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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 12/17/09


Daily Market Commentary

EUR/USD Drops Below 1.45 and our 1st Tier Uptrend Line

The EUR/USD has taken a blow today after the Fed implied that it may be comfortable with letting many of its alternative liquidity measures expire next year. The Fed’s more hawkish monetary stance resulted in a large Dollar pop today and the EUR/USD has dropped beneath our 1st tier uptrend line in the process. Our 1st tier is key since it runs through August lows. Hence, if the EUR/USD doesn’t shape up soon, we could witness more protracted near-term decline towards the 1.385-1.40 area. However, before we get ahead of ourselves, the EUR/USD does have the bottom end of its September trading range serving as a technical cushion right now. Furthermore, it seems the EUR/USD may be setting a new temporary bottom after U.S. Unemployment Claims printed 14k higher than analyst expectations. Although we don’t view the slight rise in Unemployment Claims as a large setback, the Dollar could come off of its highs nonetheless. Meanwhile, investors are awaiting the release of the Philly Fed Manufacturing Index later this morning. It will be interesting to see how the Philly turns out today since the Empire Index came in well below expectations earlier this week. A disappointing Philly Index may cement today’s bottom, whereas a strong data point could keep the EUR/USD anchored around intraday lows. The EU will get back into the action tomorrow the release of Germany’s CPI and Ifo Business Climate along with the EU’s Current Account. Should tomorrow’s EU data print positively tomorrow, this would match up with encouraging Flash PMIs at the beginning of the week, possibly yielding a relative strength in the Euro. Hence, investors may want to eye activity in the EUR/GBP.

Technically speaking, we’re leaving our uptrend lines as is to give investors an idea of the extent of the EUR/USD’s deterioration. As we mentioned previously, if the currency pair doesn’t pop back above our 1st tier uptrend line we could be witnessing a technically significant reversal since our 1st tier runs through August lows. Hence, the EUR/USD could be in the midst of a more protracted downturn. As for the topside, we’ve readjusted our downtrend lines to compensate for today’s sizable pullback. Additionally, the EUR/USD faces technical barriers in the form of the psychological 1.45 level and 12/16 highs. We’ll have to wait until the currency pair forms a new base before providing tighter technical gauges.

Present Price: 1.4369
Resistances: 1.4386, 1.4412, 1.4430, 1.4447, 1.4475, 1.4504
Supports: 1.4347, 1.4328, 1.4309, 1.4297, 1.4274, 1.4249, 1.4235
Psychological: 1.45, 1.40, 1.50, October Lows

GBP/USD Sets New December Lows

The Cable has taken another step down in the wake of a broad based Dollar rally. The Fed tightened its monetary policy stance a bit and hinted that it may allow some of its alternative liquidity programs expire next year should fundamental conditions continue to improve. Investors reacted to the Fed’s more hawkish monetary statement by snapping up the Dollar. However, the Greenback is weakening from intraday highs and appears to be setting a temporary bottom after U.S. Unemployment Claims printed 14k higher than analyst expectations. Regardless, we don’t see the rise in weekly unemployment claims as a major setback since its medium-term trend still has a negative slope. Meanwhile, investors are awaiting the Philly Fed Manufacturing Index. If the Philly Index prints higher than analyst expectations, the Cable may opt to anchor around intraday lows as investors remain bullish on the Dollar. As for the Cable, the currency pair is holding up relatively well despite UK Retail Sales coming in 8 basis points below analyst expectations. Therefore, it seems the Pound is still holding onto some of its positive momentum generated by yesterdays better than expected CCC figure.

Technically speaking, the failure of our 2nd tier uptrend line could signal a more protracted decline towards the 1.57 area since it runs through October lows. In the meantime, the Cable does have our 1st tier uptrend line to fall back on as a technical cushion along with the psychological 1.60 level. That being said, our 1st tier uptrend line does run through 3/18 lows. Hence, a failure of our 1st tier uptrend line may indicate more extensive losses over the medium-term. As for the topside, we’ve readjusted our multiple downtrend lines to compensate for today’s downturn. Additionally, the Cable faces technical barriers in the form of 12/11 and 12/16 highs.

Present Price: 1.6138
Resistances: 1.6145, 1.6171, 1.6196, 1.6221, 1.6252, 1.6286
Supports: 1.6108, 1.6079, 1.6051, 1.6033, 1.5999, 1.5972
Psychological: 1.60, 1.65, September and October lows

USD/JPY Sits at 90 Despite Dollar Rally

The USD/JPY is consolidating around its highly psychological 90 level despite a large pop in the Dollar today. Investors snapped up the Dollar after the Fed tightened its monetary policy stance a bit, indicating it may allow some of its alternative liquidity measures to expire next year. The USD/JPY is likely being neglected due to a combination of the weight of the psychological 90 level and the upcoming BoJ monetary policy decision during tomorrow’s Asia trading session. Yesterday’s tighter monetary policy stance from the Fed could be welcomed by the BoJ since the central bank has been under pressure from the DPJ due to deflationary activity in Japan’s economy. That being said, the BoJ may be comfortable keeping its monetary policy stance unchanged due to recent broad-based strength in the Dollar. Regardless, it will be interesting to see how the BoJ reacts to today’s action in the Greenback. If the central bank does decide to add onto its present alternative liquidity measures, this would likely deliver as shock on the USD/JPY and send the currency pair beyond December highs. On the other hand, if the BoJ keeps its monetary policy unchanged as anticipated the USD/JPY may stay locked in its December trading range barring further significant broad-based Dollar strength.

Technically speaking, the USD/JPY is battling with the highly psychological 90 area once again, a worthy topside foe. Furthermore, the USD/JPY faces multiple downtrend lines along with previous December highs. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with 12/14 and 12/09 lows.

Present Price: 90.06
Resistances: 89.78, 89.89, 90.01, 90.25, 90.39, 90.58
Supports: 89.35, 89.14, 88.99, 88.77, 88.60, 88.34
Psychological: 90, December Highs and Lows

Gold Drops with Broad-Based Dollar Strength

Gold is dropping beneath our 4th tier uptrend line right now, which is not shocking considering the broad-based Dollar rally taking place. Investors are snapping up the Dollar in reaction to a more hawkish monetary policy statement from the Fed. The central bank implied that it may be comfortable with allowing some of its alternative liquidity measures expire next year should economic fundamentals continue to improve. Both the EUR/USD and GBP/USD have been knocked beneath key uptrend lines while the AUD/USD drifts below its psychological .90 level. Hence, gold is exercising its negative correlation with the Greenback, sinking back toward previous September lows and the highly psychological $1100/oz level. That being said, gold’s intraday losses thus far aren’t as extreme as the downward movements in the EUR/USD. Hence, investors should continue to eye major Dollar pairs to determine whether we’re witnessing a temporary top in the Greenback considering the extent of today’s rise. If so, gold may opt to stab above its $1100/oz level. On the other hand, gold’s less severe reaction to the Fed’s decision may only mean that more extensive losses may be in the works over the near-term.

Technically speaking, gold still has multiple uptrend lines serving as technical cushions along with 12/11, 12/9, 11/13, and 11/10 lows. Furthermore, the psychological $1100/oz level could serve as a reliable technical support should it be tested. As for the topside, gold faces topside technical barriers in the form of 12/11,12/9, and 12/7 highs along with the psychological $1150/oz and $1175/oz levels.

Present Price: $1112.60oz
Resistances: $1115.27/oz, $1123.03/oz, $1128.34/oz, $1134.47/oz, $1141.42/oz, $1147.54/oz
Supports: $1110.77/oz, $1105.05/oz, $1100.15/oz, $1096.47/oz, $1088.30/oz, $1082.58/oz
Psychological: $1100/oz, $1150/oz, $1175/oz

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