Daily Market Commentary
EUR/USD Trades Higher Ahead of ECB Statement
The EUR/USD has taken another small leg up as traders await the ECB’s monetary policy decision. Though most analysts are expecting the ECB to keep its policy unchanged, investors have been riding the EUR/USD higher in anticipation of future rate hikes. The RBA’s ¼ point raise has negatively impacted the Dollar across the board. Investors are coming to reality that the exit strategies will have to come into effect sooner or later and the RBA got the ball rolling. Since the ECB has maintained a relatively hawkish stance throughout the crisis, one is led to believe that the ECB will tighten before the Fed. The ECB’s resilience has allowed the EUR/USD to hold strong while the EUR/GBP climbs towards parity. However, investors should keep in mind that Australia’s economy is in a different position than the EU’s. Australia’s commodity-dependent economy has resulted in a quick recovery, whereas the EU’s heavy reliance on manufacturing and finance has been a drag. Australia’s advantageous position has allowed the RBA to keep its minimum rate at an elevated level throughout the crisis and is therefore the first to act in terms of tightening liquidity. Therefore, although the RBA’s decision applies some pressure on the ECB to act, we believe the ECB will sit tight until global consumption and demand for manufactured goods stabilizes. Since analysts are expecting the ECB to stand pat, any surprise decision today would be a huge near-term catalyst for the EUR/USD.
We received some more negative data from Germany today with industrial production coming in two basis points lower than analyst expectations. This tags onto the weak German PMI data printed a couple weeks back. The present weakness in Germany’s economy will likely prevent the ECB from making any rash, hawkish monetary decisions today. In fact, Trichet recently mentioned the importance of a stronger Dollar, particularly since it appears Germany’s manufacturing industry is being pinched by the relative strength of the Euro. The EU is finished with econ data for the week beside tomorrow’s French Industrial Production number. Therefore, the EUR/USD’s performance will rely upon a combination of the ECB’s monetary decision and the broad-based performance of the Dollar along with gold. Earnings season will pick up was the week progresses, and stronger than expected Q3 earnings could trigger a rally in U.S. equities and send the EUR/USD beyond our 3rd tier downtrend line and September highs. Therefore are quite a few variables which could alter the EUR/USD’s trend as the week closes out, so stay tuned.
Technically speaking, our 2nd and 3rd tier downtrend lines serve as immediate-term technical barriers. If the EUR/USD can climb past our 3rd tier we believe September highs will be the next to go. Such a movement could spur a nice near-term run in the EUR/USD towards the highly psychological 1.50 level. As for the downside, the currency pair’s recent strength creates several technical cushions, including multiple uptrend lines along with 10/7 and 9/29 lows. The breakout in gold and the AUD/USD along with the S&P futures trading near 2009 highs create an optimistic environment for the EUR/USD and its medium-term uptrend. However, we will have to see how the ECB meeting fairs and if the EUR/USD is able to barrel through the aforementioned technical barriers.
Present Price: 1.4770
Resistances: 1.4784, 1.4800, 1.4818, 1.4840, 1.4850, 1.4867
Supports: 1.4768, 1.4756, 1.4741, 1.4721, 1.4702, 1.4671, 1.4637
Psychological: 1.50, September Highs
GBP/USD Bounces Past 1.60 on Broad-Based Dollar Weakness
The Cable finally decided to participate with the gold rush and broad-based weakness of the Dollar. The GBP/USD popped above the psychological 1.60 level and 10/6 highs. However, the Cable is buckling under the pressure of our 3rd tier downtrend line and 9/30 highs. The GBP/USD finally shook free of its tight and is looking to piece together a more substantial rally than the one we witnessed on 9/30. A strong movement past our 3rd tier downtrend line would likely yield such an outcome since it runs through 9/01 highs. The BoE kept its monetary policy unchanged as did the ECB. Both monetary decisions are in line with analyst expectations and are presently having a limited impact on FX markets. However, more important will be the press conferences and quotes from BoE and ECB members over the remainder of the week. Words have moved currencies as much as actions. Therefore, investors will be looking to see if BoE governor King makes any additional dovish comments as he’s been prone to do.
Britain will be light on the econ data wire until tomorrow’s PPI Input and Trade Balance releases. Both will be important gauges for future monetary policy. Weak input prices and a large Trade Balance deficit would only encourage the BoE to maintain a dovish monetary stance to help buoy prices and stimulate external demand for British goods and services. Therefore, volatility could pick up as the week comes to a close. FX markets will also be sensitive to Q3 earnings releases. Strong Q3 earnings would help drive equities hire while weakening the Dollar further, and vice versa. However, the Pound should remain at a disadvantage regardless of any continued near-term broad based weakness in the Dollar due to the state of Britain’s economy and the comparatively dovish stance of the BoE.
Technically speaking, the GBP/USD faces multiple downtrend lines along with the 9/30 highs. The Cable’s bounce past 1.60 is the first step to more significant gains, yet the currency pair will need to break through the aforementioned technical barriers before realizing more substantial movements to the topside. As for the downside, the GBP/USD has cushions in 10/2 and 9/28 lows along with multiple uptrend lines. Recent strength in the Cable has created some near-term breathing room. Consecutive higher lows (9/28, 10/2, 10.7) create a strong base for the Cable to fall back on over the near-term. Therefore, immediate-term movements to the downside should be limited. However, a failure of these triple lows and our 1st tier uptrend line would heighten near-term losses. Overall, extraordinary breakouts in gold and the AUD/USD create an environment for a new near-term uptrend line in the Cable. Therefore, investors should keep a close eye on the Cable’s interaction with our technical barriers over the next 24 hours.
Present Price: 1.6049
Resistances: 1.6072, 1.6095, 1.6127, 1.6145, 1.6168, 1.6191, 1.6211
Supports: 1.6045. 1.6024, 1.5992, 1.5964, 1.5921, 1.5900
Psychological: 1.60
USD/JPY Consolidates Above Tuesday Lows
The USD/JPY is retrenching above 10/27 and 9/28 lows as gold and the AUD/USD begin to top out. However, the GBP/USD and EUR/USD are strengthening today, normally a negative catalyst for the USD/JPY. The USD/JPY appears to be on a path of its own for right now since investors are debating whether to send the currency pair below our 1st tier uptrend line towards a retest of January lows. Although present consolidation is encouraging and may continue over the immediate-term, the USD/JPY is still stuck in its debilitating downtrend. Huge breakouts in gold and the AUD/USD are sending a message supporting a broad-based Dollar depreciation over the longer-term. Though BoJ Minister Fujii reversed his hawkish tone in favor of supporting the Yen should it strengthen to critical levels, we are not sure exactly what levels Fujii is comfortable with. Therefore, the Yen’s appreciation should continue so long as the BoJ’s future monetary policy remains hazy. We can tell you that a failure of January lows would send up a red flag and pressure the BoJ to intervene.
Meanwhile, Japan will release Core Machinery Orders data late Thursday EST. The CMO number will be closely watched since it’s a leading indicator. A stronger than expected number would likely result in further appreciation of the Yen since it would support Fujii’s hesitance in participating in QE. A solid number wouldn’t be surprising since Japan’s #1 trading partner, China, continues to experience strong economic growth. In addition to the CMO number U.S. Q3 earnings will play a large role in determining the near-term path of the Dollar. Encouraging Q3 results would lead investors away from the Dollar and place further downward pressure on the USD/JPY. Lastly, the convincing breakouts in gold and the AUD/USD spell a longer-term depreciation of the Dollar. Hence, there is little reason to change our negative outlook on the USD/JPY trend-wise.
Technically speaking, 10/27 and 9/28 lows should continue to serve as an immediate-term technical cushion. However, a failure of these lows and our 1st tier uptrend line would ultimately lead to a retest of January lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 10/7 and 10/5 highs. Additionally, the psychological 90 level is now working against the USD/JPY.
Present Price: 88.41
Resistances: 88.60, 88.85, 89.20, 89.45, 89.97, 90.30
Supports: 88.25, 87.97, 87.63, 87.12, 86.80, 86.13
Psychological: 90, 2009 and 2008 lows
Gold Starts to Top Out After Incredible Run
Gold is beginning to cool down following the amazing gold rush that took place in reaction to the RBA being the first central bank to raise rates following the beginning of the credit crisis. The AUD/USD took flight after the RBA’s decision in conjunction with much better than expected Aussie employment data. Breakouts in gold and the AUD/USD spurred a broad-based depreciation of the Dollar, only fueling gold’s bolt towards new record nominal highs. However, the psychological impact of the RBA’s monetary shock could start to wane since both the ECB and BoE kept their monetary policies unchanged today. The EUR/USD and GBP/USD still have to deal with a few technical barriers before participating more fully in the broad weakness of the Dollar. Attention will now turn to Q3 earnings season and the reaction of U.S. equities. Better than expected Q3 results would likely depreciate the Dollar further and help gold extend its breakout. Meanwhile, it seems gold will cool and consolidate as investors digest this week’s explosive movements. Technically speaking, we can’t place a downtrend line yet since we’re dealing with uncharted topside territory. However, we’ve laid a few downtrend lines to give an idea of support. It seems the $1050/oz level will play a psychological role for the time being. Regardless of current weakness, gold’s breakout to record highs sends a message of commitment to a longer-term uptrend in the precious metal. For the time being investors should keep an eye on the EUR/USD and GBP/USD and their interaction with their respective topside technical barriers should they be reached.
Present Price: $1052.45/oz
Resistances: $1053/oz, $1056.34/oz, $1058.54/oz.
Supports: $1049.24/oz, $1046.55/oz, $1042.63/oz, $1037.99/oz, $1035.54/oz.
Psychological: $1050/oz
The S&P Futures Cool Down Despite Positive Unemployment Data
The S&P futures are being deflected by our 2nd tier uptrend line despite weekly Unemployment Claims beating analyst expectations. Enthusiasm triggered by the RBA’s decision to raise rates is waning after the BoE and ECB decided to keep their monetary policies intact. In fact, the EUR/USD is facing headwinds after Trichet signaled the ECB has little intention of raising rates over the medium-term since the economic recovery is still in a fragile state. We’re seeing a sell-off in the EUR/USD as a result and profit-taking in gold. Furthermore, the AUD/USD appears to have hit a ceiling and the USD/JPY a bottom. Meanwhile, the 30 Year T-Bond futures are looking at October highs as they seem to be prepping for a retest. Today’s action in the Dollar, gold, and Treasuries implies weakness in U.S. equities due to correlative pressures.
Focus will now shift to Q3 earnings. Alcoa kicked off the Q3 season yesterday with better than expected results. Earnings will heat up over the next 48 hours and naturally carry over to next week. Investors are looking for positive earnings caused by an improvement in revenue instead of cost-cutting measures. The incredible run in the S&P futures has raised investor expectations, and Q3 results and outlooks will need to match present valuations. Despite current today’s strength in the Dollar the huge breakouts in gold and the AUD/USD signal a high probability of medium-term weakness in the greenback. Such a development would likely be a positive catalyst for U.S. equities due to the S&P’s negative correlation with the Dollar.
Technically-speaking, the S&P futures face technical barriers in the form of 9/29, 9/17, and 9/24 highs along with our new 2nd tier downtrend line. As for the downside, the S&P futures has technical cushions in the form of 10/7 and 9/28 lows along with our 1st tier uptrend line and the psychological 1050 level. While technicals and correlations are in favor of the S&P’s uptrend, Q3 results and outlooks will shape in the near-term. Meanwhile, investors should eye the future interaction of the EUR/USD and GBP/USD with their respective technical barriers and cushions. The inability of these currency pairs to match the extent of gold’s breakout signals there is still a downward force bearing on U.S. equities.
Price: 1060
Resistances: 1065.5, 1070.5, 1075
Supports: 1060, 1055.5, 1051, 1045.75, 1041, 1036.25
Psychological: 2009 highs, 1050, 1075, 1100
Crude Ducks Beneath $70/bbl with Stronger Dollar
Crude futures are trading back beneath the highly psychological $70/bbl level as the Dollar appreciates across the board and gold comes off all-time highs. Crude futures failed to break through 9/22 highs and our 2nd tier downtrend line yesterday despite the gold rush and an incredible breakout in the AUD/USD. Instead, crude experienced a moderate down-bar on sizable sell-side volume. Weekly crude inventories also came in shallow, which makes present weakness in crude a little disconcerting. Crude futures seem to be tracking the EUR/USD and GBP/USD more than gold and other major Dollar crosses. The EUR/USD and GBP/USD both failed to participate fully in gold’s record-setting breakout and the currency pairs still face a few immediate-term technical barriers. Additionally, the S&P futures need to deal with previous 2009 highs while the 30 Year T-Bond futures look to retest monthly highs. Hence, the breakout in precious metals doesn’t seem to favor crude as much as investors would hope. Furthermore, investors should keep in mind that OPEC will likely tailor production to keep the price of crude within its desired $68-$72/bbl range.
As with equities and the FX markets focus will shift to Q3 earnings. Q3 results and outlooks should help determine the near-term path of U.S. equities and the Dollar, and crude should ultimately follow the lead of its correlations. Meanwhile, the $70/bbl area should continue to play a psychological role in the movements of crude. On an encouraging note, crude continues to set lower highs after bottoming on 9/25. Crude futures have a few uptrend lines we can create below present levels while the futures also face multiple downtrend lines. Our trend lines are beginning to converge and reach inflection points, meaning crude may diverge from its two month trading range should Q3 earnings surprise in either direction.
Price: $69.58/bbl
Resistances: $70.04/bbl, $70.36/bbl, $70.73/bbl, $71.13/bbl, $71.62/bbl, $72.04/bbl
Supports: $69.23/bbl, $68.89/bbl, $68.42/bbl, $68.08/bbl, $67.76/bbl
Psychological: $70//bbl, $65/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 Trades Higher Ahead of ECB Statement
The EUR/USD has taken another small leg up as traders await the ECB’s monetary policy decision. Though most analysts are expecting the ECB to keep its policy unchanged, investors have been riding the EUR/USD higher in anticipation of future rate hikes. The RBA’s ¼ point raise has negatively impacted the Dollar across the board. Investors are coming to reality that the exit strategies will have to come into effect sooner or later and the RBA got the ball rolling. Since the ECB has maintained a relatively hawkish stance throughout the crisis, one is led to believe that the ECB will tighten before the Fed. The ECB’s resilience has allowed the EUR/USD to hold strong while the EUR/GBP climbs towards parity. However, investors should keep in mind that Australia’s economy is in a different position than the EU’s. Australia’s commodity-dependent economy has resulted in a quick recovery, whereas the EU’s heavy reliance on manufacturing and finance has been a drag. Australia’s advantageous position has allowed the RBA to keep its minimum rate at an elevated level throughout the crisis and is therefore the first to act in terms of tightening liquidity. Therefore, although the RBA’s decision applies some pressure on the ECB to act, we believe the ECB will sit tight until global consumption and demand for manufactured goods stabilizes. Since analysts are expecting the ECB to stand pat, any surprise decision today would be a huge near-term catalyst for the EUR/USD.
We received some more negative data from Germany today with industrial production coming in two basis points lower than analyst expectations. This tags onto the weak German PMI data printed a couple weeks back. The present weakness in Germany’s economy will likely prevent the ECB from making any rash, hawkish monetary decisions today. In fact, Trichet recently mentioned the importance of a stronger Dollar, particularly since it appears Germany’s manufacturing industry is being pinched by the relative strength of the Euro. The EU is finished with econ data for the week beside tomorrow’s French Industrial Production number. Therefore, the EUR/USD’s performance will rely upon a combination of the ECB’s monetary decision and the broad-based performance of the Dollar along with gold. Earnings season will pick up was the week progresses, and stronger than expected Q3 earnings could trigger a rally in U.S. equities and send the EUR/USD beyond our 3rd tier downtrend line and September highs. Therefore are quite a few variables which could alter the EUR/USD’s trend as the week closes out, so stay tuned.
Technically speaking, our 2nd and 3rd tier downtrend lines serve as immediate-term technical barriers. If the EUR/USD can climb past our 3rd tier we believe September highs will be the next to go. Such a movement could spur a nice near-term run in the EUR/USD towards the highly psychological 1.50 level. As for the downside, the currency pair’s recent strength creates several technical cushions, including multiple uptrend lines along with 10/7 and 9/29 lows. The breakout in gold and the AUD/USD along with the S&P futures trading near 2009 highs create an optimistic environment for the EUR/USD and its medium-term uptrend. However, we will have to see how the ECB meeting fairs and if the EUR/USD is able to barrel through the aforementioned technical barriers.
Present Price: 1.4770
Resistances: 1.4784, 1.4800, 1.4818, 1.4840, 1.4850, 1.4867
Supports: 1.4768, 1.4756, 1.4741, 1.4721, 1.4702, 1.4671, 1.4637
Psychological: 1.50, September Highs
GBP/USD Bounces Past 1.60 on Broad-Based Dollar Weakness
The Cable finally decided to participate with the gold rush and broad-based weakness of the Dollar. The GBP/USD popped above the psychological 1.60 level and 10/6 highs. However, the Cable is buckling under the pressure of our 3rd tier downtrend line and 9/30 highs. The GBP/USD finally shook free of its tight and is looking to piece together a more substantial rally than the one we witnessed on 9/30. A strong movement past our 3rd tier downtrend line would likely yield such an outcome since it runs through 9/01 highs. The BoE kept its monetary policy unchanged as did the ECB. Both monetary decisions are in line with analyst expectations and are presently having a limited impact on FX markets. However, more important will be the press conferences and quotes from BoE and ECB members over the remainder of the week. Words have moved currencies as much as actions. Therefore, investors will be looking to see if BoE governor King makes any additional dovish comments as he’s been prone to do.
Britain will be light on the econ data wire until tomorrow’s PPI Input and Trade Balance releases. Both will be important gauges for future monetary policy. Weak input prices and a large Trade Balance deficit would only encourage the BoE to maintain a dovish monetary stance to help buoy prices and stimulate external demand for British goods and services. Therefore, volatility could pick up as the week comes to a close. FX markets will also be sensitive to Q3 earnings releases. Strong Q3 earnings would help drive equities hire while weakening the Dollar further, and vice versa. However, the Pound should remain at a disadvantage regardless of any continued near-term broad based weakness in the Dollar due to the state of Britain’s economy and the comparatively dovish stance of the BoE.
Technically speaking, the GBP/USD faces multiple downtrend lines along with the 9/30 highs. The Cable’s bounce past 1.60 is the first step to more significant gains, yet the currency pair will need to break through the aforementioned technical barriers before realizing more substantial movements to the topside. As for the downside, the GBP/USD has cushions in 10/2 and 9/28 lows along with multiple uptrend lines. Recent strength in the Cable has created some near-term breathing room. Consecutive higher lows (9/28, 10/2, 10.7) create a strong base for the Cable to fall back on over the near-term. Therefore, immediate-term movements to the downside should be limited. However, a failure of these triple lows and our 1st tier uptrend line would heighten near-term losses. Overall, extraordinary breakouts in gold and the AUD/USD create an environment for a new near-term uptrend line in the Cable. Therefore, investors should keep a close eye on the Cable’s interaction with our technical barriers over the next 24 hours.
Present Price: 1.6049
Resistances: 1.6072, 1.6095, 1.6127, 1.6145, 1.6168, 1.6191, 1.6211
Supports: 1.6045. 1.6024, 1.5992, 1.5964, 1.5921, 1.5900
Psychological: 1.60
USD/JPY Consolidates Above Tuesday Lows
The USD/JPY is retrenching above 10/27 and 9/28 lows as gold and the AUD/USD begin to top out. However, the GBP/USD and EUR/USD are strengthening today, normally a negative catalyst for the USD/JPY. The USD/JPY appears to be on a path of its own for right now since investors are debating whether to send the currency pair below our 1st tier uptrend line towards a retest of January lows. Although present consolidation is encouraging and may continue over the immediate-term, the USD/JPY is still stuck in its debilitating downtrend. Huge breakouts in gold and the AUD/USD are sending a message supporting a broad-based Dollar depreciation over the longer-term. Though BoJ Minister Fujii reversed his hawkish tone in favor of supporting the Yen should it strengthen to critical levels, we are not sure exactly what levels Fujii is comfortable with. Therefore, the Yen’s appreciation should continue so long as the BoJ’s future monetary policy remains hazy. We can tell you that a failure of January lows would send up a red flag and pressure the BoJ to intervene.
Meanwhile, Japan will release Core Machinery Orders data late Thursday EST. The CMO number will be closely watched since it’s a leading indicator. A stronger than expected number would likely result in further appreciation of the Yen since it would support Fujii’s hesitance in participating in QE. A solid number wouldn’t be surprising since Japan’s #1 trading partner, China, continues to experience strong economic growth. In addition to the CMO number U.S. Q3 earnings will play a large role in determining the near-term path of the Dollar. Encouraging Q3 results would lead investors away from the Dollar and place further downward pressure on the USD/JPY. Lastly, the convincing breakouts in gold and the AUD/USD spell a longer-term depreciation of the Dollar. Hence, there is little reason to change our negative outlook on the USD/JPY trend-wise.
Technically speaking, 10/27 and 9/28 lows should continue to serve as an immediate-term technical cushion. However, a failure of these lows and our 1st tier uptrend line would ultimately lead to a retest of January lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 10/7 and 10/5 highs. Additionally, the psychological 90 level is now working against the USD/JPY.
Present Price: 88.41
Resistances: 88.60, 88.85, 89.20, 89.45, 89.97, 90.30
Supports: 88.25, 87.97, 87.63, 87.12, 86.80, 86.13
Psychological: 90, 2009 and 2008 lows
Gold Starts to Top Out After Incredible Run
Gold is beginning to cool down following the amazing gold rush that took place in reaction to the RBA being the first central bank to raise rates following the beginning of the credit crisis. The AUD/USD took flight after the RBA’s decision in conjunction with much better than expected Aussie employment data. Breakouts in gold and the AUD/USD spurred a broad-based depreciation of the Dollar, only fueling gold’s bolt towards new record nominal highs. However, the psychological impact of the RBA’s monetary shock could start to wane since both the ECB and BoE kept their monetary policies unchanged today. The EUR/USD and GBP/USD still have to deal with a few technical barriers before participating more fully in the broad weakness of the Dollar. Attention will now turn to Q3 earnings season and the reaction of U.S. equities. Better than expected Q3 results would likely depreciate the Dollar further and help gold extend its breakout. Meanwhile, it seems gold will cool and consolidate as investors digest this week’s explosive movements. Technically speaking, we can’t place a downtrend line yet since we’re dealing with uncharted topside territory. However, we’ve laid a few downtrend lines to give an idea of support. It seems the $1050/oz level will play a psychological role for the time being. Regardless of current weakness, gold’s breakout to record highs sends a message of commitment to a longer-term uptrend in the precious metal. For the time being investors should keep an eye on the EUR/USD and GBP/USD and their interaction with their respective topside technical barriers should they be reached.
Present Price: $1052.45/oz
Resistances: $1053/oz, $1056.34/oz, $1058.54/oz.
Supports: $1049.24/oz, $1046.55/oz, $1042.63/oz, $1037.99/oz, $1035.54/oz.
Psychological: $1050/oz
The S&P Futures Cool Down Despite Positive Unemployment Data
The S&P futures are being deflected by our 2nd tier uptrend line despite weekly Unemployment Claims beating analyst expectations. Enthusiasm triggered by the RBA’s decision to raise rates is waning after the BoE and ECB decided to keep their monetary policies intact. In fact, the EUR/USD is facing headwinds after Trichet signaled the ECB has little intention of raising rates over the medium-term since the economic recovery is still in a fragile state. We’re seeing a sell-off in the EUR/USD as a result and profit-taking in gold. Furthermore, the AUD/USD appears to have hit a ceiling and the USD/JPY a bottom. Meanwhile, the 30 Year T-Bond futures are looking at October highs as they seem to be prepping for a retest. Today’s action in the Dollar, gold, and Treasuries implies weakness in U.S. equities due to correlative pressures.
Focus will now shift to Q3 earnings. Alcoa kicked off the Q3 season yesterday with better than expected results. Earnings will heat up over the next 48 hours and naturally carry over to next week. Investors are looking for positive earnings caused by an improvement in revenue instead of cost-cutting measures. The incredible run in the S&P futures has raised investor expectations, and Q3 results and outlooks will need to match present valuations. Despite current today’s strength in the Dollar the huge breakouts in gold and the AUD/USD signal a high probability of medium-term weakness in the greenback. Such a development would likely be a positive catalyst for U.S. equities due to the S&P’s negative correlation with the Dollar.
Technically-speaking, the S&P futures face technical barriers in the form of 9/29, 9/17, and 9/24 highs along with our new 2nd tier downtrend line. As for the downside, the S&P futures has technical cushions in the form of 10/7 and 9/28 lows along with our 1st tier uptrend line and the psychological 1050 level. While technicals and correlations are in favor of the S&P’s uptrend, Q3 results and outlooks will shape in the near-term. Meanwhile, investors should eye the future interaction of the EUR/USD and GBP/USD with their respective technical barriers and cushions. The inability of these currency pairs to match the extent of gold’s breakout signals there is still a downward force bearing on U.S. equities.
Price: 1060
Resistances: 1065.5, 1070.5, 1075
Supports: 1060, 1055.5, 1051, 1045.75, 1041, 1036.25
Psychological: 2009 highs, 1050, 1075, 1100
Crude Ducks Beneath $70/bbl with Stronger Dollar
Crude futures are trading back beneath the highly psychological $70/bbl level as the Dollar appreciates across the board and gold comes off all-time highs. Crude futures failed to break through 9/22 highs and our 2nd tier downtrend line yesterday despite the gold rush and an incredible breakout in the AUD/USD. Instead, crude experienced a moderate down-bar on sizable sell-side volume. Weekly crude inventories also came in shallow, which makes present weakness in crude a little disconcerting. Crude futures seem to be tracking the EUR/USD and GBP/USD more than gold and other major Dollar crosses. The EUR/USD and GBP/USD both failed to participate fully in gold’s record-setting breakout and the currency pairs still face a few immediate-term technical barriers. Additionally, the S&P futures need to deal with previous 2009 highs while the 30 Year T-Bond futures look to retest monthly highs. Hence, the breakout in precious metals doesn’t seem to favor crude as much as investors would hope. Furthermore, investors should keep in mind that OPEC will likely tailor production to keep the price of crude within its desired $68-$72/bbl range.
As with equities and the FX markets focus will shift to Q3 earnings. Q3 results and outlooks should help determine the near-term path of U.S. equities and the Dollar, and crude should ultimately follow the lead of its correlations. Meanwhile, the $70/bbl area should continue to play a psychological role in the movements of crude. On an encouraging note, crude continues to set lower highs after bottoming on 9/25. Crude futures have a few uptrend lines we can create below present levels while the futures also face multiple downtrend lines. Our trend lines are beginning to converge and reach inflection points, meaning crude may diverge from its two month trading range should Q3 earnings surprise in either direction.
Price: $69.58/bbl
Resistances: $70.04/bbl, $70.36/bbl, $70.73/bbl, $71.13/bbl, $71.62/bbl, $72.04/bbl
Supports: $69.23/bbl, $68.89/bbl, $68.42/bbl, $68.08/bbl, $67.76/bbl
Psychological: $70//bbl, $65/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.
