Daily Market Commentary
EUR/USD Consolidates Above 1.30
The EUR/USD is consolidating above 1.30 as the EUR/GBP moves lower, indicating the Euro is exhibiting a relative weakness today. Weakness in the Euro currency comes as optimism stemming from last week’s EU stress test results fades and investors begin to look forward. Today’s EU economic data revealed a slowdown in German retail sales and the CPI flash came in a bp below analyst expectations. The EU unemployment rate remained unchanged at 10%, indicating the EU economy is still in a vulnerable position as the ECB and EU economies ready themselves for the implementation of austerity measures. As for the U.S., advance GDP came in a hair shy of estimates. The slightly disappointing GDP reading was offset by a much stronger than expected Chicago PMI as manufacturing holds strong in the U.S. despite the slowdown in consumption and high unemployment. Investors have taken U.S. equities a bit lower in reaction to today’s U.S. data set, boosting the risk trade as the dollar loses its luster due to the underperformance of America’s economy. China will sneak in manufacturing data this weekend and it will be interesting to see if the figure can hold above 50. If China’s manufacturing PMI disappoints and dips below the psychological 50 mark then the global markets could open with risk-aversion on Monday. The EU will be quiet on the data wire Monday, leaving the EUR/USD in the hands of manufacturing PMI releases from both the UK and U.S.
Technically speaking, the EUR/USD faces technical barriers in the form of intraday and 5/10 highs along with the highly psychological 1.30 level. As for the downside, the EUR/USD has supports in the form of intraday and 7/27 lows.
Present Price: 1.3051
Resistances: 1.3070, 1.3091, 1.3108, 1.3143, 1.3179, 1.3208
Supports: 1.3043, 1.3020, 1.2996, 1.2960, 1.2937, 1.2918
Psychological: 1.30
GBP/USD Pops as Pound Outperforms
The Cable is setting fresh July highs today as the month comes to a close despite a disappointing GfK consumer confidence reading. The Pound is continuing to outperform as the currency derives strength from lasts week’s stronger than expected Prelim GDP figures. However, this optimism should cool off next week and the UK will have to prove itself once again with prelim manufacturing PMI on deck to kick off the month of August. Manufacturing has begun to cool down in the UK and it will be interesting to see whether this trend continues. China will release its own manufacturing PMI this weekend and analysts are expecting a decline to 51.5. That being said, it will be important to see this data point remain above the 50 threshold, or they may be a round of risk-aversion when the markets open on Monday. Today’s U.S. data set resulted in a slightly lower than expected advanced GDP reading, although a much stronger than anticipated Chicago PMI figure is countering negative sentiment. Meanwhile, the weaker than expected GDP outlook for the U.S. is allowing the Pound to gain topside momentum against the Dollar since the UK’s prelim GDP was impressive. The Cable continues to confirm its uptrend in what appears to be a march towards previous 2010 highs, or the psychological 1.65 area.
Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with intraday lows and the psychological 1.55 level. As for the topside, the Cable faces technical barriers in the form of intraday highs and the psychological 1.60 level.
Present Price: 1.5709
Resistances: 1.5721, 1.5745, 1.5768, 1.5791, 1.5814, 1.5844
Supports: 1.5679, 1.5656, 1.5627, 1.5598, 1.5573, 1.5543
Psychological: 1.55
USD/JPY Sets New July Lows as Month Wraps Up
The USD/JPY set fresh July lows today, countering new July highs in the Cable as investors reacted to the U.S. data set. The inverse direction of these two currency pairs indicates in a bearish sentiment in regards to the Dollar and investors are clearly losing their appetite for the Greenback as U.S. data continues to reveal worrisome signs. The USD/JPY set intraday lows in reaction to a weaker than expected U.S. prelim GDP figure. However, the currency pair has regained some of these losses after the Chicago PMI came in much stronger than anticipated. Meanwhile, investors are also reacting to a weaker than expected set of data from Japan. CPI, industrial production, and unemployment all disappointed. That being said, the DPJ will likely put pressure on Prime Minister Kan and BoJ Governor Shirakawa to intervene verbally in order to keep the USD/JPY from retesting 2009 lows. Although the two have been quiet thus far, we would expect to hear a public announcement should 2009 lows give way. Investors will now turn their attention to the upcoming flurry of manufacturing PMI data from around the globe, beginning with China over the weekend. The UK and U.S. will follow with their respective manufacturing PMI releases on Monday.
Technically speaking, the USD/JPY has technical supports in the form of intraday and 2009 lows. Additionally, the psychological 85 level could continue to serve as a solid cushion over the near-term. As for the topside, the USD/JPY faces technical barriers in the form of intraday and 7/29 highs.
Present Price: 86.41
Resistances: 86.50, 87.58, 86.71, 86.82, 87.02, 87.20
Supports: 86.32, 86.22, 86.11, 85.93, 85.79, 85.50
Psychological: 85, 90, July lows
Gold Jumps on U.S. Data
Gold has jumped back above $1180/oz and is currently trying to climb back above our key medium-term uptrend lines. That being said, it will be interesting to see whether gold can close above $1185/oz and follow through to $1200/oz over the next couple trading sessions. If so, gold may manage to lock back into its uptrend following this week’s huge setback. Investors are pickup up gold and the yen again after U.S. prelim GDP disappointed analysts and investors continue to react to Fed official Bullard’s dovish statements yesterday. The gradual deterioration in investor confidence over the past 48 hours has allowed gold to retain its luster as a safe-haven, though gold is still trading in bearish territory. China will release manufacturing PMI over the weekend and analysts are expecting a cooldown to 51.5. However, if this reading should disappoint and follow below the key 50 threshold then investor may push gold higher on Monday. The UK and U.S. will also release their respective manufacturing PMIs on Monday, giving investors a comprehensive view of global manufacturing.
Technically speaking, gold has technical supports in the form of intraday and 7/29 lows. Additionally, the psychological $1150/oz level could serve as a near-term technical cushion should it be tested. As for the topside, gold faces technical barriers in the form of intraday and 7/27 highs. Additionally, the highly psychological $1200/oz level would likely serve as a solid technical barrier should it be tested once again.
Present Price: $1181.63/ oz
Resistances: $1183.03/oz, $1184.97/oz, $1186.99/oz, $1189.65/oz, $1191.75/oz, $1194.15/oz
Supports: $1180.66/oz, $1179.06/oz, $1177.43/oz, $1175.79/oz, $1173.63/oz, $1171.19/oz
Psychological: $1150/oz, $1200/oz, July highs and May lows
AUD/USD Drifts Higher as Risk Trade Thrives
The Aussie is drifting higher today while trying to set new July highs before the month draws to a close. The Aussie continues to benefit from positive money flows heading into the Forex risk trade as U.S. fundamentals send mixed signals. U.S. prelim GDP printed a Bp below analyst expectations while the Chicago PMI blew by estimates. With some key U.S. data points continuing to surprise to the downside investors have opted to divest from the Dollar and put their money into higher yielding currencies, such as the Aussie. Meanwhile, investors are awaiting China’s manufacturing PMI release over the weekend. If this data point disappoint then near-term gains in the Aussie could be capped since Australia’s economy is highly reliant on export demand from China. Regardless, the Aussie will likely hang above its highly psychological .90 level as investors look ahead to Tuesday’s key Asia trading session. Not only will the RBA makes its monthly monetary policy decision, but Australia will also print building approvals, retail sales, and ANZ job advertisements data. Hence, the Aussie will undergo a hefty test come Tuesday. Since Australia’s CPI and PPI both disappointed this week, it is likely that the RBA will keep its benchmark rate unchanged. However, if Australia’s accompanying data impresses analysts then investors will be looking ahead to a 25bp hike in September, a positive for the Aussie.
Technically speaking, the Aussie faces technical barriers in the form of intraday and 7/27 and 5/5 highs. As for the downside, the Aussie has multiple near-term uptrend lines working in its favor along with intraday and 7/28 lows. Additionally, the psychological .90 level may now serve as a psychological cushion.
Price: .9051
Resistances: .9073, .9097, .9121, .9137, .9156, .9175
Supports: .9044, .9017, .8999, .8975, .8955, .8940, .8919
Psychological: .90, July highs and lows
S&P Futures End the Month at 1100
The S&P futures have ended the month of July to close at their highly psychological 1100 level. Meanwhile, the futures are still holding well above their medium-term downtrend line despite prelim GDP coming in slightly below analyst expectations. Fortunately for the bulls, the Chicago PMI blew past analyst forecasts, indicating the rebound in U.S. manufacturing lives to see another day. That being said, the U.S. will print its manufacturing PMI on Monday and investors are expecting a slight cooldown. China kick off the manufacturing data by releasing its own PMI over the weekend and investors are expecting a decline to 51.5. Either way, it will be important to see China’s manufacturing PMI hold above 50, otherwise the trading week could begin with a round of risk-aversion. Meanwhile, U.S. markets were still feeling the impact from Fed official Bullard’s dovish comments yesterday. However, uncertainty stemming from Bullard’s statement should dissapate over the weekend as should optimism from last week’s EU stress tests. With earnings season winding down investors will now return their focus to fundamentals. However, investors should keep their eyes on the global news wires as usual since economies are treading in unfamiliar territories. Investors should now take a look at the S&P’s long-term downtrend line originating from October ’08 highs and connecting through 2010 highs. This downtrend line currently sits at around 1200, giving us an idea of how much room the S&P futures have to work with to the topside. Meanwhile, 1100 could continue to cause problems due to its psychological significance.
Price: 1100.95
Psychological: 1100
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