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Comprehensive FX and Futures Daily Research

FastBrokers Research Team from FastBrokersFX at 11/06/09


Daily Market Commentary

EUR/USD Fluctuates Despite Negative U.S. Unemployment Data

The EUR/USD is fluctuating around our 1st tier downtrend and 4th tier uptrend lines as investors digest the worse than expected U.S. unemployment data. The headline Unemployment Rate breached 10% (10.2%) and the services unemployment change data also came in weaker than anticipated. While we would normally expect a sharp pullback in the EUR/USD and broad-based preference for the Dollar in reaction to the news, the currency pair is instead exerting quite a bit of strength. The S&P futures are also trading up off intra-day lows while the gold tests its highly psychological $1100/oz level. Since the present positive reaction to the news is counter-intuitive we will have to see how the session ends up before making a more accurate fundamental analysis. That being said, we believe volatility could increase as Friday wears on, so investors should remain alert.

EU economic data will start to pick up on Monday after a relatively quiet week. On Monday the Germany will report Industrial Production data followed by ZEW Economic Sentiment on Tuesday. Considering investors are still interpreting the mass of monetary policy decisions and economic data this week from around the globe, next week’s movements could give us a better idea of what direction the next trend is headed. Technically speaking, The EUR/USD still faces multiple downtrend lines along with October highs and the highly psychological 1.50 level. As for the downside, the EUR/USD also has multiple uptrend lines serving as technical cushions to go along with 11/05 and 10/27 lows. In other words, the EUR/USD’s near-term direction bias is still a toss-up, meaning investors should actively monitor the currency pair’s interaction with our technical levels for any telling movement in either direction.

Present Price: 1.4894
Resistances: 1.4895, 1.4909, 1.4926, 1.4947, 1.4966, 1.4983, 1.4994
Supports: 1.4872, 1.4856, 1.4840, 1.4822, 1.4804, 1.4781, 1.4769
Psychological: 1.50, 1.45

GBP/USD Consolidates as Investors Digest Disappointing Unemployment Data

As with the EUR/USD, the Cable is showing a slight positive reaction to the much worse than expected U.S. headline Unemployment Rate (10.2%). The Unemployment Rate breached the psychological 10% level we warned about, yet investors are opting to stick with the riskier investment vehicles. However, as we explained in our EUR/USD analysis, the initial counter-intuitive reaction for the Dollar doesn’t necessarily tell us how the rest of the session will pan out. Therefore, we are reserving our judgment until we see what investors decide to do with U.S. equities and the Dollar. While we would normally expect investors to ultimately head for safety and unwind their equity purchases in reaction to such negative news, this market has been known to throw quite a few curveballs in the past year. On a positive note, Britain’s Input PPI data printed hotter than expected (2.6% vs. 1.6%E). Such inflationary numbers may encourage the BoE to be more conservative in regards to QE in the near-future since we’re finally witnessing the inflation the central bank is looking for.

Technically speaking, the Cable is facing what could be the final downtrend line separating the currency pair from more accelerated near-term gains. Our 4th tier downtrend line runs through October highs, meaning these highs could be tested relatively soon if the Cable doesn’t buckle under the pressure of our 4th tier. That being said, there still is a possibility that the Cable can reverse into its downtrend. However, the Cable is sitting in a fairly advantageous position considering September highs are drawing near. There isn’t much resistance between September highs and August highs, meaning the Cable could potentially have a clear shot at 1.70 should the fundamentals cooperate. As for the downside, the Cable has multiple uptrend lines serving as technical cushions along with 11/5 and 11/3 lows. Additionally, the psychological 1.65 level may now work in the Cable’s favor.

Meanwhile, investors should keep an eye on gold this afternoon. The precious metal tested its psychological $1100/oz level a few moments ago. Further strength in gold could help buoy the Cable and possibly yield a positive performance since the two investment vehicles are normally positively correlated. Regardless, we believe volatility could increase as the week comes to a close, so investors should keep an eye on current techincals.

Present Price: 1.6585
Resistances: 1.6606, 1.6630, 1.6662, 1.6688, 1.6714, 1.6736, 1.6783
Supports: 1.6564,1.6529, 1.6495, 1.6467, 1.6426, 1.6396
Psychological: 1.65, October and September highs

USD/JPY Sinks Below 90 in Reaction to U.S. Unemployment Data

While the Cable and EUR/USD are holding strong, the USD/JPY is having the negative reaction one would expect from such negative U.S. unemployment data. Both the headline Unemployment Rate figure and Service Employment Change data points came in weaker than expected, with unemployment breaching the psychological 10% level (10.2%). As a result, investors are favoring the Yen over the Dollar as a safe haven, sending the USD/JPY below our previous 2nd tier uptrend line and the psychological 90 level. One will also notice a large pop in sell-side activity on the 1-hour, indicating bears are backing the move.

Today’s development is certainly a negative turn of events for the USD/JPY, and the currency pair’s bottom-end technicals may be tested in the near-future. That being said, technical supports do remain, including what is now our 2nd tier uptrend line along with our fresh 1st tier uptrend line and previous November lows. As for the topside, the USD/JPY still faces multiple downtrend lines and the psychological 90 level may begin serving as a technical barrier if the currency pair doesn’t pop back above soon.

Meanwhile, investors should keep a close eye on the S&P futures along with activity in the EUR/USD and GBP/USD throughout the remainder of the session. All three have held up surprisingly well considering today’s negative wave of unemployment data. However, if investors do opt to head for safety across the board as the session progress, the USD/JPY could experience further immediate-term downward pressure. On the other hand, continued strength in the USD/JPY’s correlations could help the currency pair finish the week within reasonable distance of its psychological 90 level.

Present Price: 89.89
Resistances: 89.91, 90.07, 90.21, 90.35, 90.47, 90.58, 973
Supports: 89.77, 89.61, 89.44, 89.30, 89.15, 88.97, 88.82
Psychological: 90, November Lows

Gold Steps Back after Peaking Past $1100/oz

Gold made a surprise retest of $1100/oz, temporarily peaking over the highly psychological level before retreating back towards $1090/oz. What made gold’s slight pop surprising is the fact that it came in reaction to much weaker than expected U.S. unemployment data. While one would expect a flight towards the Dollar and consequently a pullback in gold due to their negative correlation, the risk trades are holding strong thus far considering the circumstances. It seems investors were initially encouraged to pick up some gold after the unemployment rate headed past 10% (10.2%) in an effort to diversify their portfolios. However, it’s hard to expect the risk trade to hold up all afternoon in light of what has transpired. Therefore, gold may be hard pressed to accelerate past $1100/oz today unless we experience a sizable devaluation of the Dollar. Therefore, we will wait to see how the day transpires before providing a more in depth analysis.

Fortunately for bulls, we’re still at a loss of downtrend lines and historical perspective for gold. Therefore, the psychological $1100/oz level serves as our only trustworthy topside technical for the time being. Today’s direct about face from $1100/oz further supports the assumption that $1100/oz could serve as a reliable topside barrier for the near-term. As for the downside, we’ve readjusted our uptrend lines, giving us an idea of support. Gold has 11/05 and 11/04 lows serving as technical cushions along with our new 3rd tier uptrend line and the psychological $1075/oz level.

Present Price: $1092.55/oz
Resistances: $1095.12/oz, $1098.11/oz, $1100.97/oz
Supports: $1089.07/oz, $1086.43/oz, $1083.14/oz, $1079.93/oz, $1075.01/oz
Psychological: $1100/oz, $1075/oz.

The S&P Futures Wobble Following Disappointing Unemployment Data

The S&P futures are all over the place this morning after the headline Unemployment Rate breached the psychological 10% level (10.2%) along with weak Service Employment Change data. Today’s data certainly takes the wind out of yesterday’s rally and tells us that the Fed could in fact keep monetary policy in check for quite some time. This could be a reason why both the Cable and EUR/USD are holding strong despite such a negative fundamental occurrence, buoying the S&P as a result. In fact, the S&P futures have recovered from intraday lows and are holding strong above the psychological 1050 level. On the other hand, crude and the USD/JPY are reacting negatively as one would expect. Regardless, the overall reaction in the equities markets and the U.S. Dollar is counter-intuitive, telling us investors may still be digesting all of the news. Therefore, there’s a possibility of volatility increasing as the session progresses. As a result, investors should keep a sharp eye on the markets and look for any significant technical developments.

Technically speaking, our 2nd tier downtrend line continues to serve as a topside obstacle along with 10/26 and 10/21 highs. As for the downside, the S&P futures have a couple uptrend lines serving as technical cushions along with 11/5 and 11/3 lows. Furthermore, the 1050 level continues to serve as a psychological support. Overall, the S&P futures remain at a crossroads with our uptrend and downtrend lines gradually approaching their respective inflection points, indicating further volatility could be on the horizon.

Price: 1062.75
Resistances: 1067.25, 1073.75, 1079.5, 1083.5, 1089
Resistances: 1057, 1047.5, 1043.25, 1036, 1028.75
Psychological: 1050, 1075, 1000

Crude Drop Below $80/bbl in the Wake of Weak U.S. Data

Crude’s psychological $80/bbl level has finally given way as our 2nd tier downtrend line reaches an inflection point with what are now our 2nd and 3rd tier uptrend lines. Crude futures have even declined beneath our new 1st tier uptrend line, which runs through previous November lows. Therefore, November lows could be in jeopardy, meaning a retracement towards the psychological $75/bbl level may be in order. However, the EUR/USD, GBP/USD, and gold are holding up relatively well considering today’s negative data, buoying crude and helping prevent a more exacerbated pullback for the time being. That being said, any broad-based preference for the Dollar as the session progresses may be enough to knock crude towards $75/bbl. As for the topside, crude still faces our two downtrend lines while the psychological $80/bbl continues to serve as a tough topside barrier.

In terms of today’s econ data, both the U.S. headline Unemployment Rate and Services Employment Change data points printed worse than analyst expectations. The 10.2% Unemployment is particularly troublesome and it takes a bite out of crude’s expected aggregate demand. On the other hand, today’s weekly inventories came in shallow, meaning the supply side of the equation is helping mitigate some of today’s downward momentum. Meanwhile, investors should keep a close eye on U.S. equities and the Greenback as the week comes to a close. Volatility may increases later in the session as investors digest what has happened this week in regards to unemployment and central bank monetary policies.

Price: $77.46/bbl
Resistances: $78.14/bbl, $78.63/bbl, $79.28/bbl, $79.82/bbl, $80.43/bbl
Supports: $77.02/bbl,$76.63/bbl, $75.82/bbl, $75.31/bbl, $74.90/bbl
Psychological: $75/bbl, $80/bbl

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