• Online Forex trading Community

Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 12/08/09


Daily Market Commentary

EUR/USD Sinks Towards November Lows as Equities Head South

The EUR/USD is declining as investors exit the risk trade in reaction to Bernanke’s cautious comments yesterday in conjunction with Moody’s warning that the U.S. and UK are testing the patience of their Aaa Ratings. Bernanke attempted to soothe investor excitement stemming from Friday’s much better than expected U.S. employment data, resulting in a sizable Dollar appreciation. Bernanke managed to devalue the Dollar a bit and stabilize equity markets after he stated that the U.S. economy still faces considerable headwinds. That being said, Bernanke is attempting to clarify that the Fed is planning on maintaining its loose monetary policy for the foreseeable future. Hence, the central bank will need further confirmation from economic data before considering shortening its policy timeframe. Meanwhile, Moody’s stated that the UK and U.S. may ‘test the boundaries’ of their Aaa ratings if they don’t get a handle on their respective budget deficits. The news from Moody’s, in addition to new uncertainty surrounding Dubai’s debt, has managed to trigger a risk-aversion session. As a result, the EUR/USD, GBP/USD, USD/JPY, and gold are all trading in the red.

The EU releaesd a couple disappointing data points which aren’t helping out the EUR/USD’s cause. Yesterday German Factory Orders printed -2.7% below analyst expectations (0.6%). The decline in factory orders is likely a symptom of the EUR/USD’s solid run last month. Furthemore, Germany printed an Industrial Production figure today which was also well beneath analyst expectations (-1.8% vs 1.1% exepcted). Therefore, it seems Germany’s economic productivity is cooling off a bit. The disappointing data points are likely adding to the downward pressure on the EUR/USD already being inflicted by the aforementioned psychological developments. The EU will be relative quiet on the data wire over the next couple sessions, leaving its movements in the hands of Thursday’s BoE meeting followed be the release of China’s Industrial Production number in the PM EST.

Technically speaking, the EUR/USD is currently testing the strength of our 1st tier uptrend line, which could carry some weight since it runs through September lows. However, the currency pair does have some technical cushions resting nearby in the forms of 10/30 and 11/03 lows. Furthrmore, the psychological 1.45 level could work in the EUR/USD’s favor should conditions deteriorate. As for the topside, the EUR/USD now faces multiple downtrend lines along with 12/08 and 12/07 highs. Additionally, the highly psychological 1.50 area should serve as a tough psychological barrier again should it be tested.

Present Price: 1.4756
Resistances: 1.4778, 1.4795, 1.4812, 1.4841, 1.4859, 1.4875
Supports: 1.4754, 1.4738, 1.4715, 1.4682, 1.4672, 1.4650, 1.4631
Psychological: 1.45, 1.50, November Lows

GBP/USD Tests November Lows

The Cable is testing its November lows as investor sentiment has turned sour following Friday’s optimism stemming from a combination of encouraging U.S. employment data and the BoE’s Darling stating that he believes the UK economy has turned a corner. We have since witnessed a risk-aversion trend since Friday’s events as investors react to Bernanke stating that the U.S. economy still faces considerable headwinds. It seems Bernanke is trying to curb speculation that the Fed will begin tightening liquidity sooner than anticipated due to Friday’s data. Bernanke’s cautious public address has sent U.S. equities lower and the Dollar and Yen higher. In addition to Bernanke’s impact on the market, investors are also reacting to Moody’s statement that the UK and U.S. are ‘testing the boundaries’ of the Aaa ratings. Moody’s statement has delivered a negative psychological blow to the risk trade as investors worry about the debt exposure of these two industrialized nations. Furthremore, investors are monitoring Dubai’s debt situation as it seems Dubai World will need to delay its Dec 14th debt payment. New uncertainties surrounding Dubai World’s ability to settle with its creditors has resulted in additional risk-aversion. Hence, the Cable has continued Friday’s sell-off as the Dollar experiences a broad-based rally.

Meanwhile, Britain released a Manufacturing Production figure which was 5 basis points below analyst expectations (0% vs. 0.5% expected). However, less weight is normally placed on the UK’s manufacturing data since the nation’s GDP is much more reliant on revenue from the services industry. In addition to today’s disappointing manufacturing number, Britain’s Retail Consortium’s data showed that the growth of retail sales has slowed, led by a decline in the purchase of food products. Invetors are presently awaiting Finance Minister Darling’s new budget plan to see how Darling plans to reduce the UK’s swelling deficit. Most of the focus will likely be on Thursday’s BoE monetary policy decision. The central bank has been a bit more hawkish concerning its monetary policy lately due to its more optimistic outlook on the UK’s economic performance. Therefore, it will be interesting to see how investors approach Thursday’s policy meeting.

Technically speaking, the Cable is currently testing important near-term technical cushions in the form of November and 10/26 lows. A failure of these lows could result in a test of our 2nd tier uptrend line. That being said, the Cable does have some historical data from August and September of this year. Hence, the Cable’s technical condition may not be as poor as it seems from our 4-hour chart. However, should conditions deteriorate, the Cable’s psychological 1.60 level could also prove to be a solid technical cushion should it be tested. As for the topside, the Cable faces multiple downtrend lines along with 12/07 and 12/04 highs. Therefore, quite a few topside technicals are in place.

Present Price: 1.6285
Resistances: 1.6325, 1.6346, 1.6371, 1.6396, 1.6435, 1.6470
Supports: 1.6284, 1.6260, 1.6248, 1.6200, 1.6163, 1.6133
Psychological: 1.65, 1.60, November Lows and Highs

USD/JPY Trades Lower with Risk Aversion

The USD/JPY is continuing Monday’s selloff as investors opt for risk aversion following disconcerting comments from both Bernanke and Moody’s. Yesterday Bernanke stated that the U.S. economy still faces considerable headwinds. It seems Bernanke is attempting to dampen investor optimism stemming from Friday’s enouraging U.S. employment data. In addition to Bernanke’s caution statement, Moody’s warned that the U.S. and UK may be testing the patience of their respective Aaa ratings. The fear of U.S. and UK debt exposure has increased investor uncertainty, thereby resulting in risk averse money flows. Hence, the USD/JPY is being hit by a combination of negative psychological developments from the West.

Meanwhile, the DPJ announced the implementation of a $81 billion stimulus package to help buoy a beleagured Japanese economy. Although the DPJ’s new stimulus package should give a positive boost to the nation’s economy, analysts are already debating whether the $81 billion is enough to turn deflationary pressures. The Yen initially strengthened in reaction the DPJ’s announcement, highlighting investor skepticism in regards to the effectiveness of the stimulus package in regards to tempering deflation. In addition to the DPJ’s announcement, Japan reported that its Trade Balance widened more than expected, suggesting global demand for Japanese exports continues to recover.

Technically speaking, the USD/JPY is trading back below its highly psychological 90 level in addition to multiple downtrend lines hanging overhead. Therefore, the currency pair still has its fair share of topside techncials to deal with before cementing a more formidable uptrend. As for the downside, the USD/JPY does have a couple new uptrend lines hanging nearby alonng 12/04 and 12/03 lows. Hence, while the USD/JPY does face strong downside pressures, the currency pair has at least gained a little breathing room from October lows and the psychological 85 level.

Meanwhile, investors are awaiting tonight’s Final GDP figure. If Final GDP prints positive as a result of an increase in export demand, then the USD/JPY may face further downward pressure as inverstors favor the Yen over the Dollar as a safe haven.

Present Price: 88.38
Resistances: 88.62, 88.86, 89.03, 89.12, 89.34, 89.54
Supports: 88.34, 88.18, 88.01, 87.82, 87.72, 87.49
Psychological: 90, November Highs and Lows

Gold Hovers Around $1150/oz

Gold bounced on Monday following Friday’s hefty sell-off in reaction to encouraging U.S. employment data. Friday’s data made investors snap up the Dollar in speculation that the Fed may raise interested rates sooner than anticipated, resulting in a selloff in gold due to the precious metal’s negative correlation to the Dollar. However, Bernanke attempted to quell speculation yesterday by stating that the U.S. economy still faces headwinds, implying the Fed is not likely to raise rates in the foreseeable future barring very positive data confirmations over the near term. That being said, Bernanke’s comments helped gold recover some of Friday’s losses.

Unfortunately for gold bulls, the Dollar is appreciating again after Moody’s warned that the U.S. and UK could test the patience of their resepective Aaa ratings. Additionally, more uncertainty concerning Dubai’s debt issue arose today. As a result, investors are favoring risk-averse investment vehicles , boosting the Dollar and sending gold back below its psychological $1150/oz level. On a positive note, gold remains above Friday lows, indicating near-term supports remain intact for EUR/USD and AUD/USD. Hence, investors should keep an eye on these currency pairs should they interact with key supports because another wave of Dollar strength could knock gold back towards its psychological $1100/oz level.

Technicaly speaking, gold has multiple uptrend lines serving as technical cushions along with 12/07, 11/19, and 11/12 lows. Furthermore, $1100/oz could prove to be a strong psychological support should it be tested. As for the topside, we’re still not able to confidently place a downtrend line due to the lack of hisorical perspective. However, gold does face technical obsticales in the form of intraday, 11/23, and 11/26 highs along with the psychological $1175/oz and $1200/oz levels.

Present Price: $1145.75/oz
Resistances: $1149.18/oz, $1153.67/oz, $1161.84/oz, $1165.11/oz, $170.01/oz, $1173.69/oz
Supports: $1143.46/oz, $1138.56/oz, $1134.47/oz, $1129.98/oz, $1126.71/oz, $1123.03/oz
Psychological: $1150/oz, $1175/oz, $1100/oz, $1200/oz

Crude Retests November Lows

Crude futures are retesting November lows as the Dollar continues to strengthen while the S&P futures turn negative. As we anticipated, crude is opting to follow a stronger correlation with the Dollar than equities. This week’s negative psychological developments concerning Bernanke, Moody’s, and Dubai (refer to S&P commentary) has led to further appreciation of both the Dollar and Yen as investors opt to put their money into more risk averse investment vehicles. The Dollar’s present wave of appreciation has placed noticable downward pressure on crude since it is a Dollar-denominated commodity. Hence, a stronger Dollar makes crude a less attractive export to other nations. Meanwhile, investors are eagerly awaiting Thursday’s trading session since markets will be barraged by a BoE monetary policy meeting, U.S. Trade Balance and Unemployment Caims data, and finally China’s Industrial Production figure during the evening.

Technically speaking, crude futures are presently trying to hold onto our new 1st tier uptrend line while fighting to get above our 2nd tier uptrend line. A movement back above our 2nd tier would be a positive development since it runs through November lows. However, crude’s technicals appear to be deteriorating, meaning a test of the psychological $70/bbl level wouldn’t be surprsing should the Dollar continue to strengthen. Hence, investors should keep an eye on the EUR/USD’s interaction with our uptrend lines and technical cushions. As for the topside, crude faces multiple downtrend lines along with the psychological $75/bbl level and December highs. Therefore, crude faces quite a few challengning near-term topside technicals should it look to piece together a new uptrend.

Price: $72.71/bbl
Resistances: $72.89/bbl, $73.46/bbl, $74.09/bbl, $74.41/bbl, $74.94/bbl, $75.22/bbl
Supports: $72.36/bbl, $72.11/bbl, $71.59/bbl, $70.93/bbl, $70.35/bbl, $69.99/bbl
Psychological: $75/bbl, $70/bbl

S&P Futures Trades Lower in Reaction to Bernanke, Moody’s, Dubai

The S&P futures are trading back below their highly psychological 1100 level as the Dollar continues its wave of appreciation. Investors are reacting to Bernanke’s cautious comments yesterday as the Fed Chairman attempted to dampen consumer excitement stemming from Friday’s enouraging jobs data. Bernanke stated the U.S. economy still faces considerable headwinds, implying that one set of positive employment data may not be enough to hasten the Fed’s monetary policy tigthening. However, the Dollar is continuing to appreciate regardless of Bernanke’s comments, placing downward pressure on the S&P futures since they are negatively correlated to the Greenback.

The Dollar is likely strengthening today in reaction to Moody’s statement that the U.S. and UK are testing the patience of the Aaa ratings. Hence, investor uncertainty has returned in regards to America’s debt exposure and the long-term implications this could have on economic performance. Meanwhile, investor uncertainty has returned concerning Dubai’s debt issue. Dubai World has asked to have its Dec 14th debt payment delayed, reigniting fears that Dubai may have trouble covering its outstanding debt. The combination of negative psychological events is weighing down on the S&P futures and encouraging investors to head for more risk averse investment vehicles.

Despite this week’s developments psychologically, investors will receive key fundamental information beginning tonight with Japan’s Final GDP. However, greater emphasis will likely be placed on Thursday’s trading session. The BoE will announce its latest monetary policy decision, followed by the U.S. Trade Balance and weekly Unemployment Claims. Thursday will be topped off late EST with the release of China’s Industrial Production data. Hence, the outcome from Thursday’s data and BoE monetary policy could help determine wether we are in a temporary dip or the beginning of a more substantial pullback.

Technically speaking, the S&P futures still have multiple uptrend lines serving as technical cushions along with 11/30, 11/13, and November lows. As for the topside, the S&P futures face technical obstalces in the form of the highly psychological 1100 level along with 12/7 and 12/04 highs.

Price: 1093.50
Resistances: 1097, 1098.75, 1101.75, 1104.75, 1107, 1110.5
Supports: 1093, 1091.25, 1086.5, 1085, 1082.5, 1080.25
Psychological: 1100, 1075, November Highs and Lows

Disclaimer: FastBrokers' market commentary is provided for information purposes only and under no circumstances should be regarded neither as investment advice or as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. All materials are property of Fast Trading services, LLC and unless otherwise indicated, any unauthorized reproduction is prohibited.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

Main Menu