Daily Market Commentary
EUR/USD Follows Gold South
The EUR/USD has crumbled beneath July 23rd lows and our 1st and 2nd tier uptrend lines. The EUR/USD’s pullback is picking up momentum after German Prelim CPI came in negative (-0.1%) along with mixed data with a negative tint from the U.S., Britain, and Japan. Meanwhile, gold is dropping like a rock, dragging on the EUR/USD due to their negative correlation. We also recognize dips in crude and the S&P futures, though the declines aren’t as exaggerated as the EUR/USD’s. The most interesting part of today’s movement is that the GBP/USD and USD/JPY are strengthening. Therefore, it appears the Euro is under relative selling pressure. While it’s too early to claim a divergence of currencies, the EUR/USD’s stark negative correlation with the GBP/USD sticks out like a sore thumb. One need look no further than today’s selloff in the EUR/GBP.
We can’t find what’s driving the Euro lower besides the bombing in Spain, although we wouldn’t expect such a large, negative reaction. On a positive note, sell-side volume hasn’t risen to abnormal levels today. Hence, the currency pair may be able to salvage its uptrend by recovering and closing back above our 1st tier uptrend line. However, if the EUR/USD can’t get its act together, we could witness a retest of the psychological 1.40 level in the near future. Momentum in the EUR/USD is tipping to the bears’ corner, and the currency pair needs strong gains from the S&P futures to stem the bleeding. Unfortunately, it seems U.S. equities are on a downward trajectory as well. Though the immediate-term outlook for the EUR/USD is sour, the currency pair’s medium-term uptrend still has a few tricks up its sleeves.
There are a few solid uptrend lines we can create, with a last resort running through June and July lows. Hence, bulls shouldn’t get too discouraged by the present setback in the EUR/USD. Investors should keep in mind the 2nd quarter earnings season has fared better than analysts anticipated. Additionally, we continue to see some positive sparks in Euro Zone data. Speaking of which, Germany will follow up today’s CPI release with unemployment change data tomorrow. A lower than expected unemployment change number could help the EUR/USD settle down and consolidate. On the other hand, a worse than expected data point would likely exacerbate the immediate-term pullback.
Present Price: 1.4087
Resistances: 1.4094, 1.4117, 1.4137, 1.4154, 1.4166
Supports: 1.4078, 1.4063, 1.4044, 1.4032, 1.4017
Psychological: 1.40
GBP/USD Bounces Between our 1st and 2nd Tier Uptrend Lines
The Cable slipped through our 2nd tier uptrend yesterday as the currency pair followed gold and the EUR/USD lower following negative CBI realized sales data. However, the Pound continued to flex its muscles, and the GBP/USD exerted its relative strength by bouncing off of our 1st tier uptrend line, avoiding an immediate-term protracted selloff like the EUR/USD. The EUR/GBP confirms the Pound’s relative strength, crashing beneath its 7/24 lows. It’s interesting the GBP/USD continues to experience a relative strength considering net lending to individuals came in even lower than expectations. Net lending to individuals is at an all-time low, and there have been no signs of a bottom yet. This can’t bode well for British consumption, supported by the negative showings from CBI realized sales and last week’s retail sales data. However, if tomorrow’s HPI number comes in beneath reduced expectations, then the GBP/USD may participate more to the downside.
The GBP/USD may be experiencing immediate-term strength since investors are still under the impression that the BOE has no intention to expand its $125 billion QE program. However, if economic data continues to come in mixed with a negative tint, the BOE may have no choice but to make another injection of liquidity. The Cable’s relative strength also depends on the S&P’s ability to hold strong above our 2nd tier uptrend line. If the S&P’s uptrend gives way in the near future the GBP/USD would likely follow U.S. equities lower due to their ultimate positive correlation. On a discouraging note, gold is declining at an alarming rate, a negative sign for the Cable’s positive correlation. We’ll keep an eye on the Cable’s present divergence from gold and the EUR/USD to see if a new norm develops. However, we’ve witnessed brief divergences in the FX markets in the past only to watch the correlations lock back into place.
Technically speaking, if our 1st tier uptrend line and intraday lows should fail, the next lines of defense would likely be 7/22 and 7/14 lows. The Cable is still in the thick of the dense June trading range, meaning there are solid walls on the bottom and topsides. As for the topside, the GBP/USD needs to overcome our 2nd tier uptrend and 3rd tier downtrend lines along with 7/28 highs. If the S&P futures continue to consolidate, we may witness an upward sloping consolidation in the GBP/USD towards our 3rd tier downtrend line as its approaches an inflection point with our 2nd tier uptrend line. Once again, investors should tread cautiously since the large pullbacks in gold and the EUR/USD raises a red flag.
Present Price: 1.6439
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 Climbs to the Psychological 95 Level
The USD/JPY has battled back above our 1st tier uptrend line, and is trading just below our 2nd tier downtrend line as the trend lines approach their inflection point. The USD/JPY’s rise is impressive considering the large declines taking place in gold and the EUR/USD. Investors are paying more attention to the worse than expected retail sales from Japan late Tuesday coupled with relative stability in the S&P futures. The contrast of a weak Japanese economy with a comparatively stable American economy is leading investors to favor the Dollar over the Yen. Meanwhile, the inflection point of our trend lines could signal a large movement approaching. The USD/JPY has been bobbling between our 1st tier uptrend and 2nd tier downtrend lines for a few days now, indicating they have importance for the immediate-term.
Japan will release its monthly industrial production number later today. Analysts are anticipated a sizable decline from the previous release. However, should industrial production come in weaker than expected and the S&P futures experience profit taking, the USD/JPY could decide to head south again. On the other hand, if tonight’s release is worse than expected and the S&P futures continue to consolidate, the USD/JPY could experience more near-term strength since investors would likely favor the Dollar over the Yen again. Meanwhile, investors should keep a watch on volume considering an inflection point is occurring.
Present Price: 94.94
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 Adds onto Yesterday’s Swift Selloff
Gold is at it again Wednesday, following through on gold’s technical selloff on Tuesday. The precious metal has dropped below the safety of the bottom end of the 7/15-7/20 trading range. Gold continues to drop faster than the Dollar appreciates while crude finally tags along to the downside. The size of gold’s pullback is incredible, and we still haven’t found the driving force. Many analysts are attributing gold’s decline to the Dollar’s appreciation. However, we believe it’s the other way around. Losses in gold are exacerbating the appreciation of the greenback. Furthermore, we speculate the size of gold’s selloff without probable cause may imply a shift in governmental reserves. China may be opting to support record U.S. debt auctions instead of buying up precious metals after a productive meeting in D.C. Again, this is purely speculation, yet we do believe there is a relevant story taking shape behind the scenes.
While gold may attempt to stabilize from present levels again today, the precious metal is at another important juncture. June 15th lows could play an important role in defending gold from an even larger retracement towards our 1st tier uptrend line. We view our 1st tier uptrend line as the last line of defense for the medium-term uptrend. A break below our 1st tier uptrend line would ultimately lead to a retest of the highly psychological $900/oz level. However, the trend line is far away, providing gold the opportunity to form a new base around our new 2nd and 3rd tier uptrend lines. The fact gold is made this pullback with U.S. equities is both odd and disconcerting. For if the S&P futures should decide to join the party, gold may be forced even lower due to their positive correlation. While immediate-term momentum is to the downside, it remains to be seen whether this is just a setback for the medium-term uptrend or the beginning of a larger leg down.
Present Price: $925.75/oz
Resistances: $927.54/oz, $928.87/oz, $931.22/oz, $932.76/oz, $933.78/oz
Supports: $925.71/oz, $923.28/oz, $922.30/oz, $920.36/oz, $918.25/oz
Psychological: $900/oz, $950/oz
Crude Futures Tumble after Large Inventories and Low DGO #
Crude futures have crashed through all of our previous uptrend lines and the psychological $65/bbl level. Both of the data points we highlighted yesterday came in worse than expected, sending crude futures sharply lower. Weekly inventories not only continued their uptrend, but bolted to a surplus of 5.1 mill. vs. a shortage of -1.8 mill. last week. Analysts were expecting a shortage of -1.1 mill. To make matters worse, the headline durable goods orders number came in below expectations while the core number beat expectations. This tells us vehicle and plane purchases are still in a poor state, reducing the present and future outlook for consumption of crude. These two negative news releases are hitting crude with a double whammy. Crude didn’t fully participate in last week’s bull-run in U.S. equities while failing to test $70/bbl, leaving crude futures in a somewhat vulnerable state as it was. Today’s news combined with yesterday’s mixed earnings and weaker than expected CB consumer confidence data was enough of a catalyst to knock crude off its horse.
In addition to today’s negative economic data, we recognize continual retracements in both gold and the EUR/USD. The downturn in these two investment vehicles is only adding downward pressure on crude futures due to their positive correlation. A weaker Euro makes dollar denominated commodities more expensive to import, reducing demand for crude and lowering price. On a positive note, the S&P futures are holding strong around 970 despite all of the market turbulence today. A comparable pullback in the S&P would only give investors more incentive to sell crude.
Despite crude’s sharp selloff today, the futures have two new uptrend lines to fall back on. Additionally, the highly psychological $60/bbl level is far away, meaning crude’s medium-term uptrend has a few strong defenses left. On the other hand, crude is only creating more barriers it will need to surpass to get back on track, beginning with July 17th highs and our 2nd tier downtrend line. Meanwhile, sell-side volume is climbing, indicating crude could have some more room to go to the downside even if there is a little consolidation from daily lows.
Present Price: $63.15/bbl
Resistances: $63.82/bbl, $64.38/bbl, $65.22/bbl, $65.83/bbl, $66.48/bbl
Supports: $63.13/bbl, $62.62/bbl, $62.05/bbl, $61.40/bbl, $60.93/bbl
Psychological: $60/bbl, $65/bbl
S&P Futures Move Sideways Despite Correlation Pullbacks
The S&P futures are floating sideways despite large sell-offs in crude and gold along with a broad appreciation of the Greenback. One would have expected a sizable pullback in the S&P in conjunction with the recent downturn in its correlations. Additionally, U.S. equities have been on a tear lately, so profit taking would be readily accepted by analysts. Hence, the S&P’s resilience is quite impressive with bulls holding strong ahead of the Beige Book at 2pm EST. Today’s better than expected core durable goods orders number is helping counter the negative headline DGO number. Additionally, investors allowed yesterday’s rise in the HPI to offset the decline in CB consumer confidence. The mixed eco. data messages are a saving grace for a 970 S&P in reaction to the better than expected 2nd quarter earnings season. However, the large downturns in the S&P’s correlations are disconcerting, and we would not be surprised to witness some profit taking towards our 1st tier uptrend line. On the other hand, the S&P could just be building up a new base in preparation for its assault on the highly psychological 1000 level.
As we stated in our previous analysis, 1000 should prove to be tougher than 9000 if it is tested. Therefore, any immediate-term upward movements in the S&P futures could be limited due to their proximity to 1000. With the 2nd quarter earnings season filling out, the S&P futures would likely need an important clarification via economic data to push past 1000. As for the downside, the S&P has our 1st and 2nd tier uptrend lines to rely upon along with the psychological 950 level. Meanwhile, investors should keep a close eye on the S&P’s correlations. The correlations are in a vulnerable position, and any further deterioration could tip the S&P south.
Present Price: 971.50
Resistances: 972.75, 977, 981.50
Supports: 968.5, 963, 955.50, 950
Psychological: 1000, 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 Follows Gold South
The EUR/USD has crumbled beneath July 23rd lows and our 1st and 2nd tier uptrend lines. The EUR/USD’s pullback is picking up momentum after German Prelim CPI came in negative (-0.1%) along with mixed data with a negative tint from the U.S., Britain, and Japan. Meanwhile, gold is dropping like a rock, dragging on the EUR/USD due to their negative correlation. We also recognize dips in crude and the S&P futures, though the declines aren’t as exaggerated as the EUR/USD’s. The most interesting part of today’s movement is that the GBP/USD and USD/JPY are strengthening. Therefore, it appears the Euro is under relative selling pressure. While it’s too early to claim a divergence of currencies, the EUR/USD’s stark negative correlation with the GBP/USD sticks out like a sore thumb. One need look no further than today’s selloff in the EUR/GBP.
We can’t find what’s driving the Euro lower besides the bombing in Spain, although we wouldn’t expect such a large, negative reaction. On a positive note, sell-side volume hasn’t risen to abnormal levels today. Hence, the currency pair may be able to salvage its uptrend by recovering and closing back above our 1st tier uptrend line. However, if the EUR/USD can’t get its act together, we could witness a retest of the psychological 1.40 level in the near future. Momentum in the EUR/USD is tipping to the bears’ corner, and the currency pair needs strong gains from the S&P futures to stem the bleeding. Unfortunately, it seems U.S. equities are on a downward trajectory as well. Though the immediate-term outlook for the EUR/USD is sour, the currency pair’s medium-term uptrend still has a few tricks up its sleeves.
There are a few solid uptrend lines we can create, with a last resort running through June and July lows. Hence, bulls shouldn’t get too discouraged by the present setback in the EUR/USD. Investors should keep in mind the 2nd quarter earnings season has fared better than analysts anticipated. Additionally, we continue to see some positive sparks in Euro Zone data. Speaking of which, Germany will follow up today’s CPI release with unemployment change data tomorrow. A lower than expected unemployment change number could help the EUR/USD settle down and consolidate. On the other hand, a worse than expected data point would likely exacerbate the immediate-term pullback.
Present Price: 1.4087
Resistances: 1.4094, 1.4117, 1.4137, 1.4154, 1.4166
Supports: 1.4078, 1.4063, 1.4044, 1.4032, 1.4017
Psychological: 1.40
GBP/USD Bounces Between our 1st and 2nd Tier Uptrend Lines
The Cable slipped through our 2nd tier uptrend yesterday as the currency pair followed gold and the EUR/USD lower following negative CBI realized sales data. However, the Pound continued to flex its muscles, and the GBP/USD exerted its relative strength by bouncing off of our 1st tier uptrend line, avoiding an immediate-term protracted selloff like the EUR/USD. The EUR/GBP confirms the Pound’s relative strength, crashing beneath its 7/24 lows. It’s interesting the GBP/USD continues to experience a relative strength considering net lending to individuals came in even lower than expectations. Net lending to individuals is at an all-time low, and there have been no signs of a bottom yet. This can’t bode well for British consumption, supported by the negative showings from CBI realized sales and last week’s retail sales data. However, if tomorrow’s HPI number comes in beneath reduced expectations, then the GBP/USD may participate more to the downside.
The GBP/USD may be experiencing immediate-term strength since investors are still under the impression that the BOE has no intention to expand its $125 billion QE program. However, if economic data continues to come in mixed with a negative tint, the BOE may have no choice but to make another injection of liquidity. The Cable’s relative strength also depends on the S&P’s ability to hold strong above our 2nd tier uptrend line. If the S&P’s uptrend gives way in the near future the GBP/USD would likely follow U.S. equities lower due to their ultimate positive correlation. On a discouraging note, gold is declining at an alarming rate, a negative sign for the Cable’s positive correlation. We’ll keep an eye on the Cable’s present divergence from gold and the EUR/USD to see if a new norm develops. However, we’ve witnessed brief divergences in the FX markets in the past only to watch the correlations lock back into place.
Technically speaking, if our 1st tier uptrend line and intraday lows should fail, the next lines of defense would likely be 7/22 and 7/14 lows. The Cable is still in the thick of the dense June trading range, meaning there are solid walls on the bottom and topsides. As for the topside, the GBP/USD needs to overcome our 2nd tier uptrend and 3rd tier downtrend lines along with 7/28 highs. If the S&P futures continue to consolidate, we may witness an upward sloping consolidation in the GBP/USD towards our 3rd tier downtrend line as its approaches an inflection point with our 2nd tier uptrend line. Once again, investors should tread cautiously since the large pullbacks in gold and the EUR/USD raises a red flag.
Present Price: 1.6439
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 Climbs to the Psychological 95 Level
The USD/JPY has battled back above our 1st tier uptrend line, and is trading just below our 2nd tier downtrend line as the trend lines approach their inflection point. The USD/JPY’s rise is impressive considering the large declines taking place in gold and the EUR/USD. Investors are paying more attention to the worse than expected retail sales from Japan late Tuesday coupled with relative stability in the S&P futures. The contrast of a weak Japanese economy with a comparatively stable American economy is leading investors to favor the Dollar over the Yen. Meanwhile, the inflection point of our trend lines could signal a large movement approaching. The USD/JPY has been bobbling between our 1st tier uptrend and 2nd tier downtrend lines for a few days now, indicating they have importance for the immediate-term.
Japan will release its monthly industrial production number later today. Analysts are anticipated a sizable decline from the previous release. However, should industrial production come in weaker than expected and the S&P futures experience profit taking, the USD/JPY could decide to head south again. On the other hand, if tonight’s release is worse than expected and the S&P futures continue to consolidate, the USD/JPY could experience more near-term strength since investors would likely favor the Dollar over the Yen again. Meanwhile, investors should keep a watch on volume considering an inflection point is occurring.
Present Price: 94.94
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 Adds onto Yesterday’s Swift Selloff
Gold is at it again Wednesday, following through on gold’s technical selloff on Tuesday. The precious metal has dropped below the safety of the bottom end of the 7/15-7/20 trading range. Gold continues to drop faster than the Dollar appreciates while crude finally tags along to the downside. The size of gold’s pullback is incredible, and we still haven’t found the driving force. Many analysts are attributing gold’s decline to the Dollar’s appreciation. However, we believe it’s the other way around. Losses in gold are exacerbating the appreciation of the greenback. Furthermore, we speculate the size of gold’s selloff without probable cause may imply a shift in governmental reserves. China may be opting to support record U.S. debt auctions instead of buying up precious metals after a productive meeting in D.C. Again, this is purely speculation, yet we do believe there is a relevant story taking shape behind the scenes.
While gold may attempt to stabilize from present levels again today, the precious metal is at another important juncture. June 15th lows could play an important role in defending gold from an even larger retracement towards our 1st tier uptrend line. We view our 1st tier uptrend line as the last line of defense for the medium-term uptrend. A break below our 1st tier uptrend line would ultimately lead to a retest of the highly psychological $900/oz level. However, the trend line is far away, providing gold the opportunity to form a new base around our new 2nd and 3rd tier uptrend lines. The fact gold is made this pullback with U.S. equities is both odd and disconcerting. For if the S&P futures should decide to join the party, gold may be forced even lower due to their positive correlation. While immediate-term momentum is to the downside, it remains to be seen whether this is just a setback for the medium-term uptrend or the beginning of a larger leg down.
Present Price: $925.75/oz
Resistances: $927.54/oz, $928.87/oz, $931.22/oz, $932.76/oz, $933.78/oz
Supports: $925.71/oz, $923.28/oz, $922.30/oz, $920.36/oz, $918.25/oz
Psychological: $900/oz, $950/oz
Crude Futures Tumble after Large Inventories and Low DGO #
Crude futures have crashed through all of our previous uptrend lines and the psychological $65/bbl level. Both of the data points we highlighted yesterday came in worse than expected, sending crude futures sharply lower. Weekly inventories not only continued their uptrend, but bolted to a surplus of 5.1 mill. vs. a shortage of -1.8 mill. last week. Analysts were expecting a shortage of -1.1 mill. To make matters worse, the headline durable goods orders number came in below expectations while the core number beat expectations. This tells us vehicle and plane purchases are still in a poor state, reducing the present and future outlook for consumption of crude. These two negative news releases are hitting crude with a double whammy. Crude didn’t fully participate in last week’s bull-run in U.S. equities while failing to test $70/bbl, leaving crude futures in a somewhat vulnerable state as it was. Today’s news combined with yesterday’s mixed earnings and weaker than expected CB consumer confidence data was enough of a catalyst to knock crude off its horse.
In addition to today’s negative economic data, we recognize continual retracements in both gold and the EUR/USD. The downturn in these two investment vehicles is only adding downward pressure on crude futures due to their positive correlation. A weaker Euro makes dollar denominated commodities more expensive to import, reducing demand for crude and lowering price. On a positive note, the S&P futures are holding strong around 970 despite all of the market turbulence today. A comparable pullback in the S&P would only give investors more incentive to sell crude.
Despite crude’s sharp selloff today, the futures have two new uptrend lines to fall back on. Additionally, the highly psychological $60/bbl level is far away, meaning crude’s medium-term uptrend has a few strong defenses left. On the other hand, crude is only creating more barriers it will need to surpass to get back on track, beginning with July 17th highs and our 2nd tier downtrend line. Meanwhile, sell-side volume is climbing, indicating crude could have some more room to go to the downside even if there is a little consolidation from daily lows.
Present Price: $63.15/bbl
Resistances: $63.82/bbl, $64.38/bbl, $65.22/bbl, $65.83/bbl, $66.48/bbl
Supports: $63.13/bbl, $62.62/bbl, $62.05/bbl, $61.40/bbl, $60.93/bbl
Psychological: $60/bbl, $65/bbl
S&P Futures Move Sideways Despite Correlation Pullbacks
The S&P futures are floating sideways despite large sell-offs in crude and gold along with a broad appreciation of the Greenback. One would have expected a sizable pullback in the S&P in conjunction with the recent downturn in its correlations. Additionally, U.S. equities have been on a tear lately, so profit taking would be readily accepted by analysts. Hence, the S&P’s resilience is quite impressive with bulls holding strong ahead of the Beige Book at 2pm EST. Today’s better than expected core durable goods orders number is helping counter the negative headline DGO number. Additionally, investors allowed yesterday’s rise in the HPI to offset the decline in CB consumer confidence. The mixed eco. data messages are a saving grace for a 970 S&P in reaction to the better than expected 2nd quarter earnings season. However, the large downturns in the S&P’s correlations are disconcerting, and we would not be surprised to witness some profit taking towards our 1st tier uptrend line. On the other hand, the S&P could just be building up a new base in preparation for its assault on the highly psychological 1000 level.
As we stated in our previous analysis, 1000 should prove to be tougher than 9000 if it is tested. Therefore, any immediate-term upward movements in the S&P futures could be limited due to their proximity to 1000. With the 2nd quarter earnings season filling out, the S&P futures would likely need an important clarification via economic data to push past 1000. As for the downside, the S&P has our 1st and 2nd tier uptrend lines to rely upon along with the psychological 950 level. Meanwhile, investors should keep a close eye on the S&P’s correlations. The correlations are in a vulnerable position, and any further deterioration could tip the S&P south.
Present Price: 971.50
Resistances: 972.75, 977, 981.50
Supports: 968.5, 963, 955.50, 950
Psychological: 1000, 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.
