Comprehensive FX and Futures Daily Commentary
FastBrokers Research Team from FastBrokersFX at 12/10/09
Daily Market Commentary
EUR/USD Consolidates Along With Risk Trade
The EUR/USD is continuing its balancing act along our 2nd tier uptrend line as bulls look to keep the currency pair above November lows. Investor confidence has improved a bit today after Australia’s employment data topped analyst expectations. Australia’s recovery has given investors renewed confidence in the risk trade, resulting weakness in both the Dollar and Yen. The EUR/USD has benefitted from today’s development, and is attempting to build a new base after the selling pressure inflicted so far this month. Meanwhile, the EU remains quiet on the data front, leaving the spotlight on tomorrow’s econ data releases from China and the U.S. China will print a set of key data during tomorrow’s Asia trading session, including Industrial Production and Trade Balance figures. Continual improvement in China’s economic performance could give a much needed boost to the risk trade, buoying the EUR/USD as a result. Afterwards, investors will be honing in on U.S. Retail Sales and UoM Consumer Sentiment data. Since U.S. employment data took a turn for the better last Friday, investors will be watching to see if the uptick in employment resulted in greater consumption. However, it will be interesting to see what impact tomorrow’s U.S. econ data has on the Dollar should it print positively. Last Friday the Greenback underwent a large wave of appreciation in reaction to the employment data as investors speculated that the Fed may raise rates sooner than expected. Therefore, investors should monitor the Dollar’s reaction to tomorrow’s data releases carefully.
Technically speaking, our 1st and 2nd tier uptrend lines may carry some weight since they run through September and August lows, respectfully. Hence, if the EUR/USD doesn’t move higher from its developing base the currency pair could be in for another wave of near-term selling pressure. That being said, the EUR/USD still does have our 1st and 2nd tier uptrend lines serving as technical cushions along with November lows. Should conditions deteriorate, the EUR/USD could find solid support in the form of its psychological 1.45 area and October lows. As for the topside, the EUR/USD is building near-term topside barriers as it weakens. The EUR/USD faces multiple downtrend lines along with 12/07 highs and the psychological 1.50 level. Therefore, it seems near-term topside technicals outweigh supports, meaning there remains a downward pressure on the EUR/USD. As a result, investors should monitor the behavior of gold and the S&P futures as investors await Friday’s wave of economic data.
Present Price: 1.4724
Resistances: 1.4738, 1.4759, 1.4780, 1.4812, 1.4841
Supports: 1.4724, 1.4701, 1.4682, 1.4669, 1.4650, 1.4640, 1.4628
Psychological: 1.45, 1.50, November Lows 
GBP/USD Consolidates Above our 2nd Tier Uptrend Line
The Cable is consolidating above our 2nd tier uptrend line after the BoE decided to keep its monetary policy unchanged as it monitors what impact the present QE package will have on overall economic performance. Meanwhile, bulls are trying to keep the Cable’s head above water as the EUR/USD and gold undergo similar consolidative patterns. Today’s bounce in the Cable hasn’t been too much to speak of thus far, indicating recent downward pressures are still intact. That being said, volatility could pick up in the next 24-48 hours as investors await key data releases from China and the U.S. China will print a set of data during the Asia trading session, including Industrial Production and Trade Balance figures. Continual outperformance by China’s economy could deliver a much needed boost to the risk trade and help the Cable regain its footing. Following China’s key data releases, Britain will print its PPI input data. Pricing is an important factor for the BoE when it is deciding upon its monetary policy. Hence, a pickup in PPI could encourage the BoE to keep its QE package as is in the future should prices recover. During the U.S. session, America will release Retail Sales and UoM Consumer Sentiment. Both data points can move markets should they surprise on either side, so investors should remain alert.
Technically speaking, the Cable has dipped below key November lows and is presently testing our 2nd tier uptrend line. Hence, a downward pressure remains on the Cable. That being said, the currency pair does have our 1st and 2nd tier uptrend lines serving as technical cushions along with the psychological 1.60 area should it be tested. As for the topside, the Cable faces multiple downtrend lines due to recent weakness. Additionally, the Cable has 12/07 and 12/04 highs serving as technical barriers along with the psychological 1.65 level.
Present Price: 1.6245
Resistances: 1.6246, 1.6260, 1.6284, 1.6325, 1.6346, 1.6371
Supports: 1.6211, 1.6186, 1.6163, 1.6133, 1.6113, 1.6098
Psychological: 1.60, 1.65
USD/JPY Stabilizes above 88
The USD/JPY is recovering rather well from yesterday’s lows as the currency pair benefits from an improvement in the risk trade. The USD/JPY is moving back towards Wednesday highs as investors await tomorrow’s key data releases from China and the U.S. China will print a set of key data during tomorrow’s Asia trading session, including Industrial Production and Trade Balance figures. Continual improvement in China’s economic performance could give a much needed boost to the risk trade. Yen investors will be paying particularly close attention to China’s data since it is Japan’s top trading partner. Afterwards, investors will be honing in on U.S. Retail Sales and UoM Consumer Sentiment data. Since U.S. employment data took a turn for the better last Friday, investors will be watching to see if the uptick in employment resulted in greater consumption. However, it will be interesting to see what impact tomorrow’s U.S. econ data has on the Dollar should it print positively. Last Friday the Greenback underwent a large wave of appreciation in reaction to the employment data as investors speculated that the Fed may raise rates sooner than expected. Therefore, investors should monitor the Dollar’s reaction to tomorrow’s data releases carefully.
Technically speaking, the USD/JPY is still trading well below its highly psychological 90 level despite last Friday’s pop above. Therefore, the currency pair still has its fair share of topside technicals to deal with before creating a more solid uptrend. That being said, longer-term downtrend forces remain. As for the downside, the USD/JPY is presently testing the patience of our 3rd and 4th tier uptrend lines along. However, the USD/JPY does have additional technical cushions waiting nearby in the form of 11/25 and 12/01 lows. Should conditions deteriorate further, the USD/JPY has our 1st and 2nd tier uptrend lines serving as supports along with November lows and the psychological 85 level.
Present Price: 88.33
Resistances: 88.33, 88.48, 88.67, 88.86, 89.12, 89.41
Supports: 88.07, 87.82, 87.66, 87.50, 87.32, 87.11
Psychological: 90, December Highs and Lows 
Crude Stabilizes above Psychological $70/bbl Level
Crude futures are recovery from yesterday’s pullback in reaction to higher than expected gasoline inventory levels. Investors brushed aside a drop in crude inventories and opted to send crude reeling towards the psychological $70/bbl level. Crude has since stabilized along $70/bbl and is looking to gain back some ground after experiencing a sharp pullback since the beginning of December. Crude futures are deriving their present strength from stability in the FX markets following a strong wave of Dollar appreciation. The Dollar is weakening across the board and the USD/JPY is heading higher, indicating investors are putting some money back into the risk play. However, it remains to be seen whether stability in the likes of the EUR/USD and GBP/USD will result in noteworthy gains, or if we are simply witnessing a condition of oversold markets in a downtrend. That being said, investors should keep an eye on the Dollar and monitor its ability to extend losses from present levels. Despite crude reacting to supply levels yesterday, the futures remain inextricably tied to the value of the Greenback since these investment vehicles are negatively correlated. Meanwhile, investors should also keep an eye out for China’s Industrial Production data release during tomorrow’s Asia trading session. Stronger than expected Industrial Production data could improve the outlook for crude’s aggregate demand, allowing the futures to add onto today’s strength. On the other hand, disappointing data from China could result in more broad-based risk-aversion, dragging crude back towards $70/bbl in the process.
Technically speaking, crude has multiple downtrend lines bearing down on price, meaning the futures have a negative inclination at this point in time. Crude futures also face topside technical barriers in the form of 12/8 and 11/26 highs along with the psychological $75/bbl level. As for the downside, we’ve installed a new uptrend line running through intraday lows. That being said, if our 1st tier uptrend line doesn’t hold, we could see a retracement towards September lows. The futures do have a few technical cushions separating present price from these September lows, including the psychological $70/bbl level along with October lows.
Price: $71.00/bbl
Resistances: $71.55/bbl, $72.04/bbl, $72.49/bbl, $72.89/bbl, $73.46/bbl, $73.82/bbl
Supports: $70.65/bbl, $70.32/bbl, $70.03/bbl, $69.66/bbl, $69.24/bbl, $68.74bbl
Psychological: $70/bbl, $75/bbl, October and September Lows
S&P Futures Climb Back Above 1100 Mark
The S&P futures are logging solid gains today and are trading back above the 1100 mark once again as negative psychological forces begin to wane. Although weekly Unemployment Claims printed 9k above analyst expectations, they are still well below the psychological 500k level. Additionally, the U.S. released data revealing that the Trade Balance has narrowed, printing $4 billion above analyst expectations. Today’s rise in the Trade Balance is a positive development for the U.S. economy since it shows America has not made an abrupt return to the consumption behavior that helped get the nation into this mess, notably a massive trade deficit funded by debt. Meanwhile, Australia released employment data which was much stronger than analyst expectations. Hence, the Australia’s impressive economic recovery continues, implying that its central bank may be comfortable with raising rates again at its next policy meeting should global fundamentals cooperate between now and then. Australia’s encouraging employment figures have contributed to the broad-based depreciation of the Dollar as investors return to the risk-trade. A weakening Dollar is adding onto positive U.S. econ data, helping lift the futures back above the 1100 threshold.
That being said, the EUR/USD, GBP/USD, and gold are still lodged in their new downtrends as investors await China’s econ data during tomorrow’s Asia trading session. Disappointing econ data from China could reverse today’s stabilization in the FX markets, weighing down on U.S. equities in the process. However, encouraging figures from China could give a little boost to the risk trade and allow investors to snap up riskier investment classes, dumping the Dollar and picking up U.S. equities. In all, investors should keep a sharp eye on the EUR/USD and GBP/USD since they are trading near some technical supports which could determine whether December’s selloff extends into Christmas. As for the S&P futures, today’s movement back above 1100 is a positive sign due to the technical significance to the level. Not only will investors be reaction to tonight’s Chinese econ data, but also tomorrow’s Retail Sales and UoM Consumer Sentiment Figures. The recent improvement in U.S. unemployment has encouraged investors that the worst may be behind us. Hence, positive consumption data could lead investors to believe that the overall economy may be turning a corner. However, what remains to be seen is how the Dollar would react to such news since the Greenback appreciated last Friday on the employment data because investors speculated that the Fed will tighten sooner than expected. Therefore, the remainder of the week could end up being a very interesting 24-48 hours.
Technically speaking, the S&P futures have multiple uptrend lines serving as technical cushions along 12/09 and 11/26 lows. Furthermore, the highly psychological 1100 level could continue to play a key role as it has for the past month. As for the topside, the S&P futures face technical barriers in the form of 12/07, 12/03, and previous 2009 highs.
Price: 1103.75
Resistances: 1104.75, 1107, 1110.25, 1115.5, 1107, 1119.25
Supports: 1100.25, 1098, 1095.25, 1093, 1088.25, 1085
Psychological: 1100, 1075, 2009 Highs and November Lows
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