Daily Market Commentary
EUR/USD Recovers from Thursday’s Pullback on Declining Volume
The EUR/USD retraced to the 1.41 zone as we anticipated before rebounding early Friday from our 1.4142 support on the 4-hour. Ignoring the large rally in U.S. equities, investors chose to make their decisions based on the discouraging flow of data we’ve seen from the EU over the past couple weeks. However, the bulls are back at it again after today’s EU PMI data points showed resilience in their fight towards growth (50+). The only drag was France’s services PMI, indicating a slight reversal. The EUR/USD responded by climbing back above our 3rd tier downtrend line. Unfortunately for the bulls, volume is slacking and the EUR/USD is a good distance away from previous July highs. Hence, the EUR/USD may finish out the week with additional consolidation since the S&P futures are overheating after disappointing earnings from MSFT, AXP, and AMZN. Additionally, we notice gold has quite a few immediate-term obstacles to the upside and the precious metal has been strongly correlated with the EUR/USD lately. As a result, the EUR/USD may not stray far from our 3rd tier trend lines today.
The EUR/USD has built up a nice base to fall back on during the consolidation process, including our 2nd tier and 3rd tier downtrend lines and Thursday lows. However, if the EUR/USD consolidates with a downward slope, the currency pair may enter a head and shoulders pattern. The EUR/USD will be relatively quiet on the economic data front next week, leaving its fate in the hands of the U.S. If the S&P futures should cool next week and pullback in the wake of profit taking, the EUR/USD may experience additional selling pressure since the currency pair has been under relative downward pressure due to overall weak data from the EU. As a result, investors should keep a close eye on the S&P and monitor its ability to retain a majority of its gains while forming a new base. On the other hand, if the S&P futures should continue their march ahead, the EUR/USD may be dragged higher since the economies are coupled. The EUR/USD has quite a near-term battle to the upside due to the lid being constructed around July highs. Furthermore, June highs are hanging far in the distance. The EU will get the week started early next Monday with GfK German Consumer Climate and M3 Money Supply data. Better than expected numbers could combine with today’s PMI data to help buoy the EUR/USD. On the flipside, discouraging data would only add onto the immediate-term downward pressure.
Present Price: 1.4215
Resistances: 1.4230, 1.4247, 1.4269, 1.4290, 1.4330
Supports: 1.4214, 1.4197, 1.4183, 1.4157, 1.4142
Psychological: 1.40, 1.45
GBP/USD Sinks after Disappointing GDP Numbers
The Cable peaked above the psychological 1.65 level and our 3rd tier trend lines after BBA mortgage approvals and retail sales exceeded analyst expectations while U.S. equities surged to new 2009 highs. However, the GBP/USD has reversed quickly after Prelim GDP came in 5 basis points below expectations (-0.8% vs -.03%E). Additionally, the previously released number was revised lower from -1.9% to -2.4%. Today’s negative GDP data suddenly increases speculation that the BoE will need to expand its $125 billion QE package at the next policy meeting. Before making an emotional reaction, we do point out that even though British production, manufacturing, and services data points have been mixed/disappointing, the unemployment rate and consumption have improved by leaps and bounds. Hence, the negative data points we’re seeing from on the GDP side may be lagging behind an improving employment market. Furthermore, even though today’s Prelim GDP missed expectations and may be revised lower next time, today’s number is certainly a nice improvement from before (-0.8% vs -2.4%). Therefore, we suggest investors exercise caution before becoming too negative on the Cable.
Meanwhile, it will be interesting to see if the Cable can recover from our 2nd tier uptrend line. If so, the GBP/USD can retain its theme of a slow, volatile upward sloping trend. The Cable is constructing an incredible foundation in the process, with pillars standing at 6/8 and 7/8 lows. We knew the meat of the June trading range would be challenging. What matters for swing bulls is that the GBP/USD is looking to make a 5th progressive higher July low today (7/8, 7/13, 7/17, 7/22, and possibly 7/24). Despite the progress being made over the medium-term uptrend, the GBP/USD still faces key resistances preventing the currency pair from a real breakout to the upside. The topside obstacles are the psychological 1.65 level, our 3rd tier downtrend line and Thursday’s highs. As for the downside, should our 2nd tier uptrend line fail the GBP/USD has 7/22 lows and our 1st tier uptrend line serving as cushions.
Like the EU, Britain will be relatively quiet on the economic data front next week. The most prominent release will be CBI realized sales on Tuesday. Therefore, investors will be paying closer attention to U.S. economic data and corporate earnings as the 2nd quarter starts to fill out.
Present Price: 1.6407
Resistances: 1.6441, 1.6467, 1.6500, 1.6542, 1.6555
Supports: 1.6405, 1.6372, 1.6347, 1.6324, 1.6301
Psychological: 1.65
USD/JPY Jogs between our Trend Lines While Playing with 95
Japan’s trade balance came in below analyst expectations late Wednesday, yet surging U.S. equities trumped the disappointing data point as we anticipated. A recovery in U.S. corporate performance implies greater demand for Japanese exports in the future, weakening the Yen and improving prospects of a global economic recovery. Even though Japan’s trade balance was shy of expectations, we’re pretty encouraged by the swift recovery over the past two releases from recession lows. The data reveals export prospects are picking up as stimulus packages ultimately prop up demand for Japanese exports. Employment markets in the developed economies are improving along with consumption, bringing life back to the Japanese manufacturing sector. Japan will release more telling data next week, including retail sales, prelim industrial production, household spending, and the Tokyo core CPI. If the S&P futures can base and continue their ascent while Japanese data points outperform, the USD/JPY could have what it takes to crack our 2nd tier uptrend line.
Yesterday’s movement propelled the USD/JPY back above the important 1st tier uptrend line. The currency pair is making a stronger bit for a return to safety in the process. However, the USD/JPY is being held down by our 1st tier downtrend line and the psychological 95 level. It appears investors will need more confirmation before committing the necessary funds for the currency pair to take a more substantial step higher. Nevertheless, Thursday’s move was encouraging, placing the USD/JPY in a more comfortable territory technically. Meanwhile, our 1st tier downtrend line along with 7/22 and 7/13 lows create a nice immediate-term support system.
Present Price: 94.76
Resistances: 94.99, 95.73, 96.33, 96.77, 97.20
Supports: 94.49, 93.82, 93.28, 92.90, 92.39
Psychological: 95
Gold Sticks Above $950/oz
Gold failed to participate in the S&P’s surge yesterday, opting to sink towards our 2nd tier uptrend line on climbing volume. Thursday’s movement in gold shows us the precious metal is more positively correlated with the Dollar than U.S. equities, aiding investors in further correlative deviations between the greenback and equities. Looking a little deeper into gold’s positive correlation with the Dollar, we believe a stronger Dollar could discourage foreign nations from diversifying their reserves from the greenback, placing downward pressure the precious metal. Despite yesterday’s pullback, gold managed to balance on our 2nd tier uptrend line and above 7/22 lows. The precious metal has proceeded to recover above the psychological $950/oz level, and is heading towards our 2nd tier downtrend line as we type. We anticipate gold could finish the week with further consolidation as immediate and near-term downward pressures are heavy. Gold will likely wait around $950/oz as the precious metal looks to see if U.S. equities can continue their ascent next week and drag the EUR/USD and GBP/USD along in the process. Near-term topside barriers are our 2nd tier downtrend and 3rd tier downtrend lines along with $950/oz and Thursday highs.
Present Price: $952.62/oz
Resistances: $952.67/oz, $954.57/oz, $958.05/oz, $960.58/oz, $962.80/oz
Supports: $949.39/oz, $947.92/oz, $946.02/oz, $944.11/oz, $941.58/oz
Psychological: $950/oz
Crude Cruise Towards our 3rd Tier Uptrend Line
Crude futures had no problem participating in yesterday’s strong rally in U.S. equities. Crude finally left the psychological $65/bbl level behind on climbing volume, stepping over our 2nd tier downtrend line in the process. The futures are presently walking along our 3rd tier uptrend line as they creep back into the June trading range while setting its sights on the psychological $70/bbl level. Crude futures may have a little more gas in the tank even though the S&P futures are waning after negative earnings from AMZN, AXP, and MSFT. Crude futures hesitated during much of the S&P’s ascent over the past week, opting to consolidate around $65/bbl instead. However, now that the S&P has broken out, crude futures may be motivated to play some catch up. On the other hand, gains in crude may be limited by an appreciating Dollar since a stronger Dollar damages external demand.
Even though corporate earnings are starting to come in a little mixed, the earnings season has been cheerful overall. Improvement in U.S. corporate outlook implies greater consumption of crude in the future. In addition to the more positive outlook concerning demand, crude inventories have been declining on a consistent basis. On the other hand, declining inventories are being countered by an increase in Nigerian oil production due to the 30 day ceasefire with MEND. Hence, even though there are clear factors supporting a rising price of crude, there are counteractive supply and demand forces at work capping upward movements in price.
Meanwhile, we wouldn’t be surprised to see crude find strength in our 1st tier uptrend line with our 2nd tier downtrend line fading in the distance. This creates the environment for a retest of the $69-$70/bbl zone. However, investors should note any further key technical movements would likely require sizable gains in the S&P. The S&P futures have been on a tear as of late, and profit taking wouldn’t be out of the question. Additionally, the S&P futures have to deal with their psychological 1000 level next, and that probably won’t be an easy feat. As for the downside, crude futures build up a solid base around $65/bbl during their consolidation period and have our 2nd tier uptrend and downtrend lines serving as cushions.
Present Price: $67.38/bbl
Resistances: $67.52/bbl, $67.99/bbl, $68.34/bbl, $68.90/bbl, $69.50/bbl
Supports: $66.79/bbl, $66.39/bbl, $65.79/bbl, $65.10/bbl, $64.55/bbl
Psychological: $70/bbl, $65/bbl
S&P Sits Near Par After Surge
The S&P futures made the confirmation we were looking for on Thursday, propelling from our 2nd tier uptrend line well beyond the psychological 950 level. The futures are leveling off today as investors take some profits amid disappointing earnings from the likes of MSFT, AXP，and AMZN. The markets have also received some disconcerting results from WFC and MS this, week along with fast food giant MCD. However, the 2nd quarter earnings season has been altogether positive, and the mixed results show winners are separating themselves from the losers (AAPL vs. MSFT, EBAY vs. AMZN, YUM vs. MCD, GS vs. MS). Investors are encouraged by the fact that there are winners this time around instead of just losers. Investors also continue to ignore the negative data emanating from the EU and Britain over the past couple weeks even though the EU’s PMI data was positive this morning. As for the U.S., even though weekly unemployment claims experienced a bounce higher, existing home sales and today’s consumer sentiment data points reveal a slight improvement. Therefore, the roots for an economic recovery have grown a little even if medium-term risks persist. Investors are acting upon what they have right now instead of their predictions of what might happen in 6 months.
Thursday’s gain in the S&P came on large buy side volume, showing investors feel more comfortable putting a second leg in the pool since corporate earnings are giving us a clearer picture of fair value. While yesterday’s movement was exciting for the uptrend, the EUR/USD, GBP/USD, and gold didn’t participate due to disconcerting data releases from the EU and Britain. Furthermore, today’s negative earnings are taking some air out of the balloon. Therefore, the S&P futures may finish off the week on a mild note with the possibility of a slight pullback towards our 2nd tier uptrend line. Meanwhile, investors will be looking for the 2nd quarter earnings to finish on a positive note as the season begins to fill out next week. We’ll also receive some heavily-weighted economic data throughout the week, including new home sales on Monday followed by the HPI and CB consumer confidence data points on Tuesday. Even though momentum is clearly in favor of the bulls right now, the 1000 mark isn’t so far away all of a sudden. Investors better believe the psychological 1000 area will be a though psychological barrier to deal with should it be reached. Therefore, the S&P certainly has its work cut out for it.
Present Price: 969.75
Resistances: 972.75, 976.50
Supports: 968.5, 963, 955.50, 950
Psychological: 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.
EUR/USD Recovers from Thursday’s Pullback on Declining Volume
The EUR/USD retraced to the 1.41 zone as we anticipated before rebounding early Friday from our 1.4142 support on the 4-hour. Ignoring the large rally in U.S. equities, investors chose to make their decisions based on the discouraging flow of data we’ve seen from the EU over the past couple weeks. However, the bulls are back at it again after today’s EU PMI data points showed resilience in their fight towards growth (50+). The only drag was France’s services PMI, indicating a slight reversal. The EUR/USD responded by climbing back above our 3rd tier downtrend line. Unfortunately for the bulls, volume is slacking and the EUR/USD is a good distance away from previous July highs. Hence, the EUR/USD may finish out the week with additional consolidation since the S&P futures are overheating after disappointing earnings from MSFT, AXP, and AMZN. Additionally, we notice gold has quite a few immediate-term obstacles to the upside and the precious metal has been strongly correlated with the EUR/USD lately. As a result, the EUR/USD may not stray far from our 3rd tier trend lines today.
The EUR/USD has built up a nice base to fall back on during the consolidation process, including our 2nd tier and 3rd tier downtrend lines and Thursday lows. However, if the EUR/USD consolidates with a downward slope, the currency pair may enter a head and shoulders pattern. The EUR/USD will be relatively quiet on the economic data front next week, leaving its fate in the hands of the U.S. If the S&P futures should cool next week and pullback in the wake of profit taking, the EUR/USD may experience additional selling pressure since the currency pair has been under relative downward pressure due to overall weak data from the EU. As a result, investors should keep a close eye on the S&P and monitor its ability to retain a majority of its gains while forming a new base. On the other hand, if the S&P futures should continue their march ahead, the EUR/USD may be dragged higher since the economies are coupled. The EUR/USD has quite a near-term battle to the upside due to the lid being constructed around July highs. Furthermore, June highs are hanging far in the distance. The EU will get the week started early next Monday with GfK German Consumer Climate and M3 Money Supply data. Better than expected numbers could combine with today’s PMI data to help buoy the EUR/USD. On the flipside, discouraging data would only add onto the immediate-term downward pressure.
Present Price: 1.4215
Resistances: 1.4230, 1.4247, 1.4269, 1.4290, 1.4330
Supports: 1.4214, 1.4197, 1.4183, 1.4157, 1.4142
Psychological: 1.40, 1.45
GBP/USD Sinks after Disappointing GDP Numbers
The Cable peaked above the psychological 1.65 level and our 3rd tier trend lines after BBA mortgage approvals and retail sales exceeded analyst expectations while U.S. equities surged to new 2009 highs. However, the GBP/USD has reversed quickly after Prelim GDP came in 5 basis points below expectations (-0.8% vs -.03%E). Additionally, the previously released number was revised lower from -1.9% to -2.4%. Today’s negative GDP data suddenly increases speculation that the BoE will need to expand its $125 billion QE package at the next policy meeting. Before making an emotional reaction, we do point out that even though British production, manufacturing, and services data points have been mixed/disappointing, the unemployment rate and consumption have improved by leaps and bounds. Hence, the negative data points we’re seeing from on the GDP side may be lagging behind an improving employment market. Furthermore, even though today’s Prelim GDP missed expectations and may be revised lower next time, today’s number is certainly a nice improvement from before (-0.8% vs -2.4%). Therefore, we suggest investors exercise caution before becoming too negative on the Cable.
Meanwhile, it will be interesting to see if the Cable can recover from our 2nd tier uptrend line. If so, the GBP/USD can retain its theme of a slow, volatile upward sloping trend. The Cable is constructing an incredible foundation in the process, with pillars standing at 6/8 and 7/8 lows. We knew the meat of the June trading range would be challenging. What matters for swing bulls is that the GBP/USD is looking to make a 5th progressive higher July low today (7/8, 7/13, 7/17, 7/22, and possibly 7/24). Despite the progress being made over the medium-term uptrend, the GBP/USD still faces key resistances preventing the currency pair from a real breakout to the upside. The topside obstacles are the psychological 1.65 level, our 3rd tier downtrend line and Thursday’s highs. As for the downside, should our 2nd tier uptrend line fail the GBP/USD has 7/22 lows and our 1st tier uptrend line serving as cushions.
Like the EU, Britain will be relatively quiet on the economic data front next week. The most prominent release will be CBI realized sales on Tuesday. Therefore, investors will be paying closer attention to U.S. economic data and corporate earnings as the 2nd quarter starts to fill out.
Present Price: 1.6407
Resistances: 1.6441, 1.6467, 1.6500, 1.6542, 1.6555
Supports: 1.6405, 1.6372, 1.6347, 1.6324, 1.6301
Psychological: 1.65
USD/JPY Jogs between our Trend Lines While Playing with 95
Japan’s trade balance came in below analyst expectations late Wednesday, yet surging U.S. equities trumped the disappointing data point as we anticipated. A recovery in U.S. corporate performance implies greater demand for Japanese exports in the future, weakening the Yen and improving prospects of a global economic recovery. Even though Japan’s trade balance was shy of expectations, we’re pretty encouraged by the swift recovery over the past two releases from recession lows. The data reveals export prospects are picking up as stimulus packages ultimately prop up demand for Japanese exports. Employment markets in the developed economies are improving along with consumption, bringing life back to the Japanese manufacturing sector. Japan will release more telling data next week, including retail sales, prelim industrial production, household spending, and the Tokyo core CPI. If the S&P futures can base and continue their ascent while Japanese data points outperform, the USD/JPY could have what it takes to crack our 2nd tier uptrend line.
Yesterday’s movement propelled the USD/JPY back above the important 1st tier uptrend line. The currency pair is making a stronger bit for a return to safety in the process. However, the USD/JPY is being held down by our 1st tier downtrend line and the psychological 95 level. It appears investors will need more confirmation before committing the necessary funds for the currency pair to take a more substantial step higher. Nevertheless, Thursday’s move was encouraging, placing the USD/JPY in a more comfortable territory technically. Meanwhile, our 1st tier downtrend line along with 7/22 and 7/13 lows create a nice immediate-term support system.
Present Price: 94.76
Resistances: 94.99, 95.73, 96.33, 96.77, 97.20
Supports: 94.49, 93.82, 93.28, 92.90, 92.39
Psychological: 95
Gold Sticks Above $950/oz
Gold failed to participate in the S&P’s surge yesterday, opting to sink towards our 2nd tier uptrend line on climbing volume. Thursday’s movement in gold shows us the precious metal is more positively correlated with the Dollar than U.S. equities, aiding investors in further correlative deviations between the greenback and equities. Looking a little deeper into gold’s positive correlation with the Dollar, we believe a stronger Dollar could discourage foreign nations from diversifying their reserves from the greenback, placing downward pressure the precious metal. Despite yesterday’s pullback, gold managed to balance on our 2nd tier uptrend line and above 7/22 lows. The precious metal has proceeded to recover above the psychological $950/oz level, and is heading towards our 2nd tier downtrend line as we type. We anticipate gold could finish the week with further consolidation as immediate and near-term downward pressures are heavy. Gold will likely wait around $950/oz as the precious metal looks to see if U.S. equities can continue their ascent next week and drag the EUR/USD and GBP/USD along in the process. Near-term topside barriers are our 2nd tier downtrend and 3rd tier downtrend lines along with $950/oz and Thursday highs.
Present Price: $952.62/oz
Resistances: $952.67/oz, $954.57/oz, $958.05/oz, $960.58/oz, $962.80/oz
Supports: $949.39/oz, $947.92/oz, $946.02/oz, $944.11/oz, $941.58/oz
Psychological: $950/oz
Crude Cruise Towards our 3rd Tier Uptrend Line
Crude futures had no problem participating in yesterday’s strong rally in U.S. equities. Crude finally left the psychological $65/bbl level behind on climbing volume, stepping over our 2nd tier downtrend line in the process. The futures are presently walking along our 3rd tier uptrend line as they creep back into the June trading range while setting its sights on the psychological $70/bbl level. Crude futures may have a little more gas in the tank even though the S&P futures are waning after negative earnings from AMZN, AXP, and MSFT. Crude futures hesitated during much of the S&P’s ascent over the past week, opting to consolidate around $65/bbl instead. However, now that the S&P has broken out, crude futures may be motivated to play some catch up. On the other hand, gains in crude may be limited by an appreciating Dollar since a stronger Dollar damages external demand.
Even though corporate earnings are starting to come in a little mixed, the earnings season has been cheerful overall. Improvement in U.S. corporate outlook implies greater consumption of crude in the future. In addition to the more positive outlook concerning demand, crude inventories have been declining on a consistent basis. On the other hand, declining inventories are being countered by an increase in Nigerian oil production due to the 30 day ceasefire with MEND. Hence, even though there are clear factors supporting a rising price of crude, there are counteractive supply and demand forces at work capping upward movements in price.
Meanwhile, we wouldn’t be surprised to see crude find strength in our 1st tier uptrend line with our 2nd tier downtrend line fading in the distance. This creates the environment for a retest of the $69-$70/bbl zone. However, investors should note any further key technical movements would likely require sizable gains in the S&P. The S&P futures have been on a tear as of late, and profit taking wouldn’t be out of the question. Additionally, the S&P futures have to deal with their psychological 1000 level next, and that probably won’t be an easy feat. As for the downside, crude futures build up a solid base around $65/bbl during their consolidation period and have our 2nd tier uptrend and downtrend lines serving as cushions.
Present Price: $67.38/bbl
Resistances: $67.52/bbl, $67.99/bbl, $68.34/bbl, $68.90/bbl, $69.50/bbl
Supports: $66.79/bbl, $66.39/bbl, $65.79/bbl, $65.10/bbl, $64.55/bbl
Psychological: $70/bbl, $65/bbl
S&P Sits Near Par After Surge
The S&P futures made the confirmation we were looking for on Thursday, propelling from our 2nd tier uptrend line well beyond the psychological 950 level. The futures are leveling off today as investors take some profits amid disappointing earnings from the likes of MSFT, AXP，and AMZN. The markets have also received some disconcerting results from WFC and MS this, week along with fast food giant MCD. However, the 2nd quarter earnings season has been altogether positive, and the mixed results show winners are separating themselves from the losers (AAPL vs. MSFT, EBAY vs. AMZN, YUM vs. MCD, GS vs. MS). Investors are encouraged by the fact that there are winners this time around instead of just losers. Investors also continue to ignore the negative data emanating from the EU and Britain over the past couple weeks even though the EU’s PMI data was positive this morning. As for the U.S., even though weekly unemployment claims experienced a bounce higher, existing home sales and today’s consumer sentiment data points reveal a slight improvement. Therefore, the roots for an economic recovery have grown a little even if medium-term risks persist. Investors are acting upon what they have right now instead of their predictions of what might happen in 6 months.
Thursday’s gain in the S&P came on large buy side volume, showing investors feel more comfortable putting a second leg in the pool since corporate earnings are giving us a clearer picture of fair value. While yesterday’s movement was exciting for the uptrend, the EUR/USD, GBP/USD, and gold didn’t participate due to disconcerting data releases from the EU and Britain. Furthermore, today’s negative earnings are taking some air out of the balloon. Therefore, the S&P futures may finish off the week on a mild note with the possibility of a slight pullback towards our 2nd tier uptrend line. Meanwhile, investors will be looking for the 2nd quarter earnings to finish on a positive note as the season begins to fill out next week. We’ll also receive some heavily-weighted economic data throughout the week, including new home sales on Monday followed by the HPI and CB consumer confidence data points on Tuesday. Even though momentum is clearly in favor of the bulls right now, the 1000 mark isn’t so far away all of a sudden. Investors better believe the psychological 1000 area will be a though psychological barrier to deal with should it be reached. Therefore, the S&P certainly has its work cut out for it.
Present Price: 969.75
Resistances: 972.75, 976.50
Supports: 968.5, 963, 955.50, 950
Psychological: 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.
