Daily Market Commentary
EUR/USD Drops to our 2nd Tier Uptrend Line
The EUR/USD is trying to balance on our 2nd tier uptrend line after reacting negatively to the collision of our 3rd tier uptrend and 1st tier downtrend line. Meanwhile, the EUR/USD is hanging out just above the bottom of the 7/20-7/28 trading range. On a positive note, volume on the sell-side is declining, meaning the currency pair could attempt to stabilize soon. The Euro is experiencing relative weakness today after the credit ratings of Latvia and Estonia were downgraded, damaging EU organizations financial exposed to the Eastern European countries. However, the EUR/USD is holding up well considering the S&P futures are under considerable selling pressure this morning. We’re going to monitor the EUR/USD’s behavior today should the S&P’s downturn accelerate. If the Dollar depreciates noticeably and the S&P futures tumble, this would add evidence to the argument that the Greenback’s correlation with U.S. equities is shifting. However, if the EUR/USD flat lines or decline and the S&P futures decline sharply, then we may conclude that the depreciation of the Dollar over the past two sessions indicated a pullback in equities.
Meanwhile, 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 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.
Though investors will be looking for EU Industrial Production to stay positive tomorrow, the focus will be on British employment data and the conclusion of the Fed’s monetary policy meeting. If Bernanke states that the U.S. economy continues to improve and there are no plans to add further liquidity to the system, it will be interesting to see whether this results in a stronger or weaker Dollar. While one may normally expect a weaker Dollar since such an announcement will ideally lift U.S. equities, we could witness the Greenback appreciate across the board should such a decision be made. However, we will have to see how tomorrow’s meeting pans out before we get too far ahead of ourselves.
Present Price: 1.4119
Supports: 1.4132, 1.4154, 1.4165, 1.4182, 1.4200
Resistances: 1.4116, 1.4094, 1.4082, 1.4063, 1.4042
Psychological: 1.40
GBP/USD Stabilizes after Positive Retail and Housing Data
The Cable’s decline carried on Monday before finding comfort in the 1.65 area as anticipated. Both the housing price and retail sales data points came in better than anticipated late Monday, helping the Cable find a bottom. Investors are ignoring the slight pullback in Britain’s Trade Balance this morning and the Cable is balancing on our 1st tier uptrend line. Meanwhile, the S&P futures are experiencing a sizable pullback. Though the reversal in correlation between the Cable and the S&P futures continues today, it remains to be seen whether this behavior will be temporary or long-lasting. After all, the recent appreciation of the Dollar could have just been an indicator for today’s pullback in U.S. equities. Therefore, we’ll need to monitor the correlation behavior for a few more sessions before drawing any conclusions. The reaction of the Dollar and equities to tomorrow’s monetary policy decision by the Fed could paint a clearer picture.
In addition to the Federal Reserve’s monetary policy decision, Britain will also release its CCC number, the Average Earnings Index, and the BOE will print its Inflation Report. Therefore, Wednesday’s session should be volatile for the Cable. Should Britain’s CCC number come in lower than expected while the BOE’s Inflation Report shows modest inflationary pressure, this could give the Pound relative strength and boost the GBP/USD. Declining unemployment and rising inflation indicates further improvement in Britain’s economy, giving the BOE room to rope in some of its liquidity in the foreseeable future.
Despite today’s consolidation in the GBP/USD, present momentum remains to the downside due to Friday’s pullback on considerable volume. However, the 1.65 area should continue to be a reliable defense since the currency pair has battled with this psychological zone in the past. The GBP/USD also has our 1st tier uptrend line and intraday lows acting as immediate-term technical cushions. As for the upside, the GBP/USD has an uphill battle. The Cable must deal with our 2nd tier uptrend line and the lid of its 7/20-7/28 trading range.
Present Price: 1.6490
Resistances: 1.6504, 1.6521, 1.6545, 1.6567, 1.6591
Supports: 1.6486, 1.6467, 1.6447, 1.6427, 1.6410
Psychological: 1.65
USD/JPY Slides Toward 95
The USD/JPY’s pullback has picked up traction, dropping below 2nd tier uptrend and 3rd tier downtrend lines. Continued strength in the Yen comes after stronger than expected economic data from Japan to kick off the week. Meanwhile, the S&P futures are logging considerable declines today, giving investors more incentive to favor the Yen and head for safety. However, today’s pullback in the S&P comes on limited news, indicating a case of overbought conditions. Therefore, it seems the USD/JPY’s positive correlation with U.S. equities is back in full swing. Volatility in the USD/JPY has really picked up considering its dormant behavior as of late.
Despite today’s setback, the USD/JPY remains well above our 1st tier uptrend line and the psychological 95 level. Therefore, bulls shouldn’t throw in the towel just yet. Our 1st tier uptrend line has proven reliable recently. However, the USD/JPY’s August highs are beneath its June highs, setting up the possibility of a head-fake and a retreat into the grips of its downtrend. Therefore, we’ll have to monitor how the USD/JPY’s support system holds up.
Present Price: 95.85
Resistances: 96.10, 96.47, 96.81, 97.10, 97.47
Supports: 95.75, 95.61, 95.30, 94.99, 94.69
Psychological: 95
Gold Gets Denied by our 2nd Tier Uptrend Line
Gold has been denied by our 2nd tier uptrend line, failing to retest $950/oz level due to insufficient buy-side backing. Gold has ducked below our 2nd and 3rd tier uptrend lines along with its psychological $950/oz level in reaction to the rapid appreciation of the Dollar. It seems gold is waiting to see how the GBP/USD and EUR/USD react to today’s pullback in U.S. equities while deciding whether to give up on the bottom-end of its 7/20-7/28 trading range. Gold continues to be more tightly correlated with the Dollar than the S&P futures, so investors should monitor the EUR/USD and GBP/USDs’ ability to hold their respective uptrend lines. As for the immediate-term, we suspect gold could consolidate above our 1st tier uptrend line. If our 1st tier uptrend line doesn’t hold, the precious metal could tumble towards our bottom-end support.
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: $944/oz
Resistances: $944.87/oz, $945.78/oz, $947.19/oz, $948.49/oz, $949.63/oz
Supports: $942.32/oz, $940.91/oz, $938.99/oz, $937.45/oz, $935.81/oz
Psychological: $950/oz
The S&P Futures Duck beneath 1000 after Weak Chinese Data
The S&P futures are off sharply Tuesday after economic data from China came in shy of analyst expectations. We highlighted the importance of China’s Industrial Production number, which came in at 10.8% vs. 11.5% expected. While today’s headline number is still a basis point above last month’s release, investors are concerned the pace of economic recovery in China is cooling. However, investors shouldn’t read too far into one mediocre release since it doesn’t necessarily mean a reversal in the medium-term’s upward pattern. Regardless, investors didn’t receive the data they were hoping for, and the S&P futures are getting punished for it. The U.S. released economic data of its own, including Prelim Non-Farm Productivity and Prelim Unit Labor Costs. Today’s data points show productivity is rising while labor costs shrink due to higher unemployment and greater pressure on employees to retain their present job. The combination of weak Chinese and U.S. data are giving investors a great opportunity to cash in some profits.
Meanwhile, the S&P futures are fighting to stay above August 7th lows. If these lows don’t hold, the futures will likely decline to our 1st tier uptrend line and August 3rd lows. Therefore, the S&P futures still have a couple technical cushions in place to prevent a more protracted selloff. However, the S&P futures may opt to hold present levels and technical supports ahead of tomorrow’s Fed meeting. Positivity from Bernanke and a slight hint at a reigning in of liquidity in the foreseeable future would likely pop the S&P futures back above 1000. Although, we don’t expect any revelations from tomorrow’s monetary policy meeting. We expect the Fed to play it cool and wait for more positive signs economically before breaching the subject of tightening liquidity. Additionally, we don’t see any reason for the Fed to increase liquidity since economic data and 2nd quarter earnings have been positive. Hence, the S&P’s battle with its highly psychological 1000 level lives to see another day.
Correlation-wise, the GBP/USD, EUR/USD and gold are stabilizing after their respective pullbacks while crude futures slide with equities. We’re receiving no clear signals via correlation today, further supporting our belief that the S&P futures may opt to consolidate from here ahead of tomorrow’s meeting. The U.S. will also release its Trade Balance number tomorrow in addition to key employment data from Britain. Hence, tomorrow could prove to be a volatile day in the markets.
Price: 992.50
Resistances: 996.5, 1001.5, 1005.75, 1011, 1016.5
Supports: 990.75, 982.5, 978.25, 969.25
Psychological: 1000
Crude Futures Break Below Consolidation after China Data and OPEC Comments
Crude futures are finally deviating from their tight $70-$72.50/bbl trading range. Unfortunately for bulls, today’s move is to the downside. Sell-side volume is climbing, indicating investors are interested in participating after a week of sideways movement. Weakness in crude comes after weaker than expected Industrial Production data from China and an uncertain outlook from OPEC concerning future supply and demand. The slight setback in Industrial Production worries investors that economic growth in China may be cooling, taking a bite out of global demand for crude. However, OPEC stated it believes China and India should continue to consume large amounts of crude through 2010, offsetting the decline in demand from developed economies. Regardless, OPEC was a bit cautious in its overall assessment since the global economic recovery is still in its early stages. As for the supply side, OPEC is concerned an increase in production from Russia and South America could place downward pressure on price should the global economy not recover as quickly as anticipated. Speaking of supply, investors will be eager to see if tomorrow’s weekly inventory report registers a surplus or deficit considering the spike in supply two weeks ago.
Meanwhile, investors should monitor the S&P’s ability to withstand profit-taking. Tomorrow’s Fed monetary policy meeting and Trade Balance data should be a good test for the bulls. Any technically significant contraction in the S&P futures could place added downward pressure on crude futures due to their positive correlation. The Euro and Pound are stabilizing against the Dollar after recent selloffs, a positive development for crude since it’s a Dollar-denominated commodity. Technically speaking, we created a new 1st tier uptrend line to compensate for today’s pullback. If our 1st tier uptrend and downtrend lines don’t hold, crude could retest June 23rd lows and the $67/bbl area. There are several more uptrend lines we can form from July 13th lows, meaning crude’s near-term uptrend is intact for the time being. As for the upside, crude faces its psychological $70/bbl level, our 2nd and 3rd tier downtrend lines and previous August highs. Therefore, crude futures have their work cut out for them to the topside.
Price: $69.05/bbl
Resistances: $69.50/bbl $69.79/bbl $70.18/bbl, $70.66/bbl, $71/bbl
Supports: $69.09/bbl, $68.69/bbl, $68.20/bbl, $67.80/bbl, $67.33/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 Drops to our 2nd Tier Uptrend Line
The EUR/USD is trying to balance on our 2nd tier uptrend line after reacting negatively to the collision of our 3rd tier uptrend and 1st tier downtrend line. Meanwhile, the EUR/USD is hanging out just above the bottom of the 7/20-7/28 trading range. On a positive note, volume on the sell-side is declining, meaning the currency pair could attempt to stabilize soon. The Euro is experiencing relative weakness today after the credit ratings of Latvia and Estonia were downgraded, damaging EU organizations financial exposed to the Eastern European countries. However, the EUR/USD is holding up well considering the S&P futures are under considerable selling pressure this morning. We’re going to monitor the EUR/USD’s behavior today should the S&P’s downturn accelerate. If the Dollar depreciates noticeably and the S&P futures tumble, this would add evidence to the argument that the Greenback’s correlation with U.S. equities is shifting. However, if the EUR/USD flat lines or decline and the S&P futures decline sharply, then we may conclude that the depreciation of the Dollar over the past two sessions indicated a pullback in equities.
Meanwhile, 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 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.
Though investors will be looking for EU Industrial Production to stay positive tomorrow, the focus will be on British employment data and the conclusion of the Fed’s monetary policy meeting. If Bernanke states that the U.S. economy continues to improve and there are no plans to add further liquidity to the system, it will be interesting to see whether this results in a stronger or weaker Dollar. While one may normally expect a weaker Dollar since such an announcement will ideally lift U.S. equities, we could witness the Greenback appreciate across the board should such a decision be made. However, we will have to see how tomorrow’s meeting pans out before we get too far ahead of ourselves.
Present Price: 1.4119
Supports: 1.4132, 1.4154, 1.4165, 1.4182, 1.4200
Resistances: 1.4116, 1.4094, 1.4082, 1.4063, 1.4042
Psychological: 1.40
GBP/USD Stabilizes after Positive Retail and Housing Data
The Cable’s decline carried on Monday before finding comfort in the 1.65 area as anticipated. Both the housing price and retail sales data points came in better than anticipated late Monday, helping the Cable find a bottom. Investors are ignoring the slight pullback in Britain’s Trade Balance this morning and the Cable is balancing on our 1st tier uptrend line. Meanwhile, the S&P futures are experiencing a sizable pullback. Though the reversal in correlation between the Cable and the S&P futures continues today, it remains to be seen whether this behavior will be temporary or long-lasting. After all, the recent appreciation of the Dollar could have just been an indicator for today’s pullback in U.S. equities. Therefore, we’ll need to monitor the correlation behavior for a few more sessions before drawing any conclusions. The reaction of the Dollar and equities to tomorrow’s monetary policy decision by the Fed could paint a clearer picture.
In addition to the Federal Reserve’s monetary policy decision, Britain will also release its CCC number, the Average Earnings Index, and the BOE will print its Inflation Report. Therefore, Wednesday’s session should be volatile for the Cable. Should Britain’s CCC number come in lower than expected while the BOE’s Inflation Report shows modest inflationary pressure, this could give the Pound relative strength and boost the GBP/USD. Declining unemployment and rising inflation indicates further improvement in Britain’s economy, giving the BOE room to rope in some of its liquidity in the foreseeable future.
Despite today’s consolidation in the GBP/USD, present momentum remains to the downside due to Friday’s pullback on considerable volume. However, the 1.65 area should continue to be a reliable defense since the currency pair has battled with this psychological zone in the past. The GBP/USD also has our 1st tier uptrend line and intraday lows acting as immediate-term technical cushions. As for the upside, the GBP/USD has an uphill battle. The Cable must deal with our 2nd tier uptrend line and the lid of its 7/20-7/28 trading range.
Present Price: 1.6490
Resistances: 1.6504, 1.6521, 1.6545, 1.6567, 1.6591
Supports: 1.6486, 1.6467, 1.6447, 1.6427, 1.6410
Psychological: 1.65
USD/JPY Slides Toward 95
The USD/JPY’s pullback has picked up traction, dropping below 2nd tier uptrend and 3rd tier downtrend lines. Continued strength in the Yen comes after stronger than expected economic data from Japan to kick off the week. Meanwhile, the S&P futures are logging considerable declines today, giving investors more incentive to favor the Yen and head for safety. However, today’s pullback in the S&P comes on limited news, indicating a case of overbought conditions. Therefore, it seems the USD/JPY’s positive correlation with U.S. equities is back in full swing. Volatility in the USD/JPY has really picked up considering its dormant behavior as of late.
Despite today’s setback, the USD/JPY remains well above our 1st tier uptrend line and the psychological 95 level. Therefore, bulls shouldn’t throw in the towel just yet. Our 1st tier uptrend line has proven reliable recently. However, the USD/JPY’s August highs are beneath its June highs, setting up the possibility of a head-fake and a retreat into the grips of its downtrend. Therefore, we’ll have to monitor how the USD/JPY’s support system holds up.
Present Price: 95.85
Resistances: 96.10, 96.47, 96.81, 97.10, 97.47
Supports: 95.75, 95.61, 95.30, 94.99, 94.69
Psychological: 95
Gold Gets Denied by our 2nd Tier Uptrend Line
Gold has been denied by our 2nd tier uptrend line, failing to retest $950/oz level due to insufficient buy-side backing. Gold has ducked below our 2nd and 3rd tier uptrend lines along with its psychological $950/oz level in reaction to the rapid appreciation of the Dollar. It seems gold is waiting to see how the GBP/USD and EUR/USD react to today’s pullback in U.S. equities while deciding whether to give up on the bottom-end of its 7/20-7/28 trading range. Gold continues to be more tightly correlated with the Dollar than the S&P futures, so investors should monitor the EUR/USD and GBP/USDs’ ability to hold their respective uptrend lines. As for the immediate-term, we suspect gold could consolidate above our 1st tier uptrend line. If our 1st tier uptrend line doesn’t hold, the precious metal could tumble towards our bottom-end support.
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: $944/oz
Resistances: $944.87/oz, $945.78/oz, $947.19/oz, $948.49/oz, $949.63/oz
Supports: $942.32/oz, $940.91/oz, $938.99/oz, $937.45/oz, $935.81/oz
Psychological: $950/oz
The S&P Futures Duck beneath 1000 after Weak Chinese Data
The S&P futures are off sharply Tuesday after economic data from China came in shy of analyst expectations. We highlighted the importance of China’s Industrial Production number, which came in at 10.8% vs. 11.5% expected. While today’s headline number is still a basis point above last month’s release, investors are concerned the pace of economic recovery in China is cooling. However, investors shouldn’t read too far into one mediocre release since it doesn’t necessarily mean a reversal in the medium-term’s upward pattern. Regardless, investors didn’t receive the data they were hoping for, and the S&P futures are getting punished for it. The U.S. released economic data of its own, including Prelim Non-Farm Productivity and Prelim Unit Labor Costs. Today’s data points show productivity is rising while labor costs shrink due to higher unemployment and greater pressure on employees to retain their present job. The combination of weak Chinese and U.S. data are giving investors a great opportunity to cash in some profits.
Meanwhile, the S&P futures are fighting to stay above August 7th lows. If these lows don’t hold, the futures will likely decline to our 1st tier uptrend line and August 3rd lows. Therefore, the S&P futures still have a couple technical cushions in place to prevent a more protracted selloff. However, the S&P futures may opt to hold present levels and technical supports ahead of tomorrow’s Fed meeting. Positivity from Bernanke and a slight hint at a reigning in of liquidity in the foreseeable future would likely pop the S&P futures back above 1000. Although, we don’t expect any revelations from tomorrow’s monetary policy meeting. We expect the Fed to play it cool and wait for more positive signs economically before breaching the subject of tightening liquidity. Additionally, we don’t see any reason for the Fed to increase liquidity since economic data and 2nd quarter earnings have been positive. Hence, the S&P’s battle with its highly psychological 1000 level lives to see another day.
Correlation-wise, the GBP/USD, EUR/USD and gold are stabilizing after their respective pullbacks while crude futures slide with equities. We’re receiving no clear signals via correlation today, further supporting our belief that the S&P futures may opt to consolidate from here ahead of tomorrow’s meeting. The U.S. will also release its Trade Balance number tomorrow in addition to key employment data from Britain. Hence, tomorrow could prove to be a volatile day in the markets.
Price: 992.50
Resistances: 996.5, 1001.5, 1005.75, 1011, 1016.5
Supports: 990.75, 982.5, 978.25, 969.25
Psychological: 1000
Crude Futures Break Below Consolidation after China Data and OPEC Comments
Crude futures are finally deviating from their tight $70-$72.50/bbl trading range. Unfortunately for bulls, today’s move is to the downside. Sell-side volume is climbing, indicating investors are interested in participating after a week of sideways movement. Weakness in crude comes after weaker than expected Industrial Production data from China and an uncertain outlook from OPEC concerning future supply and demand. The slight setback in Industrial Production worries investors that economic growth in China may be cooling, taking a bite out of global demand for crude. However, OPEC stated it believes China and India should continue to consume large amounts of crude through 2010, offsetting the decline in demand from developed economies. Regardless, OPEC was a bit cautious in its overall assessment since the global economic recovery is still in its early stages. As for the supply side, OPEC is concerned an increase in production from Russia and South America could place downward pressure on price should the global economy not recover as quickly as anticipated. Speaking of supply, investors will be eager to see if tomorrow’s weekly inventory report registers a surplus or deficit considering the spike in supply two weeks ago.
Meanwhile, investors should monitor the S&P’s ability to withstand profit-taking. Tomorrow’s Fed monetary policy meeting and Trade Balance data should be a good test for the bulls. Any technically significant contraction in the S&P futures could place added downward pressure on crude futures due to their positive correlation. The Euro and Pound are stabilizing against the Dollar after recent selloffs, a positive development for crude since it’s a Dollar-denominated commodity. Technically speaking, we created a new 1st tier uptrend line to compensate for today’s pullback. If our 1st tier uptrend and downtrend lines don’t hold, crude could retest June 23rd lows and the $67/bbl area. There are several more uptrend lines we can form from July 13th lows, meaning crude’s near-term uptrend is intact for the time being. As for the upside, crude faces its psychological $70/bbl level, our 2nd and 3rd tier downtrend lines and previous August highs. Therefore, crude futures have their work cut out for them to the topside.
Price: $69.05/bbl
Resistances: $69.50/bbl $69.79/bbl $70.18/bbl, $70.66/bbl, $71/bbl
Supports: $69.09/bbl, $68.69/bbl, $68.20/bbl, $67.80/bbl, $67.33/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.
