Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 01/22/10

Daily Market Commentary


EUR/USD Stabilizes Following Encouraging Industrial New Orders Data

The EUR/USD has stabilized above Thursday lows after the EU released an Industrial New Orders figure a full percentage point above analyst expectations. A positive data release has allowed the Euro to finally create some sort of bottom after this week’s huge pullback. The Euro’s relative strength today is highlighted by a solid pop in the EUR/GBP. However, the S&P futures made a key step back yesterday and gold has dropped below its highly psychological $1100/oz level, both negative developments for the EUR/USD due to correlative forces. That being said, investors should keep a sharp eye on the S&P futures around 1100 and monitor gold’s ability to stabilize above December ’09 lows should they be tested. If these two psychological cushions don’t hold the Dollar could be in for a more extensive leg up over the medium-term. Volatility could remain at a heightened state next week with the EU kicking off by releasing its GfK Consumer Climate data followed by U.S. Existing Home Sales. Additionally, we’ll receive heavily weighted data from around the globe over the week including monetary policy decisions from Japan and the U.S.
Technically speaking, the EUR/USD understandably faces multiple downtrend lines considering the extent of its decline. However, our downtrend lines have quite a bit of space between them, meaning the Euro could gain back some ground should the Dollar experience broad-based weakness. As for the downside, the EUR/USD has a new 1st tier uptrend line running through Thursday lows acting as a support. Additionally, the EUR/USD does have the psychological 1.40 level serving as a technical cushion.

Present Price: 1.4130
Resistances: 1.4117, 1.4146, 1.4165, 1.4191, 1.4224, 1.4247, 1.4291
Supports: 1.4080, 1.4065, 1.4045, 1.4015, 1.3981, 1.3950
Psychological: 1.40

GBP/USD Darts Lower Following Disappointing Retail Sales

The Cable continued yesterday’s downturn in reaction to UK Retail Sales printing a full basis point below analyst expectations. The Cable had held up very well during the EUR/USD’s deterioration earlier this week due to positive UK CPI and employment data. Hence, today’s negative Retail Sales number gave investors a fundamental reason to weaken the Pound, highlighted by a sizable pop in the EUR/GBP. Meanwhile, gold has dropped below $1100/oz and the S&P futures are testing their own highly psychological 1100 level. That being said, the Cable’s correlations are creating an environment suitable for a stronger dollar should fundamentals continue to cooperate. The UK will keep the data train rolling next week with the release of its Prelim GDP on Tuesday coupled with Nationwide HPI data. Furthermore, both the BoJ and the Fed will make monetary policy decisions, implying more volatility in the major Dollar pairs. Australia will kick off the week with PPI, followed by Existing Home Sales data from the U.S. the following day. In the meantime investors should keep a sharp eye on activity in the S&P futures and gold for any further technical setbacks.
Technically speaking, the Cable does have multiple uptrend lines serving as technical supports along with the psychological 1.60 level. That being said, our 1st-3rd tier uptrend lines are packed tightly together, indicating an area of solid support should it be tested. As for the topside, the Cable faces multiple downtrend lines along with 1/11, 1/04, and 1/22 highs. Therefore, despite solid support in the wings, the Cable now has a hill to climb to the topside.

Present Price: 1.6078
Supports: 1.6073, 1.6055, 1.6026, 1.5996, 1.5971, 1.5954
Resistances: 1.6099, 1.6119, 1.6142, 1.6161, 1.6180, 1.6215
Psychological: 1.60, 1.65, January highs and lows

USD/JPY Fights to Stabilize Around 90 After Thursday’s Setback

The USD/JPY is fighting to stabilize around its highly psychological 90 level after the currency pair took a large step down on sizable volume. The Dollar strengthened across the board after Unemployment Claims jumped back towards 500k and investors reacted negatively to Obama’s proposal to reduce the size and influence of banks. However, the psychological 90 level could prove to be a solid support as investors await next Tuesday’s BoJ monetary policy meeting. We would not be surprised to see the BoJ reiterate its commitment to a loose monetary policy as long as deflation is a concern, especially considering yesterday’s setback in the USD/JPY. In addition to the BoJ’s meeting the Fed will also make a monetary policy decision later in the week along with a slew of key economic data from around the globe. Japan will join the data wire with its Trade Balance, Retail Sales, CPI, Household Spending, and Industrial Production numbers peppered throughout the week. Hence, FX markets could remain very active next week as investors digest the wealth of data and news. Australia will kick off with PPI during Monday’s Asia trading session followed by U.S. Existing Home Sales.
Technically speaking, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday, 12/16, and 12/18 lows. Furthermore, the highly psychological 90 level could continue to serve as a solid support over the near-term. As for the topside, the USD/JPY faces multiple downtrend lines along with intraday and 12/18 highs.

Present Price: 90.14
Resistances: 90.33, 90.49, 90.68, 90.91, 91.19, 91.44
Supports: 89.90, 89.65, 89.40, 89.21, 88.85, 88.62
Psychological: 90, December highs and lows

Gold Sinks Below $1100/oz as S&P Tests 1100

Gold is trying to piece together a recovery from intraday lows after dipping below our key 3rd tier uptrend line. We believe our 3rd tier could hold some weight considering it runs through October ’09 lows. Hence, a clear failure of our 3rd tier uptrend line could imply a more protracted medium-term decline towards the $1100/oz level. However, before we get ahead of ourselves gold does have multiple uptrend lines running through August levels that are serving as technical cushions should conditions deteriorate further. Additionally, December ’09 lows could prove to be a solid support should they be tested. Meanwhile, all eyes are on the S&P futures and their ability to consolidate above their own highly psychological 1100 level. Gold tends to be positive correlated with the S&P futures since they are positively correlated with the Dollar. Hence, should 1100 give way on the S&P this could be enough to send gold on another leg higher and gold lower as well. That being said, markets should remain active next week with monetary policy decisions from both the BoJ and Fed along with key economic data releases from around the globe. Australia will kick off the week with PPI during Monday’s Asia session followed by the BoJ’s decision and U.S. Existing Home Sales on Tuesday.

Technically speaking, gold does have multiple uptrend lines serving as technical cushions along December ’09 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 12/31 highs could serve as technical barriers should they be reached.

Present Price: $1088.25/oz
Resistances: $1090.02/oz, $1094.41/oz, $1098.17/oz, $1102.86/oz, $1105.68/oz, $1108.50/oz
Supports: $1085.52/oz, $1082.10/oz, $1079.30/oz, $1074.95/oz, $1070.65/oz, $1063.28/oz
Psychological: $1075/oz, $1100/oz, December lows

AUD/USD Fluctuates Above .90 Amid Heightened Market Activity

The AUD/USD is working to consolidate above its psychological .90 level as we witness heightened market activity in the Dollar and U.S. equities. The S&P futures and gold tumbled yesterday after U.S. Unemployment Claims popped back towards the 500k level and investor uncertainty increased over fear that Obama’s proposed regulation of the financial industry could weigh on the earnings of banks. The ADU/USD participated to the downside, exhibiting its positive correlation with gold as the precious metal sunk below its psychological $1100/oz level. Furthermore, the Aussie has been hit by a tighter monetary policy stance in China. China’s demand for Australia’s commodities has been a driving force behind Australia’s strong economic performance. Hence, if China cools down, this could also slow down Australia, thereby discouraging Australia’s central bank from tightening once again. However, investors should keep in mind that Australia’s economic data has been printing strong lately, particularly in employment. Australia will kick off next week with PPI data during Monday’s Asia trading session. The Aussie could receive extra attention during this time frame since behavior of prices could determine whether Australia raises rates again or not. That being said, should PPI print strong the AUD/USD could experience a nice pop. On the other hand, a weak PPI could place considerable downward pressure on the Aussie since investors may speculate that the central bank will hold off considering tightening in China.

Technically speaking, the AUD/USD faces multiple downtrend lines along with intraday and 1/21 highs. As for the downside, the AUD/USD has multiple uptrend lines serving as technical cushions along with 1/21 lows and the psychological .90 level should it be retested.


Price: .9050
Resistances: $77.48. $77.87/bbl, $78.33/bbl, $78.76/bbl, $79.25/bbl
Supports: $77.10/bbl, $76.69/bbl, $76.15/bbl, $75.63/bbl, $75.32/bbl
Psychological: $80/bbl, $75/bbl, January highs and lows

S&P Futures Try to Base Above 1100

The S&P futures are battling to form a base above their highly psychological 1100 level after yesterday’s large pullback in reaction to high Unemployment Claims and fears that Obama’s proposed financial regulation will take a bite out of the revenue streams of banks. The S&P’s downturn resulted in broad-based Dollar strength as well as a pullback in gold below its highly psychological $1100/oz level. The deterioration of the S&P’s correlations is a disconcerting sign, meaning investors should continue to monitor the futures despite current stability. Speaking of deterioration, the S&P’s decline below what is now our 3rd tier uptrend was a very negative development considering it runs through 12/18 lows, or the 1090 area. More concerning is the S&P’s drop beneath our 2nd tier uptrend line, which runs through November ’09 lows. Our 1st tier uptrend line runs through similar lows. Hence, a collapse of our 1st tier uptrend line could indicate a more protracted, medium-term decline towards the 1025 area. However, the S&P futures will have an opportunity to redeem themselves next week with a wealth of economic data and news. Both the BoJ and Fed will make monetary policy decisions while investors will digest key housing, consumption, and confidence data topped off with Advance GDP on Friday. Hence, it should be an active week in the markets to say the least. Australia will kick off the trading week with PPI during Monday’s Asia trading session followed by U.S. Existing Home Sales. Investors are expecting a pullback in Existing Home Sales to 5.98 million following last month’s much stronger than expected figure.
Technically speaking, our 1st tier uptrend line is the last foreseeable uptrend line for the near-term with the psychological 1100 level serving as a strong technical cushion along with December 20 lows should they be tested. As for the topside the S&P futures face technical obstacles in the form of 12/13 and 12/28 highs.

Price: 1109.25
Resistances: 1111.75, 1114.75, 1118, 1120.25, 1124
Supports: 1107.25, 1103.25, 1100.5, 1098.25, 1093.5
Psychological: 1100, 1075, 2010 December highs and lows




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