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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/01/10


Daily Market Commentary

EUR/USD Stabilizes as Investors Await U.S. Data

The EUR/USD is stabilizing around the 1.39 level as investors wait for America’s ISM Manufacturing PMI data. Consolidation in the EUR/USD is a desirable development for Dollar bears since the Euro has been in a freefall the past couple weeks. Investors were able to take the weekend to allow fears concerning Greece’s budget deficit to cool down a bit. It now appears the EU will need to make a decision in regards to bailing out Greece. The EU may have little choice but to lend a helping hand since the failure of an EU nation could have negative ramifications for the other member nations. An EU decision could come as soon as this week and it’s uncertain what impact this will have on the Euro. Therefore, investors should monitor the EU headlines closely since such an economic move could create volatility in the EUR/USD. Meanwhile, China’s Manufacturing PMI data printed a bit shy of analyst expectations and the UK’s outperformed. Hence, the risk trade has received a fuzzy picture to kick off the week. Investors are now awaiting America’s own PMI number and the release could elicit some activity. Volatility should pick up in the FX markets as the week progresses with the RBA making a monetary policy decision during tomorrow’s Asia trading session followed by U.S. Pending Home Sales. The EUR/USD will release German Retail Sales and investors are expecting growth of 0.9%. However, recent data from Germany hasn’t received too much of a response so focus will likely remain on the U.S. and Australia barring an EU decision regarding Greece.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with 1/29 and 1/28 highs. Furthermore, the psychological 1.40 level could serve as a technical barrier should it be tested. As for the downside, the EUR/USD has our 1st tier uptrend line serving as technical cushions along with previous January lows. The EUR/USD has more uptrend lines waiting in the distance, although they are sitting off screen right now. Our 1st and 2nd tier uptrend lines could carry some weight since they run through 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: 1.3909
Resistances: 1.3936, 1.3976, 1.4002, 1.4036, 1.4065, 1.4099
Supports: 1.3903, 1.3878, 1.3857, 1.3833, 1.3806, 1.3782
Psychological: 1.40, January lows

GBP/USD Slides as Pound Underperforms

It seems the Standard and Poor’s bearish statement on Friday in regards to the state of the UK’s financial industry has carried over into today’s trading session. The Cable has been hit hard, plunging below its psychological 1.60 level and previous January lows as the Pound underperforms, highlighted by a solid pop in the EUR/GBP. Weakness in the Pound comes despite stronger than expected Manufacturing PMI data. Hence, UK manufacturing, employment, and home prices are all recovering nicely right now. Such strong manufacturing data would normally be a positive catalyst for the Pound, yet it seems investors uncertainty surrounding the state of the global economy is overpowering more encouraging fundamental developments. The Cable has now caught up with the EUR/USD and AUD/USD, which both logged larger losses last week. Meanwhile, investors are awaiting America’s Manufacturing PMI number. Furthermore, the markets will receive a monetary policy decision from the RBA during tomorrow’s Asia trading session followed by Halifax and construction PMI from the UK. Additionally, investors should continue to monitor news concerning the Greece debt issue. Should the EU make a decision in regards to how it wants to handle Greece, the FX markets could experience volatility across the board. Momentum in the Dollar is clearly to the upside right now. However, it will be interesting to see how the Cable handles December 2009 lows and whether the currency pair can make a rally back to its psychological 1.60 level.
Technically speaking, we’ve created some new uptrend lines for the Cable running from October and December ’09 lows. Furthermore, these lows could serve as technical cushions should they be reached. As for the topside, the Cable faces multiple downtrend lines along with 12/24 and 1/08 highs. The psychological 1.60 area now becomes a psychological barrier.

Present Price: 1.5924
Resistances: 1.5932, 1.5953, 1.5979, 1.6005, 1.6024, 1.6046
Supports: 1.5912, 1.5895, 1.5876, 1.5863, 1.5849, 1.5832
Psychological: 1.60, December and October lows

USD/JPY Fluctuates Around 90

The USD/JPY is hovering around its highly psychological 90 area as investors await America’s ISM Manufacturing PMI number. The USD/JPY rallied in reaction to Friday’s stronger than expected U.S. economic data. Therefore, another positive reading today could yield further topside movements in the currency pair. However, the USD/JPY still faces a wealth of topside technical barriers and it has a ways to go to remove the grips of its downtrend. Meanwhile, although China’s slightly weaker than expected Manufacturing PMI did illicit a little topside movement in the USD/JPY, the activity was not much to speak of. However, volatility could pick up during tomorrow’s Asia trading session with the RBA making a monetary policy decision. Though analyst are expecting a 25 basis point hike, the RBA could go either way since recent tightening from China and weak Australia PPI has placed a bit of pressure on the central bank. Japan will also release Cash Earnings data during tomorrow’s Asia trading session and investors are expecting a decline of -2.6%. Attention should remain on Australia and the U.S. for the next 24 hours with America also releasing Pending Home Sales tomorrow.
Technically speaking, the USD/JPY has multiple uptrend lines serving as technical cushions along with 1/28 and 1/22 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 1/29 and 1/20 highs. Furthermore, the .90 area could continue to have a psychological influence on the USD/JPY over the near-term.

Present Price: 90.28
Resistances: 90.46, 90.56, 90.67, 90.90, 91.04, 91.24
Supports: 90.22, 90.08, 89.97, 89.77, 89.58, 89.36
Psychological: 90, January highs and lows

Gold Climbs as Dollar Weakens

Investors are selling the Dollar in what appears to be a reaction to overbought conditions. Weakness in the Greenback has allowed gold to strengthen due to correlative forces as the precious metal attempts to form a bottom. However, considerable downward forces remain in the EUR/USD, GBP/USD, and AUD/USD. Hence, it’s difficult to have lasting confidence in gold until there are clear fundamental and technical turnarounds in these major Dollar pairs. Additionally, gold must deal with the psychological $1100/oz once again as a technical barrier. As a result, the precious metal faces some formidable obstacles to the topside. Meanwhile, investors are awaiting America’s Manufacturing PMI data followed by the RBA’s monetary policy decision during tomorrow’s Asia trading session. Tuesday’s trading session will also include more key economic data releases from both the U.S. and UK while the EU mulls a bailout of Greece. Therefore, activity in the FX markets could remain active over the next 24-48 hours. That being said, investors should keep a sharp eye on technicals in the aforementioned Dollar pairs for a directional breakout.
Technically speaking, gold now has multiple uptrend lines serving as a technical cushion along with January lows should they be tested. Our present uptrend lines run through August 2008 levels, highlighting the significance of the moment. As for the topside, gold faces a few steep downtrend lines along with the highly psychological $1100/oz level. Furthermore, 1/28 and 1/26 highs could serve as technical barriers should they be reached.

Present Price: $1086.70/oz
Resistances: $1090.07/oz, $1093.32, oz, $1096.91/oz, $1101.00/oz, $1103.63/oz, $1108.67/oz
Supports: $1085.03/oz, $1081.56/oz, $1078.92/oz, $1074.44/oz, $1070.65/oz, $1063.28/oz
Psychological: $1075/oz, $1100/oz, January lows

AUD/USD Fights to Stabilize with the RBA on Deck

The AUD/USD is staging a rally from intraday lows after continuing its decline in reaction to slightly weaker than expected Manufacturing PMI data from China. Weakness in China implies a decline in demand for Australia’s commodities, a negative development for the Aussie. However, the Dollar is depreciating across the board and gold is firming as investors await America’s Manufacturing PMI data. It seems the Dollar is falling victim to overbought conditions right now and the AUD/USD is benefitting. However, more fundamental data from the U.S. could illicit further volatility, particularly if the number prints above analyst expectations. Friday’s strong U.S. data set yielded a broad-based rally in the Dollar and it wouldn’t be surprising to see this happen again considering uncertainty surrounding China, the EU and U.K. However, attention will then shift to Australia with the RBA making its monetary policy decision during tomorrow’s Asia trading session. Although a majority of analysts still expect a 25 point hike, recent liquidity tightening in China coupled with weak Australia PPI data may lead the RBA to pause its rate hikes as markets determine how China’s more hawkish monetary policy impacts markets. Furthermore, recent uncertainty regarding Greece’s outstanding debt may also entice the RBA to take a wait-and-see approach. That being said, tomorrow’s RBA decision could have a considerable impact on the AUD/USD due to rising investor uncertainty. Furthermore, investors will also receive Pending Home Sales during tomorrow’s U.S. trading session followed by Australia’s Trade Balance on Wednesday. Hence, the AUD/USD could remain active for the next 48 hours.
Technically speaking, the AUD/USD is currently fighting to stay above our 1st tier uptrend line with multiple uptrend lines hanging below. Additionally, December 2009 lows could serve as a technical cushion should they be reached. As for the topside, the AUD/USD faces multiple downtrend lines along with 12/24, 12/28 and 1/29 highs serving as technical barriers. Furthermore, the .9000 area could serve as a psychological force should it be reached.

Price: .8848
Resistances: .8851, .8863, .8870, .8887, .8907, .8923
Supports: .8822, .8810, .8796, .8779, .8765
Psychological: .90, January highs and December lows

S&P Futures Pop on Positive PMI

The S&P futures are popping in reaction to stronger than expected U.S. Manufacturing PMI data. Today’s release continues a theme of strong U.S. economic data following Friday’s encouraging data set. The S&P futures are finally experiencing some solid topside movement after Friday’s decline despite strong fundamental data. That being said, there remains a good amount of investor uncertainty due to Greece’s debt issue and tighter monetary policy from China. The RBA will make a monetary policy decision tomorrow and it will be interesting to see whether the central bank hikes or pauses considering the pullback in the risk trade over the past weeks. A more hawkish monetary policy from China could not only decrease demand for Australian commodities, but for goods from around the globe. The RBA’s decision tomorrow could take China’s temperature and have a noticeable impact not only on the Dollar, but U.S. equities as well. That being said, volatility could remain at a heightened state over the next 24-48 hours with the U.S. also releasing Pending Home Sales tomorrow. Therefore, investors should continue to monitor activity in the FX markets since trading has become very volatile lately. While a rally has been overdue due to oversold conditions in the risk trade, global uncertainty is on the rise, placing a downward force on the S&P futures despite strong U.S. data and earnings.
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: 1083.25
Resistances: 1083.5, 1088.75, 1092, 1094, 1095.5, 1100.5
Supports: 1077, 1074.25, 1072.25, 1070.5, 1066.75, 1062.5
Psychological: 1100, 1075, December highs and lows, November lows

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