Daily Market Commentary
EUR/USD Stabilizes Following Yesterday’s Pullback
The EUR/USD is stabilizing and managed to catch itself before testing 3/11 lows amidst yesterday’s selloff. Investor attacked the risk trade in reaction to another statement from Moody’s warning the UK, U.S. and several EU countries to get their fiscal houses in order. Yesterday’s is more of the same in likes of news we received last week, and appears to be a warning shot to debt-laden governments. The warning did deliver a psychological shock and the Euro and Pound were hit accordingly. Meanwhile, the Euro is keeping up its relative strength, reflected by resilience in the EUR/GBP. EU finance ministers didn’t provide details of how they plan to aid Greece yesterday, which was a bit disappointing for investors. However, the EU did iterate that they have a plan for Greece and it seems they are playing a game of chicken to see whether the Greek government follows through with the implementation of its austerity measures. Action by the EU and the potential for a hung parliament in the UK is likely the force behind a strong EUR/GBP. The EU has Germany’s ZEW Economic Sentiment release on the way along with CPI data. Should both numbers print well this could benefit the Euro since investors will speculate that solid economic performance could counteract fiscal troubles in some EU countries. However, eyes remain fixated on the Fed with a monetary policy decision on deck during the U.S. session. Should the Fed make no changes to its loose monetary policy language, this could also benefit the EUR/USD and risk trade in general. On the other hand, if the Fed alters its loose language then investors could head to the Dollar in anticipation of tightening from the Fed in a reasonable time period. The combination of key data releases and an FOMC create the potential for an active FX session.
Technically speaking, the EUR/USD faces multiple downtrend lines along with 3/8, 3/3, and 3/12 highs. The EUR/USD dropped below our 1st tier downtrend line yesterday before stabilizing, a disconcerting development since our 1st tier is the key that runs through 2010 highs. Hence, it will be important to see EUR/USD create some topside separation from our 1st tier again. As for the downside, the EUR/USD has several uptrend lines serving as technical cushions along with 3/15, 3/11, and 3/10 lows. Meanwhile, the psychological 1.35 area is still serving a technical cushion while 1.40 serves as a key psychological barrier.
Present Price: 1.3692
Resistances: 1.3693, 1.3713, 1.3731, 1.3756, 1.3796
Supports: 1.3672, 1.3654, 1.3637, 1.3618, 1.3590, 1.3578
Psychological: March and February Lows, 1.35, 1.40, February highs
GBP/USD Consolidates After Hefty Selloff
The Cable is consolidating above Monday’s lows after undergoing a hefty selloff in response to more warning shots concerning UK debt levels. Moody’s issued fresh statements warning the UK, U.S. and several EU countries to get their fiscal houses in order. The prospect of a hung parliament in the UK is worrying investors that the government will not be able to make the necessary budget cuts to counter rising debt levels. The EU issued a similar warning to the UK today citing concerns that proposed austerity measures are not enough to alleviate fiscal fears. Another storm of negative statements dealt a blow to the Pound, highlighted by resilience in the EUR/GBP. Hence, it’s the same old story for the Pound with psychological attacks weighing down the GBP/USD. The UK will be quiet again on the data wire, leaving investors focused on today’s FOMC meeting. Should the Fed maintain its dovish monetary language, this could help buoy the Cable and the risk trade in general. However, if the Fed tightens its stance this could place downward pressure on the Cable with investors heading to the Dollar. Therefore, investors should keep an eye on the market’s reaction to today’s Fed statement. On a positive note, gold is rebounding from $1100/oz. Gold is normally negatively correlated with the Dollar on a trend basis, so gold’s bounce could imply further stability in the risk trade. Meanwhile, it will be interesting to see if the Cable can pop back above our 1st tier downtrend line since it runs through 2/23 eyes and has been a bearing concerning the longevity of the Cable’s present upswing from 2010 lows.
Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with 3/15 and 3/11 lows. The psychological 1.50 area comes into play again and could serve as a solid cushion. As for the topside, the Cable faces multiple downtrend lines along with 3/3, 3/8 and 3/12 highs.
Present Price: 1.5056
Resistances: 1.5065, 1.5071, 1.5085, 1.5098, 1.5106, 1.5118
Supports: 1.5037, 1.5029, 1.5020, 1.5012, 1.5004, 1.4998
Psychological: 1.50 and March highs and lows 
USD/JPY Retests 90 Ahead of FOMC
The USD/JPY is retesting its highly psychological 90 level as the Dollar pulls back across the board ahead of the FOMC. Investors will be paying close attention to the Fed’s statement to see whether the central bank alters its dovish language. Should there be any alteration, this could spur a Dollar rally and benefit the USD/JPY. However, if the Fed keeps its loose policy statement intact, the risk trade could bounce in anticipation of more cheap money in the U.S. The U.S. will also release building permits data today, meaning that either way the FX markets could be in for an active trading session. The BoJ will also make its monetary policy decision during tomorrow’s Asia trading session. It will be interesting to see whether the BoJ heeds to the DPJ’s calls for additionally liquidity injections to counter deflationary pressures. If so, the USD/JPY could pop again as the BoJ takes a looser monetary policy stance than the Fed. However, if the BoJ keeps its policy as is the USD/JPY may be buoyed around its highly psychological 90 area. That being said, there are many events on the calendar which could have a considerable impact on the USD/JPY over the next 24 hours.
Technically speaking, the USD/JPY faces multiple downtrend lines along with 3.8, 3/10, and 3/12 highs. Meanwhile, the highly psychological 90 area could continue to have an influence over the USD/JPY’s movements for the near-term. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with 3/9 lows.
Present Price: 90.06
Resistances: 90.16, 90.23, 90.29, 90.35, 90.41, 90.50
Supports: 90.01, 89.92, 89.84, 89.74, 89.64, 89.55
Psychological: 90, March highs and lows 
Gold Pops During Asia Session
Gold is staging a rally during the Asia trading session as investors await key EU economic data and the Fed’s monetary policy decision later today. Gold was a beacon of stability during yesterday’s risk-averse movement in the FX markets. The precious metal continued its consolidation above $1100/oz and is currently moving in line with its negative Dollar correlation despite last week’s deviation. However, although gold’s pop is encouraging, it still needs to surpass our 1st and 2nd tier downtrend lines along with 3/12 highs before establishing a more sustainable recovery. After all, the precious metal did dip below $1110/oz and some key uptrend lines last week during its pullback. Should EU data print strong and the Fed stick to its loose monetary policy for the foreseeable future gold could find enough strength to overcome its topside technical barriers. On the other hand, should data disappoint and the Fed tighten its language then gold could come under selling pressure again. On the other hand, gold hasn’t exactly been behaving according to its past correlation patterns as of late, so analyzing gold according to its usual correlative forces could be a mistake. Either way, gold and FX markets could experience heightened activity over the next 24 hours as investors digest the wealth of news and data.
Technically speaking, gold faces multiple downtrend lines along with 3/12and 3/10 highs. As for the downside, gold still has multiple uptrend lines serving as technical cushions along with intraday, 3/15, and 3/12 lows. Furthermore, the psychological $1100/oz area could continue to have an influence on gold over the near-term.
Present Price: $1113.30/oz
Resistances: $1113.77, $1115.19, $1116.32/oz, $1117.66/oz, $1118.87/oz, $1120.77/ oz
Supports: $1112.30/oz, $1111.13/oz, $1110.06/oz, $1109.09/oz, $1108.17/oz, $1106.94/oz
Psychological: $1100/oz, $1150/oz, March highs and Lows 
AUD/USD Solidifies from Monday Lows
The AUD/USD has bounced from Monday lows after dipping below .91 and touching our key 2nd tier uptrend line. The Aussie followed the EUR/USD and Cable lower amid a wave of risk-aversion in reaction to statements from Moody’s warning developed countries with increasing debt exposure to get their fiscal houses in line or face the possibility of a credit downgrade in the future. Uncertainty, particularly in Europe, weighed on the Aussie as investors speculated that more debt issues could dissuade the RBA from tightening its monetary policy again. However, the Aussie has staged a solid rebound thus far today, finding support in our key 2nd tier uptrend line which runs through 3/9 lows. The RBA issued its meeting minutes today and the notes showed the RBA is holding its monetary stance for the time being and stands ready to tighten or loosen depending on fundamental conditions. That being said, the RBA still seems to be leaning towards a hawkish monetary policy so long as employment and consumption continue to improve. However, last week’s negative employment and housing reports have decreased the expectations of a rate hike at the central bank’s next meeting. Meanwhile, focus will likely be on the U.S. with building permits data and an FOMC meeting on the way. Should the FOMC maintain its loose monetary language then they risk trade could receive a boost. On the other hand, any hawkish language alteration could have a negative impact on the Aussie in anticipation of tighter monetary policy from the Fed.
Technically speaking, the Aussie has multiple uptrend lines serving as technical cushions along with intraday lows, 3/15 lows, 3/9 lows, and the psychological .90 area. As for the topside, the Aussie has multiple downtrend lines serving as technical barriers along with the psychological .92 area. Additionally, previous 2010 highs could serve as a hefty technical barrier should they be tested.
Price: .9146
Resistances: .9160, .9171, .9186, .9194, .9213, .9227
Supports: .9137, .9126, .9114, .9104, .9090, .9073
Psychological: .92, .90, 2010 highs
S&P Futures Fluctuates Around 1050
The S&P futures ended yesterday’s session relatively flat despite an early pullback and are presently hanging around their psychological 1050 level as investors await EU economic data and the FOMC meeting later today. The U.S. will also release Building Permits data, meaning market activity could pick up over the next 24 hours. Investors will be looking to see whether the Fed adjusts its monetary language from a loose stance for the foreseeable future. Should the fed tighten its language this could have a negative impact on the S&P futures and the risk trade as a whole in anticipation of tighter liquidity in the near future. However, should the Fed maintain its monetary policy stance, then the risk trade could continue its upward trajectory with cheap money benefitting corporate performances. Meanwhile, investors should keep an eye on the EU for any psychological developments concerning countries experiencing debt and fiscal difficulties. The S&P futures held strong yesterday despite selloffs in the EUR/USD and Cable, so it will be interesting to see whether these currency pairs can manage to stabilize and regain Friday’s positive momentum. The futures are back above our uptrend line despite yesterday’s transgression and have managed to pop back above January highs. Hence, the S&P’s upward momentum is intact for the time being, though this positive trajectory could depend on the outcome of today’s Fed meeting and Bernanke’s testimony tomorrow.
Technically speaking, the S&P futures are still trading comfortably above our 3rd tier downtrend line, a positive technical statement. However, they are testing 1150 and it will be interesting to see if this key psychological level holds. That being said, the S&P futures face technical barriers in the form of 1050 and previous March/2010 highs. As for the downside, the futures have intraday, 3/10, and 3/9 lows serving as technical cushions along with our steep 1st tier uptrend line.
Price: 1151.25
Resistances: 1152.5, 1153.75, 1159.25
Supports: 1148.75, 1147, 1144.5, 1141.75, 1139.5
Psychological: 2010 highs, 1150
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