Comprehensive FX and Futures Daily Commentary
FastBrokers Research Team from FastBrokersFX at 12/11/09
Daily Market Commentary
EUR/USD Drops on Positive U.S. Data
The EUR/USD is experiencing a solid down bar right now as we witness a broad-based strengthening of the Dollar in reaction to this morning’s positive U.S. econ data. Since the EU has been quiet on the data front, focus shifted to China and the U.S. While the EUR/USD exhibited a slightly positive reaction to positively mixed data from China, the currency pair is logging sizable declines after the release of better than expected Retail Sales data from America. This is similar behavior to last Friday’s pop in the Dollar after encouraging U.S. employment data. Therefore, one may deduct that investors are speculating that recoveries in U.S. employment and consumption will yield a tighter monetary policy from the Fed to counter inflationary pressures. In fact, Import Prices jumped from 0.8% to 1.7% vs. 1.2% expected. Investors are currently awaiting Prelim UoM data, so it will be interesting to see if today’s Dollar rally extends should consumer sentiment top expectations as well. Meanwhile, investors should monitor gold and the S&P futures due to their negative correlation with the Dollar. If gold and equities log larger declines, this could add more downward pressure on the EUR/USD. EU econ data will pick up on Monday after a relatively quiet week with the release of Industrial Production followed by Germany’s ZEW Economic Sentiment figure on Tuesday. For the time being, the EUR/USD will likely continue its correlation with broad-based activity in the Dollar.
Technically speaking, the EUR/USD has declined below our previous 2nd tier uptrend line and is testing our previous 1st tier right now. These uptrend lines may carry some weight since they run through September and August lows, respectfully. If our previous 1st tier doesn’t hold, then the EUR/USD has additional technical supports in the form of 11/3 lows, our new 1st tier uptrend line, and the psychological 1.45 area. However, it seems the EUR/USD is testing the patience of its uptrend since our new 1st tier runs through 8/17 lows, meaning if it doesn’t hold we could eventually witness a more protracted decline towards 1.40. However, before we get ahead of ourselves we’ll have to wait and see how the EUR/USD interacts with present technical cushions. As for the topside, the EUR/USD still faces multiple downtrend lines along with 12/9 and 12/8 highs.
Present Price: 1.4661
Resistances: 1.4672, 1.4690, 1.4707, 1.4724, 1.4738, 1.4759, 1.4780
Supports: 1.4650, 1.4640, 1.4628, 1.4611, 1.4591, 1.4565
Psychological: 1.45, 1.40, 1.50, November Lows 
GBP/USD Declines as Dollar Strengthens with Positive Data
The Cable is declining with a broad-based rally in the Dollar coupled with a decline in gold as investors react to better than expected U.S. consumption data. As with last Friday, better than expected data is appreciating the Dollar rather than the Greenback exhibiting the negative correlation we’ve witnessed since the economic crisis began. The encouraging developments in U.S. employment and consumption investors have received over the past week seem to be stirring speculation that the Fed may opt to raise rates earlier than anticipated to counter inflationary pressures. In fact, today’s positive consumption data coupled with stronger than expected Import Prices may be spooking Dollar bears a bit. Speaking of prices, Britain reported softer than expected PPI data earlier today. Despite the decline in Britain’s PPI the Pound is exhibited a relative strength today, as highlighted by weakness in the EUR/GBP. Meanwhile, Sterling investors are awaiting Tuesday’s CPI and RPI releases. If Britain’s CPI and RPI also print below expectations, the Pound’s relative strength may fade since investors could speculate that the BoE will be less eager to tighten its aggressive liquidity measures. For the time being, investors should monitor behavior in the EUR/USD and gold to determine whether the Dollar will continue gaining ground amidst an apparent turn in correlation. If key supports in the EUR/USD and gold give way, the Cable could follow suit.
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 12/9 and 9/1 lows and 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: 1.6217
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 Surges with Broad-Based Dollar Strength
The USD/JPY is logging sizable gains today as we witness a broad-based rally in the Dollar in reaction to positive U.S. consumption data. U.S. Retail Sales and Prelim UoM Consumer Confidence data points all printed much hotter than expected, indicating that the improvement in U.S. employment has shown up in consumption. Today’s rally in the Dollar in reaction to positive econ data is similar to the rally we witnessed last Friday after the encouraging developments from U.S. employment data. Hence, it seems investors are beginning to speculate that the Fed may raise interest rates sooner than anticipated should employment and consumption data continue to print hotter than expected. In addition to positive U.S. econ data, China also reported a better than expected Industrial Production number. Hence, it appears China’s economy is continuing to recover, benefitting Japan’s economy since the two are key trading partners. The combination of positive U.S. and Chinese data are yielding a relative weakness in the Yen, as highlighted by positive performances in the EUR/JPY and AUD/JPY. Meanwhile, investors will be looking forward to TMI data during Monday’s Asia trading session.
Technically speaking, the USD/JPY is re-approaching its highly psychological 90 trading zone. Hence, it will be interesting to see how the currency pair behaves should it venture above 90 once again. Additionally, the currency pair faces multiple downtrend lines along with technical barriers in the form of 12/7 and 12/4 highs. As for the downside, the USD/JPY has built some comfort zone between present price and our uptrend lines. Additionally, the USD/JPY has 11/23, 12/8, and 12/9 lows serving as technical cushions.
Present Price: 89.55
Resistances: 89.66, 89.89, 90.15, 90.38, 90.61, 90.77
Supports: 89.35, 89.14, 88.97, 88.77, 88.60, 88.34
Psychological: 90, December Highs and Lows 
Gold Continues Decline with Strengthening Dollar
Gold is declining again today as the Dollar exhibits a broad-based rally in reaction to stronger than expect U.S. Retail Sales and Prelim UoM Consumer Sentiment data. Just as we saw last Friday, the Dollar is rallying with key U.S. data outperforming, reversing the correlation we’ve witnessed since the beginning of the economic crisis. Hence, we deduct that investors are speculating the encouraging improvements in U.S. employment and consumption could lead the Fed to reign in its monetary policy sooner than anticipated should data continue to print positively. Meanwhile, gold is exercising its negative correlation with the Dollar, declining on the news as we witness solid pullbacks in the EUR/USD and GBP/USD. That being said, investors should monitor the interaction of these aforementioned Dollar pairs as they reach key technical supports. Significant pullbacks in the EUR/USD and GBP/USD could yield further weakness in gold due to correlative forces.
Technically speaking, we’ve shifted our uptrend lines to compensate for today’s pullback. Gold still has multiple uptrend lines serving as technical cushions along with 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, we’ve placed a downtrend line on our chart, albeit a steep one. Additionally, gold faces topside technical barriers in the form of 12/9 and 12/7 highs along with the psychological $1150/oz and $1175/oz levels.
Present Price: $1121.25oz
Resistances: $1123.03/oz, $1128.34/oz, $1134.47/oz, $1141.42/oz, $1147.54/oz, $1152.85/oz
Supports: $1115.27/oz, $1110.77/oz, $1105.05/oz, $1100.15/oz, $1097.29/oz, $1089.12/oz
Psychological: $1100/oz, $1150/oz, $1175/oz 
Crude Heads South with Strengthening Dollar
Crude futures are fighting to stay above their psychological $70/bbl level as a strengthening Dollar outweighs a slightly positive performance from U.S. equities. U.S. Retail Sales and Prelim UoM Consumer Confidence data points surpassed analyst expectations today. Additionally, China printed stronger than anticipated Industrial Production data. Hence, one would instinctively believe that crude would pop in reaction to these positive developments in data since they imply an increase in global aggregate consumption and demand. However, crude futures are opting to trend lower due to an impressive rally in the Dollar. An appreciating Greenback makes dollar-based commodities, such as crude, more expensive to import and thus a less attractive purchase for other nations. We witnessed a similar reaction from the Dollar after last Friday’s stronger than expected U.S. employment data. Hence, it seems FX investors are continuing speculation that the Fed may tighten liquidity sooner than anticipated due to the recovery in U.S. employment and consumption. Than being said, investors should monitor the Dollar’s reaction to upcoming data releases since the Greenback’s behavior seems to be having a greater influence on the price of crude than U.S. equities. Hence, it will be interesting to see how crude behaves should key technical supports in the EUR/USD and GBP/USD give way.
Technically speaking, crude futures still do have some noteworthy technical cushions in play, including the psychological $70/bbl area along with October and September lows. We’ve readjusted our 1st tier uptrend line, which now runs through intraday lows to compensate for today’s pullback. As for the topside, crude futures still face multiple downtrend lines along with 12/10, 9/22, and 12/8 highs. Meanwhile, the psychological $70/bbl level could begin to work against crude futures should today’s sell-side activity persist.
Price: $70.05/bbl
Resistances: $70.94/bbl, $71.25/bbl, $71.55/bbl, $72.04/bbl, $72.49/bbl, $72.93/bbl
Supports: $69.92/bbl, $69.66/bbl, $69.24/bbl, $68.74/bbl, $68.04/bbl, $67.70/bbl
Psychological: $70/bbl, $75/bbl, October and September Lows
S&P Futures Stuck Between Positive Data and Strong Dollar
The S&P futures are only registering slight gains despite much better than expected Retail Sales and Prelim UoM Consumer Sentiment data releases. Although one may anticipate a pop in equities in reaction to these positive data points, gains are being weighed down by a broad-based strength in the Dollar as well as notable weakness in gold. The EUR/USD and GBP/USD are trading sharply lower as the USD/JPY surges. The Dollar’s positive reaction to today’s data is similar to last Friday’s run after encouraging U.S. employment releases. Hence, it seems investors are beginning to price in a tightening of liquidity from the Fed as key U.S. economic data points take a turn for the better. Although Bernanke fended off such speculation on Monday, investors appear to be trading with the concept of tighter liquidity regardless of the Fed’s apparent monetary stance. That being said, it will be interesting to see how the S&P futures behave should key supports in the EUR/USD and GBP/USD giver way. While equity investors instinctively want to send equities higher with such positive economic data, a continual appreciation of the Dollar could alter sentiment. The data wires will be relatively quiet at the beginning of next week, meaning present trends could carry through until Wednesday’s PPI and TIC Long-Term Purchases releases.
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: 1106.50
Resistances: 1108.5, 1110.25, 1115.5, 1119.25
Supports: 1103.5, 1100, 1097.5, 1095.25, 1092.25, 1088.25
Psychological: 1100, 1075, 2009 Highs and November Lows
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