EUR/USD Strengthens Back Above 1.40
The EUR/USD cut its losses yesterday above June 22nd highs, and is presently retesting June 24th highs along with our previous top-end 1.4097 resistance. However, we take note the EUR/USD’s current movement upward is occurring on declining volume, making a technical breakout to the upside today unlikely. On the other hand, if the EUR/USD can climb above June 24th highs we could see a near-term pop to our 3rd tier downtrend line. We notice a similar space for near-term upward mobility in gold, which is positively correlated with the EUR/USD. However, we don’t anticipate any immediate term movement above the EUR/USD’s 3rd tier downtrend line since there isn’t much economic data on the table today.
The EUR/USD is participating in another broad-based route of the greenback resulting from China reiterating its desire for a new currency standard. A global monetary detachment from the Dollar would be negative for America’s economy since it would mean replacing the greenback as the standard for global transactions and pricing of commodities. The monetary tug of war is having a negative psychological impact on the Dollar, sending the EUR/USD higher despite recent disconcerting economic data from the EU region. While the EUR/USD has experienced some encouraging defense to the downside lately, we must remember that the larger volume has been on the sell side.
The EUR/USD experienced heightened volume to the downside on the 24th as a result of the ECB discretely injecting roughly $615 Billion into its banking system. The ECB is allowing banks to take one-year loans from this massive pool of liquidity at a fixed 1% rate. While the ECB isn’t labeling the liquidity package as a bailout, the apparent terms of the loans are close enough to a rescue. Apparently, German exporters and manufacturers are facing difficulty attaining credit/capital, indicating credit markets are still tight. The ECB is hoping the new injection of liquidity into the banking system will encourage higher loan rates to keep the recovery humming. As a result of the EU’s use of one-year funds, the EU, Britain, Japan, and U.S. are a little more even now in regards to their monetary exposure to the economic crisis. Although, the ECB still has a benchmark rate of 1% as compared to the U.S. and Japan’s sub 1% rates.
Regardless of the psychological comments made by China, there remains a cap on the EUR/USD’s gains. The mixed economic data and new liquidity measures add to the concern that we may experience a second wave of the economic crisis. The BOE and Fed have also spoken cautiously about the health of the global economy and financial system. Investors should keep in mind that the EUR/USD still exhibits an ultimate positive correlation with U.S. equities. Therefore, the EUR/USD’s uptrend may be compromised if the global economic recovery were to hit a stumbling block and U.S. equities head south in reaction.
We believe the tug of war could continue between the bulls and the bears for the short-term. Investors seem indecisive in regards to which direction to commit, and we will wait for a technically significant statement before passing judgment. Most important will be the future interaction between the EUR/USD and our 3rd tier uptrend and downtrend lines.
Present Price: 1.4084
Resistances: 1.4097, 1.4141, 1.4167, 1.4191, 1.4229
Supports: 1.4061, 1.4024, 1.3978, 1.3928, 1.3894
Psychological: 1.45, 1.40, 1.35
The Cable predictably bottomed at June 23rd lows, continuing the pattern we notice over the past 10-15 days. The Cable is strengthening along with the EUR/USD as investors divest from the greenback in reaction to China’s repeated request for a new standard currency. However, volume is subsiding to the upside, and it seems the Cable may peak again below previous June highs and our 3rd tier downtrend line. Despite the near-term resilience of the GBP/USD, an immediate-term break above our 3rd tier trend line may be difficult since gains in the Pound are being constrained by comments from the BOE. The BOE voiced concern in its semi-annual financial stability report. Although UK banks have stabilized since the height of the crisis last fall, the financial system remains very vulnerable to any near/mid-term shocks. The cautionary tone from the BOE coincides with that of the Fed and ECB, signaling the global financial system remains in a fragile condition.
Even though gains in the Cable have been tempered lately, the currency pair is trading back above our 2nd tier downtrend line, the more heavily weighted of the three. Additionally, our 3rd tier trend lines are reaching an inflection point today. Hence, there remains the possibility we could witness a little breakout to the upside. We haven’t seen too many hiccups in British economic data, and Britain’s numbers have been more encouraging as compared to the U.S. and EU. Hence, the GBP/USD is well positioned for a breakout to the upside should market conditions improve. That being said, the S&P futures are heading lower as they struggle with 900 while the 30 Year T-Bond futures are adding onto recent gains. Therefore, the GBP/USD’s correlations aren’t moving in favor of the currency pair’s uptrend thus far today. Hence, we wouldn’t be surprised to see the GBP/USD to stay inbounds as the bulls and bears slug it out. The U.S. Dollar is at a crossroads, and it will be interesting to see where investors side. We maintain our neutral stance until the technicals are tested and the trading range broken.
Present Price: 1.6501
Resistances: 1.6315, 1.6371, 1.6412, 1.6702, 1.6768
Supports: 1.6472, 1.6412, 1.6371, 1.6315, 1.6241
Psychological: 1.65, 1.60
USD/JPY Steps Back From its 2nd Tier Trend Lines
The USD/JPY is backing away from our 2nd tier uptrend line again as the Dollar appreciates across the board in reaction to China’s repeated call for a new global monetary standard. In the mean time, the USD/JPY remains the beacon for investor indecisiveness. While bears are tempted to test the downside potential of the USD/JPY with the currency pair trading in a dangerous zone, the bulls continually come to the USD/JPY’s defense to keep the currency pair from falling off a cliff. The result is a relatively tight and moderate trading rage. As for the immediate-term, it will be interesting to see how the USD/JPY interacts with June 23rd and 24th lows. We’ve seen the USD/JPY play with fire before only to pop back above our 2nd tier. However, if the USD/JPY is serious about a pullback this time, we could witness a near-term movement towards our 1st tier uptrend line. After all, we have several trend lines reaching their respective inflection points today. Declining volume supports a movement to the downside, yet the USD/JPY would likely need a large, corresponding movement across the marketplace to fall beneath May 22nd lows.
Present Price: 95.25
Resistances: 95.73, 96.33, 96.90, 97.45, 98.05
Supports: 94.99, 94.45, 93.76, 93.32, 92.46
Psychological: 90, 95, 100
Crude Balances after Positive Consumer Sentiment
Crude futures are recovering from earlier losses in reaction to the better than expected UofM consumer sentiment number. Improving consumer sentiment implies the possibility of higher future consumption, production, and manufacturing of goods and consequently consumption of crude. The consumer sentiment data helps counteract negative sentiment inflicted earlier by China’s second request for a new global monetary standard. However, the consumer sentiment number isn’t necessarily game changing, and a heavy negative sentiment remains in the marketplace. We’ve seen cautionary statements from the Fed, BOE, and ECB this week along with a troubling near-term outlook from investment guru Warren Buffet. Meanwhile, despite improvements in both the EUR/USD and GBP/USD, a depreciating dollar isn’t enough to offset today’s downward momentum. Therefore, investors seem troubled about the overall state of the global economy and demand side of crude’s equation.
Regardless of today’s pullback, crude has registered larger volume to the upside than downside on the 1-hour, showing bulls are still in the driver’s seat. Crude is finding relief in our 2nd tier uptrend line, and has our 3rd tier to fall back on should today’s decline pick up speed. Even if investors are concerned about the demand for crude, weekly inventories have come in shallow six out of the last seven releases. Therefore, crude continues to experience relative strength despite uncertainty in the S&P futures. We wouldn’t be surprised to see crude bounce between our trend lines for the time being as equities and the Dollar decide upon a near/medium-term direction.
Present Price: $69.40/bbl
Resistances: $69.83/bbl, $70.37/bbl, $71.07/bbl, $71.78/bbl, $72.54/bbl
Supports: $69.16/bbl, $68.70/bbl, $68.09/bbl, $67.68/bbl, $67.03/bbl
Psychological: $65/bbl, $70/bbl, $75/bbl
S&P Futures Range Bound on Mixed Sentiment
The S&P futures are giving back some of yesterday’s gains in reaction to China’s second calling for a new global monetary standard. China may be reacting to America’s complaint to the WTO concerning unfair trade practices. It seems the U.S. and China are taking jabs at one another as China tries to leverage its advantageous position financially. The S&P is also reacting to the cautionary statements in Britain’s semi-annual financial stability report. The BOE stressed that Britain’s financial system is in a fragile state and any further shocks could destabilize the economic recovery taking root. Despite the wave of negative sentiment today, the U.S. released a better than expected UofM consumer sentiment number. The consumer sentiment data seems to be enough to limit today’s downward momentum. Therefore, it appears the trading range of the S&P may not be broken today with no more economic data on the plate.
The battle between the bulls and the bears continues in the S&P, and 900 is proving to be as psychological as we imagined. Investors are uncertain whether to bank on the continuation of the present economic recovery or do further technical damage to the S&P futures. The U.S. unemployment problem persists as weekly unemployment claims came in higher than analyst expectations. Our concept of a possible head-fake in economic data may be materializing as we’ve seen several figures in both the U.S. and EU revert towards negative territory. The mixed behavior of economic data makes investors uneasy while investment gurus such as Warren Buffet and Jim Rogers maintain their cautious outlook concerning the state of the U.S. economy. Despite the negativity creeping back into the marketplace, bulls aren’t will to give up on all of the progress made thus far this year. As we explained previously, the S&P built up a solid foundation between 880-900 and it will take a large shift in momentum to break through this consolidation zone. Meanwhile, the S&P futures are being squeezed between our 1st and 2nd tier near-term downtrend lines. We have yet to see a decisive move in either direction. Until we do, we will maintain a neutral stance on the S&P futures.
Consolidation wise, the erratic consolidation of the GBP/USD and EUR/USD reflect the indecisiveness present in the S&P. However, we notice that the 30 Year T-Bond futures continue to strengthen. Normally, this would be a negative indicator for the S&P since the two are negatively correlated. On the other hand, investors have been concerned about the impact of higher yields on the economic recovery as a whole. Hence, the S&P futures may actually find comfort in declining Treasury yields for the time being. As for crude, the futures are rallying on yesterday’s report showing yet another decline in inventory. Hence, it is unreliable right now to evaluate the S&P based on the performance of crude since the drop in inventory is likely a result of lower OPEC production. Overall, the correlations show that the S&P futures are at an intersection.
Present Price: 910.50
Resistances: 909.5, 917.75, 923, 932, 941.5
Supports: 899.25, 895.25, 888.75, 881, 873
Psychological: 900
Gold Pairs its Gains
Gold is pulling back from its daily highs as volume tails off. While the movement above June 24 highs was encouraging, volume didn’t match the upward intention of the precious metal. However, gold has made a nice recovery into respectability, and may remain lodged between our trend lines for the immediate term. It appears the precious metal had sold off too far too quickly, and investors took advantage of oversold conditions. Regardless of gold’s comeback, we’ve seen several important technicals tested to the downside. Therefore, the debate between the bulls and the bears continues as investors jockey for position. We expect gold to maintain its positive correlation with crude and equities along with a depreciating Dollar. The fact that the sustainability of the near-term and medium-term up trends of gold’s positive correlations have been thrown into question make’s the precious metal’s downtrend all the more viable. Therefore, we will have to watch how gold interacts with our 2nd tier uptrend line, 1st tier downtrend line, and $950/oz in the near-term.
Present Price: $941.60/oz
Resistances: $941.85/oz, $943.88/oz, $945.75/oz, $948.45/oz, $952.05/oz
Supports: $939.02/oz, $935.62/oz, $932.48/oz, $929.77/oz, $927.98/oz
Psychological: $900/oz, $950/oz
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 cut its losses yesterday above June 22nd highs, and is presently retesting June 24th highs along with our previous top-end 1.4097 resistance. However, we take note the EUR/USD’s current movement upward is occurring on declining volume, making a technical breakout to the upside today unlikely. On the other hand, if the EUR/USD can climb above June 24th highs we could see a near-term pop to our 3rd tier downtrend line. We notice a similar space for near-term upward mobility in gold, which is positively correlated with the EUR/USD. However, we don’t anticipate any immediate term movement above the EUR/USD’s 3rd tier downtrend line since there isn’t much economic data on the table today.
The EUR/USD is participating in another broad-based route of the greenback resulting from China reiterating its desire for a new currency standard. A global monetary detachment from the Dollar would be negative for America’s economy since it would mean replacing the greenback as the standard for global transactions and pricing of commodities. The monetary tug of war is having a negative psychological impact on the Dollar, sending the EUR/USD higher despite recent disconcerting economic data from the EU region. While the EUR/USD has experienced some encouraging defense to the downside lately, we must remember that the larger volume has been on the sell side.
The EUR/USD experienced heightened volume to the downside on the 24th as a result of the ECB discretely injecting roughly $615 Billion into its banking system. The ECB is allowing banks to take one-year loans from this massive pool of liquidity at a fixed 1% rate. While the ECB isn’t labeling the liquidity package as a bailout, the apparent terms of the loans are close enough to a rescue. Apparently, German exporters and manufacturers are facing difficulty attaining credit/capital, indicating credit markets are still tight. The ECB is hoping the new injection of liquidity into the banking system will encourage higher loan rates to keep the recovery humming. As a result of the EU’s use of one-year funds, the EU, Britain, Japan, and U.S. are a little more even now in regards to their monetary exposure to the economic crisis. Although, the ECB still has a benchmark rate of 1% as compared to the U.S. and Japan’s sub 1% rates.
Regardless of the psychological comments made by China, there remains a cap on the EUR/USD’s gains. The mixed economic data and new liquidity measures add to the concern that we may experience a second wave of the economic crisis. The BOE and Fed have also spoken cautiously about the health of the global economy and financial system. Investors should keep in mind that the EUR/USD still exhibits an ultimate positive correlation with U.S. equities. Therefore, the EUR/USD’s uptrend may be compromised if the global economic recovery were to hit a stumbling block and U.S. equities head south in reaction.
We believe the tug of war could continue between the bulls and the bears for the short-term. Investors seem indecisive in regards to which direction to commit, and we will wait for a technically significant statement before passing judgment. Most important will be the future interaction between the EUR/USD and our 3rd tier uptrend and downtrend lines.
Present Price: 1.4084
Resistances: 1.4097, 1.4141, 1.4167, 1.4191, 1.4229
Supports: 1.4061, 1.4024, 1.3978, 1.3928, 1.3894
Psychological: 1.45, 1.40, 1.35
GBP/USD Sticks in its Range
The Cable predictably bottomed at June 23rd lows, continuing the pattern we notice over the past 10-15 days. The Cable is strengthening along with the EUR/USD as investors divest from the greenback in reaction to China’s repeated request for a new standard currency. However, volume is subsiding to the upside, and it seems the Cable may peak again below previous June highs and our 3rd tier downtrend line. Despite the near-term resilience of the GBP/USD, an immediate-term break above our 3rd tier trend line may be difficult since gains in the Pound are being constrained by comments from the BOE. The BOE voiced concern in its semi-annual financial stability report. Although UK banks have stabilized since the height of the crisis last fall, the financial system remains very vulnerable to any near/mid-term shocks. The cautionary tone from the BOE coincides with that of the Fed and ECB, signaling the global financial system remains in a fragile condition.
Even though gains in the Cable have been tempered lately, the currency pair is trading back above our 2nd tier downtrend line, the more heavily weighted of the three. Additionally, our 3rd tier trend lines are reaching an inflection point today. Hence, there remains the possibility we could witness a little breakout to the upside. We haven’t seen too many hiccups in British economic data, and Britain’s numbers have been more encouraging as compared to the U.S. and EU. Hence, the GBP/USD is well positioned for a breakout to the upside should market conditions improve. That being said, the S&P futures are heading lower as they struggle with 900 while the 30 Year T-Bond futures are adding onto recent gains. Therefore, the GBP/USD’s correlations aren’t moving in favor of the currency pair’s uptrend thus far today. Hence, we wouldn’t be surprised to see the GBP/USD to stay inbounds as the bulls and bears slug it out. The U.S. Dollar is at a crossroads, and it will be interesting to see where investors side. We maintain our neutral stance until the technicals are tested and the trading range broken.
Present Price: 1.6501
Resistances: 1.6315, 1.6371, 1.6412, 1.6702, 1.6768
Supports: 1.6472, 1.6412, 1.6371, 1.6315, 1.6241
Psychological: 1.65, 1.60
USD/JPY Steps Back From its 2nd Tier Trend Lines
The USD/JPY is backing away from our 2nd tier uptrend line again as the Dollar appreciates across the board in reaction to China’s repeated call for a new global monetary standard. In the mean time, the USD/JPY remains the beacon for investor indecisiveness. While bears are tempted to test the downside potential of the USD/JPY with the currency pair trading in a dangerous zone, the bulls continually come to the USD/JPY’s defense to keep the currency pair from falling off a cliff. The result is a relatively tight and moderate trading rage. As for the immediate-term, it will be interesting to see how the USD/JPY interacts with June 23rd and 24th lows. We’ve seen the USD/JPY play with fire before only to pop back above our 2nd tier. However, if the USD/JPY is serious about a pullback this time, we could witness a near-term movement towards our 1st tier uptrend line. After all, we have several trend lines reaching their respective inflection points today. Declining volume supports a movement to the downside, yet the USD/JPY would likely need a large, corresponding movement across the marketplace to fall beneath May 22nd lows.
Present Price: 95.25
Resistances: 95.73, 96.33, 96.90, 97.45, 98.05
Supports: 94.99, 94.45, 93.76, 93.32, 92.46
Psychological: 90, 95, 100
Crude Balances after Positive Consumer Sentiment
Crude futures are recovering from earlier losses in reaction to the better than expected UofM consumer sentiment number. Improving consumer sentiment implies the possibility of higher future consumption, production, and manufacturing of goods and consequently consumption of crude. The consumer sentiment data helps counteract negative sentiment inflicted earlier by China’s second request for a new global monetary standard. However, the consumer sentiment number isn’t necessarily game changing, and a heavy negative sentiment remains in the marketplace. We’ve seen cautionary statements from the Fed, BOE, and ECB this week along with a troubling near-term outlook from investment guru Warren Buffet. Meanwhile, despite improvements in both the EUR/USD and GBP/USD, a depreciating dollar isn’t enough to offset today’s downward momentum. Therefore, investors seem troubled about the overall state of the global economy and demand side of crude’s equation.
Regardless of today’s pullback, crude has registered larger volume to the upside than downside on the 1-hour, showing bulls are still in the driver’s seat. Crude is finding relief in our 2nd tier uptrend line, and has our 3rd tier to fall back on should today’s decline pick up speed. Even if investors are concerned about the demand for crude, weekly inventories have come in shallow six out of the last seven releases. Therefore, crude continues to experience relative strength despite uncertainty in the S&P futures. We wouldn’t be surprised to see crude bounce between our trend lines for the time being as equities and the Dollar decide upon a near/medium-term direction.
Present Price: $69.40/bbl
Resistances: $69.83/bbl, $70.37/bbl, $71.07/bbl, $71.78/bbl, $72.54/bbl
Supports: $69.16/bbl, $68.70/bbl, $68.09/bbl, $67.68/bbl, $67.03/bbl
Psychological: $65/bbl, $70/bbl, $75/bbl
S&P Futures Range Bound on Mixed Sentiment
The S&P futures are giving back some of yesterday’s gains in reaction to China’s second calling for a new global monetary standard. China may be reacting to America’s complaint to the WTO concerning unfair trade practices. It seems the U.S. and China are taking jabs at one another as China tries to leverage its advantageous position financially. The S&P is also reacting to the cautionary statements in Britain’s semi-annual financial stability report. The BOE stressed that Britain’s financial system is in a fragile state and any further shocks could destabilize the economic recovery taking root. Despite the wave of negative sentiment today, the U.S. released a better than expected UofM consumer sentiment number. The consumer sentiment data seems to be enough to limit today’s downward momentum. Therefore, it appears the trading range of the S&P may not be broken today with no more economic data on the plate.
The battle between the bulls and the bears continues in the S&P, and 900 is proving to be as psychological as we imagined. Investors are uncertain whether to bank on the continuation of the present economic recovery or do further technical damage to the S&P futures. The U.S. unemployment problem persists as weekly unemployment claims came in higher than analyst expectations. Our concept of a possible head-fake in economic data may be materializing as we’ve seen several figures in both the U.S. and EU revert towards negative territory. The mixed behavior of economic data makes investors uneasy while investment gurus such as Warren Buffet and Jim Rogers maintain their cautious outlook concerning the state of the U.S. economy. Despite the negativity creeping back into the marketplace, bulls aren’t will to give up on all of the progress made thus far this year. As we explained previously, the S&P built up a solid foundation between 880-900 and it will take a large shift in momentum to break through this consolidation zone. Meanwhile, the S&P futures are being squeezed between our 1st and 2nd tier near-term downtrend lines. We have yet to see a decisive move in either direction. Until we do, we will maintain a neutral stance on the S&P futures.
Consolidation wise, the erratic consolidation of the GBP/USD and EUR/USD reflect the indecisiveness present in the S&P. However, we notice that the 30 Year T-Bond futures continue to strengthen. Normally, this would be a negative indicator for the S&P since the two are negatively correlated. On the other hand, investors have been concerned about the impact of higher yields on the economic recovery as a whole. Hence, the S&P futures may actually find comfort in declining Treasury yields for the time being. As for crude, the futures are rallying on yesterday’s report showing yet another decline in inventory. Hence, it is unreliable right now to evaluate the S&P based on the performance of crude since the drop in inventory is likely a result of lower OPEC production. Overall, the correlations show that the S&P futures are at an intersection.
Present Price: 910.50
Resistances: 909.5, 917.75, 923, 932, 941.5
Supports: 899.25, 895.25, 888.75, 881, 873
Psychological: 900
Gold Pairs its Gains
Gold is pulling back from its daily highs as volume tails off. While the movement above June 24 highs was encouraging, volume didn’t match the upward intention of the precious metal. However, gold has made a nice recovery into respectability, and may remain lodged between our trend lines for the immediate term. It appears the precious metal had sold off too far too quickly, and investors took advantage of oversold conditions. Regardless of gold’s comeback, we’ve seen several important technicals tested to the downside. Therefore, the debate between the bulls and the bears continues as investors jockey for position. We expect gold to maintain its positive correlation with crude and equities along with a depreciating Dollar. The fact that the sustainability of the near-term and medium-term up trends of gold’s positive correlations have been thrown into question make’s the precious metal’s downtrend all the more viable. Therefore, we will have to watch how gold interacts with our 2nd tier uptrend line, 1st tier downtrend line, and $950/oz in the near-term.
Present Price: $941.60/oz
Resistances: $941.85/oz, $943.88/oz, $945.75/oz, $948.45/oz, $952.05/oz
Supports: $939.02/oz, $935.62/oz, $932.48/oz, $929.77/oz, $927.98/oz
Psychological: $900/oz, $950/oz
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.
