Comprehensive FX and Futures Daily Commentary
FastBrokers Research Team from FastBrokersFX at 01/27/10
Daily Market Commentary
EUR/USD Gravitates Towards January Lows
The EUR/USD has dropped back towards January lows and our 2nd tier uptrend line as the Dollar consolidates across the board. Investors are waiting for new U.S. New Home Sales and the Fed’s monetary policy decision. Extra weight has been placed on the Fed’s monetary policy statement despite the expectation that the central bank will keep its policy unchanged. More government officials have been vocalizing their displeasure with Bernanke lately, so it will be interesting to see how the Fed reacts. Meanwhile, the EU will release German CPI and Unemployment Change data over the next 24 hours and this could move the Euro a bit. However, yesterday’s stronger than expected EU data set hasn’t had much of an influence over the Euro and the EUR/GBP has reversed from earlier gains. Therefore, it’s difficult to assume these upcoming data points from Germany will have much of an impact on the market unless the numbers swing dramatically in one direction or the other. Hence, focus should remain on the U.S. over the next 24-48 hours unless we get more news about China’s monetary tightening. Speaking of China, the SCI was under selling pressure today as investors brace for the impact of a more hawkish monetary policy from the central bank. If Chinese equities continue to turn this could drag on U.S. equities as well.
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 should it be tested. 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 fairly negative signal considering April 2009 lows are around the 1.30.
Present Price: 1.4057
Resistances: 1.4078, 1.4096, 1.4118, 1.4152, 1.4174, 1.4193
Supports: 1.4045, 1.4015, 1.3981, 1.3950, 1.3929, 1.3900
Psychological: 1.40, January lows 
GBP/USD Consolidates Ahead of Data and Fed
The Cable has stabilized along our 1st tier uptrend line and is consolidating as investors await UK CB Realized Sales followed by U.S. New Home Sales and the Fed’s monetary policy decision. Furthermore, Obama will deliver his State of the Union tonight with possible budget proposals in the mix. Hence, investors will have plenty to digest and this could lead to additional volatility in the FX markets. Britain’s disappointing GDP data sent the Pound reeling yesterday, so it will be interesting to see how today’s realized sales number pans out. Although the Cable has managed to stabilize, a weaker than expected CB release could send the Cable a step lower. Meanwhile, our 1st tier downtrend line is approaching an inflection point with our 1st tier uptrend line, meaning activity in the Cable could pick up soon. That being said, investors should pay close attention to gold and the S&P futures, particularly gold’s ability to hold above previous January lows. A pullback in gold and/or equities could signal another leg up in the Dollar due to correlative forces.
Technically speaking, despite yesterday’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: 1.6136
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 Drifts Lower as Risk Aversion Persists
The USD/JPY is drifting lower today as the Dollar strengthens against the Pound and Euro, a sign the trend of risk aversion is still in place. Chinese equities declined again today as investors digest a tighter monetary policy from the central bank. Although the positive U.S. CB Realized Sales number aided the risk trade yesterday, the optimism wasn’t lasting and investors are opting to focus on today’s U.S. New Home Sales followed by the Fed’s monetary policy decision. Furthermore, Obama will deliver his State of the Union tonight and he is expected to address his budget proposals for the coming year. That being said, the Dollar should remain active for the next 24-48 hours, particularly with Durable Goods Orders on the way tomorrow. Thursday’s CDO data could have a noticeable impact on the USD/JPY since Japan is reliant upon a recovery in U.S. consumption to help buoy Japanese manufacturers and exporters. Negative CDO data could drag the USD/JPY lower to somewhat uncomfortable levels. That being said, if the USD/JPY’s decline persists it will be interesting to see how long the BoJ will sit on the sidelines before taking a more vocal approach towards weakening the Yen. Although the BoJ reiterated its intent to fight deflationary pressures yesterday, the statement wasn’t aggressive enough to warrant a pop in the USD/JPY. Japan will release Retail Sales during Thursday’s Asia trading session followed by CPI, Household Spending, and Prelim Industrial Production on Friday. Hence, activity could heat up in the USD/JPY as the week wears on. Japan’s Trade Balance printed weaker than expected today, meaning Friday’s data set could come in mixed.
Technically speaking, the USD/JPY has multiple 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 should conditions deteriorate further.
Present Price: 89.38
Resistances: 89.39, 89.60, 89.71, 89.95, 90.14, 90.39
Supports: 89.21, 89.02, 88.85, 88.62, 88.45, 88.28
Psychological: 90, December highs and lows 
Gold Consolidates as Investors Wait for Data and Fed
Gold is continuing its consolidation around the psychological $1100/oz level as the Dollar wavers ahead of U.S. New Home Sales and the Fed’s monetary policy decision. The chaotic appearance of our chart implies that gold could be approaching a turning point. All of our trend lines are colliding while the EUR/USD and AUD/USD trade around key supports. That being said, investors should monitor the major Dollar crosses for any considerable technical setbacks for this could forewarn of a similar decline in gold. On the other hand, should the major Dollar pairs be able to stabilize and the Dollar weaken, this could help gold make up for some of January’s lost ground. In addition to today’s data and Fed decision, Obama will also deliver his State of the Union tonight followed by U.S. Durable Goods Orders tomorrow. Hence, volatility could pick up over the next 24-48 hours.
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: $1093.25/oz
Resistances: $1096.91/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 Relinquishes Earlier Gains Following Strong CPI
The AUD/USD is right back where we left it yesterday despite a pop during the Asia trading session after CPI came in a basis point above analyst expectations, allaying investor fears over Monday’s weak PPI number. However, the mixed pricing data makes the central bank’s upcoming monetary policy decision a bit cloudy. That being said, events in China could play more of a factor in guiding policy than recent economic data. Chinese equities headed south today with investors taking the central bank’s tighter liquidity stance badly. Tighter liquidity in China could mean less demand for Australia’s commodities, a negative development for Australia’s economy and the Aussie. Meanwhile, investors are on their toes with U.S. New Home Sales and the Fed’s monetary policy decision on the way. Not only do we recognize trend line inflection points in the AUD/USD but across the FX board as well. Hence, volatility could increase in the next 24-48 hours as investors digest upcoming U.S. data and news. Therefore, investors should keep a sharp eye on the S&P futures and monitor gold’s ability to hold above their previous January lows.
Technically speaking, the AUD/USD is currently testing 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: .8985, .8995, .9006, .9022, .9044, .9060
Supports: .8962, .8947, .8929, .8919, .8904, .8881
Psychological: .90, December lows and January highs
S&P Futures Settle Ahead of Key Data and News
The S&P futures experienced a nice pop intraday on Tuesday in reaction to a positive earnings flow combined with better than expected CB Consumer Confidence data. However, the gains were negated by weakness in Asia and uncertainty in the FX markets. The Shanghai Composite Index closed below 3000 today amidst continual selling pressure stemming from fears over the impact of China’s tighter liquidity measures on the nation’s economic performance. A slowdown in China could be bad news for a global economy that has depended upon emerging nations to drive the recovery forward. Meanwhile, the Dollar has been fluctuating with our trend lines approaching inflection points on multiple major Dollar crosses as well as gold, implying approaching volatility. The volatility could be warranted considering the U.S. has New Home Sales and the Fed’s monetary policy statement on the way. It will be interesting to see whether New Home Sales reiterate the negative message sent by Existing Home Sales data earlier this week. Investors will be paying close attention to the Fed’s monetary policy statement since government officials have been expressing their displeasure for Bernanke’s performance as of late. Hence, analysts will be looking to see if Bernanke responds to the criticism by altering the Fed’s monetary language. In the meantime, investors should continue to monitor activity in the Dollar and gold. Meaningful technical movements in either could give directional hints as far as U.S. equities are concerned due to correlative forces.
Technically speaking, 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: 1086.25
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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