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Comprehensive FX and Futures Daily Research

FastBrokers Research Team from FastBrokersFX at 11/24/09


Daily Market Commentary

EUR/USD Fluctuates Following Negatively Mixed U.S. Data

The EUR/USD was rejected by its psychological 1.50 level once again, and the currency pair is fluctuating between our 2nd tier uptrend and downtrend lines as activity wanes in advance of the Thanksgiving holiday. Today’s EU data releases were all positive with Germany’s Ifo Business Climate and EU Industrial New Orders topping analyst expectations. The EUR/USD strengthened following the EU releases, but this morning’s U.S. econ data is keeping the currency pair in check. U.S. Prelim GDP and the S&P/CS HPI Index data all came in weaker than anticipated and we are presently awaiting the CB Consumer Confidence number. However, even if the CB number tops estimates, the sluggish GDP data may weigh on the markets. On a positive note, the combination of positive EU and negative U.S. data is providing the Euro with a relative strength, as highlighted by the present performance of the EUR/GBP. However, it seems the S&P futures may struggle with 1100 again today due to the less than stellar econ data from the U.S. Therefore, the EUR/USD may be hard pressed to break through its topside barriers should U.S. equities not cooperate.

Technically speaking, the EUR/USD still faces our 2nd tier and 3rd tier downtrend lines, which run through October and November highs, respectfully. Furthermore, the EUR/USD has to deal with its highly psychological 1.50 zone. As for the downside, the EUR/USD does have multiple uptrend lines serving as technical cushions along with 11/20 lows. Therefore, quite a few technical cushions and barriers are waiting nearby. Hence, further consolidation may not be out of the question.

The EU will be relatively quiet on the data front tomorrow with only the release of the GfK German Consumer Climate number. Therefore, the EUR/USD’s performance may rely more upon the S&P’s reaction to today’s data along with tomorrow’s Durable Goods Orders and New Home Sales data releases. Meanwhile, activity may begin to wind down as investors clock out early for the Thanksgiving holiday. However, the U.S. does have some important data releases on deck for tomorrow, meaning that the potential for volatility remains.

Present Price: 1.4979
Resistances: 1.4983, 1.4998, 1.5021, 1.5036, 1.5051, 1.5070, 1.5088
Supports: 1.4963, 1.4952, 1.4936, 1.4918, 1.4902, 1.4882, 1.4859
Psychological: 1.50, November Highs and Lows

GBP/USD Drifts Back Towards 1.65

The Cable is drifting lower towards its psychological 1.65 level after BBA Mortgage Approvals and Prelim Business Investment came in mixed. While business investment registered a modest improvement, mortgage approvals printed a bit weak. The moderation in mortgage approvals supports last week’s statements from Nationwide and Bloomberg concerning a slower than expected recovery in Britain’s housing market. However, it seems BoE Governor King’s comments are having the larger impact on the Cable after King stated that Britain’s economy still faces ‘profound challenges’. King’s statement also revealed that the BoE’s tightening of liquidity stretch out over a 2-3 year period. Additionally, King still can’t rule out the use of further QE injections should the economic recovery take a negative turn. King’s most recent statements are having a negative psychological impact on the Pound, highlighted by an upturn in the EUR/GBP. Britain will release its Revised GDP data tomorrow, meaning volatility could pick up in the Cable should the GDP number surprise in either direction. On the other hand, activity in the FX markets should wind down as investors clock out early for the Thanksgiving holiday.

Meanwhile, investors should keep an eye on the S&P’s ongoing battle with 1100. Since the Dollar is negatively correlated with U.S. equities, the Cable’s near-term fate may depend on S&P’s decision on whether to duck back into a downtrend or finally leave 1100 behind. The U.S. will release some key econ data of its own tomorrow, including Durable Goods Orders, New Home Sales, and weekly Unemployment Claims. However, as we stated before, the holiday shortened weekend may cause any notable activity to carry over into next week.

Technically speaking, the Cable continues to find support along the psychological 1.65 level and our 2nd tier uptrend line. Our 2nd tier uptrend line runs through previous November lows, meaning a retracement could result in a movement towards 1.63. As for the topside, the GBP/USD faces multiple downtrend lines along with 11/23 and 10/23 highs. Recent weakness in the Cable has created quite a few immediate-term topside obstacles, meaning the currency pair would likely need a sizable boost in buy-side activity to get above our top-end barriers.

Present Price: 1.6534
Resistances: 1.6577, 1.6619, 1.6638, 1.6664, 1.6694, 1.6730, 1.6761
Supports: 1.6527, 1.6489, 1.6457, 1.6427, 1.6398, 1.6341, 1.6301
Psychological: 1.65, November Highs and Lows, 1.70

USD/JPY Pulls Back Towards our 1st Tier Uptrend Line

The USD/JPY has undergone a sizable pullback after consolidating the past few sessions. America’s weaker than expected GDP data is leading investors to prefer the Yen over the Dollar as a safe haven, thereby sending the USD/JPY tumbling towards October lows. Meanwhile Finance Minister Fujii reiterated his concern surrounding the impact of deflationary pressures on Japan’s economy. However, the BoJ does have autonomous power, and it remains to be seen whether Fujii carries enough clout to persuade the central bank to add more liquidity measures to the system. Meanwhile, investors should actively monitor the USD/JPY’s interaction with our 1st tier uptrend line since it runs through October lows. A retracement below our 1st tier may not only imply a retest of 88, but possibly a wave of more extensive near-term losses. On the other hand, should October lows be tested and give way, the BoJ may be inclined to buoy the USD/JPY through the use of psychological and/or fundamental monetary forces.

Japan will enter the data wires again tonight EST with the release of its Trade Balance. Japan’s Trade Balance data was disappointing in its previous release, so it will be interesting to see whether Japan maintains a trade surplus this time around. A dip back into a trade deficit would likely imply weak demand from the West since China’s econ data continues to outperform. In addition to Japan’s Trade Balance data, the U.S. will release Durable Goods Orders, New Homes Sales, and Unemployment Claims tomorrow. The DGO and Unemployment Claims releases could have a moderate impact on the USD/JPY since the numbers give investors a better idea of the current state of U.S. consumption, and consequently demand for Japanese goods.

Technically speaking, the USD/JPY has our 1st tier uptrend line and October lows serving as technical cushions. As for the topside, the currency pair faces multiple downtrend lines along with 11/23 and 11/18 highs. Additionally, the USD/JPY must deal with its psychological 90 level and longer-term downtrend pressures before mounting a credible comeback. Hence, many topside obstacles remain.

Present Price: 88.43
Resistances: 88.46, 88.61, 88.85, 89.06, 89.17, 89.42
Supports: 88.30, 88.18, 88.01, 87.86, 87.66
Psychological: 90 and October Lows

Gold Rockets Towards $1175/oz

Gold is consolidating along our 3rd tier uptrend line as the S&P futures bobble around 1100 and the EUR/USD fluctuates between trend lines. The reaction to today’s U.S. GDP and Consumer Confidence releases have been relatively quiet thus far, implying that activity may be winding down in advance to the Thanksgiving holiday. Gold has responded by holding onto yesterday’s impressive gains towards $1170/oz on the heels of more dovish comments from Fed officials. That being said, the Fed will release its Meeting Minutes this afternoon PST. If the Fed’s minutes further support extending loose monetary policies, then it will be interesting to see whether the gold responds with another surge higher as investors and central banks divest from the Dollar. Meanwhile, investors will receive some key U.S. and EU data points tomorrow, meaning the markets could experience a slight jolt of activity before Thanksgiving Day. Therefore, investors should continue to eye the EUR/USD’s present interaction with our trend lines and its highly psychological 1.50 level since the currency pair is normally positively correlated with gold.

Technically speaking, we’re unable to place any notable topside barriers or downtrend lines on our chart due to the lack of historical perspective. Therefore, the psychological $1175/oz and $1200/oz levels appear to be the only topside technicals at work for the time being. As for the downside, we continue to move our multiple uptrend lines higher while 11/20 lows and the psychological $1150/oz level serve as technical cushions.

Present Price: $1167.20/oz
Resistances: $1170.16/oz, $1173.02/oz
Supports: $1163.85/oz, $1160.69/oz, $1152.65/oz, $1150.09/oz, $1139.50/oz, $1132.01/oz
Psychological: $1175/oz, $1200/oz, $1050/oz

Crude Sells Off Towards $75/bbl

Crude futures are getting hit today despite the S&P’s resilience around 1100. Crude futures failed to break through our 2nd tier downtrend line and $80/bbl once again, and are reacting by dropping below our 1st tier uptrend line. Interestingly, crude is having a very noticeable negative reaction to another set of disappointing U.S. econ data releases while the Dollar and S&P futures consolidate. That being said, crude could be making a directional statement today by sinking beneath our 1st tier uptrend line and previous November lows. However, crude does have its highly psychological $75/bbl level serving as a technical cushion. Therefore, we could see crude’s recent pullback bottom soon as activity slows with the Thanksgiving holiday approaching.

Meanwhile, investors are awaiting the API inventory data later today. In addition to today’s API data, investors will receive a wave of key U.S. econ data tomorrow, including Durable Goods Orders, New Home Sales, and Weekly Unemployment Claims. Investors will be monitoring the DGO data to help determine how auto sales are holding up because an improvement in auto sales implies an increase in demand for and consumption of crude. Furthermore, the Unemployment Claims data tells us about the state of the U.S. employment market, and thereby impacts out outlook for aggregate consumption. Hence, investors should eye the outcome of tomorrow’s econ data and the ensuing reaction from crude and U.S. equities.

Price: $75.77/bbl
Resistances: $76.03/bbl, $76.78/bbl, $77.58/bbl, $77.99/bbl, $78.38/bbl, $78.95/bbl
Supports: $75.54/bbl, $75.21/bbl, $74.53/bbl, $74.19/bbl, $73.88/bbl, $73.24/bbl
Psychological: $75/bbl, $80/bbl, 2009 Highs

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