Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/02/10

Daily Market Commentary


EUR/USD Creeps Higher as Markets Cool

The EUR/USD is attempting to stabilize and we notice a similar pattern in the GBP/USD. Australia’s RBA decision did yield volatility, though only in the AUD/USD while the EUR/USD emerged unscathed. Chatter concerning Greece has subsided as the EU decides how to deal with the situation. In this case no news is good news, and the EUR/USD is benefitting from the silence thus far. German Retail Sales printed about in line with analyst expectations, yielding little response as we anticipated. However, the U.S. will release Pending Home Sales soon and this data point could move the Dollar should it deviate from analyst estimates. It’s uncertain at this point in time how another positive U.S. data point would impact the Dollar since the Greenback weakened yesterday and it soared on Friday with positive data releases during both sessions. Therefore, investors should keep a wary eye on the EUR/USD as today’s data hits the wires. The EU will release its headline Retail Sales figure tomorrow and considering today’s result it would be surprising for the number to print about in line with expectations. Meanwhile, attention will remain on the U.S. with ADP Non-Farm Employment Change and Services PMI data on deck for tomorrow. Additionally, the UK will release its Halifax HPI and Services PMI as well. Hence, activity in the Dollar could heat up and the EUR/USD could opt to follow broad-based movements in the FX markets barring any EU announcements concerning 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 at the moment. 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: 1.3947
Resistances: 1.3962, 1.3993, 1.40026, 1.4056, 1.4105, 1.4135
Supports: 1.3930, 1.3903, 1.3878, 1.3857, 1.3833, 1.3806, 1.3782
Psychological: 1.40, January lows

GBP/USD Consolidates Above January Lows

The Cable is attempting to build up a base above January lows as the psychological 1.60 hangs just overhead. The UK released a better than expected Construction PMI data point, tagging along with yesterday’s impressive Manufacturing PMI release. Hence, UK data continues to outperform and this is likely helping stabilize the Cable. Meanwhile, chatter has quieted down concerning Greece’s debt issues and the Standard and Poor’s bleak assessment of the UK’s financial sector is passing by as well. The relative calm psychologically is easing downward pressure on the risk trade, a positive development for the Cable. However, the EU still hasn’t decided how to deal with Greece and psychological forces could very well spark up again in the near future. Therefore, investors should keep a wary eye on the news wires for the time being. Meanwhile, investors are awaiting U.S. Pending Home Sales due shortly. U.S. housing data usually has the ability to jolt the FX markets, particularly if the number deviates from analyst estimates. The UK will release more economic data tomorrow, including Halifax HPI and Services PMI. These releases precede ADP Non-Farm Employment Change and Services PMI data from the U.S. as well. Therefore, volatility could pick up in the Cable tomorrow. More optimistic UK data and an absence of negative psychological forces could help the Cable regain a bit of lost ground. On the other hand, the FX markets are still in a fragile condition and should be monitored warily.
Technically speaking, the Cable has our 1st and 2nd tier uptrend lines serving as technical cushions along with intraday and 2/1 lows. As for the topside, the Cable still faces multiple downtrend lines along with 2/1 and 1/29 highs. Furthermore, the psychological 1.60 area could serve as a technical barrier should it be tested.

Present Price: 1.5947
Resistances: 1.5961, 1.5975, 1.5992, 1.6005, 1.6015, 1.6024
Supports: 1.5937, 1.5921, 1.5900, 1.5876, 1.5863
Psychological: 1.60, December and October lows

USD/JPY Remains Range-Bound

The USD/JPY is trading off of intraday highs after rallying in light of the RBA keeping its benchmark rate unchanged. The RBA’s decision led to risk aversion, benefitting the USD/JPY. Additionally, Japan’s Average Cash Earnings data printed much weaker than analyst expectations, leading investors to favor the Dollar over the Yen in light of recent impressive U.S. economic data. However, the USD/JPY is drifting back towards its psychological 90 level as analysts await U.S. Pending Home Sales. The USD/JPY’s behavior has been a bit unpredictable as of late considering the market turmoil taking place around the globe. Meanwhile, it seems the BoJ’s commitment to a loose monetary policy coupled with strong U.S. economic data has resulted in an upward momentum in the USD/JPY. This momentum could be tested soon considering the U.S. will also release Services PMI and ADP Non-Farm Employment Change data tomorrow. Should U.S. data releases disappoint, this would likely drive the USD/JPY lower, and vice versa.
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: 90.33
Resistances: 90.46, 90.56, 90.69, 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 Drives Past $1100/oz

Gold has popped back above its highly psychological $1100/oz level despite a large step back in the AUD/USD during the Asia trading session. Outside of volatility in the Aussie, we recognize stability in both the Cable and EUR/USD as negative psychological forces subside. Consolidation and stabilization in these two currency pairs has allowed gold to gain back some lost ground from what now appear to be oversold conditions. Meanwhile, the S&P futures are logging solid gains this morning after U.S. Pending Home Sales printed above analyst expectations, continuing the theme of strong U.S. economic data. Encouraging U.S. data is proving to be a positive catalyst for gold since the precious metal is positively correlated with U.S. equities. That being said, the U.S. will release Services PMI and ADP Employment Change data tomorrow. Hence, volatility in the FX and currency markets could pick up over the next 24-48 hours. In the mean time investors should keep an eye on activity in the Dollar and take note of any further directional breakouts.
Technically speaking, gold has hopped above our 3rd tier downtrend line, a positive technical development considering our 3rd tier runs through 1/20 highs, or the $1040/oz area. Hence, gold could be in for further topside movement over the near-term should the previous metal hold above our 3rd tier downtrend line. As for the downside, we’ve readjusted our uptrend lines to compensate for today’s gains. Therefore, gold has multiple uptrend lines serving as technical cushions along with the psychological $1100/oz level.

Present Price: $1111.50/oz
Resistances: $1113.71/oz, $1117.38, oz, $1121.03/oz, $1125.92/oz, $1128.66/oz, $1132.01/oz
Supports: $1109.44/oz, $1106.40/oz, $1102.13/oz, $1099.07/oz, $1094.19/oz
Psychological: $1100/oz, January highs and lows

AUD/USD Stabilizes Following Large Pullback

The RBA in fact opted to keep its benchmark rate in check during today’s Asia trading session as the central bank monitors slight price declines and gauges the impact from China’s more hawkish monetary policy stance. The RBA’s decision surprised markets and resulted in an immediate selloff since a majority of analysts were pricing in a 25 basis point hike. Losses in the AUD/USD were sizable, yet the currency pair managed to bottom out just around Monday lows. Therefore, the currency pair appears to have salvaged a more extensive collapse for the time being and is presently strengthening in light of better than expected U.S. Pending Home Sales data. Strong U.S. housing data has led investors back to the risk trade so far while gold strengthens above its psychological $1100/oz level. In fact, the precious metal has broken out of our 3rd tier downtrend line, a positive sign for the Aussie since the trend line runs through the $1140/oz level. Attention will shift back to Australia during tomorrow’s Asia trading session with the release of Australia’s Trade Balance. The Trade Balance data could have a considerable impact on the Aussie since analysts will likely dissect the numbers to get a better idea of how demand for the country’s exports is faring. Should export data print strong this could provide some upward momentum for the AUD/USD since investors will assume that the RBA is taking a wait and see approach in regards to its monetary policy. However, weak export demand could sound an alarm and yield a retreat in the currency pair. Additionally, the U.S. will release Services PMI and ADP Employment Change data. Hence, the AUD/USD could remain active for the next 24-48 hours as investors digest the wealth of data and news.
Technically speaking, the AUD/USD has our 1st and 2nd tier uptrend line serving as technical cushions along with intraday lows and the psychological .8800 area. As for the topside, the AUD/USD faces multiple downtrend lines along with 2/1 and intraday highs.

Price: .8824
Resistances: .8835, .8850, .8863, .8879, .8891
Supports: .8808, .8798, .8780, .8767, .8750, .8740
Psychological: .90, January highs and December lows

S&P Futures Approach 1100 on More Positive Data

U.S. Pending Home Sales beat analyst expectations today, a welcome surprise considering the last release printed much lower than estimated. Today’s Pending Home Sales figure continues the theme of strong U.S. economic data dating back to Friday’s set. We’ve witnessed upticks in housing, manufacturing, and inventories. However, the key data remains to be seen with Services PMI and employment numbers emerging as the week progresses. For the time being positive data and earnings are helping buoy the S&P futures, which are approaching their highly psychological 1100 level once again. Meanwhile, chatter is subsiding regarding Greece’s debt situation and the state of the UK’s financial industry. The release of negative psychological forces is allowing U.S. equities and the risk trade to recover. The Dollar is weakening across the board while the Cable and EUR/USD make up for some lost ground. The risk trade did receive a bit of a blow today after the RBA kept its benchmark rate unchanged, resulting in a large leg down in the AUD/USD. However, even the AUD/USD is recovering during the U.S. trading session, a positive development for U.S. equities. A pause by the RBA does raise a yellow flag as the central bank takes a wait and see approach to gauge the impact from a tighter monetary policy in China. Therefore, investors should keep an eye on Australia’s Trade Balance data hitting the wires during tomorrow’s Asia trading session. The UK will also release its Halifax HPI and Services PMI data followed by U.S. Services PMI and ADP Employment numbers. Hence, equities and the Dollar could remain relatively active over the next 24-48 hours as investors digest the wealth of data and news.
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: 1093.50
Resistances: 1095.75, 1098.25, 1100.5, 1102.75, 1106.5
Supports: 1090.5, 1086.5, 1082.5, 1079.5, 1077.25, 1074.5
Psychological: 1100, 1075, January highs and lows








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