Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/16/10

Daily Market Commentary


EUR/USD Fluctuates with Finance Ministers Choosing to Wait and See

The EUR/USD is fluctuating above Monday lows as investors digest the EU’s plan to take a wait and see approach with Greece. The finance ministers have decided to give Greece a 30-day window to prove it can implement its plan to reduce its outstanding debt. If Greece’s actions prove insufficient, the ministers hinted they may apply further debt-reduction measures. In all, the EU is choosing to give Greece a chance while allowing financial markets to settle. However, should the situation go awry volatility could return quickly. Therefore, the EU is leaving itself a bit exposed by choosing a more passive approach to dealing with the situation. On the other hand, should Greek bond yields calm in the next 30-days and the EU approve of the government’s austerity actions this could provide a boost of confidence to the Euro. In addition to today’s news concerning Greece, EU economic sentiment data printed mixed. Although Germany’s economic sentiment number came in stronger than anticipated, the headline EU figure disappointed. Hence, although confidence concerning Germany’s economy is holding strong, debt concerns in Greece, Portugal and Spain are clearly weighing on the EU region. Meanwhile, investors are awaiting the Empire Manufacturing Index and TIC Long-Term Purchases data from the U.S. It will be interesting to see whether the EUR/USD can continue to consolidate and even build some upward momentum considering the FX market volatility as of late. On a positive note, the EUR/USD is within striking range of our 3rd tier downtrend line which runs through February highs, or the 1.40 area. Hence, a large positive shift in investor sentiment has the capability of yielding some strong near-term gains in the EUR/USD. However, debt concerns continue to weigh on the Euro for the time being/
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday, 2/8 and 2/11 highs. As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with 2/15 and 2/12 lows and the psychological 1.35 level should it be tested.

Present Price: 1.3650
Resistances: 1.3664, 1.3693, 1.3721, 1.3747, 1.3766, 1.3799
Supports: 1.3639, 1.3617, 1.3592, 1.3577, 1.3550, 1.3526
Psychological: February highs and lows, 1.35

GBP/USD Weakens Following UK CPI Data

Although UK CPI surged this month, both the headline and core printed one basis point below analyst expectations. Furthermore, King played down the significance of the rise in consumer prices once again as a temporary flare. Additionally, King reiterated the BoE’s ability to reinstate QE measures should inflation drop back below 2%. Hence, Mervyn King is batting away any excitement which could be generated from the rise in UK consumer prices. In fact, King’s steadfast denial of excessive inflation is a bit disconcerting for the Pound since the BoE could be inclined to keep its monetary policy loose for a while should the recent upward pressure on prices prove temporary. Elsewhere in Europe finance ministers announced they are giving Greece 30 days to prove it can commit to its austerity plans. Hence, the EU has effectively punted and may want to give the markets another month to settle before deciding whether to take more action. Meanwhile, investors are awaiting the U.S. Empire Index and TIC Long-Term Purchases data. It will be interesting to see how the data impacts the Dollar, particularly if it prints positively. Negative U.S. data could lead investors to favor the Pound over the Dollar, although it may also send investors towards the Dollar for safety. Hence, behavior of the Greenback is still a bit unpredictable as investors weigh economic uncertainty in the EU and tightening in China. The UK will release Claimant Count Change data tomorrow along with the BoE’s monetary policy minutes. The CCC number gives the Cable an opportunity to build some upward momentum should the data impress. However, weak employment data could weigh on the Cable as investors question the ability of inflation to hold above the BoE’s 2% target.
Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/10 highs. As for the downside, the Cable has multiple uptrend liens serving as technical cushions along with 2/11 and 2/8 lows. Furthermore, the psychological 1.55 level could serve as a sturdy technical cushion should it be tested.

Present Price: 1.5665
Resistances: 1.5700, 1.5717, 1.5731, 1.5747, 1.5763, 1.5783
Supports: 1.5662, 1.5640, 1.5621, 1.5609, 1.5583, 1.5557, 1.5533
Psychological: 1.55

USD/JPY Hovers Around 90

The USD/JPY continues to hover around its psychological 90 level while showing a muted reaction to yesterday’s GDP data. Although Japan’s GDP surpassed expectations by a basis point, the previous release was revised downward by 1.2%. More importantly, the GDP Deflator came in at a staggering -3%. Hence, deflationary pressures continue to wear on Japan’s economy and the decline in prices is likely on the minds of BoJ officials considering they have declared their intent to fight deflation. Therefore, it will be interesting to see how Japan’s monetary policy decision pans out during Thursday’s Asia trading session. Meanwhile, investors are awaiting more U.S. economic data, including the Empire Index and TIC Long-Term Purchases. Furthermore, investor uncertainty remains regarding the debt issues in the EU along with monetary tightening in China. Investors are expecting Japan’s Tertiary Industry Activity to remain at -.2% tomorrow. For the time being, it seems the USD/JPY is content with hovering around 90 until either the BoJ becomes more active or there is a shift in overall investor sentiment regarding the Dollar. That being said, the USD/JPY has built a little upward momentum since bottoming in February by setting higher lows since 2/4.
Technically speaking, the USD/JPY has multiple downtrend lines serving as technical barriers along with 2/12 and 1/28 highs. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday, 2/11, and 2/10 lows. Meanwhile, the highly psychological 90 area could continue to play a key role.

Present Price: 89.90
Resistances: 89.99, 90.07, 90.20, 90.32, 90.42, 90.55
Supports: 89.86, 89.72, 89.62., 89.50, 89.37, 89.31
Psychological: 90, February highs and lows

Gold Darts Past $1100/oz

Gold has darted beyond its highly psychological $1100/oz level and our 3rd tier downtrend line despite limited volume. Meanwhile, the risk trade continues to stabilize with the Dollar weakening slightly across the board. However, conditions remain uncertain considering the amount of volatility in the market place last week. Therefore, investors should keep a close eye on the Greenback and monitor investor confidence in the Euro and Pound. Gold’s breakout beyond our 3rd tier downtrend line was a bullish move since it runs through previous February highs. On the other hand, gold’s breakout has yet to be fully reflected in the risk trade. Therefore, gold could be sending a buy signal as far as the Euro and Pound are concerned. Although currencies have yielded only a muted reaction to today’s data and news thus far, activity could pick up tomorrow with the UK releasing its Claimant Count Change data along with the BoE’s meeting minutes from its prior meeting. Furthermore, the U.S. will release a host of data and news, highlighted by Building Permits and the Fed’s meeting minutes. The meeting minutes from central banks have the greatest potential to impact gold and the Dollar tomorrow. Therefore, investors should monitor the Greenback’s reaction to the upcoming statements from central bankers.
Technically speaking, we’ve left our trend lines intact to give investors a picture of how notable today’s breakout is in gold. Meanwhile, there are several potential uptrend lines considering the extent of gold’s climb since setting February lows. Gold faces topside technical barriers in the form of 2/3 highs and the psychological $1125/oz level should it be tested. As for the downside, gold has intraday and 2/3 lows serving as technical supports along with the highly psychological $1100/oz level.

Present Price: $1116.25/oz
Resistances: $1116.74/oz, $1118.27/oz, $1120.66/ oz, $1123.67/oz, $1126.15/oz, $1128.62/oz
Supports: $1114.49/oz, $1112.51/oz, $1110.19/oz, $1008.44/oz, $1106.45/oz, $1105.07/oz
Psychological: $1100/oz, $1125/oz, February highs

AUD/USD Runs Higher After RBA Meeting Minutes

The AUD/USD has logged sizable gains today after the RBA’s minutes showed that although it paused its rate hikes, the central bank will consider raising rates again should economic fundamentals continue to improve. Therefore, investors should keep a look out for Australian employment and consumption data when it comes. The RBA’s minutes also revealed that the central bank decided to pause due to economic uncertainty in Europe and tightening in China. That being said, if European markets calm and investor uncertainty subsides the Aussie could benefit from anticipation of an RBA rate hike next meeting. EU and UK data printed mixed today while U.S. numbers came in positive. We notice the risk trade is stabilizing across the board and gold has darted beyond its highly psychological $1100/oz level. Investors should monitor activity in gold since today’s movement could signal lasting upward momentum in the precious metal, a positive development for the Aussie considering gold’s negative correlation with the Dollar. However, the Aussie does face some near-term technical barriers, most notably the psychological .90 level. Although Australia will be quiet on the data front tomorrow, investors will receive meeting minutes from both the BoE and Fed along with UK employment data and a host of U.S. data, highlighted by U.S. Building Permits.
Technically speaking, the Aussie has multiple uptrend line serving as technical cushions along with intraday, 12/11, and 12/12 lows. As for the topside, the Aussie has multiple downtrend line serving as technical barriers along with the highly psychological .90 level. Furthermore, 1/28 and 1/25 highs could serve as technical obstacles should they be reached.

Price: .8981
Resistances: .8987, .9006, .9018, .9039, .9058, .9074
Supports: .8966, .8949, .8928, .8917, .8905, .8886
Psychological: .89

S&P Futures Slightly Positive Following Encouraging Empire Index

The S&P futures are slightly positive this morning as investors digest the news and data hitting the wire. Although the EU finance ministers didn’t announce measures of rescuing Greece, they did set timetable for Greece to institute its austerity measures. Therefore, although the EU is approaching the situation seriously, the finance ministers are opting to give Greece a chance to get its fiscal house in order. Meanwhile, the EU is able to kick the can down the road for another 30-60 days in the hope that financial markets can stabilize as Greece gets its act together. Today’s EU and UK data printed mixed the BoE Governor King reiterated that the rise in UK inflation is only temporary and the central bank is standing by to implement further QE measures should economic fundamentals deteriorate. Regardless, the risk trade is stabilizing and gold has broken out beyond our 3rd tier downtrend line and its highly psychological $1100/oz level. Therefore, investors are wading back into risk, a positive development for the S&P futures over the near-term. Although the U.S. Empire Index came in well above analyst expectations, investors are being cautious following news that China was a net seller of U.S. Treasuries during December. Additionally, Capital One announced its credit card defaults are rising, a sign that U.S. consumption is still in a tough spot. With a bit of negative news out of the U.S. investors are less encouraged to favor the Dollar, a positive development for the risk trade and U.S. equities. However, the S&P futures do face challenging technical obstacles, most notably the highly psychological 1100 level.
Technically speaking, the S&P futures have multiple downtrend lines serving as technical barriers along with 1/29 and 2/2 highs. Speaking of which, our 1st tier downtrend line runs through 2/2 highs. Since our 1st tier is drifting into the distance this could be a positive sign for the S&P futures, implying a possible retest of the highly psychological 1100 level. As for the downside, the S&P futures have technical support in the form of 2/15, 1/29, and 2/12 lows.

Price: 1081
Resistances: 1083.75, 1085.25, 1087.75, 1090.5, 1093
Supports: 1080.75, 1077.75, 1074.5, 1072, 1067
Psychological: 1100, February lows








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