Daily Market Commentary
EUR/USD Skids Following Durable Goods Data
The EUR/USD is heading south towards the lower end of its weekly trading range after U.S. Core Durable Goods Orders came in two basis points below analyst expectations. The durable goods number is outweighing a better than expected German Ifo Business Climate release. Referring to yesterday’s post, we explained that U.S. demand for durable goods has a strong influence on the EU economy since EU GDP is highly reliant on exports and manufacturing. Hence, investors are sending the EUR/USD lower since the Core DGO release takes a bite out of the optimism surrounding the concept of an economic recovery. However, the Euro is holding up a lot better than the Pound since Germany’s Ifo Business Climate release continues the theme of stronger than expected economic data from the EU over the past couple weeks. One needs to look no further than the high flying EUR/GBP for confirmation of a strong Euro. The Euro will be tested tomorrow since the EU will print Germany’s Prelim CPI and the EU region’s M3 Money Supply. Weak CPI growth and a large contraction in the EU’s money supply has been a thorn in the EUR/USD’s side. Declining prices and the dwindling supply of Euros gives the EU little room to tighten its monetary policy. Hence, the EU’s commitment to keep liquidity in control comes at a cost.
Meanwhile, the Core DGO number is not the best way to set the table for tomorrow’s key releases, most notably America’s Prelim GDP and Unemployment Claims data. If these two data releases also disappoint, the S&P futures could experience a brisk selloff and result in a broad-based appreciation of the Dollar. However, the continuation of the theme of stronger than expected data from the EU could help the Euro maintain its relative strength. As for today, we could witness continued preference for the Dollar as investors head for safety. However, if New Home Sales come in better than expected later this morning, the EUR/USD can regain its footing and consolidate ahead of tomorrow’s wave of key economic data. On the other hand, weak New Home Sales would only perpetuate the EUR/USD’s present pullback.
The key for the EUR/USD will be staying above our 1st tier uptrend line. If not, the currency pair could head for its next technical cushion, 8/20 lows or 1.42. Meanwhile, the EUR/USD is experiencing multiple trend line inflection points, indicating today’s session could turn out to be a volatile one. Since the session has started off on a sour note, this combination of events may not bode well for the bulls. As for the topside, our 2nd-4th tier downtrend lines continue to serve as important technical barriers preventing a large breakout in the EUR/USD. Since data is already mixed today, positive New Home Sales data may not be enough to send the EUR/USD to a break out to the topside.
Present Price: 1.4264
Resistances: 1.4283, 1.4297, 1.4308, 1.4327, 1.4347
Supports: 1.4254, 1.4230, 1.4210, 1.4199, 1.4180
Psychological: 1.40, 1.45
GBP/USD Collapses in the Wake of Weak Core DGO Data
The Cable is crashing after U.S. Core Durable Goods Orders data came in two basis points below analyst expectations, countering the positive U.S. consumer sentiment data we’ve received lately. The GBP/USD is bearing the brunt of the sell-off since Britain won’t re-enter the economic data news stream until tomorrow’s Nationwide HPI and CBI Realized Sales releases. The data releases couldn’t come at a better time since the Pound has suffered a relative weakness among its peers since the BOE’s surprise injection of liquidity. Investors should keep in mind Britain’s economic data was coming in strong prior to the BOE’s monetary shock, so we are operating under the belief that tomorrow’s heavily-weighted British data could help buoy the Pound. However, negative data releases from Britain may only exacerbate the Cable’s present selloff.
It seems the BOE may be getting what it wanted after all, a depreciation of the Pound. We believe the BOE was concerned the rapid appreciation of the Pound would place its companies in a competitive disadvantage and stymie Britain’s economic recovery, hence the use of a monetary shock. The Pound has responded by selling off sharply against both the Dollar and the Euro. The GBP/USD seems to have given up on its psychological 1.65 level, dropping through 8/17 and 6/23 lows in the process. The Cable is presently hoping to find a bottom along our 2nd tier uptrend line. If this uptrend line doesn’t hold, the GBP/USD will look to our 1st tier uptrend line and July lows for technical support along with the highly psychological 1.60 level. Hence, even though the present pullback may have some room to go, there are a few strong supports waiting in the wings. As for the topside, there are multiple barriers beginning with our 1st and 2nd tier downtrend lines.
Present Price: 1.6203
Resistances: 1.6224, 1.6251, 1.6286, 1.6324, 1.6367
Supports: 1.6187, 1.6163, 1.6114, 1.6093, 1.6056
Psychological: 1.60, 1.65
USD/JPY Perks up in Reaction to Weak U.S. Core DGO Data
The USD/JPY moved higher after U.S. Core Durable Goods data printed two basis points below analyst expectations. However, the currency pair is returning some of its gains in reaction to a better than expected showing from New Home Sales. In addition to America’s wave of data today, investors should keep in mind Japan reported a weaker than expected Trade Balance late Tuesday in the wake of light demand for the nation’s exports. The USD/JPY’s movement in reaction to this data flow tells us the currency pair is opting to participate in broad-based Dollar sentiment rather than comparative economic performances between the two countries. However, DGO number is certainly capping gains in the USD/JPY since it only provides less incentive for investors to favor the Dollar over the Yen. The weak Japanese export data is disconcerting and puts more pressure on the BOJ to stimulate the economy. Although, the BOJ likely won’t act until it sees the results of Japan’s general election. Japan’s election will be watched closely since a defeat of the LDP would likely present a fundamental shift in political and economic policy. The LDP has run Japan for the past 50 years, so it will be interesting to see how the Yen reacts should the LDP lose as polls predict.
Japan will release more data tomorrow including Household Spending and the Tokyo Core CPI. Beforehand, the U.S. and Britain will release heavily-weighted data points of their own. We recognize multiple inflection points occurring in the USD/JPY, implying volatility could increase over the next 24-48 hours. Meanwhile, the USD/JPY continues to balance along our 1st tier uptrend and 2nd tier downtrend lines as bulls fight to get the currency pair back above its psychological 95 level. Broad-based appreciation of the Dollar continues to be the theme around the FX markets with sizable pullbacks occurring in both the GBP/USD and EUR/USD. The Dollar’s overall strength is helping buoy the USD/JPY, and may result in nice pop tomorrow should the pattern continue with tons of economic data and heightened volatility. If the USD/JPY’s upward momentum should carry it beyond 95, the currency pair will have to deal with our 3rd tier downtrend line next along with 7/31 highs.
Present Price: 94.42
Resistances: 94.53, 94.71, 94.95, 95.26, 95.54
Supports: 94.08, 93.88, 93.65, 93.42, 93.27
Psychological: 95
Gold Recoups Some Early Losses with Mixed U.S. Data
Gold is erasing some of its losses from earlier in the session resulting from Core Durable Goods Orders coming in two basis points below analyst expectations. The Dollar appreciated across the board in reaction to the news, sending the precious metal tumbling due to its negative correlation with the Greenback. However, better than expected New Home Sales data helped stem the bleeding, bouncing the precious metal off of its $940/oz level. The EUR/USD and GBP/USD are holding onto their 1st tier and 2nd tier uptrend lines, respectively. Hence, gold is trading back within reach of $950/oz while hovering within the trading range created by our trend lines. Speaking of which, gold’s trend lines will be experiencing multiple inflection points over the next 24-48 hours, relaying the theme of heightened volatility present in the FX markets. Investors will receive a truckload of heavily-weighted economic data tomorrow, meaning gold should remain in a respectable range until we see the results of America’s Prelim GDP.
Gold will ultimately follow its negative correlation with the Dollar, meaning investors should keep a close eye on both the EUR/USD and GBP/USD and their interaction with their respective trend lines. It seems a turning point could be approaching this week. Since momentum has quickly turned sour for the Cable and EUR/USD, this does not bode well for gold. Hence, we believe gold’s present pullback could pick up pace. Technically speaking, our gold’s 2nd tier uptrend line should play an important role. If our 2nd tier doesn’t hold, the precious metal may soon be testing 8/17 and 7/29 lows. Below these technical cushions gold also has our 1st tier uptrend line. As for the topside, gold must face our 2nd and 3rd tier uptrend lines along with the lid of the highly psychological $950/oz zone.
Present Price: $943.75/oz
Resistances: $944.50/oz, $946.40/oz, $947.92/oz, $949.69/oz, $951.46/oz
Supports: $942.98/oz, $941.46/oz, $939.94/oz, $938.04/oz, $936.90/oz
Psychological: $950/oz
The S&P Futures Stuck in Neutral Following Mixed Data
The S&P futures remain stuck in neutral after worse than expected Core Durable Goods Orders data was counterbalanced by an impressive New Home Sales number. Investors are also digesting the combination of weak Japanese exports and strong German Ifo Business Climate reports. The S&P futures are at a crossroads again and investors aren’t taking sides until they see tomorrow’s Prelim GDP number. We notice the GBP/USD, EUR/USD, gold, and crude are holding onto their respective uptrend lines in anticipation of tomorrow’s wave of important data. Speaking of correlations, the Dollar has experienced a broad-based appreciation, increasing the downward pressure on the S&P futures. However, the S&P futures have proven resilient despite the Dollar’s appreciation. A better than expected GDP number could buck the Dollar’s appreciation and send the S&P futures charging higher, and vice-versa. Although, investors should take note of the negative behavior of the S&P’s correlations and tread with caution over the next 24-48 hours since we anticipate heightened volatility.
Meanwhile, the S&P futures are still trading comfortably above the highly psychological 1000 level. Therefore, a pullback resulting from a weak GDP number would likely hit a temporary cushion around 1000 and 8/21 lows. On the other hand, separation from 1000 gives the S&P the mobility to log more significant movements to the topside should the data impress. In addition to Prelim GDP the U.S. will release weekly Unemployment Claims tomorrow. Unemployment Claims revealed an uncomfortable increase from their previous release. If the trend continues and Unemployment Claims surpass 600k again, this could place more downward pressure on the S&P futures since investors will become more concerned about future consumption and economic growth.
Price: 1025.75
Resistances: 1026.25, 1032.75, 1038
Supports: 1020.75, 1018, 1010.75, 1004
Psychological: 1000
Crude Future’s Decline Buoyed by Slight Inventory Surplus
Crude futures are recovering to our 2nd tier uptrend line, previously our 1st tier, following a slight surplus in weekly inventories. Crude futures have managed to avoid testing $70bbl after pulling back in reaction to an appreciating Dollar and lower than expect Core Durable Goods Orders data. In addition to the negative DGO data, Japan reported weak export data late Tuesday. Both data releases show consumption may not be improving as quickly as analysts hope, decreasing the amount of crude consumed during the manufacturing and production process. These developments do not bode well for the demand side of the equation. Fortunately for bulls, the supply side improved following the inventory shortage caused by the cash for clunkers program. However, crude futures did experience climbing sell-side activity yesterday, implying there is some weight behind the pullback. It will be very important for crude futures to hold onto our 1st tier uptrend line and their psychological $70/bbl level should the selloff continue. A contraction beneath our 1st tier uptrend line could spell a retest of August lows.
Meanwhile, crude futures should hold above $70/bbl as the GBP/USD and EUR/USD look to consolidate ahead of Thursday’s heavy-weight data releases. The U.S. will release Prelim GDP and weekly Unemployment Claims. GDP will be the primary focus. If Prelim GDP comes in lower than expected, we will likely witness crude’s pullback take another leg down with the S&P futures. However, a much better than expected number should have the opposite impact. Crude futures certainly have their fair share of obstacles to overcome to the topside, including our 3 downtrend lines and the psychological $75/bbl. If crude futures can climb above our 3rd tier downtrend line crude futures could experience explosive near-term gains. Investors should fasten their seatbelts because the FX markets and gold all indicate increasing volatility over the next 24-48 hours.
Price: $70.99/bbl
Resistances: $71.29/bbl, $71.71/bbl, $72.07/bbl, $72.46/bbl
Supports: $70.71/bbl, $770.32bbl, $69.86/bbl, $69.36/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 Skids Following Durable Goods Data
The EUR/USD is heading south towards the lower end of its weekly trading range after U.S. Core Durable Goods Orders came in two basis points below analyst expectations. The durable goods number is outweighing a better than expected German Ifo Business Climate release. Referring to yesterday’s post, we explained that U.S. demand for durable goods has a strong influence on the EU economy since EU GDP is highly reliant on exports and manufacturing. Hence, investors are sending the EUR/USD lower since the Core DGO release takes a bite out of the optimism surrounding the concept of an economic recovery. However, the Euro is holding up a lot better than the Pound since Germany’s Ifo Business Climate release continues the theme of stronger than expected economic data from the EU over the past couple weeks. One needs to look no further than the high flying EUR/GBP for confirmation of a strong Euro. The Euro will be tested tomorrow since the EU will print Germany’s Prelim CPI and the EU region’s M3 Money Supply. Weak CPI growth and a large contraction in the EU’s money supply has been a thorn in the EUR/USD’s side. Declining prices and the dwindling supply of Euros gives the EU little room to tighten its monetary policy. Hence, the EU’s commitment to keep liquidity in control comes at a cost.
Meanwhile, the Core DGO number is not the best way to set the table for tomorrow’s key releases, most notably America’s Prelim GDP and Unemployment Claims data. If these two data releases also disappoint, the S&P futures could experience a brisk selloff and result in a broad-based appreciation of the Dollar. However, the continuation of the theme of stronger than expected data from the EU could help the Euro maintain its relative strength. As for today, we could witness continued preference for the Dollar as investors head for safety. However, if New Home Sales come in better than expected later this morning, the EUR/USD can regain its footing and consolidate ahead of tomorrow’s wave of key economic data. On the other hand, weak New Home Sales would only perpetuate the EUR/USD’s present pullback.
The key for the EUR/USD will be staying above our 1st tier uptrend line. If not, the currency pair could head for its next technical cushion, 8/20 lows or 1.42. Meanwhile, the EUR/USD is experiencing multiple trend line inflection points, indicating today’s session could turn out to be a volatile one. Since the session has started off on a sour note, this combination of events may not bode well for the bulls. As for the topside, our 2nd-4th tier downtrend lines continue to serve as important technical barriers preventing a large breakout in the EUR/USD. Since data is already mixed today, positive New Home Sales data may not be enough to send the EUR/USD to a break out to the topside.
Present Price: 1.4264
Resistances: 1.4283, 1.4297, 1.4308, 1.4327, 1.4347
Supports: 1.4254, 1.4230, 1.4210, 1.4199, 1.4180
Psychological: 1.40, 1.45
GBP/USD Collapses in the Wake of Weak Core DGO Data
The Cable is crashing after U.S. Core Durable Goods Orders data came in two basis points below analyst expectations, countering the positive U.S. consumer sentiment data we’ve received lately. The GBP/USD is bearing the brunt of the sell-off since Britain won’t re-enter the economic data news stream until tomorrow’s Nationwide HPI and CBI Realized Sales releases. The data releases couldn’t come at a better time since the Pound has suffered a relative weakness among its peers since the BOE’s surprise injection of liquidity. Investors should keep in mind Britain’s economic data was coming in strong prior to the BOE’s monetary shock, so we are operating under the belief that tomorrow’s heavily-weighted British data could help buoy the Pound. However, negative data releases from Britain may only exacerbate the Cable’s present selloff.
It seems the BOE may be getting what it wanted after all, a depreciation of the Pound. We believe the BOE was concerned the rapid appreciation of the Pound would place its companies in a competitive disadvantage and stymie Britain’s economic recovery, hence the use of a monetary shock. The Pound has responded by selling off sharply against both the Dollar and the Euro. The GBP/USD seems to have given up on its psychological 1.65 level, dropping through 8/17 and 6/23 lows in the process. The Cable is presently hoping to find a bottom along our 2nd tier uptrend line. If this uptrend line doesn’t hold, the GBP/USD will look to our 1st tier uptrend line and July lows for technical support along with the highly psychological 1.60 level. Hence, even though the present pullback may have some room to go, there are a few strong supports waiting in the wings. As for the topside, there are multiple barriers beginning with our 1st and 2nd tier downtrend lines.
Present Price: 1.6203
Resistances: 1.6224, 1.6251, 1.6286, 1.6324, 1.6367
Supports: 1.6187, 1.6163, 1.6114, 1.6093, 1.6056
Psychological: 1.60, 1.65
USD/JPY Perks up in Reaction to Weak U.S. Core DGO Data
The USD/JPY moved higher after U.S. Core Durable Goods data printed two basis points below analyst expectations. However, the currency pair is returning some of its gains in reaction to a better than expected showing from New Home Sales. In addition to America’s wave of data today, investors should keep in mind Japan reported a weaker than expected Trade Balance late Tuesday in the wake of light demand for the nation’s exports. The USD/JPY’s movement in reaction to this data flow tells us the currency pair is opting to participate in broad-based Dollar sentiment rather than comparative economic performances between the two countries. However, DGO number is certainly capping gains in the USD/JPY since it only provides less incentive for investors to favor the Dollar over the Yen. The weak Japanese export data is disconcerting and puts more pressure on the BOJ to stimulate the economy. Although, the BOJ likely won’t act until it sees the results of Japan’s general election. Japan’s election will be watched closely since a defeat of the LDP would likely present a fundamental shift in political and economic policy. The LDP has run Japan for the past 50 years, so it will be interesting to see how the Yen reacts should the LDP lose as polls predict.
Japan will release more data tomorrow including Household Spending and the Tokyo Core CPI. Beforehand, the U.S. and Britain will release heavily-weighted data points of their own. We recognize multiple inflection points occurring in the USD/JPY, implying volatility could increase over the next 24-48 hours. Meanwhile, the USD/JPY continues to balance along our 1st tier uptrend and 2nd tier downtrend lines as bulls fight to get the currency pair back above its psychological 95 level. Broad-based appreciation of the Dollar continues to be the theme around the FX markets with sizable pullbacks occurring in both the GBP/USD and EUR/USD. The Dollar’s overall strength is helping buoy the USD/JPY, and may result in nice pop tomorrow should the pattern continue with tons of economic data and heightened volatility. If the USD/JPY’s upward momentum should carry it beyond 95, the currency pair will have to deal with our 3rd tier downtrend line next along with 7/31 highs.
Present Price: 94.42
Resistances: 94.53, 94.71, 94.95, 95.26, 95.54
Supports: 94.08, 93.88, 93.65, 93.42, 93.27
Psychological: 95
Gold Recoups Some Early Losses with Mixed U.S. Data
Gold is erasing some of its losses from earlier in the session resulting from Core Durable Goods Orders coming in two basis points below analyst expectations. The Dollar appreciated across the board in reaction to the news, sending the precious metal tumbling due to its negative correlation with the Greenback. However, better than expected New Home Sales data helped stem the bleeding, bouncing the precious metal off of its $940/oz level. The EUR/USD and GBP/USD are holding onto their 1st tier and 2nd tier uptrend lines, respectively. Hence, gold is trading back within reach of $950/oz while hovering within the trading range created by our trend lines. Speaking of which, gold’s trend lines will be experiencing multiple inflection points over the next 24-48 hours, relaying the theme of heightened volatility present in the FX markets. Investors will receive a truckload of heavily-weighted economic data tomorrow, meaning gold should remain in a respectable range until we see the results of America’s Prelim GDP.
Gold will ultimately follow its negative correlation with the Dollar, meaning investors should keep a close eye on both the EUR/USD and GBP/USD and their interaction with their respective trend lines. It seems a turning point could be approaching this week. Since momentum has quickly turned sour for the Cable and EUR/USD, this does not bode well for gold. Hence, we believe gold’s present pullback could pick up pace. Technically speaking, our gold’s 2nd tier uptrend line should play an important role. If our 2nd tier doesn’t hold, the precious metal may soon be testing 8/17 and 7/29 lows. Below these technical cushions gold also has our 1st tier uptrend line. As for the topside, gold must face our 2nd and 3rd tier uptrend lines along with the lid of the highly psychological $950/oz zone.
Present Price: $943.75/oz
Resistances: $944.50/oz, $946.40/oz, $947.92/oz, $949.69/oz, $951.46/oz
Supports: $942.98/oz, $941.46/oz, $939.94/oz, $938.04/oz, $936.90/oz
Psychological: $950/oz
The S&P Futures Stuck in Neutral Following Mixed Data
The S&P futures remain stuck in neutral after worse than expected Core Durable Goods Orders data was counterbalanced by an impressive New Home Sales number. Investors are also digesting the combination of weak Japanese exports and strong German Ifo Business Climate reports. The S&P futures are at a crossroads again and investors aren’t taking sides until they see tomorrow’s Prelim GDP number. We notice the GBP/USD, EUR/USD, gold, and crude are holding onto their respective uptrend lines in anticipation of tomorrow’s wave of important data. Speaking of correlations, the Dollar has experienced a broad-based appreciation, increasing the downward pressure on the S&P futures. However, the S&P futures have proven resilient despite the Dollar’s appreciation. A better than expected GDP number could buck the Dollar’s appreciation and send the S&P futures charging higher, and vice-versa. Although, investors should take note of the negative behavior of the S&P’s correlations and tread with caution over the next 24-48 hours since we anticipate heightened volatility.
Meanwhile, the S&P futures are still trading comfortably above the highly psychological 1000 level. Therefore, a pullback resulting from a weak GDP number would likely hit a temporary cushion around 1000 and 8/21 lows. On the other hand, separation from 1000 gives the S&P the mobility to log more significant movements to the topside should the data impress. In addition to Prelim GDP the U.S. will release weekly Unemployment Claims tomorrow. Unemployment Claims revealed an uncomfortable increase from their previous release. If the trend continues and Unemployment Claims surpass 600k again, this could place more downward pressure on the S&P futures since investors will become more concerned about future consumption and economic growth.
Price: 1025.75
Resistances: 1026.25, 1032.75, 1038
Supports: 1020.75, 1018, 1010.75, 1004
Psychological: 1000
Crude Future’s Decline Buoyed by Slight Inventory Surplus
Crude futures are recovering to our 2nd tier uptrend line, previously our 1st tier, following a slight surplus in weekly inventories. Crude futures have managed to avoid testing $70bbl after pulling back in reaction to an appreciating Dollar and lower than expect Core Durable Goods Orders data. In addition to the negative DGO data, Japan reported weak export data late Tuesday. Both data releases show consumption may not be improving as quickly as analysts hope, decreasing the amount of crude consumed during the manufacturing and production process. These developments do not bode well for the demand side of the equation. Fortunately for bulls, the supply side improved following the inventory shortage caused by the cash for clunkers program. However, crude futures did experience climbing sell-side activity yesterday, implying there is some weight behind the pullback. It will be very important for crude futures to hold onto our 1st tier uptrend line and their psychological $70/bbl level should the selloff continue. A contraction beneath our 1st tier uptrend line could spell a retest of August lows.
Meanwhile, crude futures should hold above $70/bbl as the GBP/USD and EUR/USD look to consolidate ahead of Thursday’s heavy-weight data releases. The U.S. will release Prelim GDP and weekly Unemployment Claims. GDP will be the primary focus. If Prelim GDP comes in lower than expected, we will likely witness crude’s pullback take another leg down with the S&P futures. However, a much better than expected number should have the opposite impact. Crude futures certainly have their fair share of obstacles to overcome to the topside, including our 3 downtrend lines and the psychological $75/bbl. If crude futures can climb above our 3rd tier downtrend line crude futures could experience explosive near-term gains. Investors should fasten their seatbelts because the FX markets and gold all indicate increasing volatility over the next 24-48 hours.
Price: $70.99/bbl
Resistances: $71.29/bbl, $71.71/bbl, $72.07/bbl, $72.46/bbl
Supports: $70.71/bbl, $770.32bbl, $69.86/bbl, $69.36/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.
