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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 01/29/10


Daily Market Commentary

EUR/USD Glides Lower as Investors Snap up Dollar

The EUR/USD is heading lower today as investors snap up the Dollar across the board in reaction to stronger than expected U.S. economic data. U.S. Advance GDP printed 1.2% above analyst expectations, spurring a Dollar buying spree due to the comparative outperformance of America’s economy. In addition to the positive GDP number the U.S. also released better than expected Chicago PMI and Revised UoM Consumer Sentiment Data. The all around impressive U.S. data has sent the Dollar higher across the board while gold drops beneath $1075/oz. Therefore, the EUR/USD’s correlations are sending sell signals. However, today’s session has already been incredibly volatile and we’ll have to see how the remainder of the day plays out. Meanwhile, the Euro is flexing a been of a relative strength today as EU officials come to the defense of Greece while attempting to negate speculation that Greece may need to leave the union. That being said, the EU could be working on a bailout package to help ready the ship for a debt scare in Greece could spread to larger struggling nations such as Spain and Portugal. Greece has already seen its bond interest rates fly higher this week and the EU may need to make a decision soon to prevent the weakness from spreading. Therefore, investors should keep a wary eye on the newsier and monitor the EUR/USD for any sudden jerks while data releases are absent. Speaking of data, the EU will be relatively quiet on the data wire next week until Thursday’s ECB meeting. Therefore, activity in the currency pair should continue to flow with broad-based Dollar movements unless there is another key development concerning Greece.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with 1/28 and 1/25 highs. As for the downside, the EUR/USD has our 1st tier uptrend line (off scree) serving as technical cushions along with previous January lows. 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: 1.3924
Resistances: 1.3964, 1.3992, 1.4030, 1.4051, 1.4100, 1.4135
Supports: 1.3902, 1.3876, 1.3850, 1.3822, 1.3796, 1.3756
Psychological: 1.40, January lows

GBP/USD Drops on Strong U.S. Data and Negative S&P Statement

Standard and Poors sent the Pound lower today after it released a statement saying that UK banks aren’t the ‘most stable and low-risk’ in the world, comparing them to financial institutions in Chile and Portugal. Standard and Poors bleak assessment of the UK’s financial industry has resulted in a comparative weakness in the Pound, highlighted by a pop in the EUR/GBP and emphasized by a large pullback in the Cable. The Cable’s weakness has been exacerbated by stronger than expected U.S. economic data. Strong U.S. GDP, Chicago PMI, and Revised UoM data has sent the Dollar higher across the board as the U.S. looks to be a viable safe haven amongst global uncertainty. The Cable reacted to the U.S. data set by plunging below 1/22 lows and nearly testing the psychological 1.60 level. However, the Cable seems to be finding strength in our 1st tier uptrend line and is attempting to stabilize to avoid another key technical setback considering our 1st tier runs through December lows, or the 1.585 area. That being said it will be interesting to see how the session plays out considering the volatility we’ve witnessed thus far. Will investors decide to head back to the risk trade, or stick with a strong Dollar theme as the week comes to a close? As for the UK, the economy did get a piece of good news in that Nationwide HPI surpassed analyst estimates. The data train will continue next week with the release of Manufacturing PMI and Net Lending to Individuals on Monday.
Technically speaking, the Cable has experienced a large setback today and is currently testing some key supports in the form of our 1st tier uptrend line and the psychological 1.60 area. As we stated before, our 1st tier runs through December lows, or the 1.5850 area. As for the topside, the Cable faces multiple downtrend lines along with 1/8 and intraday highs.

Present Price: 1.6034
Resistances: 1.6046, 1.6061, 1.6078, 1.6098, 1.6124, 1.6149
Supports: 1.6028, 1.6003, 1.5981, 1.5964, 1.5964, 1.5940, 1.5921
Psychological: 1.60, December lows and highs

USD/JPY Pops on Strong U.S. Data Set

The USD/JPY has popped past 1/22 highs in reaction to stronger than expected U.S. GDP, Chicago PMI, and Revised UoM data. The altogether positive U.S. data set has resulted in broad-based Dollar strength and the USD/JPY is certainly partaking in the action. The encouraging U.S. data comes in the wake of mixed econ data from Japan during today’s Asia trading session. Although Household Spending came in hotter than expected, both the Tokyo Core CPI and Prelim Industrial Production printed below analyst expectations. Hence, we can deduce that a stronger Yen has dragged prices lower, spurring consumption and decreasing demand for Japanese goods. The key element of today’s data set is the decline in CPI to -2%. Both the BoJ and DPJ have been vocal about combating deflationary pressures. Hence, should deflation persist the BoJ may be inclined to take action, and it seems the USD/JPY is already pricing in this realization today. Meanwhile, it will be interesting to see how the session plays out considering how volatile it has been thus far. China will kick off next week by releasing Manufacturing PMI. China’s economic performance has a large impact on Japan considering their close commercial relationship. Hence, activity in the Yen could remain at a heightened state as next week’s trading session begins.
Technically speaking, the USD/JPY has multiple uptrend lines serving as technical cushions along with 1/19 and 1/22 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with intraday and 1/20 highs. Furthermore, the .90 area could continue to have a psychological influence on the USD/JPY over the near-term should the USD/JPY’s upward momentum cool down as the session progresses.

Present Price: 90.74
Resistances: 90.75, 90.90, 91.05, 91.24, 91.43, 91.57
Supports: 90.57, 90.43, 90.27, 90.10, 89.90, 89.72
Psychological: 90, January highs and lows

Gold Fluctuates as Investors Decipher Data

Gold is fluctuating wildly today as investors react to the stronger than expected U.S. data set. U.S. GDP, Chicago PMI, and UoM Consumer Sentiment data all printed stronger than analyst expectations. While investors have reacted by buying up the Dollar and selling gold, the precious metal has been all over the place on the 1-hour and it seems investors are debating exactly how to play today’s development. The outperformance in U.S. economic data has led investors to favor the Dollar as a safe haven amidst global economic uncertainty, a negative for gold considering correlative forces. On the other hand, a boost in U.S. economic activity could also prove to be a positive development for the risk trade. Hence the wild fluctuations in gold so far this session. That being said, it seems the downside is winning the battle thus far, though we will have to wait and see how the session plays out. Meanwhile, investors should keep an eye on the major Dollar pairs should there be another considerable technical move.
Technically speaking, gold has our 1st tier uptrend line 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, intraday and 1/26 highs could serve as technical barriers should they be reached.

Present Price: $1078.05/oz
Resistances: $1078.92/oz, $1085.32, oz, $1090.07/oz, $1093.32/oz, $1096.91/oz, $1101.00/oz
Supports: $1074.44/oz, $1070.65/oz, $1063.28/oz, $1058.74/oz, $1054.86/oz, $1050.12/oz
Psychological: $1075/oz, $1100/oz, January lows

AUD/USD Sinks Back to .89 Amid Broad Dollar Strength

The AUD/USD is heading lower amid high volatility as the Dollar strengthens across the board after a better than expected U.S. economic data set. U.S. Advance GDP, Chicago PMI, and UoM Consumer Sentiment data all impressed and a Dollar buying spree has ensued as investors choose the U.S. economy as a safe harbor amid global economic uncertainty. Meanwhile, gold is heading lower towards its psychological $1075/oz with investors debating where to send the Greenback. Volatility has been at a heightened level thus far and it will be interesting to see where the Dollar ends up at the end of the day. Thus far the Dollar is beating out higher risk currencies and it seems this trend may continue as the trading week draws to a close. Meanwhile, the AUD/USD is having a tough time leaving behind .8900 level and is finding support in our present 1st tier uptrend line. Our current uptrend lines run through April 2009 levels, or the .70 area, marking the importance of present supports. The Aussie should remain active as next week kicks off. China will begin the trading week by releasing Manufacturing PMI data. We’ve witnessed the influence China’s more hawkish monetary policy had on the Aussie this week. Therefore, we expect the currency to react to Monday’s key data release as well. Australia will also begin the trading week with some data releases, including New Home Sales, HPI, and Quarterly Business Confidence. Furthermore, the RBA will make its monetary policy decision during Tuesday’s Asia trading session. Hence, the AUD/USD appears to have a busy week ahead of itself.
Technically speaking, the AUD/USD is currently fighting to stay above our 1st tier uptrend line with multiple uptrend lines hanging below. Additionally, previous January lows and the psychological .8900 level could continue to serve as technical cushions for the time being. As for the topside, the AUD/USD faces multiple downtrend lines along with 1/28 and 1/26 highs serving as technical barriers. Furthermore, the .9000 area could serve as a psychological force should it be reached.

Price: .8900
Resistances: .8901, .8912, .8933, .8949, .8959, .8984
Supports: .8884, .8870, .8857, .8842, .8822, .8812
Psychological: .90, January highs and lows

S&P Futures Even Keel Despite Positive Data Set

The S&P futures are about even despite today’s Positive economic data set. Advance U.S. GDP, Chicago PMI, and Revised UoM Consumer Sentiment data all topped analyst estimates. The encouraging data set sent the Dollar climbing across the board and gold is heading south. However, the S&P futures relinquished earlier gains and it will be interesting to see how equities turn out. Although the GDP number received a positive reaction initially, upon further inspection it seems the strong Advance GDP data can be contributed to inventory stockpiling. The onset of the Great Recession resulted in a cut in production and it appears companies are replenishing their inventories in anticipation of higher demand. Meanwhile, volatility is at a heightened state and investors are still deciphering the data points. That being said, the data train will continue to roll next week with China kicking off by releasing its Manufacturing PMI data during Monday’s Asia trading session along with a host of Aussie numbers. The U.S. and Britain will follow with their own Manufacturing PMIs and the RBA will make its monetary policy decision during Tuesday’s Asia trading session. Hence, activity in the Dollar should remain at a heightened state and this could contribute to further volatility in the S&P futures. Investors should also keep an eye on the news wire for updates concerning Greece’s debt situation. There’s still an uncertainty in regards to whether the EU will bail out Greece, and further developments in this area could spark activity in equities.
Technically speaking, continues to face multiple downtrend line along with the highly psychological 1100 level to the topside. As for the downside, the S&P futures have intraday, 1/27, and 12/26 lows serving as technical cushions along with the psychological 1075 level.

Price: 1083.25
Resistances: 1087.25, 1089.75, 1094, 1098, 1102.75
Supports: 1080.25, 1078, 1074.25, 1072.25, 1070.5
Psychological: 1100, 1075, December highs and lows, November lows

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