Daily Market Commentary
EUR/USD Tanks on Reversal in Correlation
The pullback in the EUR/USD is faring worse than we expected. The currency pair is sinking quickly below our 1st and 2nd tier uptrend lines and is currently headed towards previous August lows. The EUR/USD’s brisk decline is part of a broad-based appreciation of the Dollar in reaction to better than expected employment data from the U.S. The Dollar’s broad strength is confirmed by a breakout in the USD/JPY. The currency pair is normally dormant, so today’s movement should be on everybody’s radar. The fact that the EUR/USD isn’t rising on the news is suspicious, and raises a red flag. Yes, German Industrial Production missed expectations this morning, but one discouraging data point surely isn’t enough to send the EUR/USD tumbling like this. The Industrial Production number is simply heightening the pullback. So what message is the EUR/USD sending? Are we witnessing a shift in correlation between the Dollar and U.S. equities? While it’s certainly too early to make any conclusions, the discussion is at least warranted.
We can derive a few reasons behind today’s rapid appreciation of the Dollar in the wake of encouraging U.S. employment data. Either we are witnessing a reversal in correlation, or the EUR/USD is indicating a sizable pullback in U.S. equities. The answer could come from the S&P’s reaction as holds strong just above its highly psychological 1000 level. A reversal in correlation could be a key development. This would indicate investors believe the U.S. economy should outperform both the EU and Britain on a fundamental basis. Since the large pullback in the EUR/USD comes in reaction to much better than expected U.S. data combined with recent disappointing EU data, the reversal in correlation is a more plausible argument. However, like we said, it’s too early to jump to any conclusions about today’s movement. The positive correlation between the Dollar and U.S. equities could just be out of whack today with a return to normalcy next week. We will have to wait and see how U.S. equities behave in relation to the Dollar over the next few trading sessions.
Meanwhile, today’s decline in the EUR/USD comes on large sell-side action, indicating there is weight behind the movement. Despite today’s deterioration, the EUR/USD still has our 1st tier uptrend line and August lows to fall back on. If these cushions don’t hold, the currency pair can rely upon the bottom of its 7/20-7/28 trading range with the psychological 1.40 relaxing in the distance. Investors will need to keep a close eye on the EUR/USD as well as the S&P futures to see where the currency pair can bottom and build a new base.
Present Price: 1.4233
Resistances: 1.4252, 1.4278, 1.4294, 1.4324
Supports: 1.4225, 1.4214, 1.4200, 1.4168, 1.4152
Psychological: 1.40
GBP/USD Drops with Broad-Based Dollar Appreciation
The Cable is reversing from our 2nd tier downtrend line and it appears the currency pair could have more immediate-term losses in store. If August 3rd lows don’t hold we could witness a decline towards 1.66 and our 1st tier uptrend line. Looking across the board, we see huge gains in the USD/JPY and large losses in the EUR/USD while gold heads south. Additionally, the S&P futures are looking to break free of their highly psychological 1000 mark. All of these movements indicate a broad based appreciation WITH key upward movements in U.S. equities. America released better than expected employment data today and investors are taking notice. Rising unemployment has been the sore thumb in America’s economic recovery, so a big improvement in the non-farm employment change is very encouraging for U.S. equities. However, the most notable development today is the reversal in correlation between the S&P and the Dollar.
The Dollar’s rapid appreciation across the board in light of today’s economic data gives us reason to speculate that the positive correlation between the GBP/USD and U.S. equities could be shifting. Investors are putting a lot of faith in the U.S. economy today by betting on both U.S. equities and the Greenback. We also notice a spike in volume to the sell-side in both the Cable and the EUR/USD, indicating investors are putting their weight behind today’s FX movement. However, it would be unwise to make a conclusion based on one day of activity. On the other hand, the clear reversal in today’s correlation should ignite a great debate.
Britain released data of its own today. Britain’s PPI Input number came in much lower than expected, showing the UK is still experiencing deflationary pressures due to the decline in consumption. Today’s PPI data tells us why the BOE added $84 billion to its QE package yesterday. Inflation obviously isn’t a worry at the moment, and the BOE feels it’s suitable to inject more liquidity to keep credit flowing. Meanwhile, investors should keep a close eye on the correlation between the GBP/USD and U.S. equities. We are monitoring the reversal in correlation carefully, and will provide further observation-oriented analysis on Monday.
Present Price: 1.6712
Resistances: 1.6708, 1.6735, 1.6752, 1.6781, 1.6812
Supports: 1.6693, 1.6675, 1.6645, 1.6605, 1.6572
Psychological: 1.65
USD/JPY Blows Past our 3rd Tier Downtrend Line in Key Movement
The USD/JPY is logging huge gains to the upside as the broad-based appreciation of the Dollar continues in a big way. The USD/JPY has finally woken from its hibernation after building strength along our 1st tier uptrend line. There’s no news on the wire from Japan, indicating today’s movement is a continuation of the pattern we spotted yesterday. The brisk appreciation of the Dollar and decline in gold comes after better than expected employment data from the U.S. The depreciation of the Yen is great news for struggling Japanese exporters and manufacturers who have had to make do with an abnormally appreciated currency. If the USD/JPY can piece together a solid rally, this could do wonders for Japanese economic data.
The S&P futures are reacting positively to today employment data, and are presently attempting to create some space between present price and their highly psychological 1000 level. We are speculating the Greenback’s broad-based appreciation with rising equities may indicate a reversal in crisis-oriented correlations. After all, the USD/JPY is breaking out with positive news from the U.S. However, as we explained in our other FX commentaries today, we can’t make a conclusion of this magnitude based off of 1 day of movement. On the other hand, today’s activity is certainly intriguing and should be the topic of discussion among FX traders over the weekend.
Meanwhile, the USD/JPY has leapt beyond our 3rd tier downtrend line and July highs on a spike in buy-side volume. Therefore, we could be witnessing the beginning of a new, sizable leg up in the USD/JPY. The next barriers will be our 4th tier downtrend line, 3rd tier uptrend line, and June highs. However, even if the USD/JPY can manage to take down these obstacles, the currency pair still has the highly psychological 100 level waiting in the distance. Regardless, today’s movement in the USD/JPY is very encouraging and gives USD/JPY bulls something to cheer about.
Present Price: 97.35
Resistances: 97.37, 97.78, 98.09, 98.54, 98.90
Supports: 97.05, 96.74, 96.42, 96.02, 95.75
Psychological: 95, 100
Gold Slides as Dollar Appreciates Across the Board
Gold is buckling under the pressure of a rapidly depreciating Greenback. Investors are snapping up the Dollar after the U.S. released encouraging economic data in conjunction with disappointing data from both Britain and the EU. Meanwhile, the S&P futures are setting new 2009 highs while trying to separate themselves from 1000. Gold’s negative movement is supporting our speculative observation that the S&P’s correlation with the Dollar may be shifting (reference FX commentary). While gold is inclined to follow the EUR/USD and Cable lower, the rise in crude and U.S. equities is helping mitigate losses in the precious metal today. Additionally, gold should continue to experience considerable support around the psychological $950/oz level.
If gold’s 1st tier uptrend line doesn’t hold, the precious metal has our 2nd and 3rd tier uptrend lines to fall back on. Therefore, the precious metal has some reliable cushions in place. Meanwhile, investors should monitor the behavior of the Dollar and its interaction with U.S. equities. Since gold has been more closely tied to the Greenback, any further appreciation in the Dollar could apply added downward pressure on the precious metal. As for the upside, gold now has to deal with all three of our downtrend lines and previous August highs. Therefore, the precious metal certainly has its immediate-term work cut out for it should it want to reverse course.
Present Price: $957.40/oz
Resistances: $956.46/oz, $955.57/oz, $954.16/oz, $953.13/oz, $950.96/oz
Supports: $959.02/oz, $959.92/oz, $962.10/oz, $963.12/oz, $964.91/oz
Psychological: $950/oz
The S&P Futures Space Themselves from 1000
The S&P futures are logging key gains above our 2nd tier uptrend line and the highly psychological 1000 level. The futures are setting fresh 2009 after U.S. employment data showed encouraging signs for the second day in a row. Rising unemployment has been the sore thumb in America’s economic downturn. Therefore, the lower than expected Unemployment Rate and greater than expected Non-Farm Employment Change data points are giving the S&P futures enough energy to punch through 1000. We recognize rising buy-side action today, indicating investors are backing today’s technical move. A close comfortably above previous 2009 highs would be a very positive development for the S&P futures and bodes well for the near-term. However, even if the S&P futures should get past 1020, an eventual retracement should be in the works. Let’s not get too far ahead of ourselves though and enjoy the positive developments in the S&P futures. There is not much negative we can say about the S&P’s technicals, suggesting more near-term gains could be in the works.
Though the 30 Year T-Bond futures are registering sizable declines, the rest of the S&P’s correlations are behaving strangely. The Dollar is appreciating heavily across the board while gold declines and crude moves sides. The Dollar’s appreciation is peculiar, particularly the Yen and Euro crosses. The Greenback has exhibited a negative correlation with U.S. equities throughout most of the crisis. Therefore, it is odd the Dollar reverts to a positive correlation with the S&P futures as the futures make a technically significant move above 1000. Speculation may lead one to believe that the S&P’s correlations are shifting. However, it would be premature to make such a conclusion after one day of activity. Therefore, investors should monitor the S&P’s interaction with its correlations over the next few sessions, particularly if equities should surge and the Dollar continues its appreciation.
Price: 1012.00
Resistances: 1014
Supports: 1009.75, 1001.50, 996.50, 990.75, 983.50
Psychological: 1000
Crude Futures Float above $70/bbl as Trends Collide
Crude futures are bouncing between our 1st tier uptrend and 3rd tier downtrend lines as our 3rd tier downtrend line reaches an inflection point with our 2nd tier uptrend line. While crude futures are encouraged by better than expected U.S. employment data, the futures are being held down by a rapidly appreciating Dollar. An appreciating Dollar makes Dollar-based commodities such as crude more expensive to export, decreasing potential demand and placing a downward pressure on price. However, an ease in U.S. unemployment is very positive for future domestic consumption of crude. Therefore, crude futures are tempted to participate in today’s breakout in the S&P. Crude futures are being squeezed between our trend lines, indicating something’s gotta’ give. Meanwhile, the futures are building a solid platform above $70/bbl as they consolidate. The question becomes whether crude decides to side with equities or the Dollar. If the Dollar really is developing a positive correlation with equities this could turn into a more important topic. Therefore, investors should monitor the correlative behavior between the Cable, EUR/USD, and USD/JPY with the S&P futures.
Technically speaking, the main obstacles to the upside are our 3rd tier downtrend line and 2009 highs. If the S&P futures can separate themselves from 1000 while economic data continues to outperform, this may provide enough fuel for crude to tackle these barriers. As for the downside, crude futures have our 1st tier uptrend line, August lows, and the psychological $70/bbl to fall back on. We maintain our positive outlook on crude due to the encouraging developments in U.S. economic data coupled with the strong performance of U.S. equities.
Price: $71.71/bbl
Resistances: $71.90/bbl, $72.39/bbl, $72.71/bbl, $72.91/bbl, $73.60/bbl
Supports: $71.33/bbl, $70.94/bbl, $70.54/bbl, $70.24/bbl, $69.88/bbl
Psychological: $70/bbl
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 Tanks on Reversal in Correlation
The pullback in the EUR/USD is faring worse than we expected. The currency pair is sinking quickly below our 1st and 2nd tier uptrend lines and is currently headed towards previous August lows. The EUR/USD’s brisk decline is part of a broad-based appreciation of the Dollar in reaction to better than expected employment data from the U.S. The Dollar’s broad strength is confirmed by a breakout in the USD/JPY. The currency pair is normally dormant, so today’s movement should be on everybody’s radar. The fact that the EUR/USD isn’t rising on the news is suspicious, and raises a red flag. Yes, German Industrial Production missed expectations this morning, but one discouraging data point surely isn’t enough to send the EUR/USD tumbling like this. The Industrial Production number is simply heightening the pullback. So what message is the EUR/USD sending? Are we witnessing a shift in correlation between the Dollar and U.S. equities? While it’s certainly too early to make any conclusions, the discussion is at least warranted.
We can derive a few reasons behind today’s rapid appreciation of the Dollar in the wake of encouraging U.S. employment data. Either we are witnessing a reversal in correlation, or the EUR/USD is indicating a sizable pullback in U.S. equities. The answer could come from the S&P’s reaction as holds strong just above its highly psychological 1000 level. A reversal in correlation could be a key development. This would indicate investors believe the U.S. economy should outperform both the EU and Britain on a fundamental basis. Since the large pullback in the EUR/USD comes in reaction to much better than expected U.S. data combined with recent disappointing EU data, the reversal in correlation is a more plausible argument. However, like we said, it’s too early to jump to any conclusions about today’s movement. The positive correlation between the Dollar and U.S. equities could just be out of whack today with a return to normalcy next week. We will have to wait and see how U.S. equities behave in relation to the Dollar over the next few trading sessions.
Meanwhile, today’s decline in the EUR/USD comes on large sell-side action, indicating there is weight behind the movement. Despite today’s deterioration, the EUR/USD still has our 1st tier uptrend line and August lows to fall back on. If these cushions don’t hold, the currency pair can rely upon the bottom of its 7/20-7/28 trading range with the psychological 1.40 relaxing in the distance. Investors will need to keep a close eye on the EUR/USD as well as the S&P futures to see where the currency pair can bottom and build a new base.
Present Price: 1.4233
Resistances: 1.4252, 1.4278, 1.4294, 1.4324
Supports: 1.4225, 1.4214, 1.4200, 1.4168, 1.4152
Psychological: 1.40
GBP/USD Drops with Broad-Based Dollar Appreciation
The Cable is reversing from our 2nd tier downtrend line and it appears the currency pair could have more immediate-term losses in store. If August 3rd lows don’t hold we could witness a decline towards 1.66 and our 1st tier uptrend line. Looking across the board, we see huge gains in the USD/JPY and large losses in the EUR/USD while gold heads south. Additionally, the S&P futures are looking to break free of their highly psychological 1000 mark. All of these movements indicate a broad based appreciation WITH key upward movements in U.S. equities. America released better than expected employment data today and investors are taking notice. Rising unemployment has been the sore thumb in America’s economic recovery, so a big improvement in the non-farm employment change is very encouraging for U.S. equities. However, the most notable development today is the reversal in correlation between the S&P and the Dollar.
The Dollar’s rapid appreciation across the board in light of today’s economic data gives us reason to speculate that the positive correlation between the GBP/USD and U.S. equities could be shifting. Investors are putting a lot of faith in the U.S. economy today by betting on both U.S. equities and the Greenback. We also notice a spike in volume to the sell-side in both the Cable and the EUR/USD, indicating investors are putting their weight behind today’s FX movement. However, it would be unwise to make a conclusion based on one day of activity. On the other hand, the clear reversal in today’s correlation should ignite a great debate.
Britain released data of its own today. Britain’s PPI Input number came in much lower than expected, showing the UK is still experiencing deflationary pressures due to the decline in consumption. Today’s PPI data tells us why the BOE added $84 billion to its QE package yesterday. Inflation obviously isn’t a worry at the moment, and the BOE feels it’s suitable to inject more liquidity to keep credit flowing. Meanwhile, investors should keep a close eye on the correlation between the GBP/USD and U.S. equities. We are monitoring the reversal in correlation carefully, and will provide further observation-oriented analysis on Monday.
Present Price: 1.6712
Resistances: 1.6708, 1.6735, 1.6752, 1.6781, 1.6812
Supports: 1.6693, 1.6675, 1.6645, 1.6605, 1.6572
Psychological: 1.65
USD/JPY Blows Past our 3rd Tier Downtrend Line in Key Movement
The USD/JPY is logging huge gains to the upside as the broad-based appreciation of the Dollar continues in a big way. The USD/JPY has finally woken from its hibernation after building strength along our 1st tier uptrend line. There’s no news on the wire from Japan, indicating today’s movement is a continuation of the pattern we spotted yesterday. The brisk appreciation of the Dollar and decline in gold comes after better than expected employment data from the U.S. The depreciation of the Yen is great news for struggling Japanese exporters and manufacturers who have had to make do with an abnormally appreciated currency. If the USD/JPY can piece together a solid rally, this could do wonders for Japanese economic data.
The S&P futures are reacting positively to today employment data, and are presently attempting to create some space between present price and their highly psychological 1000 level. We are speculating the Greenback’s broad-based appreciation with rising equities may indicate a reversal in crisis-oriented correlations. After all, the USD/JPY is breaking out with positive news from the U.S. However, as we explained in our other FX commentaries today, we can’t make a conclusion of this magnitude based off of 1 day of movement. On the other hand, today’s activity is certainly intriguing and should be the topic of discussion among FX traders over the weekend.
Meanwhile, the USD/JPY has leapt beyond our 3rd tier downtrend line and July highs on a spike in buy-side volume. Therefore, we could be witnessing the beginning of a new, sizable leg up in the USD/JPY. The next barriers will be our 4th tier downtrend line, 3rd tier uptrend line, and June highs. However, even if the USD/JPY can manage to take down these obstacles, the currency pair still has the highly psychological 100 level waiting in the distance. Regardless, today’s movement in the USD/JPY is very encouraging and gives USD/JPY bulls something to cheer about.
Present Price: 97.35
Resistances: 97.37, 97.78, 98.09, 98.54, 98.90
Supports: 97.05, 96.74, 96.42, 96.02, 95.75
Psychological: 95, 100
Gold Slides as Dollar Appreciates Across the Board
Gold is buckling under the pressure of a rapidly depreciating Greenback. Investors are snapping up the Dollar after the U.S. released encouraging economic data in conjunction with disappointing data from both Britain and the EU. Meanwhile, the S&P futures are setting new 2009 highs while trying to separate themselves from 1000. Gold’s negative movement is supporting our speculative observation that the S&P’s correlation with the Dollar may be shifting (reference FX commentary). While gold is inclined to follow the EUR/USD and Cable lower, the rise in crude and U.S. equities is helping mitigate losses in the precious metal today. Additionally, gold should continue to experience considerable support around the psychological $950/oz level.
If gold’s 1st tier uptrend line doesn’t hold, the precious metal has our 2nd and 3rd tier uptrend lines to fall back on. Therefore, the precious metal has some reliable cushions in place. Meanwhile, investors should monitor the behavior of the Dollar and its interaction with U.S. equities. Since gold has been more closely tied to the Greenback, any further appreciation in the Dollar could apply added downward pressure on the precious metal. As for the upside, gold now has to deal with all three of our downtrend lines and previous August highs. Therefore, the precious metal certainly has its immediate-term work cut out for it should it want to reverse course.
Present Price: $957.40/oz
Resistances: $956.46/oz, $955.57/oz, $954.16/oz, $953.13/oz, $950.96/oz
Supports: $959.02/oz, $959.92/oz, $962.10/oz, $963.12/oz, $964.91/oz
Psychological: $950/oz
The S&P Futures Space Themselves from 1000
The S&P futures are logging key gains above our 2nd tier uptrend line and the highly psychological 1000 level. The futures are setting fresh 2009 after U.S. employment data showed encouraging signs for the second day in a row. Rising unemployment has been the sore thumb in America’s economic downturn. Therefore, the lower than expected Unemployment Rate and greater than expected Non-Farm Employment Change data points are giving the S&P futures enough energy to punch through 1000. We recognize rising buy-side action today, indicating investors are backing today’s technical move. A close comfortably above previous 2009 highs would be a very positive development for the S&P futures and bodes well for the near-term. However, even if the S&P futures should get past 1020, an eventual retracement should be in the works. Let’s not get too far ahead of ourselves though and enjoy the positive developments in the S&P futures. There is not much negative we can say about the S&P’s technicals, suggesting more near-term gains could be in the works.
Though the 30 Year T-Bond futures are registering sizable declines, the rest of the S&P’s correlations are behaving strangely. The Dollar is appreciating heavily across the board while gold declines and crude moves sides. The Dollar’s appreciation is peculiar, particularly the Yen and Euro crosses. The Greenback has exhibited a negative correlation with U.S. equities throughout most of the crisis. Therefore, it is odd the Dollar reverts to a positive correlation with the S&P futures as the futures make a technically significant move above 1000. Speculation may lead one to believe that the S&P’s correlations are shifting. However, it would be premature to make such a conclusion after one day of activity. Therefore, investors should monitor the S&P’s interaction with its correlations over the next few sessions, particularly if equities should surge and the Dollar continues its appreciation.
Price: 1012.00
Resistances: 1014
Supports: 1009.75, 1001.50, 996.50, 990.75, 983.50
Psychological: 1000
Crude Futures Float above $70/bbl as Trends Collide
Crude futures are bouncing between our 1st tier uptrend and 3rd tier downtrend lines as our 3rd tier downtrend line reaches an inflection point with our 2nd tier uptrend line. While crude futures are encouraged by better than expected U.S. employment data, the futures are being held down by a rapidly appreciating Dollar. An appreciating Dollar makes Dollar-based commodities such as crude more expensive to export, decreasing potential demand and placing a downward pressure on price. However, an ease in U.S. unemployment is very positive for future domestic consumption of crude. Therefore, crude futures are tempted to participate in today’s breakout in the S&P. Crude futures are being squeezed between our trend lines, indicating something’s gotta’ give. Meanwhile, the futures are building a solid platform above $70/bbl as they consolidate. The question becomes whether crude decides to side with equities or the Dollar. If the Dollar really is developing a positive correlation with equities this could turn into a more important topic. Therefore, investors should monitor the correlative behavior between the Cable, EUR/USD, and USD/JPY with the S&P futures.
Technically speaking, the main obstacles to the upside are our 3rd tier downtrend line and 2009 highs. If the S&P futures can separate themselves from 1000 while economic data continues to outperform, this may provide enough fuel for crude to tackle these barriers. As for the downside, crude futures have our 1st tier uptrend line, August lows, and the psychological $70/bbl to fall back on. We maintain our positive outlook on crude due to the encouraging developments in U.S. economic data coupled with the strong performance of U.S. equities.
Price: $71.71/bbl
Resistances: $71.90/bbl, $72.39/bbl, $72.71/bbl, $72.91/bbl, $73.60/bbl
Supports: $71.33/bbl, $70.94/bbl, $70.54/bbl, $70.24/bbl, $69.88/bbl
Psychological: $70/bbl
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.
