Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/04/10

Daily Market Commentary


EUR/USD Tumbles as ECB Keeps Policy Unchanged

The EUR/USD is extending yesterday’s pullback after the ECB kept its monetary policy unchanged as analysts estimated. German Factory Orders printed -2.5% below analyst expectations, adding downward pressure on the EUR/USD. Investors are also digesting a skyrocketing unemployment rate in New Zealand along with a slight pop in U.S. Unemployment Claims. Hence, negative economic indicators continue to flash around the globe and the Dollar is benefitting as investors route the risk trade. Furthermore, investors should keep in mind that U.S. economic data has been altogether positive before today’s set, so the Dollar has become an ideal hiding place amidst uncertainty. Meanwhile, we recognize a huge bar down in gold, confirming the negative sentiment regarding the risk trade since the precious metal is negatively correlated with the Dollar. Although the EU will release German Industrial Production tomorrow, focus will be on the U.S. with Non-Farm Employment Change and the official Unemployment Rate on the way. Therefore, volatility in the major Dollar pairs could remain at a heightened state as the week comes to a close. It seems like the Dollar is in a win-win situation these days since negative global developments leads investors to the Greenback for safety, whereas positive economic data leads investors to prefer the Dollar over currencies such as the Euro and Pound. Hence, the EUR/USD could remain under pressure until either EU economic fundamentals turn around or the debt situation in Greece is cleared up.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday, 2/1, and 2/3 highs. As for the downside, we’ve created a few new uptrend lines to serve as technical cushions along with previous June 2009 lows. On a negative note, our uptrend lines now run through February levels, or the 1.27 area. Hence, the EUR/USD’s downturn this month could signal a more lasting, medium-term decline.

Present Price: 1.3805
Resistances: 1.3833, 1.3857, 1.3878, 1.3896, 1.3916, 1.3938
Supports: 1.3806, 1.3782, 1.3757, 1.3737, 1.3689
Psychological: June 2009 lows

GBP/USD Crashes as Dollar Makes Another Bull Run

The Cable is crashing with the EUR/USD after the BoE issued a more Dovish monetary statement than anticipated. Although the BoE halted its QE program as expected, Mervin King stated that the possibility of more QE is on the table such economic conditions deteriorate. Hence, despite some positive economic data lately the BoE is opting to take a wait and see approach to determine whether the global economic recovery has hit a bump in the road or if we are beginning a more protracted pullback. Furthermore, it seems all central banks want to gauge how tighter liquidity measures in China will impact global growth. The wait-and-see policies issued from central banks have heightened investor uncertainty, leading investors to the Dollar as a safe haven. Today’s weaker than expected Halifax HPI data didn’t help matters either, adding further downward pressure on the Cable. Meanwhile, investors are also reacting to a pop in U.S. Unemployment Claims and Productivity. The negative U.S. data set has ignited upward momentum in the Dollar as investors question the sustainability of the global economic recovery. The UK will release PPI tomorrow. Even though a strong PPI release could help buoy the Pound, even Mervin King disregarded this month’s pop in CPI as an abnormal affair. Attention will focus in on the U.S. during the afternoon with the headline Unemployment Rate and Non-Farm Employment Change data being released. Therefore, volatility could remain at a heightened state as the trading week comes to a close.
Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/3 highs. The Cable has dropped below December lows, a negative development technically. The currency pair now has September and October 2009 lows serving as technical cushions. Furthermore, we’ve created some new uptrend lines (off screen). Investors should take note our new uptrend lines run through the 1.55 area, implying the Cable could have some more room to go to the downside.

Present Price: 1.5781
Resistances: 1.5798, 1.5818, 1.5829, 1.5848, 1.5861, 1.5876
Supports: 1.5775, 1.5758, 1.5717, 1.5690, 1.5675, 1.5639, 1.5601
Psychological: 1.55, September and October 2009 lows

USD/JPY Relatively Calm as Dollar Soars Across the Board

The USD/JPY is registering only a moderate decline today as the Dollar surges against the Euro, Pound, and Aussie. Investors are rushing to the Dollar as a safe haven amid neutral monetary policy statements from European central banks combined with weak economic data around the globe. Both the BoE and ECB kept the monetary policies on hold as central banks take a wait and see approach in regards to the health of the global economic. Debt issues in Greece and tighter monetary policy in China has caused central bankers to omit hawkish comments as they monitor how these negative economic developments will impact global growth. Meanwhile, negative data from the U.S. and UK has only fueled the Dollar’s climb, causing large pullbacks in the Cable and EUR/USD. However, the USD/JPY is holding up relatively well since Japan has been quiet on the data front and the BoJ continues to state that it will fight deflationary forces. Hence, the loose monetary policy stances from the BoJ and Fed are offsetting each other, providing a bit of stability for the USD/JPY. However, today’s negative U.S. data is leading to slight declines in the currency pair. Therefore, investors should monitor tomorrow’s U.S. Unemployment Rate and Non-Farm Employment Change data tomorrow.
Technically speaking, the USD/JPY has multiple uptrend lines serving as technical cushions along with 2/3 and 2/1 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 2/1 and 2/3 highs. Meanwhile, the USD/JPY is fighting to create some topside separation between price and the psychological 90 level. That being said, the psychological 90 level could serve as a solid technical support should it be tested.

Present Price: 90.44
Resistances: 90.55, 90.70, 90.84, 90.95, 91.07, 91.21
Supports: 90.28, 90.12, 89.97, 89.76, 89.54
Psychological: 90, January highs and lows

Gold Slammed By Dollar Rally

Gold has been hammered by an enormous 4-hour down bar as the Dollar surges against the Euro, Pound, and Aussie. Investors obviously didn’t care for central bank statements from the ECB and BoE as both decided to stay neutral and take a wait and see approach. Central bankers seem to be monitoring how economic uncertainties such as the debt issue in Greece and tightening in China impact global economic growth. Meanwhile, today’s U.S. economic data set printed negatively, fueling Dollar purchases and extending losses in major Dollar pairs as investors headed for safety. Such a development doesn’t bode well for gold considering its negative correlation with the Greenback. Gold has proceeded to tumble below all of our uptrend lines and previous 2010 lows. This is a negative development technically since our 1st tier uptrend line runs through August 2009 lows, or the $935/oz area. Hence, gold could be entering a medium-term downtrend pattern should it not recover rather quickly.
Technically speaking, we’re unable to form any new uptrend lines for gold at the time, a very negative technical development. Meanwhile, gold could find support in the October 2009 trading range. As for the topside, gold faces multiple downtrend lines along with 1/29 highs. Furthermore, the $1000/oz level could serve as a technical barrier should to be reached.

Present Price: $1072.95/oz
Resistances: $1073.95/oz, $1082.19/ oz, $1084.11/oz, $1086.25/oz, $1088.80/oz, $1092.40/oz
Supports: $1067.36/oz, $1063.28/oz, $1058.74/oz, $1054.86/oz, $1050.12/oz
Psychological: $1100/oz, January highs and lows

AUD/USD Drops Like A Rock as Dollar Surges

The Dollar is skyrocketing across the board as the Yen begins to crash as well, signaling investors are making a run for safety. The AUD/USD is participating fully as investors still have a sour taste in their mouths following the RBA’s decision to halt its rate hike. The ECB and BoE followed suit by taking a neutral wait and see approach. Meanwhile, Australia’s Retail Sales data disappointed estimates and Building Approvals outperformed, setting a mixed tone for Australia’s economy. Additionally, America’s data set disappointed this morning with a pop in Unemployment Claims, productivity, and earnings. Hence, economic fundamentals were altogether negative today, adding downward pressure on the AUD/USD and other major Dollar pairs. The scale truly tipped after the IMF issued a warning concerning Portugal’s deteriorating fiscal situation. Now the EU must take fire for debt troubles in two member countries, adding to already rising investor uncertainty. All of the events listed above proved a lethal combination for the risk trade, resulting in a huge leg down in the AUD/USD. The currency pair has tumbled below December 2009 lows and is currently fluctuating within September 2009’s trading range. The RBA will deliver its monetary policy statement during tomorrow’s Asia trading session, likely yielding further volatility for the AUD/USD. The U.S. will also release its headline Unemployment Rate along with Non-Farm Employment Change data. Hence, the FX markets should remain very active as the trading week comes to a close.
Technically speaking, we’ve had to manufacture some new uptrend lines with run through April 2009 levels, or the .70 area. Hence, this gives investors an idea in regards to the extent of the AUD/USD’s recent deterioration. As for the topside, the AUD/USD faces multiple downtrend lines along with September 2009 highs.

Price: .8676
Resistances: .8692, .8711, .8729, .8749, .8763, .8780
Supports: .8662, .8647, .8627, .8607, .8587, .8562
Psychological: .90, January highs and December lows

S&P Futures Log Large Losses Amid Rising Uncertainty

The S&P futures are undergoing a hefty selloff as investor uncertainty mounts. From the U.S. to Australia, economic data disappointed investors. America’s data points were the most disconcerting with weekly Unemployment Claims, productivity, and labor costs all disappointing. Hence, unemployment continues to improve at a snail’s pace. Meanwhile, the ECB and BoE both decided to pause as central bankers evaluate the impact of Greece’s debt issues and China’s liquidity tightening on global growth. Speaking EU debt problems, the Dollar surged today after the IMF issued a warning concerning Portugal’s fiscal affairs. Hence, it seems the EU now has to take fire for both Greece and Portugal. With Spain’s fiscal house also in disorder, it makes one wonder when the IMF may issue a warning for Spain as well. Today’s developments are having a profound impact on the Dollar and gold. The EUR/USD, Cable, AUD/USD, and gold have all tumbled below key technical levels. Hence, all of the S&P’s correlations are pointing towards a more protracted decline. Meanwhile, the S&P futures are battling to stay above January and November lows. The RBA will issue its monetary policy statement during tomorrow’s Asia trading session followed by U.S. Non-Farm Employment Change and Unemployment Rate data. Hence, volatility could remain at a heightened state as the trading week comes to a close.
Technically speaking, to the topside the S&P futures face our 2nd and 3rd tire downtrend lines along with 1/29 and 1/27 highs. Furthermore, the highly psychological 1100 level could serve as a technical barrier should it be tested. As for the downside, the S&P futures have 1/27 and 1/29 lows serving as technical cushions along with November ’09 lows should they be tested.

Price: 1069
Resistances: 1073.5, 1077, 1080, 1083.25, 1086
Supports: 1068.75, 1066.75, 1064.25, 1061.75, 1059.75, 1057.75
Psychological: January and November Lows, 1100






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