Daily Market Commentary
EUR/USD Awaits Friday’s Wave of PMI Data
The EUR/USD jumped over our 3rd tier uptrend and 2nd tier downtrend lines despite very disappointing German PPI and EU Current Account numbers yesterday. Germany’s collapse in PPI adds onto last week’s decline in EU CPI. Hence, EU prices are freefalling while producer prices decline at a faster rate than consumer prices. Therefore, the ECB may be inclined to inject more liquidity since they have held a relatively neutral monetary policy stance while the BOE takes measures to re-inflate the Pound. In regards to the surprise decline in the EU’s Current Account, this implies an outflow and consequently increase in supply of Euros since the EU’s imports outnumber its exports. Regardless of yesterday’s negative data points, investors snapped up the Euro amid a flight from the Dollar.
We notice a sizeable pullback in the USD/JPY taking place while the GBP/USD and gold drag with the EUR/USD. Keep in mind these movements are occurring with the S&P futures hovering around par in the wake of an increase in weekly U.S. Unemployment Claims. Hence, the EUR/USD is basking in Dollar negativity stemming from words of caution from it seems investors are making a slight return to safety in the Dollar with global economic uncertainty creeping in. However, heavyweights Warren Buffett and El-Erian continue their warnings that the U.S. Dollar could be stuck between a rock and a hard place if the Federal Reserve doesn’t tighten liquidity at the appropriate time. As a result, it’s possible the EUR/USD could receive some psychological support as investors contemplate an unknown future.
Technically speaking, activity favored the buy-side yesterday on the 1-hour. However, the EUR/USD failed to eclipse August 13-14 highs, putting near-term momentum in favor of the downside considering the size of the 8/13-8/17 pullback. The EUR/USD certainly isn’t clear of its downtrend considering the currency pair’s back in the thick of its 7/20-7/28 trading zone. The lid of this trading range should prove to be worthy near-term resistance along with our 3rd tier downtrend line. Investors will likely refrain from breaking these technical obstacles with a wave of EU PMI data coming on Friday. As for the downside, the EUR/USD has several strong trading range supports and all three of our uptrend lines waiting well below present price. It will be interesting to see how investors treat the Dollar should another pullback in U.S. equities ensue.
Present Price: 1.4214
Resistances: 1.4236, 1.4248, 1.4259, 1.4268, 1.4278
Supports: 1.4200, 1.4188, 1.4180, 1.4163, 1.4154
Psychological: 1.40
GBP/USD Sags Amid Concerns Surrounding Britain’s Budget
The Cable is retreating from yesterday’s pop after Public Net Sector Borrowing came in much higher than analyst expectations. Today’s unsettling debt-related data comes after BOE Minutes revealed King voted to increase QE by 75 billion rather than the 50 billion passed by the central bank. We were a bit shocked by King’s proposal considering most British data has been outperforming expectations. In fact, we were surprised the BOE decided to inject more liquidity in the first place. The development is unsettling Pound traders as uncertainty rises regarding the BOE’s future monetary policy. We believe King may fear the Pound is overheating from previous investor optimism. The faster the Pound appreciates, the less attractive British services become to foreign countries. Hence, King may be trying to give Britain’s economy a little more breathing room as it attempts to recover from a historic downturn.
Speaking of recent improvements in Britain’s data, Retail Sales came in a basis point ahead of analyst expectations today. Furthermore, Britain’s CPI and RPI outperformed earlier this week. As a result, the fundamentals are telling a more positive story than what investors are interpreting from King’s vote at the BOE meeting. With Britain’s data finished for the week, the GBP/USD’s immediate-term movement should be highly dependent on the performance of U.S. equities coupled with the EU’s slew of PMI data on Friday. Though we’ve seen the Cable’s correlation with U.S. equities flip-flop this month, we expect the positive correlation should play out until further notice.
Technically speaking, both the Cable and the EUR/USD failed to tackle their respective August 13th highs yesterday as the currency pair’s didn’t receive enough buy-side interest to power through. Hence, our 3rd tier downtrend line and August 13th highs continue to play an important role to the upside. Meanwhile, the GBP/USD’s gravitation towards the 1.65 area continues. This psychological zone is turning out to be as strong as we anticipated, and the currency pair will likely need an upward movement with conviction to leave 1.65 in the rearview. As for the downside, the Cable has Wednesday lows, our 1st tier uptrend line, and August 17th lows to fall back on. Investors should also note our 1st tier uptrend line is reaching an inflection point with our 2nd tier downtrend line, signaling the possibility of heightened near-term volatility.
Present Price: 1.6471
Resistances: 1.6482, 1.6512, 1.6544, 1.6569, 1.6608
Supports: 1.6455, 1.6428, 1.6398, 1.6376, 1.6346
Psychological: 1.65
USD/JPY Deteriorates to our 2nd Tier Downtrend Line
The USD/JPY’s deterioration has continued well past its psychological 95 level and our important 1st tier uptrend line. Investors have been favoring the Yen over the Dollar amid warnings from investor heavyweights Buffet and El-Erian that the Dollar could be under severe selling pressure over the long-term if the government doesn’t tighten liquidity appropriately. Such news coupled with disappointing U.S. employment data and large pullbacks in the Shanghai Composite Index (SCI) have led investors to buy up the Yen. The USD/JPY’s recent downturn seems to be more exaggerated than what we’ve witnessed in both the Cable and the EUR/USD.
The collapse of the USD/JPY’s 1st tier uptrend line is a bit disconcerting, and we have little reason to be positive trend-wise right now. However, the currency pair has fought to stay above March lows and our 2nd tier downtrend line. Furthermore, if the USD/JPY’s immediate-term technical do turn sour, July lows are hanging around as a last resort. The USD/JPY’s near-term challenge will be to recover to its psychological 95 level so the currency pair can take another short at our 1st tier uptrend line. Our 1st tier uptrend line is gradually approaching its inflection point with our 3rd tier downtrend line, meaning volatility could pick up in the beginning of next week.
Present Price: 94.70
Resistances: 94.95, 95.15, 95.44, 95.65, 96.08
Supports: 94.52, 94.36, 94.08, 93.88, 93.52
Psychological: 95
Gold Dips from our 3rd Tier Uptrend Line Amid Slight Dollar Strength
Gold has been deflected by our 3rd tier uptrend line and is consolidating around our 1st tier downtrend line as the S&P futures gravitate around 1000. Recent movement in gold has been uneventful with optimism and uncertainty slugging it out. However, we do notice recent buy-side action has been weaker than sell-side, telling us present momentum remains in favor of the bears. Gold still has its psychological $950/oz level and our 2nd tier downtrend line bearing overhead. Hence, the topside is riddled with potential obstacles. On the other hand, gold’s 8/17 lows were above its 7/29 lows, keeping the medium-term uptrend intact while forming several layers of technical cushions. It seems gold may continue to wobble until our 3rd tier uptrend line collides with our 2nd tier downtrend line and our 1st tier downtrend line does the same with our 2nd tier uptrend line. The trading range may expand in the meantime with volatility gradually increasing until an inflection point is reached. Meanwhile, investors should watch for a breakout in the EUR/USD in either direction since this currency pair has been a reliable positive correlation.
Present Price: $939.13/oz
Resistances: $941.46/oz, $943.10/oz, $944.62/oz, $945.64/oz, $947.79/oz
Supports: $938.80/oz, $937.28/oz, $935.88/oz, $934.11/oz, $932.34/oz
Psychological: $950/oz
The S&P Futures Edge Higher Despite Rise in Unemployment Claims
Investors are shrugging off the rise in weekly Unemployment Claims and are more encouraged by this week’s outperformance in manufacturing data. The ‘cash-for-clunkers’ program is paying dividends, driving the Philly and Empire manufacturing indexes higher while consuming tons of crude. These statistical developments are helping buoy equities amid mixed global economic data. Investors are also weathering the storm of a massive downturn in the Shanghai Composite Index (SCI). Though the SCI recovered by over 4%, the move was purely psychological.
The government announced the approval of a few composite ETFs, and Chinese investors took this as a signal that the government will take future actions if necessary to prevent a stock market crash. However, investors are ignoring the fundamental truth that a good portion of the record bank lending during the first 5 months of the year has been fed into equities. Hence the government’s desire to tighten liquidity in order to prevent major asset bubbles. Let’s not even think about what portion of the lending has been put into real-estate. In other words, loose interest-laden money has likely been a large catalyst behind the SCI’s incredible ascent from 2008 lows. Therefore, investors should pay less attention to daily movements in the SCI and focus more on longer-term, fundamental behavior. The situation is still developing, and we will monitor it closely since the SCI’s movement is having such a large psychological impact on Western markets.
Shifting back to the West, the U.S. will release Existing Home Sales tomorrow along with a boat load of PMI data from the EU. Hence, the week could end on a somewhat volatile note. Uncertainty is rising considering the sustainability of the global economic recovery after stimulus packages run out of funds. The consumption behavior of U.S. citizens is still in a bad state, as seen in last week’s U of M and retail sales data points. U.S. over-consumption sponsored by loose credit policies was the driving force behind the global economy of the past, so it remains to be seen how the global economy of the future will be fueled. Investors are hoping new Chinese consumption can be the driving force, hence the added interest in the performance of the SCI and China’s economic data.
Meanwhile, the S&P futures are hovering back around 1000 as we anticipated. Investors are waiting in the wings for a major news event, and it might not come this week. Bulls are hoping to keep the S&P above 1000 and take another jab at previous 2009 highs and our 2nd tier uptrend line. However, the S&P futures may continue to fluctuate in a wide trading range around 1000. The EUR/USD, GBP/USD, and gold are experiencing similar forms of consolidation. As for the downside, the futures have weekly lows and our 1st tier uptrend line to fall back on.
Price: 1002.75
Resistances: 1003.5, 1006.5, 1010.75, 1016
Supports: 998.5, 994.25, 990.75, 986
Psychological: 1000
Crude Futures Rally Hover Near our 3rd Tier Downtrend Line
Crude futures are hovering just beneath our 3rd tier downtrend line, potentially the last trend-oriented technical barrier separating the futures from new 2009 highs. Of course crude would need to deal with previous 2009 highs and its psychological $75/bbl level. However, we feel our 3rd tier downtrend line could serve as a foretelling indicator since it runs through June 11th and 30th highs. Crude launched above all of our previous trend lines yesterday after weekly crude inventories plunged and caught investors off-guard. However, we have a muted reaction to this number since we believe it’s directly related to the ‘cash-for-clunkers’ program, likely a temporary stimulus. Our belief is reinforced by much better than anticipated manufacturing data releases this week. The boost in manufacturing has been needed to meet the jump in demand for automobiles in reaction to the ‘cash-for-clunkers’ program. The ramp up in production coupled with the cross-country transportation required for vehicle deliveries is likely the driving force behind the surprise inventory deficit, and should bleed over into the next few releases.
Regardless of what the cause might be behind the large consumption of crude, the futures are on the brink of a breakout. Investors are looking for further depreciation of the Dollar against the Pound and Euro as well as a 1000+ S&P. The combination of the two would likely be more than enough to send crude higher due to this week’s drop in supply. However, there are downtrend forces at work in all of the aforementioned correlations, constraining crude’s upward mobility. However, crude’s momentum is clearly shifting to the upside following this week’s activity. All the Dollar-based commodity needs is more conductive participation across the marketplace. As for the downside, crude futures have several technical cushions waiting nearby, including our 2nd and 3rd uptrend lines along with the upper-band of its psychological $70/bbl trading range. Investors will be keeping a close eye on the EU’s PMI data tomorrow along with U.S. Existing Home Sales. Positive data could drive the Euro and equities higher while helping crude deal with its topside barriers.
Price: $72.54/bbl
Resistances: $72.76/bbl, $73.21/bbl, $73.56/bbl, $73.81/bbl, $74.24/bbl
Supports: $72.35/bbl, $72.14/bbl, $71.68/bbl, $71.35/bbl, $71.01/bbl
Psychological: $70/bbl, $75/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 Awaits Friday’s Wave of PMI Data
The EUR/USD jumped over our 3rd tier uptrend and 2nd tier downtrend lines despite very disappointing German PPI and EU Current Account numbers yesterday. Germany’s collapse in PPI adds onto last week’s decline in EU CPI. Hence, EU prices are freefalling while producer prices decline at a faster rate than consumer prices. Therefore, the ECB may be inclined to inject more liquidity since they have held a relatively neutral monetary policy stance while the BOE takes measures to re-inflate the Pound. In regards to the surprise decline in the EU’s Current Account, this implies an outflow and consequently increase in supply of Euros since the EU’s imports outnumber its exports. Regardless of yesterday’s negative data points, investors snapped up the Euro amid a flight from the Dollar.
We notice a sizeable pullback in the USD/JPY taking place while the GBP/USD and gold drag with the EUR/USD. Keep in mind these movements are occurring with the S&P futures hovering around par in the wake of an increase in weekly U.S. Unemployment Claims. Hence, the EUR/USD is basking in Dollar negativity stemming from words of caution from it seems investors are making a slight return to safety in the Dollar with global economic uncertainty creeping in. However, heavyweights Warren Buffett and El-Erian continue their warnings that the U.S. Dollar could be stuck between a rock and a hard place if the Federal Reserve doesn’t tighten liquidity at the appropriate time. As a result, it’s possible the EUR/USD could receive some psychological support as investors contemplate an unknown future.
Technically speaking, activity favored the buy-side yesterday on the 1-hour. However, the EUR/USD failed to eclipse August 13-14 highs, putting near-term momentum in favor of the downside considering the size of the 8/13-8/17 pullback. The EUR/USD certainly isn’t clear of its downtrend considering the currency pair’s back in the thick of its 7/20-7/28 trading zone. The lid of this trading range should prove to be worthy near-term resistance along with our 3rd tier downtrend line. Investors will likely refrain from breaking these technical obstacles with a wave of EU PMI data coming on Friday. As for the downside, the EUR/USD has several strong trading range supports and all three of our uptrend lines waiting well below present price. It will be interesting to see how investors treat the Dollar should another pullback in U.S. equities ensue.
Present Price: 1.4214
Resistances: 1.4236, 1.4248, 1.4259, 1.4268, 1.4278
Supports: 1.4200, 1.4188, 1.4180, 1.4163, 1.4154
Psychological: 1.40
GBP/USD Sags Amid Concerns Surrounding Britain’s Budget
The Cable is retreating from yesterday’s pop after Public Net Sector Borrowing came in much higher than analyst expectations. Today’s unsettling debt-related data comes after BOE Minutes revealed King voted to increase QE by 75 billion rather than the 50 billion passed by the central bank. We were a bit shocked by King’s proposal considering most British data has been outperforming expectations. In fact, we were surprised the BOE decided to inject more liquidity in the first place. The development is unsettling Pound traders as uncertainty rises regarding the BOE’s future monetary policy. We believe King may fear the Pound is overheating from previous investor optimism. The faster the Pound appreciates, the less attractive British services become to foreign countries. Hence, King may be trying to give Britain’s economy a little more breathing room as it attempts to recover from a historic downturn.
Speaking of recent improvements in Britain’s data, Retail Sales came in a basis point ahead of analyst expectations today. Furthermore, Britain’s CPI and RPI outperformed earlier this week. As a result, the fundamentals are telling a more positive story than what investors are interpreting from King’s vote at the BOE meeting. With Britain’s data finished for the week, the GBP/USD’s immediate-term movement should be highly dependent on the performance of U.S. equities coupled with the EU’s slew of PMI data on Friday. Though we’ve seen the Cable’s correlation with U.S. equities flip-flop this month, we expect the positive correlation should play out until further notice.
Technically speaking, both the Cable and the EUR/USD failed to tackle their respective August 13th highs yesterday as the currency pair’s didn’t receive enough buy-side interest to power through. Hence, our 3rd tier downtrend line and August 13th highs continue to play an important role to the upside. Meanwhile, the GBP/USD’s gravitation towards the 1.65 area continues. This psychological zone is turning out to be as strong as we anticipated, and the currency pair will likely need an upward movement with conviction to leave 1.65 in the rearview. As for the downside, the Cable has Wednesday lows, our 1st tier uptrend line, and August 17th lows to fall back on. Investors should also note our 1st tier uptrend line is reaching an inflection point with our 2nd tier downtrend line, signaling the possibility of heightened near-term volatility.
Present Price: 1.6471
Resistances: 1.6482, 1.6512, 1.6544, 1.6569, 1.6608
Supports: 1.6455, 1.6428, 1.6398, 1.6376, 1.6346
Psychological: 1.65
USD/JPY Deteriorates to our 2nd Tier Downtrend Line
The USD/JPY’s deterioration has continued well past its psychological 95 level and our important 1st tier uptrend line. Investors have been favoring the Yen over the Dollar amid warnings from investor heavyweights Buffet and El-Erian that the Dollar could be under severe selling pressure over the long-term if the government doesn’t tighten liquidity appropriately. Such news coupled with disappointing U.S. employment data and large pullbacks in the Shanghai Composite Index (SCI) have led investors to buy up the Yen. The USD/JPY’s recent downturn seems to be more exaggerated than what we’ve witnessed in both the Cable and the EUR/USD.
The collapse of the USD/JPY’s 1st tier uptrend line is a bit disconcerting, and we have little reason to be positive trend-wise right now. However, the currency pair has fought to stay above March lows and our 2nd tier downtrend line. Furthermore, if the USD/JPY’s immediate-term technical do turn sour, July lows are hanging around as a last resort. The USD/JPY’s near-term challenge will be to recover to its psychological 95 level so the currency pair can take another short at our 1st tier uptrend line. Our 1st tier uptrend line is gradually approaching its inflection point with our 3rd tier downtrend line, meaning volatility could pick up in the beginning of next week.
Present Price: 94.70
Resistances: 94.95, 95.15, 95.44, 95.65, 96.08
Supports: 94.52, 94.36, 94.08, 93.88, 93.52
Psychological: 95
Gold Dips from our 3rd Tier Uptrend Line Amid Slight Dollar Strength
Gold has been deflected by our 3rd tier uptrend line and is consolidating around our 1st tier downtrend line as the S&P futures gravitate around 1000. Recent movement in gold has been uneventful with optimism and uncertainty slugging it out. However, we do notice recent buy-side action has been weaker than sell-side, telling us present momentum remains in favor of the bears. Gold still has its psychological $950/oz level and our 2nd tier downtrend line bearing overhead. Hence, the topside is riddled with potential obstacles. On the other hand, gold’s 8/17 lows were above its 7/29 lows, keeping the medium-term uptrend intact while forming several layers of technical cushions. It seems gold may continue to wobble until our 3rd tier uptrend line collides with our 2nd tier downtrend line and our 1st tier downtrend line does the same with our 2nd tier uptrend line. The trading range may expand in the meantime with volatility gradually increasing until an inflection point is reached. Meanwhile, investors should watch for a breakout in the EUR/USD in either direction since this currency pair has been a reliable positive correlation.
Present Price: $939.13/oz
Resistances: $941.46/oz, $943.10/oz, $944.62/oz, $945.64/oz, $947.79/oz
Supports: $938.80/oz, $937.28/oz, $935.88/oz, $934.11/oz, $932.34/oz
Psychological: $950/oz
The S&P Futures Edge Higher Despite Rise in Unemployment Claims
Investors are shrugging off the rise in weekly Unemployment Claims and are more encouraged by this week’s outperformance in manufacturing data. The ‘cash-for-clunkers’ program is paying dividends, driving the Philly and Empire manufacturing indexes higher while consuming tons of crude. These statistical developments are helping buoy equities amid mixed global economic data. Investors are also weathering the storm of a massive downturn in the Shanghai Composite Index (SCI). Though the SCI recovered by over 4%, the move was purely psychological.
The government announced the approval of a few composite ETFs, and Chinese investors took this as a signal that the government will take future actions if necessary to prevent a stock market crash. However, investors are ignoring the fundamental truth that a good portion of the record bank lending during the first 5 months of the year has been fed into equities. Hence the government’s desire to tighten liquidity in order to prevent major asset bubbles. Let’s not even think about what portion of the lending has been put into real-estate. In other words, loose interest-laden money has likely been a large catalyst behind the SCI’s incredible ascent from 2008 lows. Therefore, investors should pay less attention to daily movements in the SCI and focus more on longer-term, fundamental behavior. The situation is still developing, and we will monitor it closely since the SCI’s movement is having such a large psychological impact on Western markets.
Shifting back to the West, the U.S. will release Existing Home Sales tomorrow along with a boat load of PMI data from the EU. Hence, the week could end on a somewhat volatile note. Uncertainty is rising considering the sustainability of the global economic recovery after stimulus packages run out of funds. The consumption behavior of U.S. citizens is still in a bad state, as seen in last week’s U of M and retail sales data points. U.S. over-consumption sponsored by loose credit policies was the driving force behind the global economy of the past, so it remains to be seen how the global economy of the future will be fueled. Investors are hoping new Chinese consumption can be the driving force, hence the added interest in the performance of the SCI and China’s economic data.
Meanwhile, the S&P futures are hovering back around 1000 as we anticipated. Investors are waiting in the wings for a major news event, and it might not come this week. Bulls are hoping to keep the S&P above 1000 and take another jab at previous 2009 highs and our 2nd tier uptrend line. However, the S&P futures may continue to fluctuate in a wide trading range around 1000. The EUR/USD, GBP/USD, and gold are experiencing similar forms of consolidation. As for the downside, the futures have weekly lows and our 1st tier uptrend line to fall back on.
Price: 1002.75
Resistances: 1003.5, 1006.5, 1010.75, 1016
Supports: 998.5, 994.25, 990.75, 986
Psychological: 1000
Crude Futures Rally Hover Near our 3rd Tier Downtrend Line
Crude futures are hovering just beneath our 3rd tier downtrend line, potentially the last trend-oriented technical barrier separating the futures from new 2009 highs. Of course crude would need to deal with previous 2009 highs and its psychological $75/bbl level. However, we feel our 3rd tier downtrend line could serve as a foretelling indicator since it runs through June 11th and 30th highs. Crude launched above all of our previous trend lines yesterday after weekly crude inventories plunged and caught investors off-guard. However, we have a muted reaction to this number since we believe it’s directly related to the ‘cash-for-clunkers’ program, likely a temporary stimulus. Our belief is reinforced by much better than anticipated manufacturing data releases this week. The boost in manufacturing has been needed to meet the jump in demand for automobiles in reaction to the ‘cash-for-clunkers’ program. The ramp up in production coupled with the cross-country transportation required for vehicle deliveries is likely the driving force behind the surprise inventory deficit, and should bleed over into the next few releases.
Regardless of what the cause might be behind the large consumption of crude, the futures are on the brink of a breakout. Investors are looking for further depreciation of the Dollar against the Pound and Euro as well as a 1000+ S&P. The combination of the two would likely be more than enough to send crude higher due to this week’s drop in supply. However, there are downtrend forces at work in all of the aforementioned correlations, constraining crude’s upward mobility. However, crude’s momentum is clearly shifting to the upside following this week’s activity. All the Dollar-based commodity needs is more conductive participation across the marketplace. As for the downside, crude futures have several technical cushions waiting nearby, including our 2nd and 3rd uptrend lines along with the upper-band of its psychological $70/bbl trading range. Investors will be keeping a close eye on the EU’s PMI data tomorrow along with U.S. Existing Home Sales. Positive data could drive the Euro and equities higher while helping crude deal with its topside barriers.
Price: $72.54/bbl
Resistances: $72.76/bbl, $73.21/bbl, $73.56/bbl, $73.81/bbl, $74.24/bbl
Supports: $72.35/bbl, $72.14/bbl, $71.68/bbl, $71.35/bbl, $71.01/bbl
Psychological: $70/bbl, $75/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.
