EUR/USD Fluctuates Between our Trend Lines as Inflection Approaches
The EUR/USD posted a solid recovery yesterday, exhibiting more strength than we expected considering Thursday’s economic data was nothing to cheer about. Furthermore, the S&P futures hung beneath 1000, providing little motive to devalue the Dollar. Investors may have been reacting to the breakout in gold since the Dollar has been negatively correlated with the Greenback. Gold surged to $980/oz and was the talk of the town. Therefore, investors may have taken gold’s ascent as a hint that the Dollar should head lower. On the other hand, investors may have been comfortable keeping the EUR/USD afloat since the S&P’s recent contraction was mostly influenced by psychological factors. Either way, the FX markets have been difficult to track lately with the major Dollar crosses sending mixed signals. This tells us the Dollar may be approaching a turning point as investors grow anxious and jockey for position.
Meanwhile, the EUR/USD has returned earlier gains and is trading smack in the middle of our trend lines after U.S. weekly Unemployment Claims came in slightly above analyst expectations. America’s much anticipated ISM Services PMI data printed in line with estimates, only making the present picture muddier. We have yet to receive the market moving headlines we were anticipating. The ECB kept its benchmark rate at 1% while Trichet remained cautiously optimistic as anticipated. EU data has impressed on all fronts lately, including this week’s Flash CPI. Therefore, the ECB had little reason to act other than to deliver a monetary shock. Due to the Euro’s resounding positive data, we anticipate the EUR/GBP could find bottom sometime soon as investors continue to snap up an oversold Pound. It’s the EU’s turn to take a break from economic data next week, so British data will need to present a strong case to gain back its relative strength. EU data is finished for the week, so the focus will turn to the G20 meetings and key employment data from the U.S. tomorrow.
Despite present indecisiveness in the EUR/USD, all three tiers of our trend lines are coming together beautifully with multiple inflection points on the horizon. The behavior of our trend lines indicates a turning point may finally be approaching. We’ve witnessed counterbalancing buy-side and sell-side volume with the currency pair experiencing lower highs and higher lows (9/01 excluded). Hence, the next near-term leg is hanging in the balance, though there remains a certain downward tendency in the currency pair due to recent weakness in the S&P. As the summer winds down, we anticipate volume and volatility could return once again. The G20 meetings have been flying in under the radar and start up tomorrow. A potential market mover tomorrow could be a surprise in U.S. unemployment data. However, we believe the G20 meetings could be the wild card. We wouldn’t be surprised to see the topic of a new monetary standard return in a big way since volatility in the FX markets has abated. China may take the G20 meeting as an opportunity to breach the topic on a larger stage. Such a move could provide the jolt of volatility the EUR/USD’s inflection points are indicating. On the other hand, the EUR/USD may just opt to continue its erratic consolidation.
Technically speaking, our 3rd tier uptrend and downtrend lines play the largest trend-setting role on our chart. If our 3rd tier downtrend line fails, we anticipate a retest of August highs. On the flipside, a retracement below our 3rd tier uptrend line could result in a retest of August lows. Meanwhile, the 1.40 and 1.45 psychological patiently wait in opposite directions. Investors should keep a close eye on the S&P futures. If the S&P futures should continue their downward momentum and head below technical supports the EUR/USD would likely exercise its positive correlation with U.S. equities.
Present Price: 1.4287
Resistances: 1.4300, 1.4309, 1.4327, 1.4347, 1.4366
Supports: 1.4276, 1.4261, 1.4251, 1.4224, 1.4208
Psychological: 1.40, 1.45
GBP/USD Finds Support in our 3rd Tier Uptrend Line Once Again
The Cable added onto recent strength by propelling off of our 1st tier uptrend line after Britain’s Services PMI printed ahead of analyst expectations. A piece of positive data was surely welcomed by the Pound bulls considering all of the weak numbers as of late. The data was particularly reassuring since services comprise a large portion of Britain’s GDP, more so than manufacturing. The Pound’s relative strength is highlighted by the sharp contraction in the EUR/GBP. The EUR/GBP’s run has come to an abrupt halt and investors continue to snap up an oversold Pound. Britain’s Halifax HPI will be printing tomorrow along with key U.S. unemployment data and the kickoff of the G20 Summit. While we expect a strong HPI number from Britain, the U.S. unemployment data may disappoint. However, this week’s discouraging data from the U.S. may soften the blow should the headline Unemployment Rate come in higher than expected.
As we explained in our EUR/USD analysis, the G20 Summit could prove to be the wildcard jolting the FX markets from their consolidative pattern. Such an effect would require China bringing the topic of a new monetary standard back to the forefront. With Chinese equity markets shaking and FX markets in a dazed state, now could be an opportune time for China to bring the topic of conversation to a larger stage. Such an event would surely rattle the FX markets. The GBP/USD and EUR/USD both have multiple inflection points approaching, indicating volatility could return soon. However, this is purely speculative conversation and we are simply thinking aloud. Odds are the G20 nations will exit the conference with a unified message in the hopes of maintaining global economic stability.
Technically speaking, the Cable is fortunate to have found support in our 1st and 2nd tier uptrend lines. If not, we would have surely witnessed a retest of the highly psychological 1.60 level. Not to mention our 1st tier trend line is sitting in the depths below. While the GBP/USD has 1.60, the EUR/USD has 1.40. Therefore, even though there may be some more space to the downside, each major Dollar cross has a strong psychological level waiting in the wings. On the other hand, the GBP/USD has quite a ways to go to re-establish its upward momentum. The GBP/USD has to deal with our 2nd and 3rd tier downtrend lines along with the highly psychological 1.65 level. Therefore, there remains a consolidative with a slight downward bias.
Present Price: 1.6344
Resistances: 1.6360, 1.6376, 1.6408, 1.6443, 1.6469, 1.6520
Supports: 1.6324, 1.6300, 1.6267, 1.6239, 1.6212
Psychological: 1.65, 1.60
USD/JPY Finally Forms a Bottom
The USD/JPY has finally formed a bottom, narrowly avoiding a retest of July lows in the process. The Dollar is appreciating lightly across the board today after Unemployment Claims missed expectations and the ISM Services PMI printed in line. Meanwhile, crude and the S&P are returning earlier gains as gold continues to strengthen above $980/oz. The combination of strength in gold and the Dollar tells us that investors are half-heartedly choosing to divest from riskier assets and into safer venues. However, USD/JPY investors shouldn’t get their hopes up since today’s bottom comes on light volume and a strong downward bias remains. The currency pair has experienced an intense selloff, so a little bottom fishing is not surprising.
The USD/JPY remains well below our 1st tier uptrend and 2nd tier downtrend lines while recent activity has clearly been sell-side heavy. The question becomes how far the USD/JPY’s bounce will go, and whether today’s bottom proves to be lasting or only temporary. In the meantime, bulls will fight to get the USD/JPY back above its 1st tier uptrend line and into respectability. As for the downside, it will be key for the USD/JPY to remain above July lows. If not, all bets are off and we may witness a retest of 90. Our 1st tier uptrend line is approaching an inflection point with our 2nd tier downtrend line. We notice similar occurrences in both the EUR/USD and GBP/USD, indicating further volatility could be in the cards. Japan will release Capital Spending data late Thursday. A better than expected number could add some immediate-term downward pressure n the USD/JPY. On the other hand, worse than expected Capital Spending data could help the USD/JPY climb back above our 1st tier uptrend line.
Present Price: 92.46
Resistances: 92.58, 92.73, 92.97, 93.17, 93.33
Supports: 92.36, 92.22, 92.08, 91.96, 91.72
Psychological: 90, 95
Gold Consolidates after Extending Gains
Gold continued its ascent yesterday and popped past our 2nd tier downtrend line this morning. The gold rush carried a lot of momentum with it and $1000/oz is suddenly within reach. It remains to be seen whether the recent surge in gold indicates a flight for safety, or a diversification of China’s massive reserves into the precious metal. Gold is moving higher without a large depreciation of the Dollar. In fact, we believe gold’s strength may have dragged the Greenback lower yesterday as investors acted according to correlations. The precious metal is obviously sending a message. Unfortunately, the message is not quite clear.
Regardless of the message, gold has made a very bullish move over the past 24-48 hours. The next test will be our 3rd tier downtrend line. If the precious metal can climb above our 3rd tier, then a retest of $1000/oz and February highs is probable. However, we notice buy-side volume is declining, and its possible bulls may not have enough backing to punch through the precious metal’s technical barriers. $1000/oz and previous 2009 highs should prove to be difficult obstacles to overcome. Therefore, space to the topside is becoming limited. Meanwhile, we notice multiple inflection points in the EUR/USD and GBP/USD, indicating FX volatility could increase over the next couple sessions.
Present Price: $984.05/oz
Resistances: $986.54/oz, $988.00/oz, $991.50/oz, $933.55/oz, $997.35/oz
Supports: $984.00/oz, $981.90/oz, $980.27/oz, $978.88/oz, $975.30/oz
Psychological: $1000/oz
Crude Continues to Slide with Equities
Crude futures have continued their descent beneath $70/bbl and are trading well below our important 1st tier uptrend line in reaction to the S&P futures sinking to their critical 1000 level. Crude futures are now holding onto our previous bottom-end support as bulls fight to keep the S&P above water. We witnessed an increase in sell-side activity in both crude and the S&P futures yesterday as investors took profits amid rising uncertainty concerning the durability of the global economic recovery. The new bear market in the SCI coupled with declining Chinese exports hurt the near-term prospect for the future demand for commodities. However, today’s weekly crude oil inventories data showed a slight decline. Although, the number was 400k barrels above analyst expectations. The constraint in supply is helping keep crude futures somewhat afloat despite the sudden negativity attacking the global marketplace.
Crude futures are stabilizing today with the S&P futures sitting at 1000 while the GBP/USD and EUR/USD trade just above their respective psychological supports. However, the spike in sell-side volume coupled with the failure of our 1st tier uptrend line and $70/bbl is not favorable for the near-term outlook for crude. Crude futures may opt to continue today’s stabilization process as investors await tomorrow’s wave of economic data. Tomorrow’s data points and ECB meeting should prove to be important for the near-term trajectory of the Dollar. Hence, crude investors should take notice and monitor the present appreciation of the Dollar. Should the GBP/USD test 1.60 and the EUR/USD 1.40 crude futures should react negatively. Conversely, better than expected data could help the Dollar crosses recover and provide a much needed boost to the topside for crude. Meanwhile, the S&P’s deterioration is certainly a cause for concern since it only fuels speculation regarding future demand for crude. Momentum has clearly shifted to the downside in both crude and the S&P, so investors should monitor the situation closely. If crude futures can’t hold intraday lows and our new 1st tier downtrend line, a test of the psychological $65/bbl could be in order. As for the topside, crude faces tough obstacles in the form of our 2nd tier downtrend line and the highly psychological $70/bbl level.
Price: $67.83/bbl
Resistances: $67.92/bbl, $68.54/bbl, $68.99/bbl, $69.50/bbl, $69.97/bbl
Supports: $67.37/bbl, $66.88/bbl, $66.64/bbl, $66.23/bbl, $65.72/bbl
Psychological: $65/bbl, $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.
The EUR/USD posted a solid recovery yesterday, exhibiting more strength than we expected considering Thursday’s economic data was nothing to cheer about. Furthermore, the S&P futures hung beneath 1000, providing little motive to devalue the Dollar. Investors may have been reacting to the breakout in gold since the Dollar has been negatively correlated with the Greenback. Gold surged to $980/oz and was the talk of the town. Therefore, investors may have taken gold’s ascent as a hint that the Dollar should head lower. On the other hand, investors may have been comfortable keeping the EUR/USD afloat since the S&P’s recent contraction was mostly influenced by psychological factors. Either way, the FX markets have been difficult to track lately with the major Dollar crosses sending mixed signals. This tells us the Dollar may be approaching a turning point as investors grow anxious and jockey for position.
Meanwhile, the EUR/USD has returned earlier gains and is trading smack in the middle of our trend lines after U.S. weekly Unemployment Claims came in slightly above analyst expectations. America’s much anticipated ISM Services PMI data printed in line with estimates, only making the present picture muddier. We have yet to receive the market moving headlines we were anticipating. The ECB kept its benchmark rate at 1% while Trichet remained cautiously optimistic as anticipated. EU data has impressed on all fronts lately, including this week’s Flash CPI. Therefore, the ECB had little reason to act other than to deliver a monetary shock. Due to the Euro’s resounding positive data, we anticipate the EUR/GBP could find bottom sometime soon as investors continue to snap up an oversold Pound. It’s the EU’s turn to take a break from economic data next week, so British data will need to present a strong case to gain back its relative strength. EU data is finished for the week, so the focus will turn to the G20 meetings and key employment data from the U.S. tomorrow.
Despite present indecisiveness in the EUR/USD, all three tiers of our trend lines are coming together beautifully with multiple inflection points on the horizon. The behavior of our trend lines indicates a turning point may finally be approaching. We’ve witnessed counterbalancing buy-side and sell-side volume with the currency pair experiencing lower highs and higher lows (9/01 excluded). Hence, the next near-term leg is hanging in the balance, though there remains a certain downward tendency in the currency pair due to recent weakness in the S&P. As the summer winds down, we anticipate volume and volatility could return once again. The G20 meetings have been flying in under the radar and start up tomorrow. A potential market mover tomorrow could be a surprise in U.S. unemployment data. However, we believe the G20 meetings could be the wild card. We wouldn’t be surprised to see the topic of a new monetary standard return in a big way since volatility in the FX markets has abated. China may take the G20 meeting as an opportunity to breach the topic on a larger stage. Such a move could provide the jolt of volatility the EUR/USD’s inflection points are indicating. On the other hand, the EUR/USD may just opt to continue its erratic consolidation.
Technically speaking, our 3rd tier uptrend and downtrend lines play the largest trend-setting role on our chart. If our 3rd tier downtrend line fails, we anticipate a retest of August highs. On the flipside, a retracement below our 3rd tier uptrend line could result in a retest of August lows. Meanwhile, the 1.40 and 1.45 psychological patiently wait in opposite directions. Investors should keep a close eye on the S&P futures. If the S&P futures should continue their downward momentum and head below technical supports the EUR/USD would likely exercise its positive correlation with U.S. equities.
Present Price: 1.4287
Resistances: 1.4300, 1.4309, 1.4327, 1.4347, 1.4366
Supports: 1.4276, 1.4261, 1.4251, 1.4224, 1.4208
Psychological: 1.40, 1.45
GBP/USD Finds Support in our 3rd Tier Uptrend Line Once Again
The Cable added onto recent strength by propelling off of our 1st tier uptrend line after Britain’s Services PMI printed ahead of analyst expectations. A piece of positive data was surely welcomed by the Pound bulls considering all of the weak numbers as of late. The data was particularly reassuring since services comprise a large portion of Britain’s GDP, more so than manufacturing. The Pound’s relative strength is highlighted by the sharp contraction in the EUR/GBP. The EUR/GBP’s run has come to an abrupt halt and investors continue to snap up an oversold Pound. Britain’s Halifax HPI will be printing tomorrow along with key U.S. unemployment data and the kickoff of the G20 Summit. While we expect a strong HPI number from Britain, the U.S. unemployment data may disappoint. However, this week’s discouraging data from the U.S. may soften the blow should the headline Unemployment Rate come in higher than expected.
As we explained in our EUR/USD analysis, the G20 Summit could prove to be the wildcard jolting the FX markets from their consolidative pattern. Such an effect would require China bringing the topic of a new monetary standard back to the forefront. With Chinese equity markets shaking and FX markets in a dazed state, now could be an opportune time for China to bring the topic of conversation to a larger stage. Such an event would surely rattle the FX markets. The GBP/USD and EUR/USD both have multiple inflection points approaching, indicating volatility could return soon. However, this is purely speculative conversation and we are simply thinking aloud. Odds are the G20 nations will exit the conference with a unified message in the hopes of maintaining global economic stability.
Technically speaking, the Cable is fortunate to have found support in our 1st and 2nd tier uptrend lines. If not, we would have surely witnessed a retest of the highly psychological 1.60 level. Not to mention our 1st tier trend line is sitting in the depths below. While the GBP/USD has 1.60, the EUR/USD has 1.40. Therefore, even though there may be some more space to the downside, each major Dollar cross has a strong psychological level waiting in the wings. On the other hand, the GBP/USD has quite a ways to go to re-establish its upward momentum. The GBP/USD has to deal with our 2nd and 3rd tier downtrend lines along with the highly psychological 1.65 level. Therefore, there remains a consolidative with a slight downward bias.
Present Price: 1.6344
Resistances: 1.6360, 1.6376, 1.6408, 1.6443, 1.6469, 1.6520
Supports: 1.6324, 1.6300, 1.6267, 1.6239, 1.6212
Psychological: 1.65, 1.60
USD/JPY Finally Forms a Bottom
The USD/JPY has finally formed a bottom, narrowly avoiding a retest of July lows in the process. The Dollar is appreciating lightly across the board today after Unemployment Claims missed expectations and the ISM Services PMI printed in line. Meanwhile, crude and the S&P are returning earlier gains as gold continues to strengthen above $980/oz. The combination of strength in gold and the Dollar tells us that investors are half-heartedly choosing to divest from riskier assets and into safer venues. However, USD/JPY investors shouldn’t get their hopes up since today’s bottom comes on light volume and a strong downward bias remains. The currency pair has experienced an intense selloff, so a little bottom fishing is not surprising.
The USD/JPY remains well below our 1st tier uptrend and 2nd tier downtrend lines while recent activity has clearly been sell-side heavy. The question becomes how far the USD/JPY’s bounce will go, and whether today’s bottom proves to be lasting or only temporary. In the meantime, bulls will fight to get the USD/JPY back above its 1st tier uptrend line and into respectability. As for the downside, it will be key for the USD/JPY to remain above July lows. If not, all bets are off and we may witness a retest of 90. Our 1st tier uptrend line is approaching an inflection point with our 2nd tier downtrend line. We notice similar occurrences in both the EUR/USD and GBP/USD, indicating further volatility could be in the cards. Japan will release Capital Spending data late Thursday. A better than expected number could add some immediate-term downward pressure n the USD/JPY. On the other hand, worse than expected Capital Spending data could help the USD/JPY climb back above our 1st tier uptrend line.
Present Price: 92.46
Resistances: 92.58, 92.73, 92.97, 93.17, 93.33
Supports: 92.36, 92.22, 92.08, 91.96, 91.72
Psychological: 90, 95
Gold Consolidates after Extending Gains
Gold continued its ascent yesterday and popped past our 2nd tier downtrend line this morning. The gold rush carried a lot of momentum with it and $1000/oz is suddenly within reach. It remains to be seen whether the recent surge in gold indicates a flight for safety, or a diversification of China’s massive reserves into the precious metal. Gold is moving higher without a large depreciation of the Dollar. In fact, we believe gold’s strength may have dragged the Greenback lower yesterday as investors acted according to correlations. The precious metal is obviously sending a message. Unfortunately, the message is not quite clear.
Regardless of the message, gold has made a very bullish move over the past 24-48 hours. The next test will be our 3rd tier downtrend line. If the precious metal can climb above our 3rd tier, then a retest of $1000/oz and February highs is probable. However, we notice buy-side volume is declining, and its possible bulls may not have enough backing to punch through the precious metal’s technical barriers. $1000/oz and previous 2009 highs should prove to be difficult obstacles to overcome. Therefore, space to the topside is becoming limited. Meanwhile, we notice multiple inflection points in the EUR/USD and GBP/USD, indicating FX volatility could increase over the next couple sessions.
Present Price: $984.05/oz
Resistances: $986.54/oz, $988.00/oz, $991.50/oz, $933.55/oz, $997.35/oz
Supports: $984.00/oz, $981.90/oz, $980.27/oz, $978.88/oz, $975.30/oz
Psychological: $1000/oz
Crude Continues to Slide with Equities
Crude futures have continued their descent beneath $70/bbl and are trading well below our important 1st tier uptrend line in reaction to the S&P futures sinking to their critical 1000 level. Crude futures are now holding onto our previous bottom-end support as bulls fight to keep the S&P above water. We witnessed an increase in sell-side activity in both crude and the S&P futures yesterday as investors took profits amid rising uncertainty concerning the durability of the global economic recovery. The new bear market in the SCI coupled with declining Chinese exports hurt the near-term prospect for the future demand for commodities. However, today’s weekly crude oil inventories data showed a slight decline. Although, the number was 400k barrels above analyst expectations. The constraint in supply is helping keep crude futures somewhat afloat despite the sudden negativity attacking the global marketplace.
Crude futures are stabilizing today with the S&P futures sitting at 1000 while the GBP/USD and EUR/USD trade just above their respective psychological supports. However, the spike in sell-side volume coupled with the failure of our 1st tier uptrend line and $70/bbl is not favorable for the near-term outlook for crude. Crude futures may opt to continue today’s stabilization process as investors await tomorrow’s wave of economic data. Tomorrow’s data points and ECB meeting should prove to be important for the near-term trajectory of the Dollar. Hence, crude investors should take notice and monitor the present appreciation of the Dollar. Should the GBP/USD test 1.60 and the EUR/USD 1.40 crude futures should react negatively. Conversely, better than expected data could help the Dollar crosses recover and provide a much needed boost to the topside for crude. Meanwhile, the S&P’s deterioration is certainly a cause for concern since it only fuels speculation regarding future demand for crude. Momentum has clearly shifted to the downside in both crude and the S&P, so investors should monitor the situation closely. If crude futures can’t hold intraday lows and our new 1st tier downtrend line, a test of the psychological $65/bbl could be in order. As for the topside, crude faces tough obstacles in the form of our 2nd tier downtrend line and the highly psychological $70/bbl level.
Price: $67.83/bbl
Resistances: $67.92/bbl, $68.54/bbl, $68.99/bbl, $69.50/bbl, $69.97/bbl
Supports: $67.37/bbl, $66.88/bbl, $66.64/bbl, $66.23/bbl, $65.72/bbl
Psychological: $65/bbl, $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.
