Comprehensive FX and Futures Daily Commentary
International Trading
EUR/USD Underperforms Following Webber’s Comments
The EUR/USD is underperforming today after ECB member Axel Webber stated that it is unlikely the ECB will consider tightening liquidity until next year. The realization that the ECB’s monetary policy will remain dovish for quite some time has resulted in relative weakness in the Euro. We are not surprised by Weber’s comments, and actually believe the ECB will stay dovish for longer than today’s revised estimates since the ECB will need to keep monetary policy loose as EU economies weather the effects of austerity measures. Meanwhile, the data wire was quiet in the EU and U.S. today, leaving markets in the head of psychological forces and negative sentiment stemming from yesterday’s disappointing U.S. data set. Despite the EU’s quiet week the EU will kick off Monday with its flash PMI data set. Hence, the EUR/USD could start the next trading week on an active note. That being said, if the flash PMI data set signals a cool down in the EU then we can expect further near-term weakness in the EUR/USD. On the other hand, a solid PMI data set could help contain losses and help the EUR/USD stabilize.
Technically speaking, the EUR/USD faces technical barriers in the form of intraday and 8/18 highs along with the highly psychological 1.30 level. As for the downside, the EUR/USD has supports in the form of intraday and 7/13 lows. Additionally, the psychological 1.25 level could serve as a solid cushion should it be tested.
Present Price: 1.2712
Resistances: 1.2726, 1.2747, 1.2765, 1.2786, 1.2812, 1.2833
Supports: 1.2696, 1.2677, 1.2653, 1.2615, 1.2581, 1.2522
Psychological: 1.25, 1.30
GBP/USD Dribbles Lower as Risk Rally Wanes
The Cable is heading south again today and is currently testing the strength of its psychological 1.55 level as the risk trade struggles across the board. Investors are still focusing on yesterday’s discouraging U.S. economic data which revealed a slowdown in both manufacturing and employment. Investors are reacting by purchasing the Greenback and the Cable is no exception despite yesterday’s encouraging UK retail sales figure. Meanwhile, the Cable is sitting right on top of our medium-term uptrend line running through 7/12 lows. If our medium-term uptrend line doesn’t hold then it’s possible the Cable could enter a new downtrend towards the currency pair’s highly psychological 1.50 level. The UK will be relatively quiet on the data wire next week until Friday’s GDP figure. Hence, investors will be paying particularly close attention to upcoming U.S. and EU data when determining whether to keep the Cable’s uptrend intact or send the currency pair a leg lower. The EU kicks off the data wire next week with its flash PMI set and it will be interesting to see whether austerity measures are beginning to have an impact on economic fundamentals.
Technically speaking, the Cable still out medium-term uptrend line serving as a technical cushion along with intraday and 7/23 lows. Additionally, the psychological 1.55 level could continue to serve as a solid technical cushion over the near-term. As for the topside, the Cable faces technical barriers in the form of intraday and 8/16 highs.
Present Price: 1.5526
Resistances: 1.5530, 1.5551, 1.5572, 1.5598, 1.5627, 1.5656
Supports: 1.5503, 1.5472, 1.5441, 1.5398, 1.5374, 1.5342
Psychological: 1.55, 1.60
USD/JPY Consolidates along August Lows
The USD/JPY is consolidating above August lows and its psychological 85 level as investors look ahead to Monday’s meeting between Shirakawa and Kan. Some analysts are speculating that the BOJ will soon announce some form of currency intervention or measures aimed at loosening liquidity as policy makers look to limit abnormal gains in the Yen. This speculation has allowed the USD/JPY to continue its consolidation patter despite weakness in the risk trade as investors react negatively to recent U.S. economic data. That being said, if the BOJ and DPJ fail to provide some sort of near-term bandaid for the Yen then we could witness another leg down in the USD/JPY over the medium-term if global fundamentals don’t improve. On the other hand, if policy makers come to the defense of exporters as we suspect then the USD/JPY may receive enough buying interest for a solid, near-term rally.
Technically speaking, the USD/JPY has supports in the form of intraday and 2009 lows. Additionally, the psychological 85 level could continue to serve as a solid cushion over the near-term. As for the topside, the USD/JPY faces technical barriers in the form of intraday and 8/13 highs.
Present Price: 85.73
Resistances: 85.78, 85.93, 86.11, 86.22, 86.32, 86.44
Supports: 85.65, 85.45, 85.27, 85.18, 85.04, 84.90, 84.68
Psychological: 85, 2009 lows
Gold Consolidates Around $1230/oz
Gold is consolidating around $1230/oz as investors lock in some profits as the trading week comes to a close. It has been another successful week for gold as the precious metal benefits from renewed investor uncertainty in regards to the sustainability of the global economic recovery. The slowdown in fundamentals, particularly in the U.S., has led investors back towards gold as a safe-haven and the precious metal has made an impressive recovery from July lows. In fact, gold seems to be eyeing $1250/oz and previous 2010 highs. Should U.S. fundamentals weaken further then gold may receive enough buying interest in order to tackle these key barriers. That being said, the U.S. won’t be tested until Tuesday’s existing home sales data, meaning gold should remain locked into its present trading pattern for the time being. The EU will release its PMI data set on Monday, and if the data set disappoint this could benefit gold as investors divest from the risk trade.
Technically speaking, gold has technical supports in the form of intraday and 8/18 lows. The highly psychological $1200/oz level becomes a technical cushion once again. As for the topside, gold faces technical barriers in the form of intraday and 8/19 highs. Additionally, the psychological $1250/oz level could serve as a solid technical barrier should it be tested.
Present Price: $1227.60/ oz
Resistances: $1228.80/oz, $1230.94/oz, $1233.72/oz, $1236.49/oz, $1240.12/oz, $1242.58/oz
Supports: $1226.93/oz, $1224.35/oz, $1222.01/oz, $1219.88/oz, $1217.55/oz, $1215.45/oz
Psychological: $1250/oz, $1200/oz, July highs and August lows
AUD/USD Tries to Hold .89
The Aussie is bouncing from intraday lows investors continue to divest from the risk trade. Since the data wire has been relatively quiet around the globe today investors are still reacting to yesterday’s disappointing U.S. unemployment and manufacturing data. Meanwhile, investors are also digest comments from the RBA’s Ric Battellino. Battellino expressed the RBA’s neutral monetary policy stance. While the RBA is wary of inflation caused by Australia’s resource boom, the RBA is also treading cautiously as Europe implements austerity measures and U.S. fundamentals cool. Additionally, we’ve seen a recent pullback in China’s economic data, and if China was to slow further than anticipated then the RBA would be hard pressed to hike rates again in the near-future. Regardless, Battellino expressed the confidence we’ve felt from Stevens, leaving the Aussie at a strong level as policy makes hang on a fence. That being said, if global fundamentals turn around then we expect relative strength in the Aussie since the RBA would feel more comfortable tightening monetary policy a bit.
Technically speaking, the Aussie faces technical barriers in the form of intraday and 8/17 highs. Additionally, the highly psychological .90 level is now serving as a technical barrier. As for the downside, the Aussie has multiple medium-term uptrend lines working in its favor along with intraday and 7/22 lows.
Price: .8927
Resistances: .8932, .8955, .8975, .8999, .9019, .9044
Supports: .8917, .8899, .8885, .8867, .8851, .8829
Psychological: .90, August highs and lows
S&P Futures Climb Back from Intraday Losses
The S&P futures are climbing back towards par after starting the session with sizable losses. Investors are continuing to digest yesterday’s negative data which revealed further weakness in employment and housing. However, the U.S. has been quiet on the data wire today, allowing investors to calm down as we head into the weekend. That being said, the U.S. will be quiet on the data wire again on Monday, meaning markets could have an opportunity to consolidate to kick off the week. The EU will print its flash PMI data set on Monday and if the PMIs signal a cooldown in the EU then negativity could spread into the U.S. trading session. On the other hand, solid PMI figures could help the S&P futures hang above 1075. Meanwhile, we notice the S&P’s medium-term uptrend line originating from 2009 lows and running through June lows is creeping up towards price. Hence, the S&P futures could be in for a key technical test soon, though we may have to wait until the month of September. Such a test would prove timely over the next few weeks since markets will likely become more active as investors awake from summer doldrums. For the time being, keep an eye on the aforementioned medium-term uptrend line along with 1050. As for the topside, 1100 is still hanging overhead as a key technical barrier.
Price: 1070
Psychological: 1100, 1050
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