EUR/USD Turns Course to Retest 1.40
The EUR/USD has taken a step up from the inflection point of our 2nd tier uptrend and downtrend lines despite unexciting economic data. Most of the PMI numbers from the EU today came in at or below analyst expectations while Germany’s consumer confidence surprised to the upside. The EU’s manufacturing and service sectors are still contracting since global demand has yet to pick up to pre-crisis levels. Overall, the data over the past 48 hours hasn’t been encouraging, yet the Euro is outperforming across the board. Therefore, the Euro’s appreciation may be a result of oversold conditions. It seems the EUR/USD may fluctuate between our 2nd tier uptrend and 3rd tier downtrend lines in a sign that investors aren’t willing to give up yet on the currency pair’s medium-term uptrend. This is good news for the bulls and the prospect of a global economic recovery since the EUR/USD managed to ignore a pullback in gold and equities while avoiding a technical downturn of its own. However, the EUR/USD finds itself facing the psychological 1.40 level once again, and our 3rd tier downtrend line could prove to be a worthy foe should it be tested. Hence, a near-term downtrend force remains despite the encouraging pop taking place. Investors should keep track of volume to see if the EUR/USD can register volume of 6000+ on a 4-hour up-bar. High volume to the upside could be an indicator of a changing tide in market sentiment from negative to positive.
Meanwhile, investors will be interested in the housing and durable goods data coming in from the U.S. over the next two trading sessions. Should the numbers disappoint, the Dollar may experience a rapid near-term appreciation across the board. Furthermore, markets will be paying close attention to the results of the Fed meeting ending on Wednesday. Investors will be interested in language from the Fed concerning its quantitative easing program and outlook for inflation. However, we don’t expect the Fed to make any surprise moves, and will likely state that inflation isn’t a worry at present due to rising unemployment and weak CPI data. On the other hand, we expect Bernanke & Co. reassure the market that the Fed will unwind its liquidity policies when the economy is stable enough to handle rising interest rates. However, if the Fed does suggest a rate hike in the near future and/or another form of liquidity constraint, the Dollar would likely appreciate rapidly.
Regardless of the outcome of the Fed meeting and upcoming economic data, we maintain our negative near-term outlook on the EUR/USD trend-wise due to the discouraging economic data from the EU today. Furthermore, U.S. equities are under selling pressure and are trading below the psychological 900 level. Additionally, we believe gold me an important downward movement technically during yesterday’s session. Hence, there remains a negative tone in the market and the EUR/USD should exercise its positive correlation with U.S. equities. Meanwhile, a medium-term uptrend is at play, meaning there are several reliable defenses on the way down should the EUR/USD reverse course.
Present Price: 1.3989
Resistances: 1.4019, 1.4052, 1.4112, 1.4147, 1.4198
Supports: 1.3947, 1.3847, 1.3807, 1.3759
Psychological: 1.40, 1.35
GBP/USD Finds Support Once More at 1.62
The Cable declined on climbing volume earlier today, yet has balanced on our 1.6210 support once again. The GBP/USD is rising back towards our 3rd tier downtrend line as investors hold onto their hope of a global economic stabilization. We notice considerable strength in the EUR/USD today, indicating investors are supporting a near-term depreciation of the Dollar. However, as with the EUR/USD, the GBP/USD has an important downtrend line bearing down on price. Therefore, a near-term downward pressure remains while crude futures and U.S. equities struggle. Regardless, today’s defense of the GBP/USD and EUR/USD is encouraging since the respective currency pairs are at a critical juncture as far as patterns are concerned. With the global economic stabilization at a crossroads, investors are waiting to see if the optimistic signs grow into more substantial results, or at least begin to approach pre-crisis levels. The markets are indicating investor hesitation, represented in the Cable by sideways movement over the past 10 sessions.
Meanwhile, the Pound remains in an advantageous position globally since its economic data continues to outperform. Britain’s BBA mortgage approvals came in above expectations, supporting the rise in British home prices we’ve seen recently. Additionally, unemployment is declining and the British manufacturing and service sectors are rebounding. Hence, even though there have been a couple hiccups in Britain’s economic data, the Pound maintains its comparative strength globally. Favoritism of the Pound is exemplified by the repeated defense of our 1.6210 support while ignoring near-term weakness in U.S. equities and crude. Regardless, should U.S. equities stumble into a more protracted decline the Cable would unwillingly follow suit due to their positive correlation. A weak U.S. economy implies a decrease in demand for British goods and services, causing further troubles for Britain’s economy due to economic coupling. Since U.S. equities seem overpriced and a global economic recovery isn’t written in stone, we maintain our negative outlook on the GBP/USD trend-wise. However, even if the Cable should struggle in the near-term, the currency pair’s medium-term uptrend is well intact with several technical and psychological supports in place.
Present Price: 1.6349
Resistances: 1.6371, 1.6412, 1.6498, 1.6574, 1.6624
Supports: 1.6315 1.6263, 1.6210, 1.6151, 1.6102
Psychological: 1.65, 1.60
USD/JPY Edges below our Heavily-Weighted 2nd Tier Uptrend Line
The USD/JPY is clawing back towards our 2nd tier uptrend line after dipping below for the 4th time in the past month. However, volume cooled to the downside and bulls came to the defense of the currency pair. Even though volume didn’t match the potential significance of the movement, this contraction below our 2nd tier was still larger than the previous three. Therefore, we’ll keep a close eye on volume and price over the next 24 hours, especially since we have several trend lines approaching their respective inflection points. In the mean time, Japan will release two more data points, including its corporate service price index and the nation’s trade balance. Analysts are expected Japan’s trade balance to turn into a surplus for the first time since August 2008. It will be interesting to see how exports fared since Japan’s economy is highly reliant on its manufacturing base. Regardless, the USD/JPY has been trading at an abnormally low level, and the Yen’s strength is certainly taking its toll on Japan’s economy.
We maintain our negative outlook on the USD/JPY since it is positively correlated with U.S. equities and we spot trouble ahead for the S&P. If the USD/JPY’s 2nd tier uptrend line doesn’t hold, we could witness a near-term pullback towards our 1st tier uptrend line, which is quite a ways off. The USD/JPY has been stable for a while now, and any contraction beneath May lows would certainly be noteworthy. The battle between the uptrend and the downtrend ensues as investors slug it out over a trend. Therefore, investors should keep a close eye on the ability of the S&P futures to remain relatively close to their highly psychological 900 level.
Present Price: 95.70
Resistances: 95.82, 96.33, 96.90, 97.45, 97.58
Supports: 95.20, 94.45, 93.76, 93.32, 92.69
Psychological: 95, 100
Crude Futures Decline after Disappointing EU PMI and U.S. EHS Data
Crude futures are heading south again following a bounce off our 2nd tier uptrend line earlier in the session. The weakness comes after disappointing manufacturing PMI data from the EU combined with a U.S. existing home sales number shy of analyst expectations. Both data points indicate contraction in the global economy, knocking a dent into the hope for an economic recovery. A slowdown in EU manufacturing implies a decrease in demand for crude. Meanwhile, lagging existing home sales raises uncertainty regarding the state of America’s economy. The disappointing economic numbers are providing the fuel bears need to place more downward pressure on the techincals of crude’s uptrend.
Crude futures have already had an impressive run from yearly lows, and investors were looking for a reason to take profit and send the futures south. Additionally, our 2nd tier uptrend line has more historical strength than our first tier, meaning it wouldn’t be surprising to see crude retest June lows. If this happens and June lows don’t hold, then the pullback in crude could pick up speed in the near-term. Crude’s ability to hold its June lows will likely depend on the S&P future’s ability to hold the lower end of their May trading range. Therefore, investors should keep a close eye on the performance of the S&P futures as well as that of gold.
Gold dropped through what we deem important near-term uptrend lines, and a retest of its psychological $900/oz level seems likely. The performance of the precious metal is important for crude futures since the two investment vehicles are positively correlated. The ability for crude futures to hold onto their June lows may also depend on the outcome of weekly inventories. Inventories have been coming in shallow lately, and a rise in inventories would likely place more downward pressure on crude and raise near-term volatility. Investors should keep an eye on performance of the Dollar, for an appreciating Dollar decreases export demand. Unfortunately for bulls, all of crude’s correlations are indicating that there is further room to the downside. Hence, we maintain our negative near-term outlook on crude.
Present Price: $67.13/bbl
Resistances: $67.68/bbl, $68.09/bbl, $68.90/bbl, $69.67/bbl, $70.37/bbl
Supports: $67.03/bbl, $66.38/bbl, $65.96/bbl, $65.53/bbl, $64.90/bbl
Psychological: $70/bbl, $65/bbl
Gold Bottoms-Out on Weak Volume
Gold is fighting back from Monday lows, which almost saw a retest of the psychological $900/oz level. However, volume to the upside has been weak, indicating bulls don’t feel too confident about the near-term future of the precious metal. We view yesterday’s pullback as a significant movement since it occurred at the collision point of two important uptrend lines. Therefore, it seems a retest of $900/oz is imminent. Investors should keep an eye on U.S. equities. Gold may take its cue from the behavior of the S&P futures since the precious metal is heading towards a highly psychological zone. If the S&P futures can’t hold onto their own psychological 900 level, then gold may find the momentum to head south of $900/oz due to their positive correlation. Encouragingly, the Dollar is depreciating across the board right now, which is normally positive for gold. We maintain our negative near-term outlook on gold due to the aforementioned analysis.
Present Price: $922.40/oz
Resistances: $923.96/oz, $927.40/oz, $931.41/oz, $935.62/oz, $939.82/oz
Supports: $920.95/oz, $917.49/oz, $914.99/oz, $911.14/oz, $908.25/oz
Psychological: $950/oz, $900/oz
S&P Futures Drop on Disappointing EHS Data
The S&P futures are reversing course Tuesday after existing home sales data came in shy of analyst expectations. Since the downfall of the U.S. housing market is at the core of the economic crisis, any discouraging numbers in the housing sector can have a considerable impact on market activity. The sluggish performance of existing home sales is likely a direct result of the recent decline in Treasury futures and corresponding climb in yield and mortgage rates. Consequently, investors perceive the quantitative easing undertaken by the Fed may not produce the desired result. Conversely, declining U.S. equities are sending the 30 and 10 year Treasury futures higher, lowering yield and giving a little boost to the outlook of future home sales. Hence, the U.S. economy seems to be performing a balancing act which is now highly dependent on the performance of U.S. Treasuries. Perhaps this is part of the reason why analysts predict a slow recovery for the U.S. economy.
Meanwhile, the S&P futures are gaining momentum to the downside and volume is rising in stride. Therefore, it appears the present downturn in U.S. equities has legs. The next key for the S&P futures will be the ability to hold onto the lower end of May’s trading range. If these lows don’t hold, a lot of the progress made by the S&P over the past couple months could be wiped away. Therefore, the next 24-48 hours could prove to be a critical time for the S&P’s near-term direction. Though the GBP/USD and EUR/USD have experienced encouraging support today, gold and crude have made discouraging technical retracements. Furthermore, the USD/JPY appears to be headed towards our 1st tier uptrend line while the 30 year T-Bond futures gain momentum to the upside. Hence, the S&P’s correlations enhance our negative near-term outlook for U.S. equities.
Investors are anxiously awaiting new home sales data tomorrow as well as the result of the most recent Fed meeting. Investors will be paying close attention to any outlook provided by Bernanke concerning the outlook for U.S. inflation as well as the Fed’s plans for its current quantitative easing initiative. While we don’t expect much change in the Fed’s plans and cautiously optimistic economic outlook, Bernanke’s speech could still be a market mover.
Present Price: 886
Resistances: 893.25, 899.25, 906.75, 914, 922
Supports: 882, 878, 873, 864.25, 854.25
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 has taken a step up from the inflection point of our 2nd tier uptrend and downtrend lines despite unexciting economic data. Most of the PMI numbers from the EU today came in at or below analyst expectations while Germany’s consumer confidence surprised to the upside. The EU’s manufacturing and service sectors are still contracting since global demand has yet to pick up to pre-crisis levels. Overall, the data over the past 48 hours hasn’t been encouraging, yet the Euro is outperforming across the board. Therefore, the Euro’s appreciation may be a result of oversold conditions. It seems the EUR/USD may fluctuate between our 2nd tier uptrend and 3rd tier downtrend lines in a sign that investors aren’t willing to give up yet on the currency pair’s medium-term uptrend. This is good news for the bulls and the prospect of a global economic recovery since the EUR/USD managed to ignore a pullback in gold and equities while avoiding a technical downturn of its own. However, the EUR/USD finds itself facing the psychological 1.40 level once again, and our 3rd tier downtrend line could prove to be a worthy foe should it be tested. Hence, a near-term downtrend force remains despite the encouraging pop taking place. Investors should keep track of volume to see if the EUR/USD can register volume of 6000+ on a 4-hour up-bar. High volume to the upside could be an indicator of a changing tide in market sentiment from negative to positive.
Meanwhile, investors will be interested in the housing and durable goods data coming in from the U.S. over the next two trading sessions. Should the numbers disappoint, the Dollar may experience a rapid near-term appreciation across the board. Furthermore, markets will be paying close attention to the results of the Fed meeting ending on Wednesday. Investors will be interested in language from the Fed concerning its quantitative easing program and outlook for inflation. However, we don’t expect the Fed to make any surprise moves, and will likely state that inflation isn’t a worry at present due to rising unemployment and weak CPI data. On the other hand, we expect Bernanke & Co. reassure the market that the Fed will unwind its liquidity policies when the economy is stable enough to handle rising interest rates. However, if the Fed does suggest a rate hike in the near future and/or another form of liquidity constraint, the Dollar would likely appreciate rapidly.
Regardless of the outcome of the Fed meeting and upcoming economic data, we maintain our negative near-term outlook on the EUR/USD trend-wise due to the discouraging economic data from the EU today. Furthermore, U.S. equities are under selling pressure and are trading below the psychological 900 level. Additionally, we believe gold me an important downward movement technically during yesterday’s session. Hence, there remains a negative tone in the market and the EUR/USD should exercise its positive correlation with U.S. equities. Meanwhile, a medium-term uptrend is at play, meaning there are several reliable defenses on the way down should the EUR/USD reverse course.
Present Price: 1.3989
Resistances: 1.4019, 1.4052, 1.4112, 1.4147, 1.4198
Supports: 1.3947, 1.3847, 1.3807, 1.3759
Psychological: 1.40, 1.35
GBP/USD Finds Support Once More at 1.62
The Cable declined on climbing volume earlier today, yet has balanced on our 1.6210 support once again. The GBP/USD is rising back towards our 3rd tier downtrend line as investors hold onto their hope of a global economic stabilization. We notice considerable strength in the EUR/USD today, indicating investors are supporting a near-term depreciation of the Dollar. However, as with the EUR/USD, the GBP/USD has an important downtrend line bearing down on price. Therefore, a near-term downward pressure remains while crude futures and U.S. equities struggle. Regardless, today’s defense of the GBP/USD and EUR/USD is encouraging since the respective currency pairs are at a critical juncture as far as patterns are concerned. With the global economic stabilization at a crossroads, investors are waiting to see if the optimistic signs grow into more substantial results, or at least begin to approach pre-crisis levels. The markets are indicating investor hesitation, represented in the Cable by sideways movement over the past 10 sessions.
Meanwhile, the Pound remains in an advantageous position globally since its economic data continues to outperform. Britain’s BBA mortgage approvals came in above expectations, supporting the rise in British home prices we’ve seen recently. Additionally, unemployment is declining and the British manufacturing and service sectors are rebounding. Hence, even though there have been a couple hiccups in Britain’s economic data, the Pound maintains its comparative strength globally. Favoritism of the Pound is exemplified by the repeated defense of our 1.6210 support while ignoring near-term weakness in U.S. equities and crude. Regardless, should U.S. equities stumble into a more protracted decline the Cable would unwillingly follow suit due to their positive correlation. A weak U.S. economy implies a decrease in demand for British goods and services, causing further troubles for Britain’s economy due to economic coupling. Since U.S. equities seem overpriced and a global economic recovery isn’t written in stone, we maintain our negative outlook on the GBP/USD trend-wise. However, even if the Cable should struggle in the near-term, the currency pair’s medium-term uptrend is well intact with several technical and psychological supports in place.
Present Price: 1.6349
Resistances: 1.6371, 1.6412, 1.6498, 1.6574, 1.6624
Supports: 1.6315 1.6263, 1.6210, 1.6151, 1.6102
Psychological: 1.65, 1.60
USD/JPY Edges below our Heavily-Weighted 2nd Tier Uptrend Line
The USD/JPY is clawing back towards our 2nd tier uptrend line after dipping below for the 4th time in the past month. However, volume cooled to the downside and bulls came to the defense of the currency pair. Even though volume didn’t match the potential significance of the movement, this contraction below our 2nd tier was still larger than the previous three. Therefore, we’ll keep a close eye on volume and price over the next 24 hours, especially since we have several trend lines approaching their respective inflection points. In the mean time, Japan will release two more data points, including its corporate service price index and the nation’s trade balance. Analysts are expected Japan’s trade balance to turn into a surplus for the first time since August 2008. It will be interesting to see how exports fared since Japan’s economy is highly reliant on its manufacturing base. Regardless, the USD/JPY has been trading at an abnormally low level, and the Yen’s strength is certainly taking its toll on Japan’s economy.
We maintain our negative outlook on the USD/JPY since it is positively correlated with U.S. equities and we spot trouble ahead for the S&P. If the USD/JPY’s 2nd tier uptrend line doesn’t hold, we could witness a near-term pullback towards our 1st tier uptrend line, which is quite a ways off. The USD/JPY has been stable for a while now, and any contraction beneath May lows would certainly be noteworthy. The battle between the uptrend and the downtrend ensues as investors slug it out over a trend. Therefore, investors should keep a close eye on the ability of the S&P futures to remain relatively close to their highly psychological 900 level.
Present Price: 95.70
Resistances: 95.82, 96.33, 96.90, 97.45, 97.58
Supports: 95.20, 94.45, 93.76, 93.32, 92.69
Psychological: 95, 100
Crude Futures Decline after Disappointing EU PMI and U.S. EHS Data
Crude futures are heading south again following a bounce off our 2nd tier uptrend line earlier in the session. The weakness comes after disappointing manufacturing PMI data from the EU combined with a U.S. existing home sales number shy of analyst expectations. Both data points indicate contraction in the global economy, knocking a dent into the hope for an economic recovery. A slowdown in EU manufacturing implies a decrease in demand for crude. Meanwhile, lagging existing home sales raises uncertainty regarding the state of America’s economy. The disappointing economic numbers are providing the fuel bears need to place more downward pressure on the techincals of crude’s uptrend.
Crude futures have already had an impressive run from yearly lows, and investors were looking for a reason to take profit and send the futures south. Additionally, our 2nd tier uptrend line has more historical strength than our first tier, meaning it wouldn’t be surprising to see crude retest June lows. If this happens and June lows don’t hold, then the pullback in crude could pick up speed in the near-term. Crude’s ability to hold its June lows will likely depend on the S&P future’s ability to hold the lower end of their May trading range. Therefore, investors should keep a close eye on the performance of the S&P futures as well as that of gold.
Gold dropped through what we deem important near-term uptrend lines, and a retest of its psychological $900/oz level seems likely. The performance of the precious metal is important for crude futures since the two investment vehicles are positively correlated. The ability for crude futures to hold onto their June lows may also depend on the outcome of weekly inventories. Inventories have been coming in shallow lately, and a rise in inventories would likely place more downward pressure on crude and raise near-term volatility. Investors should keep an eye on performance of the Dollar, for an appreciating Dollar decreases export demand. Unfortunately for bulls, all of crude’s correlations are indicating that there is further room to the downside. Hence, we maintain our negative near-term outlook on crude.
Present Price: $67.13/bbl
Resistances: $67.68/bbl, $68.09/bbl, $68.90/bbl, $69.67/bbl, $70.37/bbl
Supports: $67.03/bbl, $66.38/bbl, $65.96/bbl, $65.53/bbl, $64.90/bbl
Psychological: $70/bbl, $65/bbl
Gold Bottoms-Out on Weak Volume
Gold is fighting back from Monday lows, which almost saw a retest of the psychological $900/oz level. However, volume to the upside has been weak, indicating bulls don’t feel too confident about the near-term future of the precious metal. We view yesterday’s pullback as a significant movement since it occurred at the collision point of two important uptrend lines. Therefore, it seems a retest of $900/oz is imminent. Investors should keep an eye on U.S. equities. Gold may take its cue from the behavior of the S&P futures since the precious metal is heading towards a highly psychological zone. If the S&P futures can’t hold onto their own psychological 900 level, then gold may find the momentum to head south of $900/oz due to their positive correlation. Encouragingly, the Dollar is depreciating across the board right now, which is normally positive for gold. We maintain our negative near-term outlook on gold due to the aforementioned analysis.
Present Price: $922.40/oz
Resistances: $923.96/oz, $927.40/oz, $931.41/oz, $935.62/oz, $939.82/oz
Supports: $920.95/oz, $917.49/oz, $914.99/oz, $911.14/oz, $908.25/oz
Psychological: $950/oz, $900/oz
S&P Futures Drop on Disappointing EHS Data
The S&P futures are reversing course Tuesday after existing home sales data came in shy of analyst expectations. Since the downfall of the U.S. housing market is at the core of the economic crisis, any discouraging numbers in the housing sector can have a considerable impact on market activity. The sluggish performance of existing home sales is likely a direct result of the recent decline in Treasury futures and corresponding climb in yield and mortgage rates. Consequently, investors perceive the quantitative easing undertaken by the Fed may not produce the desired result. Conversely, declining U.S. equities are sending the 30 and 10 year Treasury futures higher, lowering yield and giving a little boost to the outlook of future home sales. Hence, the U.S. economy seems to be performing a balancing act which is now highly dependent on the performance of U.S. Treasuries. Perhaps this is part of the reason why analysts predict a slow recovery for the U.S. economy.
Meanwhile, the S&P futures are gaining momentum to the downside and volume is rising in stride. Therefore, it appears the present downturn in U.S. equities has legs. The next key for the S&P futures will be the ability to hold onto the lower end of May’s trading range. If these lows don’t hold, a lot of the progress made by the S&P over the past couple months could be wiped away. Therefore, the next 24-48 hours could prove to be a critical time for the S&P’s near-term direction. Though the GBP/USD and EUR/USD have experienced encouraging support today, gold and crude have made discouraging technical retracements. Furthermore, the USD/JPY appears to be headed towards our 1st tier uptrend line while the 30 year T-Bond futures gain momentum to the upside. Hence, the S&P’s correlations enhance our negative near-term outlook for U.S. equities.
Investors are anxiously awaiting new home sales data tomorrow as well as the result of the most recent Fed meeting. Investors will be paying close attention to any outlook provided by Bernanke concerning the outlook for U.S. inflation as well as the Fed’s plans for its current quantitative easing initiative. While we don’t expect much change in the Fed’s plans and cautiously optimistic economic outlook, Bernanke’s speech could still be a market mover.
Present Price: 886
Resistances: 893.25, 899.25, 906.75, 914, 922
Supports: 882, 878, 873, 864.25, 854.25
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.
