Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/03/10

Daily Market Commentary


EUR/USD Jackknifes as Risk Comes and Goes

The EUR/USD staged a solid rally over the past 24 hours as investors returned to the risk trade with the lack of negative psychological forces. The EU later fed the rally by announcing it is backing Greece’s plan to get its fiscal house in order. However, it remains to be seen whether this is a sign of concrete support or a political move to give the Euro some psychological support. The risk trade has made a direct u-turn during the U.S. trading session after the headline U.S. ADP Non-Farm Employment Change number printed stronger than analyst expectations. In fact, the barometer almost registered jobs growth. On the downside, the ADP data revealed that announced layoffs increased significantly, taking a bit of the optimism out of the number. Either way, this data point has proven to be Dollar positive. Encouraging jobs data along with recent positive data releases has made the Dollar an ideal safe haven amidst global economic uncertainty. Furthermore, the fact that EU headline Retail Sales data printed 5 basis points below analyst expectations didn’t help matters either. Meanwhile, investors are awaiting America’s Services PMI data due shortly. An outperformance in Services data could give the Dollar another boost, whereas a negative could strengthen the EUR/USD from intraday lows. Activity should remain at a heightened state over the next 24 hours with the ECB and BoE making monetary policy decision on Thursday. It’s difficult to imagine the ECB will tighten liquidity considering the debt issues in Greece combined with recent underwhelming data. However, central bank statements usually move markets so investors should keep a sharp eye on behavior in the major Dollar crosses.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday, 1/29, and 1/28 highs. Furthermore, the psychological 1.40 level could serve as a technical barrier should it be retested. As for the downside, the EUR/USD has multiple 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: 1.3944
Resistances: 1.3974, 1.3999, 1.4026, 1.4056, 1.4101, 1.4136
Supports: 1.3931, 1.3906, 1.3878, 1.3857, 1.3833, 1.3806, 1.3782
Psychological: 1.40, January lows

GBP/USD Dives Following Negative Services PMI

The Cable has come crashing down from the perches of its Asia trading session rally. The risk trade rallied across the board after Australia’s trade Balance printed stronger than expected followed by an EU approval of Greece’s plan to reduce its outstanding fiscal debt. However, gains were soon washed away after Britain’s Services PMI data point came in below analyst expectations. UK data has been outperforming lately, making the pullback in services a shock for investors, and the Cable’s ensuing downturn reflected this mental state. Services comprise a large part of the UK’s GDP, so weakness in services trumps strength in manufacturing. The Cable’s intraday decline accelerated after U.S. ADP Non-Farm Employment Change data printed stronger than analysts anticipated. Strong U.S. employment numbers led investors to the Dollar as a safe haven due to the recent wave of positive U.S. economic data. Meanwhile, investors are awaiting U.S Services PMI data. An outperformance in U.S. services could paint a stark contrast between the U.S. and UK economies, enticing investors to favor the Dollar further. The BoE and ECB will make monetary policy decisions tomorrow, meaning the Pound could remain very active over the next 24-48 hours. Disregarding today’s services number, the recent wave of encouraging UK today may lead one to believe the BoE would tighten its monetary stance further. However, debt issues in Greece and tightening in China could lead the BoE to err on the cautious side this time around. Either way, the combination of events makes tomorrow’s BoE more interesting and a bit unpredictable.
Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with intraday and 2/2 lows. As for the topside, the Cable still faces multiple downtrend lines along with intraday and 1/29 highs. Furthermore, the psychological 1.60 area could serve as a technical barrier should it be retested.

Present Price: 1.5948
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 Rallies with Dollar

The USD/JPY is back on the rise as the Dollar appreciates across the board in reaction to a stronger than expected ADP Non-Farm Employment Change figure. The outperformance of recent U.S. economic data has led investors towards the Dollar amidst economic uncertainties taking root across the globe. The USD/JPY is benefitting in particularly since Japan’s recent economic data has left something to be desired. Additionally, recalls at Toyota combined with the BoJ’s vocal determination to fight deflation has resulted inventors snapping up the Dollar against the Yen in light of economic improvements in the U.S. Investors are currently awaiting U.S. Services PMI data due shortly. Considering our analysis above, a positive Services PMI number could send the USD/JPY beyond previous February highs. Meanwhile, both the BoE and ECB will make monetary policy decision tomorrow and the U.S. will release weekly Unemployment Claims data. Hence, volatility could remain at a heightened level across the FX market, the USD/JPY included.
Technically speaking, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday and previous February lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 2/1 and 1/19 highs. Meanwhile, the USD/JPY is fighting to create some topside separation between price and the psychological 90 level.

Present Price: 90.80
Resistances: 90.90, 91.07, 91.07, 91.24, 91.36, 91.47, 91.64
Supports: 90.69, 90.58, 90.46, 90.28, 90.12, 89.97
Psychological: 90, January highs and lows

Gold Fluctuates Wildly as Investors Digest Data

Gold has been all over the place today. The previous metal climbed higher during the Asia trading session as the risk rally continued in light of Australia’s encouraging Trade Balance data coupled with news the EU is accepting Greece’s plan to reduce its fiscal debt. However, gold reversed course and dove back to intraday lows after U.S. ADP Non-Farm Employment Change data printed stronger than analyst estimates. The positive headline ADP number sent investors back towards the Dollar in a hurry, registering large down bars in the EUR/USD and AUD/USD in the process. The Dollar’s rally resulted in an accompanying decline in gold due to correlative forces. Meanwhile, investors are awaiting U.S. Services PMI data due shortly. That being said, FX markets and gold could remain active throughout the remainder of the session. Speaking of volatility, the ECB and BoE will make monetary policy decisions during tomorrow’s trading session along with weekly U.S. Unemployment Claims. Hence, gold and the Dollar could remain active for the next 24-48 hours. Investors should monitor behavior in the major Dollar pairs closely for any new direction signals for this could be a telling sign for gold.
Technically speaking, gold’s earlier rally sent the precious metal beyond our 2nd tier downtrend line, a very positive development considering it runs through 2010 highs, or the $1160/oz area. However, gold has dipped back below our 2nd tier and remains under the influence of behavior in the Dollar. Hence, there are still downward forces at play. Gold now faces our 2nd and 3rd tier downtrend lines to the topside along with intraday highs. As for the downside, gold has multiple uptrend lines serving as technical cushions along with intraday and 2/2 lows.

Present Price: $1116.83/oz
Resistances: $1118.08/oz, $1121.04/ oz, $1124.86/oz, $1128.66/oz, $1132.02/oz, $1135.04/oz
Supports: $1113.71/oz, $1110.73/oz, $1107.33/oz, $1103.94/oz, $1100.55/oz
Psychological: $1100/oz, January highs and lows

AUD/USD Wobbles as Volatility Increases

It’s been another very active session for the AUD/USD again. After crash yesterday in reaction to the RBA’s decision to stand pat, the AUD/USD posted a sizable rally during the Asia trading session, almost reaching 2/1 highs. Money flowed into the Aussie after Australia’s Trade Balance deficit printed shallow of analyst expectations, implying that the RBA is being more cautious than negative economically by halting its rate hikes. However, the AUD/USD has reversed course again on heavy volume after U.S. ADP Non-Farm Employment Change data came in stronger than analyst expectations. The figure did come with a silver lining since the number of planned layoffs jumped. Regardless, the data led to a broad reversal in the risk trade, dragging the Aussie lower in wake of the RBA’s pause. Additionally, investors just received a U.S. Services PMI number below analyst expectations, further strengthening the Dollar as investors head for safety. Hence, it seems the Dollar is in a winning position at this point in time. Australia has more economic data on the way tomorrow, including Building Approvals and Retail Sales. Disappointing data could place further downwards pressure on the AUD/USD, whereas positive data could help buoy the currency pair. Investors will also digest monetary policy decisions from the BoE and ECB along with weekly U.S. Unemployment Claims. Hence, the FX markets could remain very active over the next 24-48 hours.
Technically speaking, the AUD/USD has our 1st and 2nd tier uptrend line serving as technical cushions along with intraday and 2/2 lows. As for the topside, the AUD/USD faces multiple downtrend lines along with 2/1 and intraday highs.

Price: .8863
Resistances: .8870, .8883, .8893, .8912, .8928, .8949
Supports: .8842, .8827, .8827, .8812, .8798, .8780
Psychological: .90, January highs and December lows

S&P Futures Head Lower as PMI Data Disappoints

The S&P futures rallied initially off of a stronger than expected headline ADP Non-Farm Employment Change figure. However, the ADP data carries a silver lining in that planned layoffs jumped. Hence, the ADP’s climb to a break-even point left a bitter after taste. The U.S. later released Services PMI data which printed shy of analyst expectations. Hence, today’s data set ended up negatively mixed. The UK also released a Services PMI number below estimates earlier today, resulting in a hefty selloff in the Cable. The Dollar is staging a broad-based rally in light of today’s economic data, a negative development for the S&P futures considering correlative forces. Meanwhile, Australia’s Trade Balance deficit printed a little lighter than expected, a welcome number considering the hit the Aussie took yesterday after the RBA decided to pause its rate hikes. The EU announced its support for Greece’s plan to reduce its blooming fiscal deficit. Although the EU’s approval relieves negative psychological pressure, for some reason we get the feeling this is not the last we’ll hear of Greece’s debt problems. Speaking of the EU, the ECB will announce its monetary policy decision tomorrow. It’s hard to believe the ECB will tighten considering the uncertainty surrounding Greece coupled with sluggish economic data as of late. However, the BoE’s meeting could be more interesting since, not including today’s Services PMI release, UK data has been outperforming expectations. Therefore, it will be interesting to see whether the BoE tightens its stance, especially considering the pullback in the Cable taking place. On the other hand, uncertainty in the EU and tightening from China could keep the BoE at bay. That being said, the markets have a wealth of news and data to digest, implying the next 24-48 hours could prove to be active. Meanwhile, investors should monitor the ability of the major Dollar pairs to recover from today’s pullback and avoid more technically significant declines.
Technically speaking, to the topside the S&P futures face multiple downtrend lines along with intraday, 1/27, and 1/21 highs. Furthermore, the highly psychological 1100 level could serve as a technical barrier should it be retested. As for the downside, the S&P futures have 2/1 and 1/31 lows serving as technical cushions along with November ’09 lows should they be tested.

Price: 1093.50
Resistances: 1097.5, 1099.5, 1101.25, 1102.75, 1106.5, 1110
Supports: 1092.75, 1090.75, 1088.75, 1086, 1082.5
Psychological: 1100, 1075, January highs and lows







Disclaimer: FastBrokers' market commentary is provided for information purposes only and under no circumstances should be regarded neither as investment advice or as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. All materials are property of Fast Trading services, LLC and unless otherwise indicated, any unauthorized reproduction is prohibited.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.