Comprehensive FX and Futures Daily Commentary
FastBrokers Research Team from FastBrokersFX at 01/26/10
Daily Market Commentary
EUR/USD Holds Above 1.40 After Positive Data Set
The EUR/USD has recovered some of its intraday losses after the Dollar appreciated across the board in reaction to news that Chinese banks are being aggressive in limiting new loan volume. The Euro received some good news after Germany’s Ifo Business Climate and French Consumer Spending outperformed. Furthermore, the EU’s current account registered a slight surplus after analysts anticipated a deficit of -3.1 billion. Hence, it seems demand for EU goods and services is recovering faster than anticipated, a positive development for the Euro which has been hammered the past couple weeks. However, investors should keep in mind that last week’s Flash PMI data left something to be desired. Therefore, EU economic data is painting a mixed picture. Regardless, today’s encouraging data set has allowed the Euro to strengthen and make up for some lost ground, highlighted by a solid up-bar taking place in the EUR/GBP right now. Attention will now shift back to the U.S. with CB Consumer Confidence on deck. Yesterday’s U.S. Existing Home Sales data came in weaker than anticipated and it will be interesting to see how the Dollar reacts should today’s CB number also disappoint. Although the EU will release German Prelim CPI tomorrow, attention will be centered on the Fed’s monetary policy meeting. That being said, volatility could remain at a heightened state in the FX market over the next couple trading sessions, especially considering the earnings season is just beginning to heat up.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with 1/25 highs. As for the downside, the EUR/USD has our 1st and 2nd tier uptrend lines serving as technical cushions along with previous January lows and the psychological 1.40 level. Our 1st tier uptrend line could carry some weight since it runs through some April 2009 lows. That being said, a failure of our 1st tier could send a pretty negative signal considering April 2009 lows are around the 1.30.
Present Price: 1.4096
Resistances: 1.4115, 1.4146, 1.4169, 1.4191, 1.4224, 1.4247
Supports: 1.4080, 1.4065, 1.4045, 1.4015, 1.3981, 1.3950
Psychological: 1.40 
GBP/USD Under Selling Pressure Following Weak GDP Data
The Cable is under considerable selling pressure right now after the UK’s Prelim GDP number printed 3 basis points below analyst expectations. Although BBA Mortgage Approvals came about in line, the setback in GDP has delivered another blow to the Pound, adding onto Friday’s disappointing Retail Sales data. Therefore, it seems the improvement in UK employment has not carried through to GDP and consumption. Meanwhile, we recognize a pop in the EUR/GBP taking place, highlighted by a comparative weakness in the Pound. Additionally, the Pound is experiencing downward pressure from today’s revelation that China’s banks are being aggressive in terms of limiting the amount of new lows after the massive lending spree during the first couple weeks of the year. Tighter liquidity in China is a negative development for the global economic recovery as a whole since China has been an integral part of the turnaround. Therefore, we witnessed another wave of Dollar purchasing during the Asia trading session. Investors will now look forward to today’s U.S. CB Consumer Confidence release. While a positive number would likely lead to further Greenback buying, it will be interesting to see what reaction the FX markets would have to another negative U.S. data point. Yesterday’s disappointing Existing Homes number led to weakness in the Dollar, meaning a similar pattern could occur today. The UK will keep its data train rolling tomorrow with the release of its CBI Realized Sales. Investors will also digest U.S. New Home Sales and a monetary policy decision from the Fed. Hence, it wouldn’t be surprising to experience continued volatility in the Dollar over the next few trading sessions.
Technically speaking, despite today’s setback in the Cable the currency pair still has multiple uptrend lines serving as technical cushions along with 1/22 lows and the psychological 1.60 level should it be tested. As for the topside, the Cable faces multiple downtrend lines along with 1/04, 1/21 and 1/15 highs. Therefore, although the Cable’s uptrend line has been dealt a blow today, the currency pair still has some wiggle room on both sides.
Present Price: 1.6130
Resistances: 1.6143, 1.6170, 1.6195, 1.6223, 1.6247, 1.6264
Supports: 1.6119, 1.6092, 1.6073, 1.6048, 1.6023, 1.6001
Psychological: 1.60, 1.65, January highs and lows
USD/JPY Tumbles with Flow of Negative News
The USD/JPY has tumbled back below the psychological 90 level and previous January lows in a flood of negative developments in both the East and the West. During the Asia trading session investors headed for safety after China’s major banks indicated they are taking the central banks’ new hawkish monetary stance seriously, benefitting the Yen in the process. Additionally, the BoJ kept its monetary policy unchanged despite external pressure from Finance Minister Kan in regards to fighting deflationary forces. Therefore, it seems the BoJ is not comfortable with intervening at present levels, especially considering the S&P just lowered Japan’s credit rating outlook. The S&P’s downgrade has delivered another blow to investor confidence and the Yen is benefitting as investors exit the risk trade. Moving to the West, the UK printed a Prelim GDP figure below analyst expectations. The negative GDP number led to a wave of risk aversion, a negative development for the USD/JPY. Attention now shifts to the U.S. with the release of CB Consumer Confidence and it will be interesting to see how FX markets react since yesterday’s disappointing Existing Home Sales number led to broad-based weakness in the Greenback. Japan will print its Trade Balance during tomorrow’s Asia trading session. Should the Trade Balance yield a stronger than expected surplus this could result in another round of Yen purchases. Meanwhile, volatility should remain at a heightened state for the next couple trading sessions since the U.S. will release New Home Sales tomorrow followed by the Fed’s monetary policy decision.
Technically speaking, the USD/JPY has our 1st and 2nd tier uptrend lines serving as technical cushions along with 12/18 and 12/14 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with intraday and 12/18 highs. Furthermore, the psychological 90 level may work against the USD/JPY’s favor should conditions deteriorate further.
Present Price: 89.47
Resistances: 89.69, 89.97, 90.14, 90.37, 90.64, 90.77
Supports: 89.40, 89.21, 89.02, 88.85, 88.62, 88.28
Psychological: 90, December highs and lows 
Gold Negated by $1100/oz as Dollar Strengthens
Gold has reversed from our 2nd tier downtrend line and the psychological $1100/oz level as investors snap up the Dollar in another wave of risk aversion. The wave of Dollar strength began during today’s Asia trading session as China’s major banks indicated they are serious about reducing the issuance of new loans. Additionally, the S&P lowered its credit rating outlook for Japan, another positive development for the Dollar considering the negative message this sends in regards to the health of the global economic recovery. Furthermore, the UK just printed a Prelim GDP figure 3 basis points below analyst expectations. Hence, there is a combination of negative developments contributing to strength in the Greenback. However, despite today’s pop in the Dollar gold’s reaction has been somewhat limited thus far. Perhaps it’s the fact that gold is deciding how to deal with $1000/oz while hovering just above previous January lows. Meanwhile, volatility in the FX markets should remain at a heightened state with the release of U.S. CB Consumer Confidence later today. Additionally, Australia will print CPI during tomorrow’s Asia trading session followed by U.S. New Home Sales and the Fed’s monetary policy decision. That being said, investors should keep an eye on key support in the major Dollar pairs because further deterioration could have enough of an influence to drag gold below previous 2010 lows.
Technically speaking, gold has 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: $1091.00/oz
Resistances: $1095.66/oz, $1100.67/oz, $1103.49/oz, $1106.31/oz, $1110.07/oz, $1115.39/oz
Supports: $1088.45/oz, $1085.01/oz, $1082.10/oz, $1079.30/oz, $1074.95/oz, $1070.65/oz
Psychological: $1075/oz, $1100/oz, December lows
AUD/USD Drops Below .90 Level on China News
The AUD/USD has dropped well below its psychological .90 level and is setting new January lows as the Dollar strengthens across the board. The Aussie’s selloff was triggered by news that China’s major banks are tightening their lending practices in light of the central bank’s hawkish monetary stance in an effort to combat inflation and the formation of asset bubbles. Tighter liquidity in China indicates the government is trying to cool down its economy, a particularly negative development for the Aussie since Australia’s strong economic performance has been fueled by China’s demand for commodities such as crude and iron ore. Furthermore, investors should consider that Australia just printed a weaker than expected PPI figure and this may dissuade Australia’s central bank from raising rates at its next policy meeting despite the improvement in employment and domestic consumption. That being said, Australia’s CPI release during tomorrow’s Asia trading session could carry some additional weight. A weaker than expected CPI figure could place further downward pressure on the AUD/USD while a hot CPI could help buoy the currency pair. Additionally, the U.S. will release CB Consumer Confidence today followed by New Home Sales and the Fed’s monetary policy decision tomorrow. Hence, volatility in the Greenback could remain at a heightened state for the next couple trading sessions.
Technically speaking, the AUD/USD is currently approaching our key 1st and 2nd tier uptrend lines. These trend lines could serve as the last line of defense for the currency pair over the near term since they run through December ’09 lows, or the .8730 level. As for the topside, the AUD/USD faces multiple downtrend lines along with 12/16 and 1/25 highs. Furthermore, the psychological .90 level may serve as a technical barrier now.
Price: .8962
Resistances: .8972, .8994, .9006, .9022, .9044, .9060
Supports: .8950, .8931, .8919, .8904, .8881, .8867
Psychological: .90, December lows and January highs 
S&P Futures in the Red as Dollar Strengthens
The S&P futures are trading back below their highly psychological 1100 level after a series of negative events have led to broad-based risk aversion while placing downward pressure on equities. Today’s wave of Dollar and Yen purchasing began during the Asia trading session as China’s major banks signaled they are serious about implementing the central bank’s tighter monetary policy by decreasing the issuance of new loans. Tighter monetary policy from China has dampened the outlook for global economic performance considering China has been steering the recovery from the nadir of the Great Recession. Additionally, the S&P lowered its credit rating outlook for Japan and while the BoJ and Japan’s Finance Ministry expressed concern about the country’s economic performance going forward. The combination of negative events concerning China and Japan was enough lead investors away from the risk trade and towards the Dollar and Yen, a negative development for U.S. equities considering correlative forces.
Meanwhile, the UK released a Prelim GDP figure 3 basis points below analyst expectations, showing the economic recovery in developed countries could be losing steam. Speaking of which, U.S. Existing Home Sales disappointed yesterday and investors will receive CB Consumer Confidence shortly along with Obama’s budget proposal. Rumors are circulating that Obama will freeze certain elements of fiscal spending. Hence, Obama seems to be flexing a more conservative fiscal policy, a positive for the Dollar and negative for equities. Additionally, the U.S. will release New Home Sales tomorrow followed by the Fed’s monetary policy decision. Hence, volatility could remain at a heightened state over the next couple trading sessions. That being said, investors should keep an eye on key supports in the major Dollar pairs as well as gold’s ability to hold above previous January lows for further deterioration in these investment vehicles could yield additional weakness in the S&P futures.
Technically speaking, our uptrend lines are fading into the distance as the S&P futures separate themselves from 1100. This is a negative development concerning the S&P’s medium-term outlook since our 1st tier uptrend line runs through November lows, or the 1025 area. As for the topside, the S&P futures face technical obstacles in the form of 1/24 and 12/4 highs along with the psychological 1100 level should it be tested.
Price: 1086.75
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, 2010 December highs and lows, November lows
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