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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 01/28/10


Daily Market Commentary

EUR/USD Fluctuates Around 1.40

The EUR/USD has been fluctuating around its psychological 1.40 level as invertors digest the Fed’s monetary policy statement, Obama’s State of the Union Address, and today’s mixed bag of U.S. economic data. While Bernanke and the Fed played it safe and kept its policy in neutral, volatility really picked up during Obama’s State of the Union Address. The EUR/USD initially headed south to intra-session lows, but the risk trade rallied as Obama spoke and addressed the financial industry with a slap on the wrist and this encouraged investors that his proposed regulation may not be as constrictive as previously thought. However, the impact from Obama’s speech should wear off by the beginning of next week. Meanwhile, the U.S.released weaker than expected Unemployment Claims and Durable Goods data. These negative releases tack onto yesterday’s disappointing New Home Sales number, signaling the U.S. economy’s recovery is progressing very slowly. On a bright note, the Core DGO number printed above analyst expectations, showing durable goods purchases excluding autos picked up. In fact, the strong core number is probably limiting weakness in the EUR/USD right now as the Dollar wobbles. In addition to today’s U.S. data releases, the EU printed a Germany Unemployment Change figure which topped analyst expectations, a positive development for the Euro. However, the Euro is still underperforming, as highlighted by another downturn in the EUR/GBP. That being said, it seems mixed EU econ data combined with worries surrounding Greece’s economy are continuing to weigh down on the currency. The EU will release CPI and Money Supply data tomorrow to go along with the headline Unemployment Rate. Although focus will likely remain on the U.S. as it releases its Advance GDP. Meanwhile, even though the EUR/USD is sinking lower the AUD/USD and GBP/USD have firmed up over the past 24 hours, so it will be interesting to see how the Dollar reacts to tomorrow’s news.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with 1/27 and 1/25 highs. As for the downside, the EUR/USD has our 1st tier uptrend line serving as technical cushions along with previous January lows. Our 1st and 2nd tier uptrend lines could carry some weight since they run through some April 2009 lows. That being said, a failure of our 1st tier could send a fairly negative signal considering April 2009 lows are around the 1.30.

Present Price: 1.3989
Resistances: 1.4028, 1.4069, 1.410, 1.4135, 1.4174
Supports: 1.3981, 1.3950, 1.3929, 1.3900, 1.3876, 1.3833
Psychological: 1.40, January lows

GBP/USD Pops on Fed and Obama

The Cable is trading slightly below intraday highs after rallying in reaction to the Fed’s commitment to loose monetary policy in addition to a broad-based risk rally occurring during Obama’s State of the Union. Volatility is really picking up and the FX markets are all over the place as investors digest data and psychological events. Although U.S. Unemployment Claims printed higher than expected and Durable Goods disappointed, the Core DGO number surpassed analyst expectations. Hence, even though unemployment remains at a high level consumers are pickup up more pricey, longer lasting goods excluding autos. The U.S. will also release its Advance GDP, meaning investors will have more than enough data to sift through. Meanwhile, the UK will print its Nationwide HPI data tomorrow, suggesting volatility in the Cable could pick up a bit. It will be interesting to see how the currency pair reacts should HPI come in light considering the Pound is exhibiting a relative strength despite disappointing Prelim GDP and Realized Sales data earlier this week. The Pound’s strength is highlighted by another large leg down in the EUR/GBP. Investors should also keep an eye on gold as it battles to get back above its psychological $1100/oz level. A breakout in either direction could bring the Cable along for the ride considering the two are normally positively correlated.
Technically speaking, the Cable made an encouraging move today by topping January 25 highs. However, the currency pair is presently being negated by our multiple downtrend lines. In addition to these downtrend lines the Cable also faces technical obstacles in the form of 1/20, 1/15, and 1/29 highs. As for the downside, the Cable has multiple uptrend lines serving as technical cushions along with 1/27, 1/26, and 1/22 lows. Considering the Cable continues to set higher lows the currency pair appears to have a solid near-term support system in place. Furthermore, the psychological 1.60 could serve as a technical cushion should conditions deteriorate.

Present Price: 1.6243
Resistances: 1.6247, 1.6264, 1.6285, 1.6312, 1.6334, 1.6359
Supports: 1.6223, 1.6195, 1.6171, 1.6143, 1.6119, 1.6099
Psychological: 1.60, 1.65, January highs and lows

USD/JPY Locked at 90 As Investors Digest Data and News

The USD/JPY logged solid gains over the past 24 hours with the risk trading getting a boost from a positive reaction to Obama’s State of the Union. Furthermore, the Fed’s commitment to a loose monetary policy helped fuel the risk trade. Meanwhile, Japan released weaker than expected Retail Sales data, leading investors to prefer the Dollar over the Yen. However, the USD/JPY is relinquishing some of its gains as the risk trade gets knocked by more negatively mixed U.S. economic data. Weekly Unemployment Claims printed higher than analyst expectations, adding onto yesterday’s disappointing New Home Sales number. Furthermore, Durable Goods Orders came in weaker than expected while the Core DGO number surpassed expectations. This tells us that although consumption is improving, demand for autos is waning. Such a development could be negative news for Japanese manufacturers especially considering all of the recalls Toyota is making right now. Meanwhile, Japan will release a large set of data during tomorrow’s Asia trading session, including Household Spending, CPI, Prelim Industrial Production, and meeting minutes from the BoJ’s policy meeting this week. Investors will be looking to see whether the BoJ hinted at any inclination to loosen liquidity to fight deflationary forces. Furthermore, during the U.S. trading session investors will receive Prelim GDP data. Hence, the USD/JPY could remain very active as the trading week comes to a close.
Technically speaking, the USD/JPY has multiple uptrend lines serving as technical cushions along with 1/22 and 1/26 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with intraday and 12/18 highs. Furthermore, the .90 area could continue to have a psychological influence on the USD/JPY over the near-term.

Present Price: 90.06
Resistances: 90.22, 90.39, 90.57, 90.75, 90.90, 91.05
Supports: 89.95, 89.72, 89.55, 89.36, 89.21, 89.02
Psychological: 90, January highs and lows

Gold Consolidates Below $1100/oz

Gold is continuing its consolidative pattern despite wild fluctuations in the FX market. The Combination of the Fed’s monetary policy decision, weak housing and unemployment data, and Obama’s State of the Union have provided more than enough data and news to move markets. While New Home Sales drove the Dollar higher, negative New Home Sales data sent the risk trading reeling only to be boosting back up by the Fed maintaining its loose monetary policy. Furthermore, Obama’s speech garnered a positive reaction from equities and helped send the risk trade higher once again. However, disappointing Unemployment Claims data has led investors back to safety. The FX markets have been all over the map to say the least. Gold has remained relatively calm amidst the volatility and it seems the precious metal is waiting for a more definitive directional commitment from the Dollar before settling upon a direction itself. Meanwhile, Congress may vote upon Bernanke’s confirmation today and investors are eagerly awaiting tomorrow’s U.S. Advance GDP data. Hence, FX markets should remain volatile throughout the remainder of the week and it will be interesting to see whether gold decides to participate. That being said, FX investors should keep an eye on gold and monitor the precious metal for a direction breakout for it could signal a similar movement in the Dollar.
Technically speaking, gold has our 1st tier uptrend line serving as a technical cushion along with January lows should they be tested. As for the topside, gold faces a few steep downtrend lines along with the highly psychological $1100/oz level. Furthermore, intraday and 1/26 highs could serve as technical barriers should they be reached.

Present Price: $1088.30/oz
Resistances: $1087.56/oz, $1085.32/oz, $1082.10/oz, $1078.92/oz, $1074.44/oz, $1070.65/oz
Supports: $1093.32/oz, $1096.91/oz, $1101.00/oz, $1103.49/oz, $1106.76/oz, $1109.96/oz
Psychological: $1075/oz, $1100/oz, January lows

AUD/USD Trades off Session Highs Following Mixed U.S. Data

The AUD/USD posted a solid rally earlier today after dropping below our 1st tier uptrend line. The FX market experienced a broad-based risk rally fueled by a positive reaction to Obama’s State of the Union. Asia equity markets charged higher, a positive sign for the Aussie since China’s equities have been on a losing streak since the financial industry began tightening liquidity. However, the Dollar is appreciating again after U.S. weekly Unemployment Claims printed higher than analyst expectations. Furthermore, Durable Goods Orders came in weak as well. However, the Core DGO data surpassed analyst expectations, showing consumption ex-auto has picked up. Regardless, econ data this week has been altogether mixed with a negative tint, creating a downward drag on most major Dollar pairs and the AUD/USD is no exception. Meanwhile, investors are preparing for tomorrow’s U.S. Advance GDP data release. The GDP number will top off a wild week and volatility should remain at a heightened state. Australia will be absent from the data wire for the remainder of the week, meaning the AUD/USD’s behavior should remain in the hands of broad-based activity in the Dollar along with any further news from China regarding liquidity.
Technically speaking, the AUD/USD is currently fighting to stay above our 3rd tier uptrend line with our 1st and 2nd tier hanging below. Additionally, previous January lows and the psychological .8900 level should serve as technical cushions should they be reached. As for the topside, the AUD/USD faces multiple downtrend lines along with 1/28 and 1/26 highs serving as technical barriers. Furthermore, the .9000 area could continue to serve as a psychological force over the near-term.

Price: .8990
Resistances: .8995, .9005, .9019, .9030, .9042, .9056
Supports: .8982, .8972, .8960, .8950, .8940
Psychological: .90, January highs and lows

S&P Futures Reverse Gains after Mixed Data

The S&P futures are reversing from earlier gains despite a wave of stronger than expected earnings as well as a positive reaction to Obama’s State of the Union. The risk trade received a solid boost following Obama’s speech after he refrained from attacking the financial industry. However, a disappointing weekly Unemployment Claims release is countering positive momentum derived from Obama and encouraging earnings releases. In addition to the discouraging unemployment data the U.S. also released mixed DGO data. While headline Durable Goods data printed well below expectations, the Core DGO number exceeded forecasts. The mixed DGO data hasn’t registered much optimism from the market as equities are still being bogged down by a week of discouraging housing data, including yesterday’s negative New Home Sales release. Meanwhile, it appears Congress will vote upon Bernanke’s confirmation today and this could provide some volatility, particularly in the rare case that he is not confirmed for another term. Furthermore, investors are eagerly awaiting tomorrow’s Advance GDP data. That being said, markets could remain very active over the remainder of the week as investors digest the wealth of data and news. Investors should keep an eye on gold and the risk trade. While gold and the major Dollar pairs still have some supports in play, technical conditions have heated up this weekend and it could take the tip of a hat to send the risk trade into a momentum changing move.
Technically speaking, continues to face multiple downtrend line along with the highly psychological 1100 level to the topside. As for the downside, the S&P futures have 1/27 and 12/26 lows serving as technical cushions along with the psychological 1075 level.

Price: 1084.75
Resistances: 1088.75, 1093.75, 1098.75, 1102.50, 1106.75
Supports: 1083.50, 1080.25, 1077.75, 1072.25, 1069.75
Psychological: 1100, 1075, December highs and lows, November lows

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