Daily Market Commentary


EUR/USD Eyes 1.30
The EUR/USD closed the trading week on a positive note and the currency pair is now eyeing its psychological 1.30 level as markets head into a relatively quiet week data-wise. The risk trade rallied across the board on Monday after U.S. headline employment data came in stronger than expected. Non-farm payrolls declined by -54k vs. -101k expected, fueling a continuation of the recent risk rally. Friday’s follow-through was encouraging and investors are suddenly becoming more comfortable with the risk trade. U.S. unemployment has been the main drag on bulls and signs of improvement were warmly received by investors. Meanwhile, the data wire will be relatively quiet around the globe on Monday, allowing investors to build on topside momentum originating from August lows. However, investors should still proceed with a slight air of caution since these markets are prone to sudden shifts in sentiment, as we’ve seen this last week. On the other hand, if conditions can continue to improve in the U.S., particularly in unemployment, then the EUR/USD may begin building the foundation of a more lasting uptrend.
Technically speaking, the EUR/USD faces technical barriers in the form of 8/18 and 7/20 highs along with the highly psychological 1.30 level. As for the downside, the EUR/USD has supports in the form of 9/2 and 8/16 lows. Additionally, the psychological 1.25 level could serve as a solid cushion should it be tested.

Present Price: 1.2895
Resistances: 1.2899, 1.2914, 1.2929, 1.2947, 1.2958, 1.2970
Supports: 1.2882, 1.2868, 1.2852, 1.2833, 1.2802, 1.2786
Psychological: 1.25, 1.30

GBP/USD Battles Back Towards 1.55
The Cable battled back towards its psychological 1.55 level despite a weaker than expected UK services PMI release. The negative services figure completes a disappointing cycle of PMI data as the UK underperforms. Relative weakness in the UK has held down the Cable despite last week’s impressive rally in the risk trade. However, positive developments in the risk trade allowed the Cable to stabilize and build off of August lows. That being said, if the risk trade can continue its ascent next week then it is likely August lows will hold for an extended period of time. Meanwhile, Monday will be a quiet trading session as Americans celebrate the Labor Day holiday. Hence, positive sentiment generated from Friday’s better than expected U.S. non-farm payrolls figure will probably carry over. Even though sentiment has taken a brisk turn for the positive, large question marks linger regarding the sustainability of the global economic recovery, so we’ll have to see whether big money can back the Cable’s new bottom and allow the risk trade to form a more lasting uptrend.
Technically speaking, the Cable has supports in the form of 9/2 and 8/31 lows. Additionally, the psychological 1.55 level could continue to have a noticeable influence over near-term movements in the Cable. As for the topside, the Cable faces technical barriers in the form of 9/1 and 8/26 highs.

Present Price: 1.5461
Resistances: 1.5472, 1.5503, 1.5530, 1.5551, 1.5572, 1.5598
Supports: 1.5449, 1.5419, 1.5398, 1.5374, 1.5342, 1.5322
Psychological: 1.55, August Lows

USD/JPY Looks to Defend August Lows
The USD/JPY experienced another volatile trading session on Friday as investors reacted to better than expected U.S. non-farm payrolls data. While investors initially bought up the USD/JPY and sent the currency pair climbing above its psychological 85 level, bears countered and held the currency down around weekly lows. However, the USD/JPY has managed to avoid a retest of August lows, meaning the USD/JPY may be building a new, more sustainable bottom. The resilience of August lows will depend highly upon economic performance in the U.S. since the BOJ has thus far refused to give into those requested currency intervention. If U.S. fundamentals can manage to stabilize and improve then investors would have more incentive to buy the USD/JPY as the risk trade regains its luster. Looking ahead, Monday should be a relatively quiet trading session since American investors will be celebrating the Labor Day holiday. Hence, investor sentiment could continue to improve over the near-term, allowing the USD/JPY’s August lows to solidify.
Technically speaking, the USD/JPY has supports in the form of 9/2 and 9/1 lows. As for the topside, the USD/JPY faces technical barriers in the form of 9/3 highs and the psychological 85 level.

Present Price: 84.39
Resistances: 84.47, 84.57, 84.68, 84.81, 84.90, 85.04
Supports: 84.25, 84.15, 83.98, 83.89, 83.70, 83.57
Psychological: 85, August Lows

Gold Battles $1250/oz

Gold is continuing to battle its psychological $1250/oz level after the precious metal took a bit of a hit on Friday as the risk trade rallied across the board. Stronger than expected U.S. employment data sent investors back into risk, denting gold due to its status as a safe-haven asset. However, the precious metal held up relatively well despite risk flows due to inflationary signals in soft commodities. Wheat and corn barreled higher last week as talks of food shortages reemerged for the first time since the global financial crisis struck. Should agricultural commodities continue to climb toward uncomfortable levels this could benefit gold due to the precious metal’s use as a hedge against inflation. Meanwhile, despite last week’s positive turn in investors sentiment headwinds remain in the global economy and we’ll have to see whether the risk trade can make August lows a lasting bottom. Regardless, gold’s long-term uptrend is clearly intact and the precious metal just another wave of strong buying interest in order to leave behind $1250/oz and top previous 2010 highs.

Technically speaking, gold has technical supports in the form of 9/3 and 8/31 lows. As for the topside, gold faces technical barriers in the form of previous September highs and the psychological $1250/oz level. Additionally, previous 2010 highs could serve as a solid technical barrier should they be reached.

Present Price: $1246.50/ oz
Resistances: $1248.34/oz, $1250.91/oz, $1252.71/oz, $1254.71/oz, $1255.70/oz, $1258.05/oz
Supports: $1246.71/oz, $1244.97/oz, $1241.60/oz, $1240.12/oz, $1238.62/oz, $1237.21/oz
Psychological: $1250/oz, 2010 Highs

AUD/USD Challenges August Highs

The Aussie outperformed again on Friday as the risk trade rallied across the board in reaction to stronger than expected U.S. employment data. The Aussie was already in a favorable position after Australia’s GDP data topped analyst forecasts. Should the U.S. employment market continue to improve then this would clearly give the RBA a green light to raise its benchmark rate again in order to contain inflation pressures. Speaking of inflation, soft commodities are soaring higher as global leaders clamor about the potential for food shortages. If agricultural commodities test 2008 highs then the RBA would be under more pressure to tighten liquidity, particularly since Australia’s economy should benefit from higher wheat prices. The RBA has often cited economic headwinds blowing from the West as reasoning behind hesitating to pull the trigger on another rate hike. Hence, if U.S. fundamentals stabilize and improve then we would likely see tighter liquidity from the RBA and a stronger Aussie. However, many question marks remain regarding the sustainability of the global economic recovery so investors should still tread with a bit of caution. Australia will release job advertisements data on Monday and it wouldn’t be surprising if the figure tops last month’s 1.3% reading considering the positive data we’ve been receiving from Australia lately.
Technically speaking, the Aussie faces technical barriers in the form of 9/3 and 8/6 highs. As for the downside, the Aussie has multiple medium-term uptrend lines working in its favor along with 9/3 lows. Meanwhile, the highly psychological .90 level becomes a technical cushion once again.

Price: .9166
Resistances: .9181, .9195, .9204, .9219, .9239
Supports: .9161, .9145, .9127, .9114, .9096, .9076
Psychological: .90, August Highs