Daily Market Commentary
EUR/USD Continues to Slip Towards 7/20-7/28 Lows
Friday’s large pullback is following through into Monday while the S&P futures continue to dangle just above their highly psychological 1000 level. Friday’s pullback came on abnormally large volume, giving ample reason for the EUR/USD to continue its slide today. Weakness in the EUR/USD comes despite better than expected French Industrial Production data. However, positive data from the EUR/USD is likely giving the Euro relative strength, as exhibited by the bounce taking place in the EUR/GBP. We recognize similar downturns in both the GBP/USD and gold as well, indicating a broad-based market weakness. The USD/JPY is also trading lower today, deviating from Friday’s theme of a stronger Dollar. Meanwhile, crude and the S&P futures are holding strong above their psychological levels, $70/bbl and 1000 respectively. The continual strength in the U.S. marketplace despite the overall appreciation of the Dollar is puzzling. Could the Dollar’s latest round of appreciation indicate an approaching pullback in the S&P futures, or are the crisis-prone correlations shifting? We will closely monitor the S&P’s correlation with the Dollar for any sort of confirmation. There is always the possibility that an appreciation in the Dollar was overdue and doesn’t detract from the S&P’s rise.
Meanwhile, we shifted our trend lines to form new 1st tier and 2nd tier uptrend line. The EUR/USD is quite a ways from our 2nd tier uptrend line. However, if the EUR/USD can’t stay above our 1.4155 support a pullback towards the 2nd tier seems probable. Our 1st tier turned 3rd tier uptrend line is reaching an inflection point with our 1st tier downtrend line. Therefore, there’s the possibility of heightened volatility over the next 24 hours. While we maintain our negative outlook on the EUR/USD for the immediate term, the EUR/USD’s medium-term uptrend still has two uptrend lines and the psychological 1.40 acting in its defense to the downside. As for the upside, the EUR/USD will just build more obstacles to the upside the more it declines. The immediate-term hurdles to the upside are intraday highs and our 1st tier downtrend line. A recovery into the meat of the 7/20-7/28 trading range could be a positive develop and allow the EUR/USD to build a new base. However, Friday’s high volume shows immediate-term momentum is still in favor of the downside.
Present Price: 1.4175
Supports: 1.4163, 1.4155, 1.4132, 1.4116, 1.4082
Resistances: 1.4195, 1.4215, 1.4234, 1.4248, 1.4275
Psychological: 1.40
GBP/USD Sinks Towards its Psychological 1.65 Level
The Cable snapped after August 3rd lows failed to hold their ground. Friday’s sell-side action was simply too much for the currency pair to handle, and the GBP/USD has proceeded to flop towards the 1.66 area as we anticipated. There’s continual downward pressure on GBP/USD and EUR/USD as FX investors head for safety. Meanwhile, the Pound is experiencing relative weakness in light of the BOE’s $84 billion QE injection last week, as indicated by an upturn in the EUR/GBP. However, even though further immediate-term losses in the GBP/USD appear likely, the currency pair has a strong support zone approaching. The Cable has experienced immense consolidation around the 1.65 level in the past, and there’s no reason to believe this behavior should change any time soon. Therefore, with 1.65 and our 1st and 2nd tier uptrend lines within reach, we believe any immediate-term losses could be halted by these technical cushions. In the meantime, crude and the S&P futures are consolidating above their respective psychological levels, $70/bbl and 1000. As long as these investment vehicles hold strong, the Cable should forego any further technically significant setbacks. Meanwhile, investors should keep an eye on sell-side action to deem whether the Cable’s pullback has the juice to drop below its aforementioned technical cushions.
All is quiet on the data front until Britain releases its BRC Retail Sales Monitor and RICS House Price Balance numbers late Monday. A continual rise in housing prices could help solidify a temporary bottom in the Cable. Furthermore, investors will keep a close eye on key Chinese economic data. We could witness a broad-based Dollar depreciation if the Chinese numbers come in better than expected. China is helping pull the entire global economy out of the gutter, so outperformance in China could lift both the Pound and the Euro. Meanwhile, we’ll monitor the Cable’s correlation with the S&P futures since we witnessed a large appreciation of the Dollar on Friday despite stability in U.S. equities. Though we are not tossing the GBP/USD’s positive correlation with the S&P futures, we are certainly monitoring the situation closely.
As for the upside, an encouraging development would be for the GBP/USD to solidify above our 3rd tier uptrend line. However, the Cable has quite an uphill battle, including July 31st highs and our 2nd tier downtrend line. On the other hand, any climb above our top 1.6651 resistance could result in an additional immediate-term pop in the Pound. We maintain our negative immediate-term outlook on the GBP/USD, though losses should be limited with strong supports on the horizon. The Cable’s medium-term uptrend is still safe, and the currency pair would need a hefty technical reversal to alter its path.
Present Price: 1.6570
Resistances: 1.6572, 1.6591, 1.6612, 1.6637, 1.6651
Supports: 1.6544, 1.6521, 1.6504, 1.6486, 1.6467
Psychological: 1.65
USD/JPY is Deflected by our 4th Tier Downtrend Line
The USD/JPY is reversing from 98 and our 4th tier downtrend line after Friday’s encouraging rise. The currency pair is now bouncing between our 4th tier downtrend line and 2nd tier uptrend line as they approach their inflection point. Today’s appreciation of the Yen comes with much better than expected Core Machinery Orders and Current Account data points from Japan. Investors are favoring the Yen and the Japanese economy in reaction, particularly after economist Paul Krugman cautioned that the U.S. economic recovery has a long road ahead. The improvement in Japan’s economic data is certainly encouraging, especially the sizable rise in the nation’s Current Account balance. The pickup in Japan’s Current Account balance is likely due to the economic recovery taking place in China. Therefore, better than expected economic data from China tomorrow could add further near-term downward pressure since this news would favor Japan’s economy.
Despite today’s pullback, the USD/JPY made encouraging headway on Friday. The currency pair finally woke from its hibernation, heading back into contention for 100. However, the USD/JPY faces new immediate-term foes, including our 4th tier downtrend line and Jen highs. Regardless, the USD/JPY is in an opportunistic position to extend its near-term breakout. Furthermore, any eclipse of our 5th tier downtrend line could signal a longer uptrend line with a retest of 100 likely. On the other hand, should our 2nd tier uptrend give way, the USD/JPY’s immediate-term pullback could pick up speed towards the 96.42-96.74 zone.
Present Price: 97.30
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 Gravitates Beneath $950/oz
Gold’s pullback picked up speed on Friday as the precious metal experienced heightened sell-side volume in the midst of a broad-based appreciation of the Dollar. Gold has ducked below our 2nd and 3rd tier uptrend lines along with its psychological $950/oz level in the process. Furthermore, it appears the precious metal may give up on the bottom-end of its 7/20-7/28 trading range. We notice a similar occurrence in the EUR/USD, indicating a negative technical development considering their tight positive correlation. Meanwhile, the Greenback continues its rapid comeback, only placing further downward pressure on the precious metal. Therefore, a test of our 3rd tier uptrend line and $940/oz appears likely. Crude and the S&P futures continue to stabilize above their respective psychological levels, $70/oz and 1000. The stability in gold and U.S. equities is helping mitigate losses in gold due to their positive correlations. However, we have witnessed gold follow its negative correlation with the Dollar time and again, meaning further appreciation of the Greenback should undoubtedly have a negative impact on the precious metal despite resilience in crude and equities.
Meanwhile, even if gold’s pullback should pick up momentum past our 1st tier uptrend line, we can form a couple more medium-term uptrend lines beneath this area. Therefore, gold’s medium-term uptrend is intact. However, gold is only building more obstacles to the upside as it declines below important levels, most notably $950/oz. Hence, bulls would like to see gold recover above our 2nd tier uptrend line and the psychological $950/oz level so the precious metal can save face and attempt to build a new base.
Present Price: $945/oz
Resistances: $945.78/oz, $947.19/oz, $948.49/oz, $949.63/oz, $951.43/oz
Supports: $944.37/oz, $942.32/oz, $940.91/oz, $938.99/oz, $937.45/oz
Psychological: $950/oz
The S&P Futures Hold Steady Above 1000
The S&P futures are experiencing slight losses after Friday’s pop on considerable buy-side volume. Friday’s movement higher lost steam as the futures were denied by our 2nd tier uptrend line. Meanwhile, the S&P futures are ignoring the rapid appreciation of the Dollar coupled with a sizable pullback in gold. Encouraging improvements in America’s employment market are countering the data and psychological setbacks in the EU and Britain last week. However, a continued appreciation of the Greenback could limit movements to the upside due to the S&P’s usual positive correlation with the GBP/USD and EUR/USD. In the meantime, we’ll closely monitor the S&P’s correlation with the Dollar since a reversal in correlation would be an important development regarding equity analysis. The S&P futures are also ignoring an upturn in the 30 Year T-Bond futures today, showing bulls are confident in recent U.S. economic data and 2nd quarter earnings. Meanwhile, 1000 is proving to be a difficult adversary as we anticipated. The S&P’s 1000 level plays an important psychological role in the S&P’s ability to log future noteworthy gains. However, better than expected economic data from China tomorrow could help separate the S&P futures from 1000.
China will release a truckload of pricing, production, and trade balance data tomorrow. Since China has been the growth engine for the global economic recovery, tomorrow’s results should be a market mover. The more closely watched figure amid tomorrow’s releases will be China’s Industrial Production number. A reading above 11%, or previous 2009 highs, could excite bulls and result in another S&P rally. However, any setback in China’s Industrial Production data could result in uncertainty and give investors a reason to cash in some profits. We expect the S&P futures to hover at or above 1000 until China’s economic data hits the wire later on. The U.S. will release economic data of its own tomorrow, including Prelim Non-Farm Productivity and Unit Labor Costs. A combination of an outperformance in Chinese economic data and U.S. productivity could give the S&P futures enough motivation to set fresh 2009 highs.
Technically speaking, the S&P’s topside obstacles are Friday highs and our 2nd tier uptrend line. As for the downside, the S&P futures have the highly psychological 1000 level, August 7th lows, and our 1st tier uptrend line to fall back on should today’s pullback pick up momentum.
Price: 1004.75
Resistances: 1005.25, 1011, 1016.5
Supports: 1001.50, 996.50, 990.75, 982.50, 978.25
Psychological: 1000
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 Continues to Slip Towards 7/20-7/28 Lows
Friday’s large pullback is following through into Monday while the S&P futures continue to dangle just above their highly psychological 1000 level. Friday’s pullback came on abnormally large volume, giving ample reason for the EUR/USD to continue its slide today. Weakness in the EUR/USD comes despite better than expected French Industrial Production data. However, positive data from the EUR/USD is likely giving the Euro relative strength, as exhibited by the bounce taking place in the EUR/GBP. We recognize similar downturns in both the GBP/USD and gold as well, indicating a broad-based market weakness. The USD/JPY is also trading lower today, deviating from Friday’s theme of a stronger Dollar. Meanwhile, crude and the S&P futures are holding strong above their psychological levels, $70/bbl and 1000 respectively. The continual strength in the U.S. marketplace despite the overall appreciation of the Dollar is puzzling. Could the Dollar’s latest round of appreciation indicate an approaching pullback in the S&P futures, or are the crisis-prone correlations shifting? We will closely monitor the S&P’s correlation with the Dollar for any sort of confirmation. There is always the possibility that an appreciation in the Dollar was overdue and doesn’t detract from the S&P’s rise.
Meanwhile, we shifted our trend lines to form new 1st tier and 2nd tier uptrend line. The EUR/USD is quite a ways from our 2nd tier uptrend line. However, if the EUR/USD can’t stay above our 1.4155 support a pullback towards the 2nd tier seems probable. Our 1st tier turned 3rd tier uptrend line is reaching an inflection point with our 1st tier downtrend line. Therefore, there’s the possibility of heightened volatility over the next 24 hours. While we maintain our negative outlook on the EUR/USD for the immediate term, the EUR/USD’s medium-term uptrend still has two uptrend lines and the psychological 1.40 acting in its defense to the downside. As for the upside, the EUR/USD will just build more obstacles to the upside the more it declines. The immediate-term hurdles to the upside are intraday highs and our 1st tier downtrend line. A recovery into the meat of the 7/20-7/28 trading range could be a positive develop and allow the EUR/USD to build a new base. However, Friday’s high volume shows immediate-term momentum is still in favor of the downside.
Present Price: 1.4175
Supports: 1.4163, 1.4155, 1.4132, 1.4116, 1.4082
Resistances: 1.4195, 1.4215, 1.4234, 1.4248, 1.4275
Psychological: 1.40
GBP/USD Sinks Towards its Psychological 1.65 Level
The Cable snapped after August 3rd lows failed to hold their ground. Friday’s sell-side action was simply too much for the currency pair to handle, and the GBP/USD has proceeded to flop towards the 1.66 area as we anticipated. There’s continual downward pressure on GBP/USD and EUR/USD as FX investors head for safety. Meanwhile, the Pound is experiencing relative weakness in light of the BOE’s $84 billion QE injection last week, as indicated by an upturn in the EUR/GBP. However, even though further immediate-term losses in the GBP/USD appear likely, the currency pair has a strong support zone approaching. The Cable has experienced immense consolidation around the 1.65 level in the past, and there’s no reason to believe this behavior should change any time soon. Therefore, with 1.65 and our 1st and 2nd tier uptrend lines within reach, we believe any immediate-term losses could be halted by these technical cushions. In the meantime, crude and the S&P futures are consolidating above their respective psychological levels, $70/bbl and 1000. As long as these investment vehicles hold strong, the Cable should forego any further technically significant setbacks. Meanwhile, investors should keep an eye on sell-side action to deem whether the Cable’s pullback has the juice to drop below its aforementioned technical cushions.
All is quiet on the data front until Britain releases its BRC Retail Sales Monitor and RICS House Price Balance numbers late Monday. A continual rise in housing prices could help solidify a temporary bottom in the Cable. Furthermore, investors will keep a close eye on key Chinese economic data. We could witness a broad-based Dollar depreciation if the Chinese numbers come in better than expected. China is helping pull the entire global economy out of the gutter, so outperformance in China could lift both the Pound and the Euro. Meanwhile, we’ll monitor the Cable’s correlation with the S&P futures since we witnessed a large appreciation of the Dollar on Friday despite stability in U.S. equities. Though we are not tossing the GBP/USD’s positive correlation with the S&P futures, we are certainly monitoring the situation closely.
As for the upside, an encouraging development would be for the GBP/USD to solidify above our 3rd tier uptrend line. However, the Cable has quite an uphill battle, including July 31st highs and our 2nd tier downtrend line. On the other hand, any climb above our top 1.6651 resistance could result in an additional immediate-term pop in the Pound. We maintain our negative immediate-term outlook on the GBP/USD, though losses should be limited with strong supports on the horizon. The Cable’s medium-term uptrend is still safe, and the currency pair would need a hefty technical reversal to alter its path.
Present Price: 1.6570
Resistances: 1.6572, 1.6591, 1.6612, 1.6637, 1.6651
Supports: 1.6544, 1.6521, 1.6504, 1.6486, 1.6467
Psychological: 1.65
USD/JPY is Deflected by our 4th Tier Downtrend Line
The USD/JPY is reversing from 98 and our 4th tier downtrend line after Friday’s encouraging rise. The currency pair is now bouncing between our 4th tier downtrend line and 2nd tier uptrend line as they approach their inflection point. Today’s appreciation of the Yen comes with much better than expected Core Machinery Orders and Current Account data points from Japan. Investors are favoring the Yen and the Japanese economy in reaction, particularly after economist Paul Krugman cautioned that the U.S. economic recovery has a long road ahead. The improvement in Japan’s economic data is certainly encouraging, especially the sizable rise in the nation’s Current Account balance. The pickup in Japan’s Current Account balance is likely due to the economic recovery taking place in China. Therefore, better than expected economic data from China tomorrow could add further near-term downward pressure since this news would favor Japan’s economy.
Despite today’s pullback, the USD/JPY made encouraging headway on Friday. The currency pair finally woke from its hibernation, heading back into contention for 100. However, the USD/JPY faces new immediate-term foes, including our 4th tier downtrend line and Jen highs. Regardless, the USD/JPY is in an opportunistic position to extend its near-term breakout. Furthermore, any eclipse of our 5th tier downtrend line could signal a longer uptrend line with a retest of 100 likely. On the other hand, should our 2nd tier uptrend give way, the USD/JPY’s immediate-term pullback could pick up speed towards the 96.42-96.74 zone.
Present Price: 97.30
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 Gravitates Beneath $950/oz
Gold’s pullback picked up speed on Friday as the precious metal experienced heightened sell-side volume in the midst of a broad-based appreciation of the Dollar. Gold has ducked below our 2nd and 3rd tier uptrend lines along with its psychological $950/oz level in the process. Furthermore, it appears the precious metal may give up on the bottom-end of its 7/20-7/28 trading range. We notice a similar occurrence in the EUR/USD, indicating a negative technical development considering their tight positive correlation. Meanwhile, the Greenback continues its rapid comeback, only placing further downward pressure on the precious metal. Therefore, a test of our 3rd tier uptrend line and $940/oz appears likely. Crude and the S&P futures continue to stabilize above their respective psychological levels, $70/oz and 1000. The stability in gold and U.S. equities is helping mitigate losses in gold due to their positive correlations. However, we have witnessed gold follow its negative correlation with the Dollar time and again, meaning further appreciation of the Greenback should undoubtedly have a negative impact on the precious metal despite resilience in crude and equities.
Meanwhile, even if gold’s pullback should pick up momentum past our 1st tier uptrend line, we can form a couple more medium-term uptrend lines beneath this area. Therefore, gold’s medium-term uptrend is intact. However, gold is only building more obstacles to the upside as it declines below important levels, most notably $950/oz. Hence, bulls would like to see gold recover above our 2nd tier uptrend line and the psychological $950/oz level so the precious metal can save face and attempt to build a new base.
Present Price: $945/oz
Resistances: $945.78/oz, $947.19/oz, $948.49/oz, $949.63/oz, $951.43/oz
Supports: $944.37/oz, $942.32/oz, $940.91/oz, $938.99/oz, $937.45/oz
Psychological: $950/oz
The S&P Futures Hold Steady Above 1000
The S&P futures are experiencing slight losses after Friday’s pop on considerable buy-side volume. Friday’s movement higher lost steam as the futures were denied by our 2nd tier uptrend line. Meanwhile, the S&P futures are ignoring the rapid appreciation of the Dollar coupled with a sizable pullback in gold. Encouraging improvements in America’s employment market are countering the data and psychological setbacks in the EU and Britain last week. However, a continued appreciation of the Greenback could limit movements to the upside due to the S&P’s usual positive correlation with the GBP/USD and EUR/USD. In the meantime, we’ll closely monitor the S&P’s correlation with the Dollar since a reversal in correlation would be an important development regarding equity analysis. The S&P futures are also ignoring an upturn in the 30 Year T-Bond futures today, showing bulls are confident in recent U.S. economic data and 2nd quarter earnings. Meanwhile, 1000 is proving to be a difficult adversary as we anticipated. The S&P’s 1000 level plays an important psychological role in the S&P’s ability to log future noteworthy gains. However, better than expected economic data from China tomorrow could help separate the S&P futures from 1000.
China will release a truckload of pricing, production, and trade balance data tomorrow. Since China has been the growth engine for the global economic recovery, tomorrow’s results should be a market mover. The more closely watched figure amid tomorrow’s releases will be China’s Industrial Production number. A reading above 11%, or previous 2009 highs, could excite bulls and result in another S&P rally. However, any setback in China’s Industrial Production data could result in uncertainty and give investors a reason to cash in some profits. We expect the S&P futures to hover at or above 1000 until China’s economic data hits the wire later on. The U.S. will release economic data of its own tomorrow, including Prelim Non-Farm Productivity and Unit Labor Costs. A combination of an outperformance in Chinese economic data and U.S. productivity could give the S&P futures enough motivation to set fresh 2009 highs.
Technically speaking, the S&P’s topside obstacles are Friday highs and our 2nd tier uptrend line. As for the downside, the S&P futures have the highly psychological 1000 level, August 7th lows, and our 1st tier uptrend line to fall back on should today’s pullback pick up momentum.
Price: 1004.75
Resistances: 1005.25, 1011, 1016.5
Supports: 1001.50, 996.50, 990.75, 982.50, 978.25
Psychological: 1000
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.
