Daily Market Commentary
EUR/USD Edges Lower Despite Encouraging Flash CPI
The EUR/USD gave us a head-fake to the topside yesterday, instead deciding to submit to the downward force of its trading range. The EUR/USD is fighting to stay above our 2nd tier uptrend line and previous bottom-end support of 1.4281 as investors digest the nearly -7% decline in China’s SCI. The EUR/USD’s inability to charge past our 4th tier downtrend line despite solid buy-side volume is a bit disconcerting. However, the EUR/USD continues to flex its relative strength after the EU’s CPI Flash Estimate came in two basis points ahead of analyst expectations. The recovery in the EU’s Flash CPI is a positive turn of events since spiraling prices have been the sore thumb in the EU’s economic recovery. It will be interesting to see if the EU’s PPI can register a similar stabilization once it rolls around. Even though the Flash CPI is showing improvement, EU prices continue to decline at a historic rate. However, today’s reading could buy the ECB some more time as the central bank tries to avoid another injection of liquidity. The CPI number comes just in time since the ECB will be making a monetary policy decision on Thursday. Although analysts aren’t expecting any further liquidity injections at this week’s meeting, investors should still be on their toes since the ECB has been prone to deliver monetary shocks in the past. In fact, the ECB may be uncomfortable with the rate the Euro is appreciating against the Pound, and could be tempted to deliver a shock to depreciate the Euro a bit and level the playing field.
Meanwhile, the EUR/USD is right in the gut of the trading zone created by our trend lines. The EUR/USD is relaying the message of a consolidating S&P. However, should the S&P futures follow the SCI lower, the EUR/USD may have little choice but to drop back towards our 1st tier uptrend line. On the other hand, we don’t expect that investors will send the EUR/USD through any significant technical areas until we receive the next couple sessions of EU data, including German Retail Sales and Unemployment Change on Tuesday and the EU’s Revised GDP on Wednesday. If the EU’s data comes in better than expected, investors may price in a neutral monetary stance at Thursday’s ECB meeting by appreciating the Euro against the Dollar. We will see how the condition develops over the next 24-48 hours.
We still believe our 4th tier downtrend line plays an important role to the topside, and investors should keep in mind the currency pair has been experiencing more buy-side than sell-side activity as of late. A majority of the EU economic data has been outpacing analyst expectations except for prices, which registered an about face today. Therefore, there is little reason to be fundamentally negative on the EUR/USD right now. It would take a blatantly negative turn of events in both EU and U.S. economic data this week to send the EUR/USD tumbling below our first tier uptrend line. Even if the EUR/USD should decline below our 1st tier uptrend line, we can form several more trend lines beneath, not to mention the currency pair has its highly psychological 1.40 level hanging far below present price. As for the topside, our 4th tier downtrend line plays an important technical role along with 8/27 highs. Meanwhile, the EUR/USD is a leg up away from a substantial breakout since July highs are within reach.
Present Price: 1.4288
Resistances: 1.4297, 1.4310, 1.4327, 1.4340, 1.4360
Supports: 1.4281, 1.4262, 1.4254, 1.439, 1.4219
Psychological: 1.40, 1.45
GBP/USD Finds Support in our 3rd Tier Uptrend Line Once Again
The GBP/USD is finding support in our 2nd tier turned 3rd tier uptrend line once again as the Greenback depreciates across the board. The Dollar’s broad-based depreciation is a bit odd considering the crude and the S&P futures are moving lower today in reaction to the SCI’s freefall during the Asian trading session. Since we haven’t witnessed any discernable deterioration in economic data today, we are attributing the S&P’s decline as a psychological reaction to the downturn in the SCI. Hence, investors should refrain from reading too far into the S&P’s present pullback. We can tell you theme today is one of a weaker Dollar, highlighted by large gains in the EUR/USD and losses in the USD/JPY. Meanwhile, gold is caught in the headwinds with little sense of direction.
Investors are becoming more comfortable with the GBP/USD after Britain’s GDP number came in one basis point above expectations on Friday. However, investors should keep in mind the rest of Britain’s data was disappointing, including disconcerting outlooks for both consumer sentiment and business investment. As a result, the Pound continues to experience a relative weakness, signified by the incessant rise of the EUR/GBP. Britain will have a chance to redeem itself tomorrow when it releases its Halifax HPI, Manufacturing PMI and Net Lending to Individuals data points. While we expect the Halifax data to impress since British housing data has been a bright spot lately, the more significant event will be to see whether Britain’s Manufacturing PMI can expand on its return to growth. If so, the Pound may receive a boost of buy-side activity.
Technically speaking, the GBP/USD must deal with our 2nd and 3rd tier downtrend lines along with 8/28 highs. After these technical barriers, the currency pair should have a clear shot at its psychological 1.65 level. However, 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 our 2nd and 3rd tier uptrend lines along with 8/27 lows to fall back on. If these technical cushions don’t hold, the GBP/USD should experience considerable support in its psychological 1.60 level. Meanwhile, investors should take note that our 3rd tier uptrend line is reaching an inflection point with our 1st and 2nd tier downtrend lines over the next 24-48 hours, indicating a forthcoming area of high volatility. The multiple inflection points are not surprising considering the important British data hitting the wire soon.
Present Price: 1.6277
Resistances: 1.6294, 1.6313, 1.6340, 1.6379, 1.6416
Supports: 1.6251, 1.6212, 1.6181, 1.6146, 1.6119
Psychological: 1.60, 1.65
USD/JPY Continues Pullback with DPJ Victory Official
The USD/JPY is reacting negatively to the inflection point of our 2nd tier uptrend and downtrend lines. Investors continue to favor the Yen in the wake of a shift in Japanese governmental power to the DPJ. Investors are speculating the DPJ’s more conservative fiscal stance will result in a stronger Yen as we recognize similar pullbacks in both the EUR/JPY and GBP/JPY despite the Greenback’s broad-based depreciation. To exacerbate the rush to the Yen, Japan reported some positive economic data today for a change of pace. Prelim Industrial Production, Retail Sales, and Average Cash Earnings all exceeding analyst expectations. Hence, investors have just another incentive to favor the Yen over the Dollar. However, investors should keep in mind Japan’s wave of economic data over the past week has been negative for the most part. Investors will be paying close attention to China’s Manufacturing PMI data late Monday. If China’s economic data continues to cool down, the USD/JPY may hit a bottom since investors will be concerned about the impact this will have on China’s demand for Japanese exports.
Meanwhile, the USD/JPY is drifting uncomfortably far away from our 1st tier and 2nd tier uptrend lines, indicating a retest of July lows. As a result, it will important to see whether the USD/JPY can recover from today’s pullback and climb into the safety of our 1st tier uptrend line. Regardless, the USD/JPY is burning bridges while flirting with the idea of retesting yearly lows. Therefore, it’s safe to say the USD/JPY’s downward momentum is in the driver’s seat. The currency pair has quite a battle ahead of itself to the topside. Focus will return to China, the U.S. and Britain with Japanese elections and economic data out of the way. As a result, we will monitor which correlations come into play over the next 24 hours.
Present Price: 92.73
Resistances: 92.98, 93.17, 93.27, 93.54, 93.74
Supports: 92.73, 92.55, 92.36, 92.08, 91.91
Psychological: 95, 90
Gold Shines Amid Inflection Points
Gold gave us a head-fake on Friday along with the EUR/USD as the precious metal buckled despite substantial buy-side action on the 1-hour. Gold has proceeded to re-gravitate towards its highly psychological $950/oz level. Today investors are caught in the middle of declining equities and a depreciating Dollar. However, since the precious metal tends to follow the Dollar more closely than equities, the bulls are winning out as gold sets a new bottom above Thursday lows. The battle between the bulls and the bears continues with $950/oz serving as the median. Ideally, bulls are looking for the combination of rising equities and a depreciating Dollar. Unfortunately, the Dollar and equities have been out of sync as proponents of the global economic recovery counterbalance the naysayers expecting a sizable pullback in the S&P futures. Regardless, investors should pay closer attention to the Dollar since gold should ultimately follow its negative correlation with the Greenback.
Technically speaking, gold faces multiple uptrend and downtrend lines in either direction. However, overall momentum continues to pull in favor of the bulls considering all of gold’s consecutive lows combined with the fact that the S&P futures are still trading comfortably above 1000. On the other hand, should S&P futures deteriorate, it will be interesting to see whether gold decides to follow suit if the Dollar continues to depreciate. The big concern would be if a decline in U.S. equities is accompanied by a pullback in the EUR/USD and GBP/USD, causing gold to tumble in the process. Any decline below our 1st tier uptrend line could result in a sizable leg down. Therefore, investors should keep a close eye on the correlation between the Dollar and the S&P futures. As for the topside, gold face our 2nd and 3rd tier downtrend lines along with 8/28 highs. An eclipse of these 3 barriers would likely result in a retest of previous August highs.
Present Price: $950.00/oz
Resistances: $949.73/oz, $950.75/oz, $953.42/oz, $955.58/oz, $957.36/oz
Supports: $947.69/oz, $946.63/oz, $945.15/oz, $943.88/oz, $942.74/oz
Psychological: $950/oz
The S&P Futures Sink Lower Following SCI’s Skid
The SCI’s nearly -7% plunge has caught investors off-guard, and the S&P futures are declining despite better than expected Chicago PMI data. However, we suggest investors shouldn’t get too carried away with the SCI’s selloff since the decline has more to do with liquidity and psychology than economic fundamentals. With the Chinese government tightening liquidity, Chinese investors will likely need to start paying back the loans they’ve invested into equities, hence the sharp contraction following the news. While China’s actions are sure to cool its economy further, we believe wrangling in liquidity is the best choice for China’s economy over the medium to long-term. Tightening liquidity and deflating the asset bubbles should help China avoid a more dramatic downturn in the future, securing the economy’s longer-term growth trajectory. Investors will get another peek at the state of China’s economy at the open of the Asian trading session tomorrow. China will release some important Manufacturing PMI data and investors will be looking for China’s rapid economic recovery to continue. These PMI numbers should be market movers since investors have been paying particularly close attention to the Chinese economy lately.
The U.S. will release Manufacturing PMI data of its own on Tuesday along with Pending Home Sales. While we expect Pending Home Sales to come in positive due to the upturn in America’s housing market, the key will be for the ISM Manufacturing PMI to turn positive for the first time since July 2008. Tomorrow’s ISM heading for expansion (50+) could have a positive impact on investor psychology. Combined with a better than expected Chinese Manufacturing PMI, the S&P could experience a substantial rebound. However, if both numbers miss expectations, we could witness exactly the opposite and a sub-1000 S&P. Meanwhile, the FX markets are experiencing a broad-based depreciation in the Greenback, a bit odd considering the pullback in equities. However, the Dollar could be ahead of the curve, signaling a better few sessions ahead. On the other hand, crude futures are freefalling below $70/bbl and our 1st tier uptrend line. Therefore, crude is sending quite the opposite message. Investors may opt to see tomorrow’s wave of data before making a stronger commitment in either direction. We can say immediate-term momentum is shifting to the downside. If our 1st tier uptrend line doesn’t hold we could witness a more protracted selloff. However, the 1000 trading zone should continue to play a prominent role and will be tough to defeat. As for the topside, the S&P futures need to brave above our 2nd tier uptrend line and the lid of the 8/21-8/31 trading range.
Price: 1016.25
Supports: 1015, 1010.75, 1002.25, 995.25
Resistances: 1023.5, 1030, 1034, 1038
Psychological: 1000
Crude Futures Plummet with SCI
Crude futures have slammed beneath $70/bbl following a nearly -7% decline in the SCI during the Asian trading session. Investors are deeply concerned about the Chinese economy slowing down. We’ve noticed Chinese imports are dropping quickly and the BDI is heading south. The decline in shipping activity indicates China may be slowing down its commodity buying spree as the government’s stimulus package starts to tap out. There is no secret that China’s demand for commodities has been the driving force behind the recovery in crude, copper, etc. Therefore, the stream of news out of China is driving crude futures lower despite today’s broad-based appreciation of the Dollar. However, we’ll receive Manufacturing PMIs from China, Britain and the U.S. over the next 24 hours. Better than expected results could help crude futures find a temporary bottom since this would improve the outlook for consumption. On the other hand, weaker than expected Manufacturing PMI data would likely exacerbate crude’s current pullback.
Technically speaking, crude’s decline below our 1st tier uptrend line and $70/bbl are both strong technical movements to the downside. Therefore, it appears as if crude could be heading for another leg down, at least this is what the technicals are telling us. Then again, the concrete fundamentals are still in favor of strong crude with known demand holding steady and supply declining. However, it seems investors are taking a more speculative, forward-looking approach to pricing today. Meanwhile, the key for the bulls will be getting crude back above $70/bbl and our 1st tier uptrend line.
Price: $69.50/bbl
Resistances: $69.86/bbl, $70.44/bbl, $70.94/bbl, $71.55/bbl
Supports: $69.36/bbl, $69.11/bbl, $68.66/bbl, $68.24/bbl, $67.87/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 Edges Lower Despite Encouraging Flash CPI
The EUR/USD gave us a head-fake to the topside yesterday, instead deciding to submit to the downward force of its trading range. The EUR/USD is fighting to stay above our 2nd tier uptrend line and previous bottom-end support of 1.4281 as investors digest the nearly -7% decline in China’s SCI. The EUR/USD’s inability to charge past our 4th tier downtrend line despite solid buy-side volume is a bit disconcerting. However, the EUR/USD continues to flex its relative strength after the EU’s CPI Flash Estimate came in two basis points ahead of analyst expectations. The recovery in the EU’s Flash CPI is a positive turn of events since spiraling prices have been the sore thumb in the EU’s economic recovery. It will be interesting to see if the EU’s PPI can register a similar stabilization once it rolls around. Even though the Flash CPI is showing improvement, EU prices continue to decline at a historic rate. However, today’s reading could buy the ECB some more time as the central bank tries to avoid another injection of liquidity. The CPI number comes just in time since the ECB will be making a monetary policy decision on Thursday. Although analysts aren’t expecting any further liquidity injections at this week’s meeting, investors should still be on their toes since the ECB has been prone to deliver monetary shocks in the past. In fact, the ECB may be uncomfortable with the rate the Euro is appreciating against the Pound, and could be tempted to deliver a shock to depreciate the Euro a bit and level the playing field.
Meanwhile, the EUR/USD is right in the gut of the trading zone created by our trend lines. The EUR/USD is relaying the message of a consolidating S&P. However, should the S&P futures follow the SCI lower, the EUR/USD may have little choice but to drop back towards our 1st tier uptrend line. On the other hand, we don’t expect that investors will send the EUR/USD through any significant technical areas until we receive the next couple sessions of EU data, including German Retail Sales and Unemployment Change on Tuesday and the EU’s Revised GDP on Wednesday. If the EU’s data comes in better than expected, investors may price in a neutral monetary stance at Thursday’s ECB meeting by appreciating the Euro against the Dollar. We will see how the condition develops over the next 24-48 hours.
We still believe our 4th tier downtrend line plays an important role to the topside, and investors should keep in mind the currency pair has been experiencing more buy-side than sell-side activity as of late. A majority of the EU economic data has been outpacing analyst expectations except for prices, which registered an about face today. Therefore, there is little reason to be fundamentally negative on the EUR/USD right now. It would take a blatantly negative turn of events in both EU and U.S. economic data this week to send the EUR/USD tumbling below our first tier uptrend line. Even if the EUR/USD should decline below our 1st tier uptrend line, we can form several more trend lines beneath, not to mention the currency pair has its highly psychological 1.40 level hanging far below present price. As for the topside, our 4th tier downtrend line plays an important technical role along with 8/27 highs. Meanwhile, the EUR/USD is a leg up away from a substantial breakout since July highs are within reach.
Present Price: 1.4288
Resistances: 1.4297, 1.4310, 1.4327, 1.4340, 1.4360
Supports: 1.4281, 1.4262, 1.4254, 1.439, 1.4219
Psychological: 1.40, 1.45
GBP/USD Finds Support in our 3rd Tier Uptrend Line Once Again
The GBP/USD is finding support in our 2nd tier turned 3rd tier uptrend line once again as the Greenback depreciates across the board. The Dollar’s broad-based depreciation is a bit odd considering the crude and the S&P futures are moving lower today in reaction to the SCI’s freefall during the Asian trading session. Since we haven’t witnessed any discernable deterioration in economic data today, we are attributing the S&P’s decline as a psychological reaction to the downturn in the SCI. Hence, investors should refrain from reading too far into the S&P’s present pullback. We can tell you theme today is one of a weaker Dollar, highlighted by large gains in the EUR/USD and losses in the USD/JPY. Meanwhile, gold is caught in the headwinds with little sense of direction.
Investors are becoming more comfortable with the GBP/USD after Britain’s GDP number came in one basis point above expectations on Friday. However, investors should keep in mind the rest of Britain’s data was disappointing, including disconcerting outlooks for both consumer sentiment and business investment. As a result, the Pound continues to experience a relative weakness, signified by the incessant rise of the EUR/GBP. Britain will have a chance to redeem itself tomorrow when it releases its Halifax HPI, Manufacturing PMI and Net Lending to Individuals data points. While we expect the Halifax data to impress since British housing data has been a bright spot lately, the more significant event will be to see whether Britain’s Manufacturing PMI can expand on its return to growth. If so, the Pound may receive a boost of buy-side activity.
Technically speaking, the GBP/USD must deal with our 2nd and 3rd tier downtrend lines along with 8/28 highs. After these technical barriers, the currency pair should have a clear shot at its psychological 1.65 level. However, 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 our 2nd and 3rd tier uptrend lines along with 8/27 lows to fall back on. If these technical cushions don’t hold, the GBP/USD should experience considerable support in its psychological 1.60 level. Meanwhile, investors should take note that our 3rd tier uptrend line is reaching an inflection point with our 1st and 2nd tier downtrend lines over the next 24-48 hours, indicating a forthcoming area of high volatility. The multiple inflection points are not surprising considering the important British data hitting the wire soon.
Present Price: 1.6277
Resistances: 1.6294, 1.6313, 1.6340, 1.6379, 1.6416
Supports: 1.6251, 1.6212, 1.6181, 1.6146, 1.6119
Psychological: 1.60, 1.65
USD/JPY Continues Pullback with DPJ Victory Official
The USD/JPY is reacting negatively to the inflection point of our 2nd tier uptrend and downtrend lines. Investors continue to favor the Yen in the wake of a shift in Japanese governmental power to the DPJ. Investors are speculating the DPJ’s more conservative fiscal stance will result in a stronger Yen as we recognize similar pullbacks in both the EUR/JPY and GBP/JPY despite the Greenback’s broad-based depreciation. To exacerbate the rush to the Yen, Japan reported some positive economic data today for a change of pace. Prelim Industrial Production, Retail Sales, and Average Cash Earnings all exceeding analyst expectations. Hence, investors have just another incentive to favor the Yen over the Dollar. However, investors should keep in mind Japan’s wave of economic data over the past week has been negative for the most part. Investors will be paying close attention to China’s Manufacturing PMI data late Monday. If China’s economic data continues to cool down, the USD/JPY may hit a bottom since investors will be concerned about the impact this will have on China’s demand for Japanese exports.
Meanwhile, the USD/JPY is drifting uncomfortably far away from our 1st tier and 2nd tier uptrend lines, indicating a retest of July lows. As a result, it will important to see whether the USD/JPY can recover from today’s pullback and climb into the safety of our 1st tier uptrend line. Regardless, the USD/JPY is burning bridges while flirting with the idea of retesting yearly lows. Therefore, it’s safe to say the USD/JPY’s downward momentum is in the driver’s seat. The currency pair has quite a battle ahead of itself to the topside. Focus will return to China, the U.S. and Britain with Japanese elections and economic data out of the way. As a result, we will monitor which correlations come into play over the next 24 hours.
Present Price: 92.73
Resistances: 92.98, 93.17, 93.27, 93.54, 93.74
Supports: 92.73, 92.55, 92.36, 92.08, 91.91
Psychological: 95, 90
Gold Shines Amid Inflection Points
Gold gave us a head-fake on Friday along with the EUR/USD as the precious metal buckled despite substantial buy-side action on the 1-hour. Gold has proceeded to re-gravitate towards its highly psychological $950/oz level. Today investors are caught in the middle of declining equities and a depreciating Dollar. However, since the precious metal tends to follow the Dollar more closely than equities, the bulls are winning out as gold sets a new bottom above Thursday lows. The battle between the bulls and the bears continues with $950/oz serving as the median. Ideally, bulls are looking for the combination of rising equities and a depreciating Dollar. Unfortunately, the Dollar and equities have been out of sync as proponents of the global economic recovery counterbalance the naysayers expecting a sizable pullback in the S&P futures. Regardless, investors should pay closer attention to the Dollar since gold should ultimately follow its negative correlation with the Greenback.
Technically speaking, gold faces multiple uptrend and downtrend lines in either direction. However, overall momentum continues to pull in favor of the bulls considering all of gold’s consecutive lows combined with the fact that the S&P futures are still trading comfortably above 1000. On the other hand, should S&P futures deteriorate, it will be interesting to see whether gold decides to follow suit if the Dollar continues to depreciate. The big concern would be if a decline in U.S. equities is accompanied by a pullback in the EUR/USD and GBP/USD, causing gold to tumble in the process. Any decline below our 1st tier uptrend line could result in a sizable leg down. Therefore, investors should keep a close eye on the correlation between the Dollar and the S&P futures. As for the topside, gold face our 2nd and 3rd tier downtrend lines along with 8/28 highs. An eclipse of these 3 barriers would likely result in a retest of previous August highs.
Present Price: $950.00/oz
Resistances: $949.73/oz, $950.75/oz, $953.42/oz, $955.58/oz, $957.36/oz
Supports: $947.69/oz, $946.63/oz, $945.15/oz, $943.88/oz, $942.74/oz
Psychological: $950/oz
The S&P Futures Sink Lower Following SCI’s Skid
The SCI’s nearly -7% plunge has caught investors off-guard, and the S&P futures are declining despite better than expected Chicago PMI data. However, we suggest investors shouldn’t get too carried away with the SCI’s selloff since the decline has more to do with liquidity and psychology than economic fundamentals. With the Chinese government tightening liquidity, Chinese investors will likely need to start paying back the loans they’ve invested into equities, hence the sharp contraction following the news. While China’s actions are sure to cool its economy further, we believe wrangling in liquidity is the best choice for China’s economy over the medium to long-term. Tightening liquidity and deflating the asset bubbles should help China avoid a more dramatic downturn in the future, securing the economy’s longer-term growth trajectory. Investors will get another peek at the state of China’s economy at the open of the Asian trading session tomorrow. China will release some important Manufacturing PMI data and investors will be looking for China’s rapid economic recovery to continue. These PMI numbers should be market movers since investors have been paying particularly close attention to the Chinese economy lately.
The U.S. will release Manufacturing PMI data of its own on Tuesday along with Pending Home Sales. While we expect Pending Home Sales to come in positive due to the upturn in America’s housing market, the key will be for the ISM Manufacturing PMI to turn positive for the first time since July 2008. Tomorrow’s ISM heading for expansion (50+) could have a positive impact on investor psychology. Combined with a better than expected Chinese Manufacturing PMI, the S&P could experience a substantial rebound. However, if both numbers miss expectations, we could witness exactly the opposite and a sub-1000 S&P. Meanwhile, the FX markets are experiencing a broad-based depreciation in the Greenback, a bit odd considering the pullback in equities. However, the Dollar could be ahead of the curve, signaling a better few sessions ahead. On the other hand, crude futures are freefalling below $70/bbl and our 1st tier uptrend line. Therefore, crude is sending quite the opposite message. Investors may opt to see tomorrow’s wave of data before making a stronger commitment in either direction. We can say immediate-term momentum is shifting to the downside. If our 1st tier uptrend line doesn’t hold we could witness a more protracted selloff. However, the 1000 trading zone should continue to play a prominent role and will be tough to defeat. As for the topside, the S&P futures need to brave above our 2nd tier uptrend line and the lid of the 8/21-8/31 trading range.
Price: 1016.25
Supports: 1015, 1010.75, 1002.25, 995.25
Resistances: 1023.5, 1030, 1034, 1038
Psychological: 1000
Crude Futures Plummet with SCI
Crude futures have slammed beneath $70/bbl following a nearly -7% decline in the SCI during the Asian trading session. Investors are deeply concerned about the Chinese economy slowing down. We’ve noticed Chinese imports are dropping quickly and the BDI is heading south. The decline in shipping activity indicates China may be slowing down its commodity buying spree as the government’s stimulus package starts to tap out. There is no secret that China’s demand for commodities has been the driving force behind the recovery in crude, copper, etc. Therefore, the stream of news out of China is driving crude futures lower despite today’s broad-based appreciation of the Dollar. However, we’ll receive Manufacturing PMIs from China, Britain and the U.S. over the next 24 hours. Better than expected results could help crude futures find a temporary bottom since this would improve the outlook for consumption. On the other hand, weaker than expected Manufacturing PMI data would likely exacerbate crude’s current pullback.
Technically speaking, crude’s decline below our 1st tier uptrend line and $70/bbl are both strong technical movements to the downside. Therefore, it appears as if crude could be heading for another leg down, at least this is what the technicals are telling us. Then again, the concrete fundamentals are still in favor of strong crude with known demand holding steady and supply declining. However, it seems investors are taking a more speculative, forward-looking approach to pricing today. Meanwhile, the key for the bulls will be getting crude back above $70/bbl and our 1st tier uptrend line.
Price: $69.50/bbl
Resistances: $69.86/bbl, $70.44/bbl, $70.94/bbl, $71.55/bbl
Supports: $69.36/bbl, $69.11/bbl, $68.66/bbl, $68.24/bbl, $67.87/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.
