Daily Market Commentary
EUR/USD Climbs above our 4th Tier Downtrend Line
The EUR/USD has popped above our key 4th tier downtrend line after the combination of better than expected U.S. and British GDP data with an encouraging EU Services Confidence number has motivated bulls to re-enter the risk pool. The S&P futures are knocking at the door of their previous 2009 highs while the 30 Year T-Bond futures drop like a rock. To top the cake, gold is registering an explosive move to the topside. As a result, all of the EUR/USD’s correlations are indicating a bullish movement approaching. It appears the volatility we were anticipating is finally kicking in. The EUR/USD’s ascent past our 4th tier downtrend line is a key technical move in our eyes since it runs through August highs. Hence, the EUR/USD may be headed for a larger leg up with a high probability of retesting these August 5th highs. We notice volume is picking up on the buy-side, highlighted by the 1-hour chart.
Even though America’s better than expected GDP number passed by without a flinch, Britain’s GDP number is driving home the fact that the global economy is stabilizing. However, there are a few cautionary notes hiding behind the silver lining. U.S. Unemployment Claims aren’t dropping as quickly as projected and Japan’s economy is taking a beating. Furthermore, it remains to see what impact tighter liquidity in China will have on the EU’s manufacturing base. If China cools down, the EU’s rebound may hit a speed bump since Chinese demand has been fueling the global economic recovery. Regardless, the S&P futures may be the driving force behind the EUR/USD’s next leg up as they distance themselves from 1000 and head to new highs. Investors aren’t discouraged by the mixed economic data and are buying into the concept of a lasting recovery. Hence, even though China may tap on the brakes, rising U.S. demand for EU exports could more than compensate from the slowdown in the East.
The EUR/USD’s technical obstacles to the topside will likely be August highs and the meat of the 8/3-8/6 trading range. Beyond these levels the next level of significance is the currency pair’s psychological 1.45 level. As for the downside, the EUR/USD has multiple uptrend lines, intraday lows, and our support levels to fall back on.
Present Price: 1.4367
Resistances: 1.4373, 1.4383, 1.4397, 1.4410, 1.4424
Supports: 1.4340, 1.4327, 1.4310, 1.4297, 1.4281
Psychological: 1.40, 1.45
GBP/USD Touches Bottom on our 2nd Tier and Surges
The Cable has finally found bottom on our 2nd tier uptrend line, logging encouraging movements to the topside as the EUR/GBP pulls back. Despite mixed economic data, investors are choosing to run with the better than expected GDP data from both Britain and the U.S. As we anticipated, the flush of British data is appeasing Cable investors by taking their minds off of the BOE’s recent injection of liquidity into Britain’s QE package. The fact Britain’s GDP came in a basis point better than expectations shows the BOE’s monetary shock may be more cautionary than preventative. However, Britain’s stream of data comes with a red flag since CBI Realized Sales, Prelim Business Investment, and GfK Consumer Confidence were all weaker than analyst expectations yesterday. Hence, British consumption is still struggling to approach pre-crisis levels, and the sharp decline in business investment is certainly disconcerting. Therefore, we’re not sure how long the Pound’s resurgence will last, and the excitement surrounding an oversold Cable may fade quickly. On the other hand, the S&P futures are knocking on the door of their previous 2009 highs while gold surges well past $950/oz. Since the Cable is positively correlated with both of these investment vehicles, the currency pair should be inclined to participate with any immediate-term run to the topside in either U.S. equities or precious metals.
Technically speaking, the GBP/USD must deal with our 3rd tier downtrend line and 8/25 highs. After these technical barriers the currency pair will need to overcome its psychological 1.65 level, no easy feat. Furthermore, even if the Cable’s upward momentum should carry the currency pair beyond these resistances, we can create many more downtrend lines if need be. This is the price the Cable must pay for experiencing such an aggressive pullback over the past month. Britain’s mixed data won’t cut it, and the GBP/USD will need an impressive showing on all fronts to piece together a more meaningful rally. As for the downside, the Cable has a little more breathing room for now. The GBP/USD has 8/17 and 8/27 lows along with our 1st and 2nd tier downtrend and 1st tier uptrend lines serving as technical cushions.
Britain will keep the data train rolling next week by releasing its Halifax HPI, Manufacturing PMI, and Net Lending to Individuals on Tuesday. Additionally, we’ll receive more economic data from the U.S., Japan, China, and the EU. Least we mention there is an ECB monetary policy decision on Thursday. Hence, today’s volatility should carry over into the next trading week.
Present Price: 1.6341
Resistances: 1.6367, 1.6394, 1.6410, 1.6427, 1.6455
Supports: 1.6337, 1.6302, 1.6277, 1.6261, 1.6247
Psychological: 1.60, 1.65
USD/JPY Declines as DPJ Looks to Take Control
The USD/JPY is weakening despite disappointing Japanese data combined with positively mixed U.S. numbers. This combination of economic data would normally be a positive catalyst for the USD/JPY due to the outperformance of the U.S. economy vs. the Japanese economy. Furthermore, the added signs that the global economic recovery is spreading would usually lead investors to sell the Yen and snatch up riskier currencies. However, the trading today seems to be more focused on the governmental election taking place in Japan. It seems the LDP will lose power for the first time in 50 years. Investors are speculating that the DPJ’s more conservative fiscal approach may result in a stronger Yen. Hence, we see the Yen appreciating not only against the Dollar, but also against the Pound and the Euro as well. Furthermore, even though we’ve received some positive economic data from the West, the consumption-oriented numbers left something to be desired.
U.S. and British consumer confidence readings showed little improvement while U.S. Unemployment Claims and Personal Spending remain at discouraging levels. Furthermore, Core Durable Goods Orders came in two basis points below analyst expectations earlier this week. Lastly, China has decided to reign in its liquidity to try and deflate asset bubbles. The combination of these economic developments does not bode well for the demand for Japanese exports. Hence, Japan’s struggling economy may not have much relief in sight. Japanese consumer prices are sinking while household spending declines, both are ramifications of rising unemployment.
Negative economic data and a shift in governmental power seem to have investors favoring the Yen. The USD/JPY is trading back below our 1st tier and 2nd tier uptrend lines, a risky move technically. All of the sudden the USD/JPY is reconsidering a test of July lows. Meanwhile, the
USD/JPY has several difficult downtrend lines bearing overhead, telling us momentum is turning in favor of the bears again. Japan will release more important economic data to kick off the next trading week, including Prelim Industrial Production, Retail Sales, and Average Cash Earnings. The combination of a governmental election and more key economic data should result in rising volatility. Additionally, investors will receive important economic data from the U.S., China, and the EU. Therefore, investors should fasten their seatbelts and keep an eye on the shifting fundamentals.
Present Price: 93.52
Resistances: 93.42, 93.27, 93.08, 92.85, 92.68
Supports: 93.47, 93.88, 94.08, 94.25, 94.44
Psychological: 95
Gold Shines Amid Inflection Points
Gold is rushing higher as our 2nd tier uptrend and 1st tier downtrend lines collide. The precious metal is reacting positively to its multiple inflection points, a reverse of course from what we anticipated earlier. The EUR/USD is experiencing a technical breakout to the topside after elbowing through our 4th tier downtrend line while the Dollar depreciates against the Yen. Gold has exhibited a tighter positive correlation with the EUR/USD lately than the rest of the Dollar crosses. Hence, investors are brushing aside the Dollar’s appreciation against the Pound considering Britain’s cup of economic data has been half empty. Meanwhile, investors are dipping into crude and the S&P futures, all signs that higher-risk investors are getting back into the game.
All of these developments bode well for gold, and the precious metal has responding by leaping past $950/oz. We recognize a spike of buy-side volume on the 1-hour, signaling the upward movement has some conviction. However, investors should keep in mind gold’s $950/oz psychological trading range has proven far-reaching. Therefore, we are not discounting the possibility that gold could re-gravitate towards $950/oz. Meanwhile, we’ve reset our top-end downtrend line to compensate for today’s activity. The precious metal still faces our 2nd and 3rd tier downtrend lines along with August highs. Gold will need a considerable burst of energy to climb past these technical barriers before the week is over. Hence, a downward force remains. As for the downside, gold now has $950/oz and our 2nd tier uptrend line to rely upon. Therefore, the precious metal has solid near-term protection.
Present Price: $957.60/oz
Resistances: $958.82/oz, $959.72/oz, $960.87/oz, $962.01/oz, $963.16/oz
Supports: $956.02/oz, $954.74/oz, $953.08/oz, $951.94/oz, $950.66/oz
Psychological: $950/oz
The S&P Futures Can’t Get out of Neutral
The S&P futures are continuing their sideways movements as mixed economic data points negate each other. While yesterday’s Prelim GDP outpaced analyst expectations, weekly Unemployment Claims are floating back towards 600k and America’s employment market doesn’t seem to be improving. Furthermore, today’s slightly better than expected U of M Consumer Confidence number was countered by weak personal spending data. Hence, unemployment remains abnormally high, creating a strain on consumption. However, a depreciating Dollar is leading a recovery in demand for U.S. exports and manufactured goods while government programs boost GDP. Additionally, corporate earnings from technology companies continue to impress as both Dell and Intel revealed their respective earnings outlooks are looking up. The positive spots of economic recovery and growth are strong enough to keep the S&P futures comfortably above their highly psychological 1000 level. However, global economic developments are testing the patience of investor uncertainty.
The SCI dropped another 3% today after China announced it is following through on its plan to tighten liquidity in order to try and deflate the asset bubbles popping up in equity and real-estate markets. The government’s decision to cool down their economy is worrying investors since China has been the engine of growth in the global economic recovery. Additionally, economic data this week from Britain has been mixed and disconcerting. Despite the slightly better than expected GDP number, Britain’s consumer confidence is lagging behind the economy’s fundamental improvements. These disconcerting economic developments are preventing the S&P futures from taking off, and the futures are instead forming a thin consolidative pattern.
Despite present consolidation, we expect volatility could pick up next week. We will receive more key data from the U.S., Japan, China and Britain. Japan will kick off the week with several indicators and investors will focus in on China’s Manufacturing PMI number late Monday. If China’s economy really is cooling off then the S&P futures may be inclined to pullback, and vice versa. However, if declining Japanese exports to China are any indicator, China’s upcoming economic data may be miss analyst expectations by a slim margin. The U.S. will join the party on Tuesday by releasing ISM Manufacturing PMI and Pending Home Sales data. Hence, rising volatility appears to be in the cards. On the other hand, mixed data may just lead to more consolidation as investors opt to enjoy the summer.
Although movements in the S&P futures have been limited, we recognize encouraging gains in the EUR/USD, GBP/USD, and gold. Meanwhile, crude futures are holding up well above their psychological $70/bbl mark. Hence, the S&P’s correlations are green and creating a positive environment for bulls. As a result, if next week’s economic data impresses the S&P’s correlations are in position to support a substantial breakout to the topside. However, data has been coming in mixed, so uncertainty is present.
Price: 1025.75
Resistances: 1026.25, 1032.75, 1038
Supports: 1020.75, 1018, 1010.75, 1004
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 Climbs above our 4th Tier Downtrend Line
The EUR/USD has popped above our key 4th tier downtrend line after the combination of better than expected U.S. and British GDP data with an encouraging EU Services Confidence number has motivated bulls to re-enter the risk pool. The S&P futures are knocking at the door of their previous 2009 highs while the 30 Year T-Bond futures drop like a rock. To top the cake, gold is registering an explosive move to the topside. As a result, all of the EUR/USD’s correlations are indicating a bullish movement approaching. It appears the volatility we were anticipating is finally kicking in. The EUR/USD’s ascent past our 4th tier downtrend line is a key technical move in our eyes since it runs through August highs. Hence, the EUR/USD may be headed for a larger leg up with a high probability of retesting these August 5th highs. We notice volume is picking up on the buy-side, highlighted by the 1-hour chart.
Even though America’s better than expected GDP number passed by without a flinch, Britain’s GDP number is driving home the fact that the global economy is stabilizing. However, there are a few cautionary notes hiding behind the silver lining. U.S. Unemployment Claims aren’t dropping as quickly as projected and Japan’s economy is taking a beating. Furthermore, it remains to see what impact tighter liquidity in China will have on the EU’s manufacturing base. If China cools down, the EU’s rebound may hit a speed bump since Chinese demand has been fueling the global economic recovery. Regardless, the S&P futures may be the driving force behind the EUR/USD’s next leg up as they distance themselves from 1000 and head to new highs. Investors aren’t discouraged by the mixed economic data and are buying into the concept of a lasting recovery. Hence, even though China may tap on the brakes, rising U.S. demand for EU exports could more than compensate from the slowdown in the East.
The EUR/USD’s technical obstacles to the topside will likely be August highs and the meat of the 8/3-8/6 trading range. Beyond these levels the next level of significance is the currency pair’s psychological 1.45 level. As for the downside, the EUR/USD has multiple uptrend lines, intraday lows, and our support levels to fall back on.
Present Price: 1.4367
Resistances: 1.4373, 1.4383, 1.4397, 1.4410, 1.4424
Supports: 1.4340, 1.4327, 1.4310, 1.4297, 1.4281
Psychological: 1.40, 1.45
GBP/USD Touches Bottom on our 2nd Tier and Surges
The Cable has finally found bottom on our 2nd tier uptrend line, logging encouraging movements to the topside as the EUR/GBP pulls back. Despite mixed economic data, investors are choosing to run with the better than expected GDP data from both Britain and the U.S. As we anticipated, the flush of British data is appeasing Cable investors by taking their minds off of the BOE’s recent injection of liquidity into Britain’s QE package. The fact Britain’s GDP came in a basis point better than expectations shows the BOE’s monetary shock may be more cautionary than preventative. However, Britain’s stream of data comes with a red flag since CBI Realized Sales, Prelim Business Investment, and GfK Consumer Confidence were all weaker than analyst expectations yesterday. Hence, British consumption is still struggling to approach pre-crisis levels, and the sharp decline in business investment is certainly disconcerting. Therefore, we’re not sure how long the Pound’s resurgence will last, and the excitement surrounding an oversold Cable may fade quickly. On the other hand, the S&P futures are knocking on the door of their previous 2009 highs while gold surges well past $950/oz. Since the Cable is positively correlated with both of these investment vehicles, the currency pair should be inclined to participate with any immediate-term run to the topside in either U.S. equities or precious metals.
Technically speaking, the GBP/USD must deal with our 3rd tier downtrend line and 8/25 highs. After these technical barriers the currency pair will need to overcome its psychological 1.65 level, no easy feat. Furthermore, even if the Cable’s upward momentum should carry the currency pair beyond these resistances, we can create many more downtrend lines if need be. This is the price the Cable must pay for experiencing such an aggressive pullback over the past month. Britain’s mixed data won’t cut it, and the GBP/USD will need an impressive showing on all fronts to piece together a more meaningful rally. As for the downside, the Cable has a little more breathing room for now. The GBP/USD has 8/17 and 8/27 lows along with our 1st and 2nd tier downtrend and 1st tier uptrend lines serving as technical cushions.
Britain will keep the data train rolling next week by releasing its Halifax HPI, Manufacturing PMI, and Net Lending to Individuals on Tuesday. Additionally, we’ll receive more economic data from the U.S., Japan, China, and the EU. Least we mention there is an ECB monetary policy decision on Thursday. Hence, today’s volatility should carry over into the next trading week.
Present Price: 1.6341
Resistances: 1.6367, 1.6394, 1.6410, 1.6427, 1.6455
Supports: 1.6337, 1.6302, 1.6277, 1.6261, 1.6247
Psychological: 1.60, 1.65
USD/JPY Declines as DPJ Looks to Take Control
The USD/JPY is weakening despite disappointing Japanese data combined with positively mixed U.S. numbers. This combination of economic data would normally be a positive catalyst for the USD/JPY due to the outperformance of the U.S. economy vs. the Japanese economy. Furthermore, the added signs that the global economic recovery is spreading would usually lead investors to sell the Yen and snatch up riskier currencies. However, the trading today seems to be more focused on the governmental election taking place in Japan. It seems the LDP will lose power for the first time in 50 years. Investors are speculating that the DPJ’s more conservative fiscal approach may result in a stronger Yen. Hence, we see the Yen appreciating not only against the Dollar, but also against the Pound and the Euro as well. Furthermore, even though we’ve received some positive economic data from the West, the consumption-oriented numbers left something to be desired.
U.S. and British consumer confidence readings showed little improvement while U.S. Unemployment Claims and Personal Spending remain at discouraging levels. Furthermore, Core Durable Goods Orders came in two basis points below analyst expectations earlier this week. Lastly, China has decided to reign in its liquidity to try and deflate asset bubbles. The combination of these economic developments does not bode well for the demand for Japanese exports. Hence, Japan’s struggling economy may not have much relief in sight. Japanese consumer prices are sinking while household spending declines, both are ramifications of rising unemployment.
Negative economic data and a shift in governmental power seem to have investors favoring the Yen. The USD/JPY is trading back below our 1st tier and 2nd tier uptrend lines, a risky move technically. All of the sudden the USD/JPY is reconsidering a test of July lows. Meanwhile, the
USD/JPY has several difficult downtrend lines bearing overhead, telling us momentum is turning in favor of the bears again. Japan will release more important economic data to kick off the next trading week, including Prelim Industrial Production, Retail Sales, and Average Cash Earnings. The combination of a governmental election and more key economic data should result in rising volatility. Additionally, investors will receive important economic data from the U.S., China, and the EU. Therefore, investors should fasten their seatbelts and keep an eye on the shifting fundamentals.
Present Price: 93.52
Resistances: 93.42, 93.27, 93.08, 92.85, 92.68
Supports: 93.47, 93.88, 94.08, 94.25, 94.44
Psychological: 95
Gold Shines Amid Inflection Points
Gold is rushing higher as our 2nd tier uptrend and 1st tier downtrend lines collide. The precious metal is reacting positively to its multiple inflection points, a reverse of course from what we anticipated earlier. The EUR/USD is experiencing a technical breakout to the topside after elbowing through our 4th tier downtrend line while the Dollar depreciates against the Yen. Gold has exhibited a tighter positive correlation with the EUR/USD lately than the rest of the Dollar crosses. Hence, investors are brushing aside the Dollar’s appreciation against the Pound considering Britain’s cup of economic data has been half empty. Meanwhile, investors are dipping into crude and the S&P futures, all signs that higher-risk investors are getting back into the game.
All of these developments bode well for gold, and the precious metal has responding by leaping past $950/oz. We recognize a spike of buy-side volume on the 1-hour, signaling the upward movement has some conviction. However, investors should keep in mind gold’s $950/oz psychological trading range has proven far-reaching. Therefore, we are not discounting the possibility that gold could re-gravitate towards $950/oz. Meanwhile, we’ve reset our top-end downtrend line to compensate for today’s activity. The precious metal still faces our 2nd and 3rd tier downtrend lines along with August highs. Gold will need a considerable burst of energy to climb past these technical barriers before the week is over. Hence, a downward force remains. As for the downside, gold now has $950/oz and our 2nd tier uptrend line to rely upon. Therefore, the precious metal has solid near-term protection.
Present Price: $957.60/oz
Resistances: $958.82/oz, $959.72/oz, $960.87/oz, $962.01/oz, $963.16/oz
Supports: $956.02/oz, $954.74/oz, $953.08/oz, $951.94/oz, $950.66/oz
Psychological: $950/oz
The S&P Futures Can’t Get out of Neutral
The S&P futures are continuing their sideways movements as mixed economic data points negate each other. While yesterday’s Prelim GDP outpaced analyst expectations, weekly Unemployment Claims are floating back towards 600k and America’s employment market doesn’t seem to be improving. Furthermore, today’s slightly better than expected U of M Consumer Confidence number was countered by weak personal spending data. Hence, unemployment remains abnormally high, creating a strain on consumption. However, a depreciating Dollar is leading a recovery in demand for U.S. exports and manufactured goods while government programs boost GDP. Additionally, corporate earnings from technology companies continue to impress as both Dell and Intel revealed their respective earnings outlooks are looking up. The positive spots of economic recovery and growth are strong enough to keep the S&P futures comfortably above their highly psychological 1000 level. However, global economic developments are testing the patience of investor uncertainty.
The SCI dropped another 3% today after China announced it is following through on its plan to tighten liquidity in order to try and deflate the asset bubbles popping up in equity and real-estate markets. The government’s decision to cool down their economy is worrying investors since China has been the engine of growth in the global economic recovery. Additionally, economic data this week from Britain has been mixed and disconcerting. Despite the slightly better than expected GDP number, Britain’s consumer confidence is lagging behind the economy’s fundamental improvements. These disconcerting economic developments are preventing the S&P futures from taking off, and the futures are instead forming a thin consolidative pattern.
Despite present consolidation, we expect volatility could pick up next week. We will receive more key data from the U.S., Japan, China and Britain. Japan will kick off the week with several indicators and investors will focus in on China’s Manufacturing PMI number late Monday. If China’s economy really is cooling off then the S&P futures may be inclined to pullback, and vice versa. However, if declining Japanese exports to China are any indicator, China’s upcoming economic data may be miss analyst expectations by a slim margin. The U.S. will join the party on Tuesday by releasing ISM Manufacturing PMI and Pending Home Sales data. Hence, rising volatility appears to be in the cards. On the other hand, mixed data may just lead to more consolidation as investors opt to enjoy the summer.
Although movements in the S&P futures have been limited, we recognize encouraging gains in the EUR/USD, GBP/USD, and gold. Meanwhile, crude futures are holding up well above their psychological $70/bbl mark. Hence, the S&P’s correlations are green and creating a positive environment for bulls. As a result, if next week’s economic data impresses the S&P’s correlations are in position to support a substantial breakout to the topside. However, data has been coming in mixed, so uncertainty is present.
Price: 1025.75
Resistances: 1026.25, 1032.75, 1038
Supports: 1020.75, 1018, 1010.75, 1004
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.
