Daily Market Commentary
EUR/USD Experiences Relative Strength after Upbeat German Data
The EUR/USD is recovering from our important 2nd tier uptrend line after German Industrial Production came in much higher than expected, countering June’s setback to the downside. In fact, today’s release is the highest reading in years, and should help ease investor uncertainty for the time being. In addition to today’s positive Industrial Production number, yesterday Germany reported a large, unexpected increase in Factory Orders. The recent optimistic signs from the Germany economy are helping stabilize the Euro despite growing pessimism in global markets. That being said, we saw volume begin to rise to the downside yesterday as the greenback appreciated with U.S. equities posting sizable losses. Therefore, investors should keep a watch on the 15M, 30M, and 1H charts to see if volume continues to rise on the sell-side. If sell-side volume increases and the EUR/USD closes below our 2nd tier uptrend line, we could witness a more rapid pullback towards June lows and our 1st tier uptrend line. On the other hand, we very well may see the EUR/USD jog between our 2nd tier uptrend and downtrend lines today due to the positive data from Germany.
Since news will be relatively quiet on the EU front this week, we expect the EUR/USD to take its cue from U.S. equities and crude futures. The S&P futures are trading near critical supports, and any protracted downward movement in the S&P should be accompanied by a broad-based appreciation of the Dollar. We don’t expect the positive correlation between the EUR/USD and equities to change any time soon, so U.S. corporate earnings should play a big role in the currency pair’s immediate-term movements. While the EUR/USD is bouncing off our 2nd tier uptrend line, the currency pair is trading back below the highly psychological 1.40 level. Furthermore, our 2nd tier and 3rd tier uptrend lines are reaching their respective inflection points with our 1st tier and 2nd tier downtrend lines over the next 24-48 hours. Since the S&P futures are trading around important supports, we believe the multiple inflection points in the EUR/USD may signify an approaching trend-making move. However, the 2nd quarter earnings season doesn’t really start cooking until next week, so the EUR/USD may choose to stay range-bound for the remainder of the week…Stay tuned.
Present Price: 1.3924
Resistances: 1.3944, 1.3970, 1.3991, 1.4018, 1.4050
Supports: 1.3915, 1.3889, 1.3865, 1.3848, 1.3826
Psychological: 1.40
GBP/USD May Retest 1.60 after Negative HPI number
The Cable is trying to recover to our 2nd tier uptrend line after yesterday’s pullback resulting from a substantial selloff in U.S. equities. The Cable is finding little salvation in last night’s better than expected Consumer Confidence number since both British Manufacturing Production and today’s Halifax HPI come in negative. While we expected the pullback in Manufacturing Production since the PMI was negative last week, the disappointing HPI data deflates the confidence surrounding a potential recovery in the British housing market. These two negative data points, combined with last week’s discouraging GDP and Current Account numbers, are weakening the Pound further. Meanwhile, the S&P futures are experiencing substantial downward pressure, and crude continues to log large losses. Hence, investor confidence still seems to be turning sour in regards to the longevity of a global economic recovery.
We’ve seen volume increase to the downside in both the GBP/USD and the EUR/USD, though total volume remains at a relatively subdued level. Therefore, investors should take notice if volume increases to the downside from Tuesday’s session, for this could indicate a sharper selloff approaching. Though the Cable remains above 1.60, it is struggling to stay above our 1st tier downtrend line while hoping to reach our 2nd tier uptrend line. Should the Cable’s immediate-term pullback should pick up pace, the currency pair could find noteworthy support in the psychological 1.60 level. If not, then the GBP/USD still has our 1st tier uptrend line and June lows as a safety net.
Investor and analyst focus will be on tomorrow’s BoE meeting and 2nd quarter earnings releases. Rumors have been floating around that the BoE may increases its present quantitative easing plan by 25 billion. Even though these rumors are unsubstantiated, they make for an interesting BoE press conference. Investors will be paying particularly close attention to the BoE’s plans regarding quantitative easing. However, should the BoE increase its level of QE, we wouldn’t be surprised to see a small, near-term pop in the Cable since this is what occurred following the initiation of the plan. We noticed a similar positive reaction from the EUR/USD after it announced its alternative liquidity measures as well. As far as earnings go, investors are very curious as to how 3rd and 4th quarter projections will fare. Naturally, corporate earnings should have a large impact on U.S. equities. If the S&P futures should falter, the Cable would likely tumble with them due to their strong positive correlation.
Present Price: 1.6073
Resistances: 1.6082, 1.6133, 1.6152, 1.6183, 1.6223
Supports: 1.6052, 1.6018, 1.5978, 1.5924, 1.5887
Psychological: 1.60
USD/JPY Falls Through Critical 1st Tier Uptrend
The USD/JPY has finally decided to venture below our critical 1st tier uptrend line, which we view as an important development for the currency pair. Though the USD/JPY hasn’t registered the corresponding large volume on the pullback that bears would like to see, this could be the mark of a turning point. The USD/JPY is trading just above 3/19 lows at present. Should the pullback pick move beneath these lows on rising volume, we could see a sharp immediate-term selloff towards the 92 level. The USD/JPY has been in a drawn out battle between the bulls in the bears, so today’s movement could mark a significant turning point. Such a movement could signal the beginning of a new downtrend, which would place further strain on a beleaguered Japanese economy.
Japan reported discouraging Core Machinery Orders and Current Account data yesterday. These data points signal the Japanese economy continues to feel pressure from declining demand for its manufactured goods both at home and abroad. Lower Japanese corporate earnings and higher unemployment are pinching domestic demand. The discouraging Current Account number makes investors worry that international consumption is not picking up as quickly as the improvement in global consumer sentiment data may suggest. An appreciating Yen should only make matters worse, so a declaration of the downtrend by the USD/JPY could be very bad news for Japan.
Meanwhile, the U.S. earnings season is kicking off with Alcoa, and the S&P futures are beginning the week on a downbeat. A commitment by the S&P to its downtrend would likely spell more trouble for a pressured USD/JPY since they are positive correlated. Hence, investors will be keeping a close eye on how earnings fare over the coming two weeks.
Present Price: 93.46.
Resistances: 95.73, 96.33, 96.90, 97.45, 98.05
Supports: 93.32, 92.57, 91.96, 91.50, 91.03
Psychological: 95
Gold Makes Confirmation Move to the Downside
Gold is making the confirmation move to the downside we were looking for as the Dollar appreciates across the board. The USD/JPY is logging a large technical movement to the downside while crude drains towards $60/bbl. Additionally, the selloff in the S&P futures is picking up, trading beneath May lows. All of these movements are negative indicators for gold due to positive correlations, and the precious metal is reacting as one would expect. Gold has dropped sharply since breaking beneath June lows as we anticipated. However, we still believe the precious metal should find some substantial support in the $890-$900/oz range due to the psychological and historical significance of the range. However, how long the $900/oz psychological level plays out remains to be seen. Should earnings results and outlooks disappoint investors over the next couple weeks, we could be witnessing the beginning of a large downtrend.
Present Price: $905.10/oz
Resistances: $906.34/oz, $907.98/oz, $910.99/oz, $913.37/oz, $916.27/oz
Supports: $903.78/oz, $901.56/oz, $900.08/oz, $897.19/oz, $895.14/oz
Psychological: $900/oz
Crude Futures Log Further Large Declines
Crude futures are continuing their brisk decline on rising volume today, entering the heavy-handed $60-$61/bbl zone we mentioned in our previous analysis. Crude’s declines are feeding off of quite a few fuels, the foremost being a report from OPEC saying they don’t expect crude consumption to reach 2008 levels until 2013. OPEC’s prediction manages to provide a starker image than the IEA’s estimation last week of 2011-2012. Altogether, both OPEC and the IEA are indicating that the demand side of crude will likely take years to repair and restore to previous levels. Not only are we witnessing a drop-off in global production and manufacturing due to higher unemployment and lower consumption, but the U.S. and China are enacting aggressive policies to decrease their reliance on fossil fuels. Therefore, there are several factors impacting the demand side of crude. Weekly crude inventories came in just shallow of analyst expectations, but failed to have a positive impact on price yet again. Hence, fear of deterioration on the demand side of the equation is overpowering the consistent decline in U.S. stockpiles.
The negative performance of crude can also be attributed to the movements in the commodity’s correlations. The Dollar is appreciating across the board and gold is testing its psychological $900/oz zone. Meanwhile, the S&P futures are testing the limits of their support as they hover beneath May lows. Additionally, the 30 Year T-Bond futures are positing large gains on rising volume, another negative indicator. Hence, many of crude’s positive correlations are making trend-statement moves, applying further downward pressure on crude futures.
Meanwhile, crude is finding intra-day support in the $60-$61/bbl range as we anticipated, and is trading back above our new 2nd tier uptrend line. Despite the intra-day stabilization, there continues to be a considerable downward pressure on price. Therefore, we could be in for a messy earnings season. If this is so, the $60/bbl psychological support may only last a week or two. Corporate earnings and 3rd quarter outlook should be a driving force for the near-term performance of crude and equities. If corporations project lower earnings, this implies a decline in production, manufacturing, and consequently overall consumption of crude. On the flipside, should corporations provide a rosy outlook for the upcoming quarter, crude futures could bottom and begin a substantial rebound. We can tell you crude futures are in a very vulnerable position, and the near-term potential remains for a more protracted selloff. The question becomes whether this is the worst if it, or just the beginning of a path towards a retest of the lows? We will closely monitor the developing situation.
Present Price: $61.20/bbl
Resistances: $61.58/bbl, $62.16/bbl, $62.59/bbl, $63.13/bbl, $63.79/bbl
Supports: $61.14/bbl, $60.53/bbl, $60.25/bbl, $59.69/bbl, $58.90/bbl
Psychological: $60/bbl
S&P Dips Beneath May Lows
In the past 24 hours the S&P futures have managed to break below both June and May lows on rising sell-side volume. Though the S&P futures are fighting back up to May lows as we type, it seems the damage may be done. Crude futures have skidded back towards $60/bbl, and the USD/JPY has made what could be a trend-setting movement to the downside. Meanwhile, the Dollar is appreciating everywhere else across the board, and the 30 Year T-Bond futures are posting large gains on sizeable volume. Therefore, most all of the S&P’s key correlations are confirming the significance of today’s movement. The volume is there to match the movement, and our downtrend lines are reaching an inflection point with our 1st tier uptrend line. Speaking of which, we believe our 1st tier uptrend line forms the neckline of a large head and shoulders pattern (labeled in our chart). Hence, we could be witnessing a right shoulder reversal, which would further support the confirmation of a downtrend. On the bright side, we haven’t seen any earnings results yet, so an optimistic earnings season could turn the ship around. It seems as if investors are beginning to price in a negative earnings season, so it will be intriguing to see how the S&P reacts to the news, to say the least.
The most disconcerting part of today’s key reversal is that it comes on only a little concrete news/data. Investors received weak data from Britain, yet positive numbers from Germany. The most negative signs came from Japan, which released worse than expected Core Machinery Orders and Current Account data. These two data points show export demand isn’t recovering as quickly as analysts had hoped, indicated consumption is still declining quickly. The news out of Japan is hitting the USD/JPY badly as investors run for cover. As we’ve stated previously, 2nd quarter earnings and 2nd half outlook remain the highly anticipated events on Wall Street, it just seems the markets may be a step ahead. From here it will be interesting to see whether the S&P can pull itself together and stabilize back above May lows.
Present Price: 871.50
Resistances: 903.75, 909.5, 919.25, 924, 929.5
Supports: 895.25, 888.75, 881.5, 873.5, 864.25
Psychological: 900
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.
EUR/USD Experiences Relative Strength after Upbeat German Data
The EUR/USD is recovering from our important 2nd tier uptrend line after German Industrial Production came in much higher than expected, countering June’s setback to the downside. In fact, today’s release is the highest reading in years, and should help ease investor uncertainty for the time being. In addition to today’s positive Industrial Production number, yesterday Germany reported a large, unexpected increase in Factory Orders. The recent optimistic signs from the Germany economy are helping stabilize the Euro despite growing pessimism in global markets. That being said, we saw volume begin to rise to the downside yesterday as the greenback appreciated with U.S. equities posting sizable losses. Therefore, investors should keep a watch on the 15M, 30M, and 1H charts to see if volume continues to rise on the sell-side. If sell-side volume increases and the EUR/USD closes below our 2nd tier uptrend line, we could witness a more rapid pullback towards June lows and our 1st tier uptrend line. On the other hand, we very well may see the EUR/USD jog between our 2nd tier uptrend and downtrend lines today due to the positive data from Germany.
Since news will be relatively quiet on the EU front this week, we expect the EUR/USD to take its cue from U.S. equities and crude futures. The S&P futures are trading near critical supports, and any protracted downward movement in the S&P should be accompanied by a broad-based appreciation of the Dollar. We don’t expect the positive correlation between the EUR/USD and equities to change any time soon, so U.S. corporate earnings should play a big role in the currency pair’s immediate-term movements. While the EUR/USD is bouncing off our 2nd tier uptrend line, the currency pair is trading back below the highly psychological 1.40 level. Furthermore, our 2nd tier and 3rd tier uptrend lines are reaching their respective inflection points with our 1st tier and 2nd tier downtrend lines over the next 24-48 hours. Since the S&P futures are trading around important supports, we believe the multiple inflection points in the EUR/USD may signify an approaching trend-making move. However, the 2nd quarter earnings season doesn’t really start cooking until next week, so the EUR/USD may choose to stay range-bound for the remainder of the week…Stay tuned.
Present Price: 1.3924
Resistances: 1.3944, 1.3970, 1.3991, 1.4018, 1.4050
Supports: 1.3915, 1.3889, 1.3865, 1.3848, 1.3826
Psychological: 1.40
GBP/USD May Retest 1.60 after Negative HPI number
The Cable is trying to recover to our 2nd tier uptrend line after yesterday’s pullback resulting from a substantial selloff in U.S. equities. The Cable is finding little salvation in last night’s better than expected Consumer Confidence number since both British Manufacturing Production and today’s Halifax HPI come in negative. While we expected the pullback in Manufacturing Production since the PMI was negative last week, the disappointing HPI data deflates the confidence surrounding a potential recovery in the British housing market. These two negative data points, combined with last week’s discouraging GDP and Current Account numbers, are weakening the Pound further. Meanwhile, the S&P futures are experiencing substantial downward pressure, and crude continues to log large losses. Hence, investor confidence still seems to be turning sour in regards to the longevity of a global economic recovery.
We’ve seen volume increase to the downside in both the GBP/USD and the EUR/USD, though total volume remains at a relatively subdued level. Therefore, investors should take notice if volume increases to the downside from Tuesday’s session, for this could indicate a sharper selloff approaching. Though the Cable remains above 1.60, it is struggling to stay above our 1st tier downtrend line while hoping to reach our 2nd tier uptrend line. Should the Cable’s immediate-term pullback should pick up pace, the currency pair could find noteworthy support in the psychological 1.60 level. If not, then the GBP/USD still has our 1st tier uptrend line and June lows as a safety net.
Investor and analyst focus will be on tomorrow’s BoE meeting and 2nd quarter earnings releases. Rumors have been floating around that the BoE may increases its present quantitative easing plan by 25 billion. Even though these rumors are unsubstantiated, they make for an interesting BoE press conference. Investors will be paying particularly close attention to the BoE’s plans regarding quantitative easing. However, should the BoE increase its level of QE, we wouldn’t be surprised to see a small, near-term pop in the Cable since this is what occurred following the initiation of the plan. We noticed a similar positive reaction from the EUR/USD after it announced its alternative liquidity measures as well. As far as earnings go, investors are very curious as to how 3rd and 4th quarter projections will fare. Naturally, corporate earnings should have a large impact on U.S. equities. If the S&P futures should falter, the Cable would likely tumble with them due to their strong positive correlation.
Present Price: 1.6073
Resistances: 1.6082, 1.6133, 1.6152, 1.6183, 1.6223
Supports: 1.6052, 1.6018, 1.5978, 1.5924, 1.5887
Psychological: 1.60
USD/JPY Falls Through Critical 1st Tier Uptrend
The USD/JPY has finally decided to venture below our critical 1st tier uptrend line, which we view as an important development for the currency pair. Though the USD/JPY hasn’t registered the corresponding large volume on the pullback that bears would like to see, this could be the mark of a turning point. The USD/JPY is trading just above 3/19 lows at present. Should the pullback pick move beneath these lows on rising volume, we could see a sharp immediate-term selloff towards the 92 level. The USD/JPY has been in a drawn out battle between the bulls in the bears, so today’s movement could mark a significant turning point. Such a movement could signal the beginning of a new downtrend, which would place further strain on a beleaguered Japanese economy.
Japan reported discouraging Core Machinery Orders and Current Account data yesterday. These data points signal the Japanese economy continues to feel pressure from declining demand for its manufactured goods both at home and abroad. Lower Japanese corporate earnings and higher unemployment are pinching domestic demand. The discouraging Current Account number makes investors worry that international consumption is not picking up as quickly as the improvement in global consumer sentiment data may suggest. An appreciating Yen should only make matters worse, so a declaration of the downtrend by the USD/JPY could be very bad news for Japan.
Meanwhile, the U.S. earnings season is kicking off with Alcoa, and the S&P futures are beginning the week on a downbeat. A commitment by the S&P to its downtrend would likely spell more trouble for a pressured USD/JPY since they are positive correlated. Hence, investors will be keeping a close eye on how earnings fare over the coming two weeks.
Present Price: 93.46.
Resistances: 95.73, 96.33, 96.90, 97.45, 98.05
Supports: 93.32, 92.57, 91.96, 91.50, 91.03
Psychological: 95
Gold Makes Confirmation Move to the Downside
Gold is making the confirmation move to the downside we were looking for as the Dollar appreciates across the board. The USD/JPY is logging a large technical movement to the downside while crude drains towards $60/bbl. Additionally, the selloff in the S&P futures is picking up, trading beneath May lows. All of these movements are negative indicators for gold due to positive correlations, and the precious metal is reacting as one would expect. Gold has dropped sharply since breaking beneath June lows as we anticipated. However, we still believe the precious metal should find some substantial support in the $890-$900/oz range due to the psychological and historical significance of the range. However, how long the $900/oz psychological level plays out remains to be seen. Should earnings results and outlooks disappoint investors over the next couple weeks, we could be witnessing the beginning of a large downtrend.
Present Price: $905.10/oz
Resistances: $906.34/oz, $907.98/oz, $910.99/oz, $913.37/oz, $916.27/oz
Supports: $903.78/oz, $901.56/oz, $900.08/oz, $897.19/oz, $895.14/oz
Psychological: $900/oz
Crude Futures Log Further Large Declines
Crude futures are continuing their brisk decline on rising volume today, entering the heavy-handed $60-$61/bbl zone we mentioned in our previous analysis. Crude’s declines are feeding off of quite a few fuels, the foremost being a report from OPEC saying they don’t expect crude consumption to reach 2008 levels until 2013. OPEC’s prediction manages to provide a starker image than the IEA’s estimation last week of 2011-2012. Altogether, both OPEC and the IEA are indicating that the demand side of crude will likely take years to repair and restore to previous levels. Not only are we witnessing a drop-off in global production and manufacturing due to higher unemployment and lower consumption, but the U.S. and China are enacting aggressive policies to decrease their reliance on fossil fuels. Therefore, there are several factors impacting the demand side of crude. Weekly crude inventories came in just shallow of analyst expectations, but failed to have a positive impact on price yet again. Hence, fear of deterioration on the demand side of the equation is overpowering the consistent decline in U.S. stockpiles.
The negative performance of crude can also be attributed to the movements in the commodity’s correlations. The Dollar is appreciating across the board and gold is testing its psychological $900/oz zone. Meanwhile, the S&P futures are testing the limits of their support as they hover beneath May lows. Additionally, the 30 Year T-Bond futures are positing large gains on rising volume, another negative indicator. Hence, many of crude’s positive correlations are making trend-statement moves, applying further downward pressure on crude futures.
Meanwhile, crude is finding intra-day support in the $60-$61/bbl range as we anticipated, and is trading back above our new 2nd tier uptrend line. Despite the intra-day stabilization, there continues to be a considerable downward pressure on price. Therefore, we could be in for a messy earnings season. If this is so, the $60/bbl psychological support may only last a week or two. Corporate earnings and 3rd quarter outlook should be a driving force for the near-term performance of crude and equities. If corporations project lower earnings, this implies a decline in production, manufacturing, and consequently overall consumption of crude. On the flipside, should corporations provide a rosy outlook for the upcoming quarter, crude futures could bottom and begin a substantial rebound. We can tell you crude futures are in a very vulnerable position, and the near-term potential remains for a more protracted selloff. The question becomes whether this is the worst if it, or just the beginning of a path towards a retest of the lows? We will closely monitor the developing situation.
Present Price: $61.20/bbl
Resistances: $61.58/bbl, $62.16/bbl, $62.59/bbl, $63.13/bbl, $63.79/bbl
Supports: $61.14/bbl, $60.53/bbl, $60.25/bbl, $59.69/bbl, $58.90/bbl
Psychological: $60/bbl
S&P Dips Beneath May Lows
In the past 24 hours the S&P futures have managed to break below both June and May lows on rising sell-side volume. Though the S&P futures are fighting back up to May lows as we type, it seems the damage may be done. Crude futures have skidded back towards $60/bbl, and the USD/JPY has made what could be a trend-setting movement to the downside. Meanwhile, the Dollar is appreciating everywhere else across the board, and the 30 Year T-Bond futures are posting large gains on sizeable volume. Therefore, most all of the S&P’s key correlations are confirming the significance of today’s movement. The volume is there to match the movement, and our downtrend lines are reaching an inflection point with our 1st tier uptrend line. Speaking of which, we believe our 1st tier uptrend line forms the neckline of a large head and shoulders pattern (labeled in our chart). Hence, we could be witnessing a right shoulder reversal, which would further support the confirmation of a downtrend. On the bright side, we haven’t seen any earnings results yet, so an optimistic earnings season could turn the ship around. It seems as if investors are beginning to price in a negative earnings season, so it will be intriguing to see how the S&P reacts to the news, to say the least.
The most disconcerting part of today’s key reversal is that it comes on only a little concrete news/data. Investors received weak data from Britain, yet positive numbers from Germany. The most negative signs came from Japan, which released worse than expected Core Machinery Orders and Current Account data. These two data points show export demand isn’t recovering as quickly as analysts had hoped, indicated consumption is still declining quickly. The news out of Japan is hitting the USD/JPY badly as investors run for cover. As we’ve stated previously, 2nd quarter earnings and 2nd half outlook remain the highly anticipated events on Wall Street, it just seems the markets may be a step ahead. From here it will be interesting to see whether the S&P can pull itself together and stabilize back above May lows.
Present Price: 871.50
Resistances: 903.75, 909.5, 919.25, 924, 929.5
Supports: 895.25, 888.75, 881.5, 873.5, 864.25
Psychological: 900
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.
