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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/17/10

 



Daily Market Commentary


EUR/USD Cools After Encouraging Rally

The EUR/USD is cooling off after posting solid gains yesterday amid a broad-based risk rally. Although there wasn’t much game changing news or data to reignite the risk trade, a long weekend allowed investors to calm their anxieties concerning Greece, leading to a large pop on oversold conditions. Today Greece announced a budget surplus surpassing expectations, an encouraging development and a sign that the government may be able to pull off its fiscal austerity measures. Yesterday’s rally in the EUR/USD sent the currency pair beyond our downtrend lines, a positive near-term development considering our 3rd tier runs through 2/11 and 2/3 highs. Hence, the EUR/USD could be sending a positive technical message regarding the near-term. Additionally, gold has surged beyond our downtrend lines running through 2/3 and 1/11 highs, emitting a similar bullish message as the EUR/USD in the process. The EU will be quiet on the data front until Thursday’s PMI data set. Meanwhile, investors will focus on today’s U.S. data set, including Building Permits, Housing Starts, Import Prices, Industrial Production, etc. Furthermore, the Fed will release its meeting minutes in the afternoon and investors will be looking to see if the Fed has become more hawkish regarding its outlook for the U.S. economy. It will be interesting to see whether the risk rally can sustain its upward momentum as data and news flows in throughout the remainder of the week.
Technically speaking, the EUR/USD faces topside technical barriers in the form of intraday, 2/10 and 2/9 highs. As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with 2/10 and 2/16 lows.

Present Price: 1.3724
Resistances: 1.3747, 1.3766, 1.3786, 1.3807, 1.3824, 1.3843
Supports: 1.3724, 1.3698, 1.3674, 1.3650, 1.3631, 1.3614
Psychological: February highs, 1.40, 1.35


GBP/USD Consolidates Following Risk Rally

The Cable is consolidating today following yesterday’s broad-based pullback in the Dollar as investors bit on oversold conditions and returned to the risk trade. The Cable dipped a bit today after the Claimant Count Change jumped and the Average Earnings Index slipped. However, despite today’s discouraging development regarding UK employment and potential consumption, the BoE’s meeting minutes showed that the central bank still plans to pause its QE measures in anticipation of an improving economy and inflation on the rise. The BoE’s hawkish stance countered today’s disappointing UK data and has kept the Cable within decent range of yesterday’s highs. Meanwhile, U.S. data has printed about in line with expectations today, leading to a reactionary preference for the Dollar. However, it will be interesting to see how the risk trade holds up today. The Pound and Euro were subject to intense selling pressure last week, meaning both currencies could continue to log solid gains over the near-term should investor uncertainty ease. On a positive note, gold surged beyond our downtrend lines and its psychological $1100/oz level while temporarily setting fresh February highs today. We recognize a similar breakout in the EUR/USD, meaning investors should continue to monitor these two investment vehicles to determine how the risk trade’s overall recovery is faring.
Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday highs. As for the downside, the Cable has multiple uptrend liens serving as technical cushions along with intraday, 2/16, and 2/12 lows.

Present Price: 1.5773
Resistances: 1.5783, 1.5803, 1.5815, 1.5843, 1.5867, 1.5886
Supports: 1.5760, 1.5747, 1.5715, 1.5700, 1.5681, 1.5662, 1.5640
Psychological: February highs and lows


USD/JPY Climbs Past 91

The USD/JPY has darted past the highly psychological 90 level and is currently trading above 91. The USD/JPY joined yesterday’s risk rally as investor uncertainty cooled amid solid econ data and reassurances from Greece that it will get its fiscal house in order. The USD/JPY is on the rise again today after U.S. data printed well, showing investors think the Fed may tighten before the BoJ. Speaking of which, the Fed will release its meeting minutes today and investors will look to see if the central bank continues to have a more positive outlook on the U.S. economy. Furthermore, the BoJ will make its monetary policy decision during tomorrow’s Asia trading session. Considering deflationary pressures persist in Japan, it wouldn’t be surprising to see the BoJ to maintain a loose policy stance. With the Fed becoming more hawkish and the BoJ remaining adamantly dovish, investors are opting to invest in the Dollar over the Yen. That being said, volatility could increase as the trading session progresses.
Technically speaking, the USD/JPY has multiple downtrend lines serving as technical barriers along with 2/3 and 1/21 highs. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday and 2/3 lows. Meanwhile, the highly psychological 90 level becomes a technical cushion should it be retested.

Present Price: 90.96
Resistances: 91.05, 91.11, 91.23, 91.34, 91.34, 91.44
Supports: 90.95, 90.87, 90.74, 90.66, 90.60, 90.50
Psychological: 90, February highs


Gold Fluctuates Following Breakout

Gold is hovering around the $1120/oz level after breaking through our multiple downtrend lines and clearing its highly psychological $1100/oz level. Separation from our downtrend lines was a key move since they run through 2/3 and 1/11 highs. Gold already pushed pashed the 2/3 highs earlier today before profit taking ensued. Meanwhile, there are no downtrend lines we can form at the moment, a positive development for gold and the risk trade. Gold benefitted from a risk rally yesterday as investors took advantage of oversold conditions following a 3 day weekend. EU uncertainty has cooled a bit after reassurances from Greece that it will follow its austerity pledges and reduce its debt load. Meanwhile, U.S. economic data has had a solid showing today, continuing the theme of U.S. economic stabilization in 2010. However, markets are still unsettled following last week’s intense selloff in the risk trade, so investors should continue to keep an eye on broad-based movements in the Dollar. On a positive note, the EUR/USD also broke out of our downtrend lines yesterday, an encouraging development for gold considering its negative correlation with the Dollar. Analysts and investors now turn their focus to the Fed’s meeting minutes due this afternoon. It will be interesting to see how the Dollar reacts should the Fed reiterate its more positive outlook on the U.S. economy.
Technically speaking, we’ve left our trend lines intact to give investors a picture of how notable today’s breakout is in gold. Meanwhile, we’ve shifted our uptrend lines which now serve as technical cushions. Gold faces topside technical barriers in the form of intraday and 1/19 highs. 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: $1121.40/oz
Resistances: $1123.67/oz, $1126.15/oz, $1128.62/ oz, $1131.85/oz, $1134.33/oz, $1136.06/oz
Supports: $1119.70/oz, $1117.72/oz, $1115.98/oz, $1114.49/oz, $1112.01/oz, $1110.03/oz
Psychological: $1100/oz, $1125/oz, February highs


AUD/USD Climbs Past .90

The AUD/USD is hovering around its psychological .90 level after participating in yesterday’s risk rally. A return to risk benefitted the Aussie in particular since the RBA stated that it will consider raising rates again should economic fundamentals continue to improve and investor uncertainty in the EU subsides. Meanwhile, attention returns to the U.S. with the release of the FOMC meeting minutes coming later today. Investors will be looking to see whether the Fed is more optimistic about the prospects for the U.S. economy and whether it still abides by its loose monetary policy for the foreseeable future. Australia will be relatively quiet on the news wire tomorrow besides the release of its NAB Quarterly Business Confidence. Therefore, attention should remain focused on the U.S. with PPI, Unemployment Claims, and the Philly Index being released tomorrow. Additionally, the BoJ will make its monetary policy decision during tomorrow’s Asia trading session. Hence, volatility should remain at a heightened state considering uncertainty remains in the Euro Zone. That being said, investors should monitor the Greenbacks ability to stabilize across the board considering the extent of last week’s surge.
Technically speaking, the Aussie has multiple uptrend lines serving as technical cushions along with intraday and 12/16 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: .9018
Resistances: .9027, .9039, .9058, .9074, .9090, .9102
Supports: .9010, .8998, .8980, .8961, .8945, .8933
Psychological: .90


S&P Futures Moves Higher after Solid U.S. Data Set

The S&P futures are climbing higher today after today’s U.S. data came in positively mixed. Building Permits, Housing Starts, and the Capacity Utilization Rate all printed about in line with estimates while Industrial Production and Import Prices were stronger than anticipated. The S&P is now retesting its highly psychological 1100 level after equities rallied yesterday in reaction to a broad-based decline in the Dollar. That being said, the Dollar is currently experiencing a large leg up despite the positive U.S. data. Though no stories are confirmed, there are rumors swirling around the FX markets that debt concerns in Italy may be flaring up. The EUR/USD and Cable have experienced another large selloff this morning and there should be some information surfacing soon confirming the reasons behind the selloff. It will be interesting to see whether the S&P futures react to today’s current upswing in the Dollar since the two vehicles are normally negatively correlated. Meanwhile, investors are awaiting the release of the Fed’s meeting minutes. Investors will be looking to see whether the Fed has become more optimistic in regards to its outlook for the U.S. economy and whether there are any further hints about a timeline for a QE exit. Meeting minutes have the potential to swing markets so investors should keep an eye out for volatility. The BoJ will make its monetary policy decision during tomorrow’s Asia trading session and it wouldn’t be surprising to see the central bank maintain its loose monetary policy for the foreseeable future. Deflationary pressures remain and the BoJ has consistently stated that it will fight deflation until price growth returns to a reasonable level. The U.S. will follow with PPI, weekly Unemployment Claims, and the Philly Index. Investors will likely pay particularly close attention to PPI to see whether loose liquidity has translated to rising prices. If PPI should print stronger than anticipated this could be favorable for the Dollar and a negative development for the S&P futures since investors may speculate that the Fed will need to tighten sooner than later. Meanwhile, weak PPI data could allow the Fed to maintain its loose monetary policy measures. Regardless, volatility should remain at a heightened level for the next 24 hours.
Technically speaking, the S&P futures have multiple downtrend lines serving as technical barriers along with 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: 1096.75
Resistances: 1099.75, 1101.5, 1103.5, 1106.75, 1109.75
Supports: 1095.25, 1092, 1090.5, 1088.5, 1086
Psychological: 1100







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.

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