/bbl yesterday could be a negative indicator, foreboding of a steeper pullback on the horizon.
Meanwhile, the S&P futures are flirting with the idea of a retest of their highly psychological 900 level. Any sizeable drop below 900 in the S&P could force crude lower since they are ultimately positively correlated. Any aggregate weakness in U.S. corporate performance would suggest a discouraged consumer, and consequently lower demand for crude. However, OPEC maintains a tight control on supply, and the group of major oil producers hasn’t indicated an increase in production any time soon. Hence, should demand slip, OPEC will do what it can to keep supply constrained and price high.
Regardless, we see a downtrend forming, creating a short term squeeze between our new downtrend line and our 2nd tier uptrend line. If our 2nd tier uptrend line doesn’t hold, we could see a pullback towards our 1st tier uptrend line. Investors should keep an eye on volume. A decline on rising volume could provide the kick to send crude tumbling towards $67/bbl. Since we have a negative near-term outlook on equities and a positive one on the greenback, crude’s correlations show there is certainly a downward force at work. Therefore, we maintain our negative outlook on crude, though we suspect any declines should be muted as long as inventories are dropping.
Present Price: $71.07/bbl
Resistances: $71.56/bbl, $72.37/bbl, $72.98/bbl, $75/bbl
Supports: $70.72/bbl, $69.65/bbl, $68.69/bbl, $67.14/bbl
Psychological: $75/bbl, $70/bbl, $65/bbl.
Gold Consolidates While the S&P Flirts With 900
Gold is consolidating just above our 2nd and 3rd uptrend lines while encouragingly experiencing a little volume to the upside yesterday. The positive volume is encouraging since we’ve seen more interest to the downside lately. The present consolidation of gold reflects the S&P’s hesitation at its highly psychological 900 level. Since gold is positively correlation with U.S. equities now, a fundamental breakdown in one could coincide with or be followed by a similar pullback in the other. Therefore, investors should be watching gold’s 2nd and 3rd tier uptrend lines closely. For if these trend lines down hold, we could witness another near-term pullback towards our 1st tier downtrend line and the $907/oz area. The near-term momentum still sides with the downside since a majority of the volume over the past couple weeks has come from the bears. As for the upside, gold has to deal with our 1st tier downtrend line and the psychological $950/oz level. The precious metal still has reliable defenses intact to the downside, protecting the precious metal’s medium-term uptrend line.
Present Price: $938.90/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 Trend Downward in Reaction to Overbought Conditions
The S&P futures continue to creep further away from our uptrend lines as the bulls fight to avoid a retest of 900. The further our uptrend lines drift away, the more likely we are to see a sizeable pullback. On a positive note, buyers were able to keep the S&P at a reasonable level despite a report showing a decline in consumer prices in addition to Standard and Poors slashing its ratings on 22 U.S. banks. While considerable hope remains that the U.S. economy is on the path to recovery, investors can’t ignore that equities have made an incredible run thus far this year. Therefore, the question becomes whether U.S. equities are trading at fair value. We believe the impact of the economic crisis on future corporate earnings hasn’t been fully realized. As a result, investors may be pricing in a recovery based on historical precedents rather than reality. Hence, the debate among investors continues, creating the relatively narrow trading range we’ve witnessed over the past 10 weeks. Meanwhile, the 900 area should prove to be a worthy battle ground. Investors should keep an eye on the S&P’s interaction with our newly formed 2nd tier downtrend line along with our 1st tier downtrend line. Any decline beneath our 1st tier downtrend line could result in considerable losses. Luckily for bulls, today’s Philly manufacturing index came in well above analyst expectations, reinforcing the viability of an economic recovery.
Indicator wise, all of the S&P’s correlations are recovering or consolidating while maintaining their near-term downward pressure. The correlations show investors are considering sending U.S. equities into another leg down, yet investors aren’t ready to commit since a medium-term uptrend is in play. However, inflection points are approaching in both the EUR/USD and GBP/USD while gold trades just above important uptrend lines. Hence, even though the market may choose to consolidate over the immediate term, it seems a breakout point is approaching. Therefore, investors shouldn’t get too comfortable since we believe volatility could pick up shortly.
Present Price: 919.00
Resistances: 918, 927, 933.75, 939.50, 945.75, 952
Supports: 914, 906.75, 897.50, 890, 878
Psychological: 900, 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.
