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Comprehensive FX and Futures Daily Commentary

FastBrokers Research Team from FastBrokersFX at 02/09/10

 



Daily Market Commentary


EUR/USD Climbs in Speculation EU to Take Action

The risk trade ran with speculation that the EU plans to take action in regards to Greece’s troublesome fiscal situation. Trichet cut a trip to Australia short to return for an EU meeting this week, igniting speculation that the EU will be proactive in sorting out Greece’s troubles. However, such a deduction seems highly speculative and investors may not want to read too far into Trichet’s actions at this point in time. That being said, it appears the risk trade was looking for any excuse to bounce considering the extent of last week’s decline. Hence, the EUR/USD is still lodged in its downtrend and may need more concrete fundamental and/or psychological evidence to turn a corner. The data wire will begin to pick up during tomorrow’s Asia trading session with Australia releasing Home Loans data followed by New Loans and Trade Balance data from China. Additionally, the EU will release French Industrial Production and the U.S. will print its own Trade Balance numbers. Furthermore, the UK will publish its highly anticipated BoE Inflation Report accompanied by a public address from Mervyn King. Therefore, the FX markets have more than enough news and data to digest tomorrow and determine whether to take the present risk rally a step higher.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday and 2/4 highs. As for the downside, we’ve created a few new uptrend lines to serve as technical cushions along the psychological 1.35 level and previous February lows.

Present Price: 1.3732
Resistances: 1.3744, 1.3773, 1.3806, 1.3831, 1.3861, 1.3895
Supports: 1.3721, 1.3693, 1.3664, 1.3640, 1.3610, 1.3658
Psychological: February highs and lows, 1.35


GBP/USD Rises Amid Hopes for Greece

Speculation is rampant once again, this time in favor of the risk trade as investors wonder whether Trichet’s early exit from a meeting in Australia to return to the EU implies the union has a solution for Greece’s troubling fiscal situation. However, it seems such speculation may be a bit preemptive and the risk trade could need more concrete fundamental and/or psychological improvements to establish a sustainable turnaround. Meanwhile, we still recognize a considerable downward pressure on the Cable considering the extent of last week’s downturn. Regardless, the bounce in the risk trade is a welcome development for the risk bulls. The Pound is exhibiting a relative weakness today, highlighted by another pop in the EUR/GBP. The UK’s trade deficit widened, registering the largest deficit since March 2009. A weak Trade Balance reading seems to be weighing on the Pound along with overall concern of exposure to Greece’s debt. Although the data wire for the remainder of the trading session is relatively quiet, activity will pick up during tomorrow’s Asia trading session with the release of Australia’s Home Loans data along with New Loans and Trade Balance numbers from China. Furthermore, the UK will print Manufacturing Production during the European trading session along with the much anticipated BoE Inflation report accompanied by a public address from Governor King. Inflation plays an important role in regards to the BoE setting monetary policy. Hence, if prices continue to rise, then investors may deduct that the BoE will be hesitant in tightening liquidity too quickly, especially considering present uncertainty in the EU. Hence, tomorrow could prove to be a busy session for the Pound.
Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday and 2/5 highs. We’ve created some new uptrend lines, albeit tight ones, to serve as technical cushions along with the psychological 1.55 area.

Present Price: 1.5636
Resistances: 1.5639, 1.5673, 1.5690, 1.5717, 1.5758, 1.5775
Supports: 1.5572, 1.5558, 1.5533, 1.5502, 1.5470, 1.5444
Psychological: 1.55


USD/JPY Floats Below 90

The USD/JPY is fluctuating below the highly psychological 90 level as FX markets cool down in the wake of last week’s heavy volatility. Although the USD/JPY was holding up relatively well, the currency pair finally gave in to downward forces as investors exited the risk trade in a flurry. Debt scares in Greece and Portugal combined with mixed global economic data sent bulls to the exits with the Cable and EUR/USD registering hefty pullbacks. The USD/JPY was performing relatively well for a while since the BoJ’s dedication to fight deflation managed to counter the flight to the Dollar. Furthermore, recalls from Toyota has placed a downward pressure on Japanese equites, a negative development for the Yen. However, the USD/JPY slid late Thursday as the decline in the risk trade accelerated and the USD/JPY is currently attempting to stabilize. The data wire will be relatively quiet until China’s New Loans and Trade Balance data tomorrow morning. Japan will also release Core Machinery Orders data during Wednesday’s Asia trading session, giving investors an idea of how industrial production is faring. Meanwhile, investors should keep an eye on the news wire for further developments in the EU regarding Greece’s fiscal woes.
Technically speaking, the USD/JPY still has multiple uptrend lines serving as technical cushions along with 1/27, 2/5 and 2/4 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 2/5 highs and the highly psychological 90 area.

Present Price: 89.45
Resistances: 89.64, 89.72, 89.88, 89.99, 90.17, 90.32
Supports: 89.37, 89.13., 89.00, 88.89, 88.78, 88.63
Psychological: 90, February highs and lows


Gold Edges Higher with Risk Trade

Gold is moving higher today as the risk trade strengthens across the board. The EUR/USD, GBP/USD, and AUD/USD have all logged solid gains thus far today as investors speculate that the EU will be proactive in dealing with Greece’s fiscal situation. However, speculation is rampant in all directions, making today’s pop in the risk trade a bit circumspect. While the data wire will remain relatively quiet today, news will begin to pick up during tomorrow’s Asia trading session with the release of Australia’s Home Sales data followed by New Loans and Trade Balance numbers from China. Additionally, the BoE will release its Inflation Report accompanied by a public address from Governor King, not to mention UK Manufacturing Production data. Hence, volatility could pick up again as tomorrow’s trading session progresses. Investors should keep a sharp eye on the major Dollar pairs to gauge whether the risk trade is truly undergoing a recovery or whether we are merely witnessing a bounce in the road south. That being said, there’s little reason to believe gold will deviate from its negative correlation with the Dollar. Therefore, all eyes will likely be on activity the Greenback.
Technically speaking, we’ve formed some new uptrend lines which run through levels set last week. Additionally, 2/5 lows and the psychological $1050/oz level could serve as technical cushions. As for the topside, gold faces multiple downtrend lines along with the psychological $1075/oz and $1100/oz levels.

Present Price: $1071.75/oz
Resistances: $1073.95/oz, $1076.61/ oz, $1078.79/oz, $1082.19/oz, $1084.11/oz, $1087.31/oz
Supports: $1070.77/oz, $1067.61/oz, $1065.90/oz, $1062.26/oz, $1058,74/oz
Psychological: $1050/oz, $1075/oz, $1100/oz, February highs and lows


AUD/USD Climbs with Risk Trade

The Cable experienced a solid pop today as the Dollar weakened across the board in speculation that the ECB will be proactive in addressing Greece’s troubling fiscal situation. Trichet left a central banking meeting in Australia early to head back to the EU, igniting suspicion that the union has a plan for how to deal with Greece. Trichet’s agenda adjustment supplied investors with a perfect excuse to send the risk trade higher considering the extent of last week’s pullback. Meanwhile, the data wire will remain relatively quiet throughout the remainder of today’s trading session. However, activity should begin to pick up tomorrow beginning with the release of Australia’s Home Sales data during the Asia trading session. The RBA’s decision to halt its rate hikes along with weak Retail Sales data spooked investors. Hence, strong Home Sales data could move the AUD/USD higher by increasing speculation that the RBA will have a tighter monetary stance next time around. However, weak economic data could add to the AUD/USD’s current downward pressure. In addition to data from Australia China will release New Loans and Trade Balance numbers. Investors will hone in on the Trade Balance data, particularly imports in regards to the Aussie since strong import data could prove to be a Aussie positive. Furthermore, the BoE will release its Inflation Report along with U.S. Trade Balance data. Hence, tomorrow could prove to be an active session in the FX market.
Technically speaking, the AUD/USD has multiple downtrend lines serving as technical barriers along with intraday and 2/4 highs. As for the downside, the AUD/USD has multiple uptrend lines serving as technical cushions along with intraday and 2/5 lows. Furthermore, the psychological .85 area could serve as a technical cushion should it be tested.

Price: .8730
Resistances: .8749, .8763, .8780, .8793, .8814, .8843
Supports: .8729, .8711, .8689, .8665, .8644, .8627
Psychological: .85, February highs and lows.



S&P Futures Pop As Dollar Drops

The S&P futures have recovered yesterday’s losses as the Dollar dips across the board. Investors bought up the risk trade after Trichet decided to head back from a meeting in Australia early. Trichet’s agenda adjustment has led to speculation that the EU is formulating a plan to rescue Greece from its troubling fiscal situation. However, such a deduction may be premature since markets lack concrete information. Hence, it seems the risk trade was looking for any reason to recover some lost ground from last week’s hefty downturn. That being said, although the EUR/USD and AUD/USD have popped, there remains an overbearing downward force on the risk trade. The markets will likely need more substantial fundamental and/or psychological developments to solidify a recovery. Although the data wire will remain quiet for the remainder of the day, activity could begin to heat up during tomorrow’s Asia trading session. Australia will release Home Sales data along with New Loans and Trade Balance numbers from China. Positive growth in these data points could yield a solid pop in the risk trade as investors regain confidence in the risk trade, and vice versa. In addition to data from Australia and China, the BoE will release Manufacturing Production and the BoE’s inflation letter during tomorrow’s EU trading session. Particularly close attention will be paid to pricing data and Governor King’s reaction since the BoE places considerable weight on inflation when determining its monetary policy. Furthermore, the U.S. will release its own Trade Balance data followed by a testimony from Ben Bernanke. In all, tomorrow’s trading session as more than enough events to move markets, meaning investors should keep a sharp eye on activity in the Dollar. Should the Greenback take another step higher this could apply downward pressure on U.S. equities.
Technically speaking, to the topside the S&P futures face multiple downtrend lines along with the psychological 1075 and 1100 levels. As for the downside, the S&P futures have 2/5 and 2/4 lows serving as technical cushions along with the psychological 1050 area.

Price: 1068.75
Resistances: 1069.25, 1071.75, 1073.5, 1077, 1079.5
Supports: 1066.75, 1063.25, 1061.5, 1059.5, 1057
Psychological: February highs and lows, 1100, 1075, 1050








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