Comprehensive FX and Futures Daily Commentary
FastBrokers Research Team from FastBrokersFX at 01/15/10
Daily Market Commentary
EUR/USD Tumbles Amid Risk Aversion
The Euro logged large losses today as Merkel and Trichet continue to emit words of caution concerning the state of Greece’s troubled economy. Meanwhile, we noticed signs of tighter liquidity in China dragged the AUD/USD lower as investors speculated that a slowdown in China could decrease demand for Australia’s exports. Furthermore, U.S. economic data printed poorly today, adding onto the risk-aversion we witnessed earlier in the trading session. We recognize declines in gold and the S&P futures as well. Hence, today’s pullback in risk-oriented investment vehicles is wide spread and the Euro is leading the way. The extent of the Euro’s weakness is highlighted by a huge leg down in the EUR/GBP. Data wise, although EU Core CPI printed a basis point hotter than analyst expectations, the EU Trade Balance came in surprisingly weak. Therefore, it seems demand for EU exports is waning, certainly not a helpful fundamental development considering the downward pressure on the Euro today. On the other hand, a pickup in Core CPI could hold the ECB off from increasing liquidity since EU prices are stabilizing. However, Trichet’s comments at this week’s ECB press conference were a bit more dovish than last month. Hence, investors are beginning to speculate that the ECB may hold off on tightening liquidity until 2H. Although the data wire is relatively empty on Monday, the EU will release its German ZEW Economic Sentiment figure on Tuesday. Hence, volatility could continue next week.
Technically speaking, the EUR/USD has been driven beneath our 2nd tier uptrend line, a negative technical development. However, the currency pair does have our 1st tier uptrend line waiting below. Our 1st tier uptrend line could prove to be a key test for the EUR/USD should it be reached since the line runs through previous January lows. As for the topside, the EUR/USD faces multiple downtrend lines along with 1/5 and 1/11 highs along with the psychological 1.45 level.
Present Price: 1.4367
Resistances: 1.4400, 1.4427, 1.4460, 1.4474, 1.4499, 1.4520
Supports: 1.4351, 1.4328, 1.4310, 1.4289, 1.4264, 1.444
Psychological: 1.45, December highs and January lows 
GBP/USD Weakens Following Sluggish U.S. Econ Data
The Cable is finally giving into intraday risk-aversion following weaker than expected Prelim UoM Consumer Sentiment and Industrial Production data. The AUD/USD and S&P futures also pulled back in reaction to the release, signaling investors are becoming a bit cautious in regards to the health of the global economy. The risk trade was hit by a few developments earlier today, most notably more cautionary words from the EU in regards to the health of Greece’s economy. The EUR/USD proceeded to sell-off aggressively while the Cable held its ground highlighted by a huge leg down in the EUR/GBP. Furthermore, the AUD/USD weakened as investors reacted to signs that China is tightening liquidity in fear that this will decrease demand for Australia’s commodities. The reality that China is trying to cool down its economy could have a negative global impact since China has been the engine to the economic recovery. Hence, today’s risk-aversion has both fundamental and psychological backing, enticing the Cable to follow suit despite recent resilience. The UK will light up the wires again next Tuesday with the release of CPI. The BoE monitors prices closely while making decisions regarding monetary policy. Hence, sluggish CPI could deliver a blow to the Pound’s recent relative strength. On the other hand, a positive CPI number could help the Cable stabilize and maintain its solid uptrend.
Technically speaking, we recognize the Cable’s trend lines are approaching inflection points, a signal that heightened volatility could be approaching. Meanwhile, the Cable is still trading above 1/04 highs with multiple uptrend lines serving as technical cushions. As for the topside, the Cable faces multiple downtrend lines along with 1/15 and 12/16 highs. Therefore, the Cable has solid technical levels on either side.
Present Price: 1.6265
Resistances: 1.6262, 1.6238, 1.6214, 1.6184, 1.6161, 1.6133
Supports: 1.6318, 1.6340, 1.6360, 1.6379, 1.6407, 1.6431
Psychological: 1.60, 1.65, January highs and lows
USD/JPY Moves Sideways Amid Broad Dollar Appreciation
The USD/JPY reacted negatively to disappointing U.S. UoM Consumer Sentiment data as the Dollar appreciated across the board. Today’s disappointing wave of data coupled with cautionary language regarding Greece’s economy and hawkish behavior in China spurred risk-averse movements in currencies which has carried over into the U.S. session. However, data from Japan hasn’t been too encouraging either and Finance Minister Kan has exhibited a more dovish monetary stance since taking office. Therefore, the USD/JPY is being pulled back and forth as investors debate which currency to favor for the time being, resulting in consolidation around 1/12 lows and what is now our 2nd tier uptrend line. That being said, the USD/JPY appears to be exhibiting somewhat of a positive correlation with gold and the Cable. Therefore, investors should monitor the Dollar for further broad-based appreciation since the USD/JPY may apt to participate more should more supports be taken out in the Cable and/or gold. Shirakawa will address the general public during Monday’s Asia trading session and investors will be paying close attention to see whether recent dovish statements from Kan have carried over to the BoJ. However, the wire will be quiet in the West on Monday, meaning activity may not pick up until Tuesday.
Technically speaking, the USD/JPY has our 1st and 2nd tier uptrend lines serving as technical cushions along with intraday lows and the highly psychological 90 level should it be tested. As for the topside, the USD/JPY faces multiple downtrend lines along with 1/14 and 1/12 highs.
Present Price: 90.79
Resistances: 90.75, 90.91, 91.15, 91.38, 91.55, 91.82
Supports: 90.54, 90.37, 90.24, 90.05, 89.86, 89.72
Psychological: 90, January highs and lows 
Gold Drifts Lower as Dollar Rallies
Gold is drifting lower today as the Dollar rallies across the board amid risk-aversion. The Dollar’s rally began during the Asia trading session after the EU released more bleak statements in regards to the state of Greece’s economy. Furthermore, the AUD/USD dropped as reality sunk in that China is tightening liquidity, cooling down the globe’s hottest economy. Additional hawkish monetary measures from China could decreases demand for Australia’s commodities and this realization dragged the Aussie lower. Meanwhile, the U.S. released sluggish Industrial Production and UoM Consumer Sentiment data. Investors reacted by sending the Cable and AUD/USD lower, a negative development for gold considering their positive correlation. However, gold is holding up relatively well despite a retreat from the risk trade today. Gold is trading above intraday lows and has bounced off our 4th tier uptrend line. However, gold could be dragged lower should the Dollar continue to rally and the S&P futures extend their intraday losses. That being said, gold still has a solid support system in place.
Technically speaking, gold has multiple uptrend lines serving as technical cushions along with 1/13, 1/8, 1/5 lows. We recognize that gold has built a neckline along our 4th tier uptrend line. Hence, a movement below our 4th tier could result in a large step lower. Meanwhile, gold’s psychological $1150/oz area should continue to play a role for the near-term. As for the topside, gold faces technical barriers in the form of 1/7 and 11/18, 11/23, and 11/27 highs along with the psychological $1175/oz level.
Present Price: $1131.75/oz
Resistances: $1136.38, $1138.89/oz, $1141.39/oz, $1145.47/oz, $1148.91/oz, $1153.61/oz
Supports: $1130.43/oz, $1127.30/oz, $1124.48/oz, $1120.41/oz, $1117.27/oz, $1114.45/oz
Psychological: $1150/oz, $1100/oz, January and December highs, January lows 
Crude Sinks below $80/bbl
Crude futures have dropped below our 2nd tier uptrend line and the psychological $80/bbl level as the S&P futures log solid declines and the Dollar appreciates across the board. A disappointing data set from the U.S. sent the futures tumbling and the Dollar higher, both negative developments as far as correlations are concerned. Today’s drop in consumer confidence coupled with yesterday’s sluggish retail sales data indicates U.S. consumption is still waning, a disconcerting development for the demand side of the equation. Speaking of demand, the AUD/USD took a leg lower during the Asia trading session as investors reacted to signs that China is serious about tightening liquidity and cooling growth to deflate asset bubbles. Tighter liquidity in China could also cool demand for crude. Meanwhile, weekly crude inventories came in much higher than analyst expectation. Therefore, both supply and demand are weighing down on the price of crude. Investors should continue to monitor activity in the FX and equity markets. Should conditions deteriorate further crude may be inclined to follow due to correlative forces.
Technically speaking, crude futures have suddenly dropped below their highly psychological $80/bbl level, a negative development. Crude futures currently have our 1st tier uptrend line serving as a technical cushion along with 12/4 lows. Furthermore, the psychological $75/bbl level could serve as a solid support should it be tested. As for the topside, crude faces technical obstacles in the form of 1/13 highs and the highly psychological $80/bbl level.
Price: $78.36/bbl
Resistances: $78.76/bbl, $79.25/bbl, $79.63/bbl, $79.97/bbl, $80.45/bbl
Supports: $78.22/bbl, $77.80/bbl, $77.49/bbl, $77.10/bbl, $76.69/bbl
Psychological: $80/bbl, $75/bbl, January highs and lows 
S&P Futures Drop to our 2nd Tier on Weak Consumer Sentiment
The S&P futures are registering a sizable pullback today after the U.S. data set disappointed investors. Although the Empire Index surpassed analyst expectations, Core CPI and the UoM Consumer Sentiment data points both came in light. The sluggish consumer sentiment data tacks onto yesterday’s disappointing Retail Sales and weekly Unemployment Claims data points. Hence, it seems unemployment is improving at a very slow pace, hampering consumption and weighing down on the U.S. economic recovery. Meanwhile, the Dollar is appreciating across the board as investors divest from the risk trade. The Dollar’s intraday rally was triggered during the Asia trading session after the EU issued more disconcerting statements in regards to the health of Greece’s economy. The EUR/USD reacted by taking a large step down. Additionally, the reality of tighter liquidity in China began to impact the Aussie and the AUD/USD experienced a leg down in speculation that demand for Australia’s commodities could decline. Hence, multiple factors are weighing down on the S&P futures today with growing concern in regards to the performance of the global economy during 2010. Meanwhile, investors should continue to monitor activity in the Dollar as well as gold. Any further key technical setbacks in the major Dollar pairs or gold could signal further weakness in the S&P futures due to correlative pressures. The wire will be relatively quiet on Monday due to a banking holiday and the U.S. will release TIC Long-Term Purchases on Tuesday.
Technically speaking, the S&P futures are currently trading at an important near-term juncture. The futures are currently fighting to stay above our 2nd tier uptrend line and 1/13 lows. A collapse of our 2nd tier could result in a retracement towards our 1st tier. Hence, the S&P futures are testing the patience of some heavier technical supports for the first time this year. As for the topside, the S&P futures face technical barriers in the form of 1/7 and 1/14 highs along with previous January highs.
Price: 1132
Resistances: 1135, 1138.75, 1141.5, 1145.5, 1148
Supports:1129.25, 1127.25, 1124.5, 1121.5, 1117.25
Psychological: 1150, 1100, 2010 Highs and January Lows
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