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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/11/10

 



Daily Market Commentary


EUR/USD Weakens in Wake of Positive U.S. Data

The EUR/USD is pulling back after U.S. Unemployment Claims came in at 440k, 20k below analyst estimates. The stronger than expected U.S. employment data is sending investors towards the Dollar as an EU resolution for Greece becomes more certain. Although the details of the plan haven’t been revealed yet, the Euro seems to be selling off on the news since the concept of EU relief was priced into the currency earlier this week. Meanwhile, we notice a pullback in gold as well, indicating that investors are opting to be risk-averse right now. On that note, the risk trade did receive a bit of good news during the Asia trading session. Australian employment data printed stronger than analyst expectations and China’s CPI data was cooler than estimates. Hence, the RBA has more incentive to maintain a tight monetary stance while China may feel less pressure to tighten liquidity at this point in time. Both developments are positive for the risk trade. However, debt issues in the EU have ignited investor uncertainty which is bearing down on risk right now. Although the EU has been quiet on the economic data front this week, it will reenter the fray tomorrow by releasing German Prelim GDP along with EU Flash GDP and Industrial Production. Strong economic data could help the EUR/USD regain its footing whereas a weak showing could lead to a retest of February lows. Meanwhile, investors should keep an eye on broad-based activity in the Dollar and gold as investors digest the EU’s decision to aid Greece.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday and 2/9 highs. Our 2nd tier could carry some weight since it runs through 2/3 highs and the 1.40 area. As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with 2/5 lows and the psychological 1.35 level should it be tested.

Present Price: 1.3670
Resistances: 1.3693, 1.3721, 1.3744, 1.3773, 1.3806, 1.3841
Supports: 1.3640, 1.3610, 1.3587, 1.3563, 1.3533, 1.35
Psychological: February highs and lows, 1.35


GBP/USD Gravitates around February Lows

The Cable is battling to stay above previous February lows and the psychological 1.55 level as the Dollar strengthens across the board during the U.S. trading session. Weekly U.S. Unemployment Claims printed stronger than analyst expectations, leading investors towards the Dollar amidst economic uncertainty in Europe. Speaking of which, although the EU has come to a decision to help Greece the Euro is weakening, telling us assistance from the EU may have already been priced in earlier this week. Meanwhile, investors also appear to be brushing aside stronger than expected Australian employment data and weaker than expected CPI data from China, both positive developments for the risk trade. Therefore, investor uncertainty concerning the ramifications of European debt problems seems to be bearing on the market. Although the UK is quiet on the economic data front today, Manufacturing Production printed much stronger than analyst estimates yesterday. However, investors should keep in mind that services drive the UK economy, and Services PMI data disappointed last week. Hence, the UK still faces economic headwinds despite noticeable signs of improvement. Also weighing on the Pound is weaker than expected projections for UK GDP and CPI growth released yesterday in the BoE’s inflation report. The BoE’s modest economic outlook for the UK is a bit discouraging and may also be yielding weakness in the Pound. Meanwhile, attention will remain focused on the EU and its plan to guide Greece out of its debt problems in addition to Germany’s Prelim GDP data due tomorrow. Additionally, the U.S. will release Retail Sales and Prelim UoM Consumer Sentiment data. Hence, the trading week could end on a volatile note.
Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/10 highs. We’ve created some new uptrend lines, albeit tight ones, to serve as technical cushions along with the psychological 1.55 area.

Present Price: 1.5608
Resistances: 1.5621, 1.5637, 1.5659, 1.5690, 1.5717, 1.5744
Supports: 1.5593, 1.5572, 1.5558, 1.5533, 1.5502
Psychological: 1.55


USD/JPY Fluctuates Below 90

The USD/JPY continues to fluctuate below its highly psychological 90 level despite heightened volatility in the Euro and Aussie. Japan’s surge in CapEx (20.1%), suggesting a pickup in manufacturing and economic activity. However, it will be interesting to see how Toyota recalls impact CapEx the next time around. Regardless, it’s a welcome development for a beleaguered Japanese economy battling deflationary pressures. The risk trade received some good news today in the form of strong Australian employment data and weaker than expected CPI data from China. Such developments would normally be positive for the USD/JPY, yet the currency pair seems to be held down by economic uncertainty in the EU. Speaking of which, investors should continue to monitor the Euro’s reaction the to the EU’s decision to assist Greece with its debt issues. Meanwhile, the U.S. released stronger than expected weekly Unemployment Claims, a positive development for the Dollar. The EU will release Germany’s Prelim GDP tomorrow followed by retail sales and consumer sentiment numbers from the U.S. Hence, the trading week could end on a volatile note. Yen traders will likely be paying close attention to U.S. retail sales numbers since they could give further insight in regards to the state of Japan’s manufacturing sector.
Technically speaking, the USD/JPY still has multiple uptrend lines serving as technical cushions along with intraday, 2/10 and 2/5 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with intraday, 1/28, and 1/29 highs. Furthermore, the psychological 90 area could continue to serve as a technical barrier.

Present Price: 89.70
Resistances: 89.88, 89.99, 89.99, 90.17, 90.32, 90.50
Supports: 89.72, 89.62., 89.50, 89.37, 89.23, 89.13, 89
Psychological: 90, February highs and lows


Gold Trades Off Session Highs Amid EU Uncertainty

Gold is coming off intraday highs as investors react to the lack of details in the EU’s commitment to help Greece. At first glance it seems the EU is prepared to help Greece once it shows some commitment to its austerity plans. The lack of details in the EU’s statement is a bit discouraging to investors who were hoping for a more active approach to aiding Greece. We’ve seen the Euro slide in reaction while the Dollar appreciates across the board. Hence, risk aversion is coming back with investors heading for the Dollar, a negative development for gold thus far considering its negative correlation with the Greenback. However, we’ll have to see how the session plays out as investors continue to digest the EU’s announcement. Investors also received weaker than expected weekly U.S. Unemployment Claims, a positive for the Dollar since the Fed may wait for unemployment to improve before considering tightening liquidity. During the Asia trading session Australia also released stronger than expected employment data while China’s CPI number printed cooler than anticipated. Both data points are normally a Dollar negative, yet news from the EU and U.S. seems to be winning the tug of war right now. The EU will release Germany’s Prelim GDP data tomorrow followed by U.S. retail sales and consumer sentiment data. Hence, investors should keep a close eye on the Dollar since the trading week could conclude on a volatile note.
Technically speaking, gold has multiple uptrend line serving as technical cushions along with intraday, 2/10 and 2/8 lows. As for the topside, gold faces multiple downtrend lines along with intraday and 1/28 highs. Furthermore, the psychological $1100/oz level could serve as a technical barrier should it be reached.

Present Price: $1078.15/oz
Resistances: $1078.28/oz, $1080.30/oz, $1084.11/ oz, $1086.87/oz, $1090.16/oz, $1093.95/oz
Supports: $1073.95/oz, $1070.77/oz, $1069.17/oz, $1065.63/oz, $1062.60/oz, $1059.56/oz
Psychological: $1050/oz, $1075/oz, $1100/oz, February highs and lows


AUD/USD Surges Following Impressive Employment Data

The Aussie surged during the Asia trading session after Australia’s Employment change number printed over 3 times stronger than analyst expectations and the headline Unemployment Rate sank to 5.5%. The encouraging improvement in Australian Unemployment sent the Aussie surging higher as investors speculated that the RBA will keep its monetary policy tight in the anticipation of higher consumption and consumer prices. Meanwhile, China’s CPI printed weaker than anticipated even though new loans surged. Hence, it seems China can leave its liquidity relatively loose since prices are under control, appositive development for Australia and anticipated demand for its commodities. However, the Aussie is trading off of intraday highs as the Dollar appreciates across the board in reaction to the EU Summit and a decline in U.S. weekly Unemployment Claims. The EU announced that it plans to help Greece deal with its troubling fiscal situation, yet provided few details. Investors are reacting negatively to the lack of clarity, sending the Euro tumbling lower. Additionally, an improvement in U.S. employment is a positive for the Dollar since the Fed has implied that it is waiting for a turnaround in unemployment before tightening liquidity. Meanwhile, volatility could pick up tomorrow with the release of Germany’s Prelim GDP followed by U.S. retail sales and consumer confidence data. Hence, investors should keep a sharp eye on broad-based activity in the Dollar and gold since Australia will be quiet on the data front tomorrow. That being said, the Aussie could maintain a positive bias considering today’s impressive employment data.
Technically speaking, we’ve readjusted our trend lines to compensate for today’s leg up. To the topside the Aussie faces multiple downtrend lines along with 2/3, 2/1, and 1/28 highs. Additionally, the psychological .89 and .90 levels could serve as technical barriers should they be tested. As for the downside, the Aussie has multiple uptrend lines serving as technical cushions along with 2/2 and 2/10 lows.

Price: .8851
Resistances: .8869, .8885, .8901, .8921, .8935, .8956
Supports: .8842, .8826, .8808, .8794, .8778, .8762
Psychological: .88, .89, February highs and lows.


S&P Futures Edge Lower as Investors React Negatively to EU Summit

The S&P futures are edging lower as investors digest the EU’s plan to deal with Greece’s troubling fiscal situation. Although the EU pledged to aid Greece, the lack of details and immediate commitment has unsettled FX markets, sending the Euro tumbling lower with the EUR/USD testing previous February lows. However, the other major Dollar pairs are holding up relatively well and the Euro’s large pullback has been isolated thus far. That being said, investors should continue to keep an eye on broad based movements in the Greenback as analysts and investors digest the EU’s decision. Meanwhile, the risk trade received some positive news during the Asia trading session. Australia’s employment data came in much stronger than anticipated, indicating the RBA may maintain a tight monetary policy. Furthermore, China’s CPI data printed cooler than anticipated, implying China could keep liquidity relatively loose since the policy hasn’t had a worrying impact on prices. Both developments are normally negative for the Dollar and consequently positive for U.S. equities due to their negative correlation with the Greenback. However, uncertainty in Europe is trumping data and sending the Dollar higher as investors head for safety, a negative for equities. As for the U.S., weekly Unemployment Claims registered an encouraging decline. The U.S. will also release retail sales and consumer confidence data tomorrow along with Germany’s Prelim GDP number. Hence, volatility could pick up as the trading week comes to a close. Investors should keep an eye on the Euro for the time being and monitor the EUR/USD’s ability to settle down from today’s hefty pullback. Furthermore, if the rest of the major Dollar pairs opt to follow the EUR/USD’s lead a broad based pop in the Dollar could drag U.S. equities lower.
Technically speaking, to the topside the S&P futures face multiple downtrend lines along with 2/9 and 1/29 highs. Furthermore, the psychological 1075 and 1100 levels could serve as technical barriers should they be tested. As for the downside, the S&P futures have intraday, 2/8, and 2/5lows serving as technical cushions along with the psychological 1050 area.

Price: 1061.75
Resistances: 1065, 1067.25, 1070, 1071.75, 1074.25
Supports: 1061.5, 1059.5, 1056, 1053, 1050.5
Psychological: February highs and lows, 1100, 1075, 1050






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