Daily Market Commentary
EUR/USD Rises Past our 2nd Tier Downtrend Line
The EUR/USD is backing away from our 2nd tier downtrend line and the psychological 1.40 mark as volume to the upside has been insufficient thus far in prompting meaningful gains technically. Even if an immediate-term rally is to ensue in the EUR/USD with the currency pair climbing past the psychological 1.40 level and July 7th highs, it still has to confront our 3rd tier downtrend line hanging in the distance. Therefore, the currency pair is a far cry from reinitiating its medium-term uptrend. Investors should keep in mind that volume on the sell-side has been larger than the buy-side, reflecting the negative attitude out there. Regardless, the present hop out of our 2nd tier downtrend line is encouraging, indicating the bulls are aiming to achieve further stabilization in the currency pair.
The EUR/USD made a noteworthy bounce 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, yesterday’s release is the highest reading in years, and should help ease investor uncertainty for the time being. In addition to yesterday’s positive Industrial Production number, Germany reported a large, unexpected increase in Factory Orders on Monday. The recent optimistic signs from the Germany economy are helping stabilize the Euro despite growing pessimism in global markets. Today’s positive performance in the EUR/USD comes from a better than expected earnings report from Alcoa. Cost-cutting measures were able to counter Alcoa’s decline in revenue more effectively than anticipated, giving investors hope that the 2nd quarter earnings season may not be so bad after all. However, Alcoa’s earnings are strongly correlated to the cost of aluminum, so it’s unwise to make an assumption about the 2nd quarter earnings season based off of the report of one commodity price-reliant company.
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. 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: 1.3991
Resistances: 1.3991, 1.4020, 1.4050, 1.4065, 1.4091
Supports: 1.3970, 1.3944, 1.3915, 1.3889, 1.3865
Psychological: 1.40
GBP/USD Rallies Strongly after BoE Keeps QE Level Unchanged
The Cable is posting a solid rally Thursday after the BoE kept its 125 billion Pound quantitative easing plan unchanged. Though many analysts were expecting a 25 billion bump up this time around, we warned that these rumors may have been unsubstantiated. Investors are taking the BoE’s inaction as a sign of confidence in the British economy. However, we believe the central bank just wants to see how the remainder of the 125 billion Pounds fares as its injected into the economy over the next month or so. Therefore, we believe the optimism resulting from today’s BoE meeting may be short-lived.
Regardless, the Cable has received a much-needed boost above the psychological 1.60- level for the immediate-term, and is currently testing our 2nd tier downtrend line. We haven’t seen any abnormally large volume to the upside thus far today, so it will be interesting to watch how the GBP/USD interacts with our 2nd tier downtrend line. Other than the BoE meeting, investors are buying up the Pound after Britain announced a narrower than anticipated Trade Balance deficit. Even if the Cable should break through our 2nd tier downtrend line large barriers remain, including our 3rd tier uptrend and downtrend lines and the psychological 1.65 level. However, it would be encouraging for bulls to see the Cable settle back in the middle of the June trading range. Despite the positive developments made in the Cable over the past 24 hours, we believe the downtrend remains the prevalent force in this picture as with the EUR/USD. We would need to see a large, technical reversal for us to alter our present negative outlook.
Meanwhile, all eyes are on U.S. equities and the 2nd quarter earnings season. Alcoa kicked off the 2nd quarter with lower than expected losses as a result of effective cost-cutting by management. Investors are encouraged by the better than anticipated number from Alcoa, and are stabilizing the S&P futures in reaction. However, earnings season doesn’t really heat up until next week, so it’s too early to judge how U.S. corporate earnings will fare as an entity. Although Britain will release its Input PPI tomorrow, the GBP/USD should remain positively correlated with U.S. equities trend-wise since the S&P futures are trading near important supports. Furthermore, investors should keep in mind that British economic data has come in mixed this week. Today’s lower than expected trade balance deficit is countered by negative numbers concerning manufacturing and housing. Therefore, the pressure to the downside remains.
Present Price: 1.6242
Resistances: 1.6264, 1.6287, 1.6321, 1.6367, 1.6428
Supports: 1.6210, 1.6152, 1.6129, 1.6079, 1.6026
Psychological: 1.60
USD/JPY Logs Significant Losses
The USD/JPY continued its heavy losses yesterday after the currency pair reactive negatively to the inflection point of our 1st tier uptrend and downtrend lines. Volume increased to the downside with the currency pair breaking below important March 19 lows. The USD/JPY seems to finally be making a decision trend-wise after months of heavy consolidation. We viewed our 1st tier uptrend line as a critical support, and it wouldn’t be surprising to see losses accelerate over the coming week. The USD/JPY’s negative inflection comes with the S&P futures trading at important supports and 2nd quarter earnings season on the way. It will be interesting to see if the USD/JPY’s present breakdown indicates an upcoming selloff in U.S. equities. If so, we could witness the USD/JPY retest the highly psychological 90 level.
Japan reported discouraging Core Machinery Orders and Current Account data Tuesday. 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.
Present Price: 92.84.
Resistances: 93.32, 93.76, 94.45, 94.99, 95.73
Supports: 92.57, 91.96, 91.50, 91.03, 90.28
Psychological: 90, 95
Gold Bounces after Heavy Losses
Gold has bounced from our 1st tier uptrend line and is battling with our 2nd tier downtrend line as we type. Gold managed to avoid a test of the psychological $900/oz level, and is strengthening on better than expected earnings from Alcoa coupled with an encouraging decline in weekly unemployment claims. However, gold’s pullback yesterday came on a large spike in volume compared to the relative calm of previous trading sessions. Additionally, we have yet to see any substantial volume to the upside today. Therefore, there remains considerable downward pressure on price with bears outnumbering bulls. We believe yesterday’s pullback in gold could have been a trend-setting statement with the precious metal tumbling beneath June lows. Ultimately, the fate of gold rests upon its positive correlation with U.S. equities. Should the S&P futures give into their downtrend, we would likely see a corresponding contraction in Gold. On the other hand, gold has the highly psychological $900/oz level to rely upon for near-term support. Additionally, we believe the $890-$990/oz zone would prove to be a worthy defense to the downside should the area be breached. In the meantime, investors should keep a close eye on volume and gold’s interaction with our 2nd tier downtrend and 1st tier uptrend lines.
Present Price: $915.40/oz
Resistances: $916.27/oz, $919.59/oz, $922.80/oz, $925.27/oz, $927.01/oz
Supports: $913.93/oz, $911.42/oz, $909.57/oz, $906.34/oz, $904.77/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.
Meanwhile, crude is finding intra-day support in the $60-$61/bbl range as we anticipated, yet failed to stay above our 2nd tier uptrend line, a negative sign technically-speaking. 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 $58-$61/bbl range may only last a week or so. 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 to rebound substantially. 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: $60.10/bbl
Resistances: $60.25/bbl, $60.73/bbl, $61.26/bbl, $61.66/bbl, $62.16/bbl
Supports: $59.69/bbl, $59.17/bbl, $58.90/bbl, $58.55/bbl, $57.87/bbl
Psychological: $60/bbl
S&P Futures Fight to Stabilize Back Above May Lows
The S&P futures are making a concerted effort to stabilize back above critical May lows after they collapsed under heaving sell-side volume yesterday. Speaking of volume, we’ve actually noticed some sizable, countering volume to the upside as bulls battle to hold important technical levels. Meanwhile, our downtrend lines are reaching an inflection point with our 1st tier uptrend line, reinforcing our prediction of a trend-changing moment. We still believe yesterday’s pullback may have been a statement trend-wise, though we haven’t seen the meat of earnings season yet. U.S. equities are experiencing some encouraging strength today after Alcoa’s earnings weren’t as bad as analysts anticipated. More importantly, weekly unemployment claims finally dipped beneath the 600 mark. In fact, this is the largest week to week decline we’ve seen in unemployment claims since December 2008. This is certainly an encouraging development, though it doesn’t necessarily imply an end to America’s unemployment problem. A glaring side-note to today’s release is that continuing claims continue to climb, signaling job creation is an issue. Regardless of the improvement in unemployment claims, the S&P futures remain lodged between May and June highs while trading well beneath our two downtrend lines. Furthermore, we believe we may be witnessing a downward break from the head and shoulders pattern we pointed out yesterday (See Chart Attachment). Hence, there remains a considerable downward pressure on price, and it seems it will take a much better than expected earnings season to get the uptrend back on course.
Correlation wise, the EUR/USD, GBP/USD, and gold have made noticeable pops today to trade back above their respective important technical levels. However, the USD/JPY has not made a sizeable recovery, and is presently in dangerous territory. Meanwhile, crude is sitting at its psychological $60/bbl level. Overall, the S&P’s correlations are showing a bit of stabilization from yesterday’s losses, yet they are by no means in the clear. We believe yesterday could have been a statement to the downside across the board, and a more protracted pullback may ensue in the near-term. Investors will want to see how the 2nd quarter earnings season materializes before making a larger commitment in either direction, but the momentum clearly lies in favor of the bears.
Present Price: 877.75
Resistances: 883, 887.75, 892, 898, 905.25
Supports: 873.5, 867, 862.5, 857.75, 853.75
Psychological: 900, 850
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 Rises Past our 2nd Tier Downtrend Line
The EUR/USD is backing away from our 2nd tier downtrend line and the psychological 1.40 mark as volume to the upside has been insufficient thus far in prompting meaningful gains technically. Even if an immediate-term rally is to ensue in the EUR/USD with the currency pair climbing past the psychological 1.40 level and July 7th highs, it still has to confront our 3rd tier downtrend line hanging in the distance. Therefore, the currency pair is a far cry from reinitiating its medium-term uptrend. Investors should keep in mind that volume on the sell-side has been larger than the buy-side, reflecting the negative attitude out there. Regardless, the present hop out of our 2nd tier downtrend line is encouraging, indicating the bulls are aiming to achieve further stabilization in the currency pair.
The EUR/USD made a noteworthy bounce 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, yesterday’s release is the highest reading in years, and should help ease investor uncertainty for the time being. In addition to yesterday’s positive Industrial Production number, Germany reported a large, unexpected increase in Factory Orders on Monday. The recent optimistic signs from the Germany economy are helping stabilize the Euro despite growing pessimism in global markets. Today’s positive performance in the EUR/USD comes from a better than expected earnings report from Alcoa. Cost-cutting measures were able to counter Alcoa’s decline in revenue more effectively than anticipated, giving investors hope that the 2nd quarter earnings season may not be so bad after all. However, Alcoa’s earnings are strongly correlated to the cost of aluminum, so it’s unwise to make an assumption about the 2nd quarter earnings season based off of the report of one commodity price-reliant company.
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. 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: 1.3991
Resistances: 1.3991, 1.4020, 1.4050, 1.4065, 1.4091
Supports: 1.3970, 1.3944, 1.3915, 1.3889, 1.3865
Psychological: 1.40
GBP/USD Rallies Strongly after BoE Keeps QE Level Unchanged
The Cable is posting a solid rally Thursday after the BoE kept its 125 billion Pound quantitative easing plan unchanged. Though many analysts were expecting a 25 billion bump up this time around, we warned that these rumors may have been unsubstantiated. Investors are taking the BoE’s inaction as a sign of confidence in the British economy. However, we believe the central bank just wants to see how the remainder of the 125 billion Pounds fares as its injected into the economy over the next month or so. Therefore, we believe the optimism resulting from today’s BoE meeting may be short-lived.
Regardless, the Cable has received a much-needed boost above the psychological 1.60- level for the immediate-term, and is currently testing our 2nd tier downtrend line. We haven’t seen any abnormally large volume to the upside thus far today, so it will be interesting to watch how the GBP/USD interacts with our 2nd tier downtrend line. Other than the BoE meeting, investors are buying up the Pound after Britain announced a narrower than anticipated Trade Balance deficit. Even if the Cable should break through our 2nd tier downtrend line large barriers remain, including our 3rd tier uptrend and downtrend lines and the psychological 1.65 level. However, it would be encouraging for bulls to see the Cable settle back in the middle of the June trading range. Despite the positive developments made in the Cable over the past 24 hours, we believe the downtrend remains the prevalent force in this picture as with the EUR/USD. We would need to see a large, technical reversal for us to alter our present negative outlook.
Meanwhile, all eyes are on U.S. equities and the 2nd quarter earnings season. Alcoa kicked off the 2nd quarter with lower than expected losses as a result of effective cost-cutting by management. Investors are encouraged by the better than anticipated number from Alcoa, and are stabilizing the S&P futures in reaction. However, earnings season doesn’t really heat up until next week, so it’s too early to judge how U.S. corporate earnings will fare as an entity. Although Britain will release its Input PPI tomorrow, the GBP/USD should remain positively correlated with U.S. equities trend-wise since the S&P futures are trading near important supports. Furthermore, investors should keep in mind that British economic data has come in mixed this week. Today’s lower than expected trade balance deficit is countered by negative numbers concerning manufacturing and housing. Therefore, the pressure to the downside remains.
Present Price: 1.6242
Resistances: 1.6264, 1.6287, 1.6321, 1.6367, 1.6428
Supports: 1.6210, 1.6152, 1.6129, 1.6079, 1.6026
Psychological: 1.60
USD/JPY Logs Significant Losses
The USD/JPY continued its heavy losses yesterday after the currency pair reactive negatively to the inflection point of our 1st tier uptrend and downtrend lines. Volume increased to the downside with the currency pair breaking below important March 19 lows. The USD/JPY seems to finally be making a decision trend-wise after months of heavy consolidation. We viewed our 1st tier uptrend line as a critical support, and it wouldn’t be surprising to see losses accelerate over the coming week. The USD/JPY’s negative inflection comes with the S&P futures trading at important supports and 2nd quarter earnings season on the way. It will be interesting to see if the USD/JPY’s present breakdown indicates an upcoming selloff in U.S. equities. If so, we could witness the USD/JPY retest the highly psychological 90 level.
Japan reported discouraging Core Machinery Orders and Current Account data Tuesday. 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.
Present Price: 92.84.
Resistances: 93.32, 93.76, 94.45, 94.99, 95.73
Supports: 92.57, 91.96, 91.50, 91.03, 90.28
Psychological: 90, 95
Gold Bounces after Heavy Losses
Gold has bounced from our 1st tier uptrend line and is battling with our 2nd tier downtrend line as we type. Gold managed to avoid a test of the psychological $900/oz level, and is strengthening on better than expected earnings from Alcoa coupled with an encouraging decline in weekly unemployment claims. However, gold’s pullback yesterday came on a large spike in volume compared to the relative calm of previous trading sessions. Additionally, we have yet to see any substantial volume to the upside today. Therefore, there remains considerable downward pressure on price with bears outnumbering bulls. We believe yesterday’s pullback in gold could have been a trend-setting statement with the precious metal tumbling beneath June lows. Ultimately, the fate of gold rests upon its positive correlation with U.S. equities. Should the S&P futures give into their downtrend, we would likely see a corresponding contraction in Gold. On the other hand, gold has the highly psychological $900/oz level to rely upon for near-term support. Additionally, we believe the $890-$990/oz zone would prove to be a worthy defense to the downside should the area be breached. In the meantime, investors should keep a close eye on volume and gold’s interaction with our 2nd tier downtrend and 1st tier uptrend lines.
Present Price: $915.40/oz
Resistances: $916.27/oz, $919.59/oz, $922.80/oz, $925.27/oz, $927.01/oz
Supports: $913.93/oz, $911.42/oz, $909.57/oz, $906.34/oz, $904.77/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.
Meanwhile, crude is finding intra-day support in the $60-$61/bbl range as we anticipated, yet failed to stay above our 2nd tier uptrend line, a negative sign technically-speaking. 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 $58-$61/bbl range may only last a week or so. 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 to rebound substantially. 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: $60.10/bbl
Resistances: $60.25/bbl, $60.73/bbl, $61.26/bbl, $61.66/bbl, $62.16/bbl
Supports: $59.69/bbl, $59.17/bbl, $58.90/bbl, $58.55/bbl, $57.87/bbl
Psychological: $60/bbl
S&P Futures Fight to Stabilize Back Above May Lows
The S&P futures are making a concerted effort to stabilize back above critical May lows after they collapsed under heaving sell-side volume yesterday. Speaking of volume, we’ve actually noticed some sizable, countering volume to the upside as bulls battle to hold important technical levels. Meanwhile, our downtrend lines are reaching an inflection point with our 1st tier uptrend line, reinforcing our prediction of a trend-changing moment. We still believe yesterday’s pullback may have been a statement trend-wise, though we haven’t seen the meat of earnings season yet. U.S. equities are experiencing some encouraging strength today after Alcoa’s earnings weren’t as bad as analysts anticipated. More importantly, weekly unemployment claims finally dipped beneath the 600 mark. In fact, this is the largest week to week decline we’ve seen in unemployment claims since December 2008. This is certainly an encouraging development, though it doesn’t necessarily imply an end to America’s unemployment problem. A glaring side-note to today’s release is that continuing claims continue to climb, signaling job creation is an issue. Regardless of the improvement in unemployment claims, the S&P futures remain lodged between May and June highs while trading well beneath our two downtrend lines. Furthermore, we believe we may be witnessing a downward break from the head and shoulders pattern we pointed out yesterday (See Chart Attachment). Hence, there remains a considerable downward pressure on price, and it seems it will take a much better than expected earnings season to get the uptrend back on course.
Correlation wise, the EUR/USD, GBP/USD, and gold have made noticeable pops today to trade back above their respective important technical levels. However, the USD/JPY has not made a sizeable recovery, and is presently in dangerous territory. Meanwhile, crude is sitting at its psychological $60/bbl level. Overall, the S&P’s correlations are showing a bit of stabilization from yesterday’s losses, yet they are by no means in the clear. We believe yesterday could have been a statement to the downside across the board, and a more protracted pullback may ensue in the near-term. Investors will want to see how the 2nd quarter earnings season materializes before making a larger commitment in either direction, but the momentum clearly lies in favor of the bears.
Present Price: 877.75
Resistances: 883, 887.75, 892, 898, 905.25
Supports: 873.5, 867, 862.5, 857.75, 853.75
Psychological: 900, 850
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.
