Providio's Daily Futures Market Commentary for April 11, 2012
Currencies: 11Apr As we have mentioned in past comments, the “aurthorities” will make forays into the traded markets to prevent collapse. Today’s permutation on that theme is the ECB jawboning on Spanish debt. An ECB Board member intimated the ECB would be willing to buy Spanish debt to lower borrowing costs. It accomplished just that by the market interpreting this statement as a willingness to intervene. It bid up the Spanish Bonds, thereby lowering borrowing costs. This is an example o how the Central Banks are using more than actual monetary policy execution, but also the power of the press to change market conditions. With the ECB’s “safety net” now public, the Euro rallied of its negatively biased Trend.
This effect is maximized as the US Fed is now in a situation where another round of QE is being publicly debated.
This is another example of our common theme of the push-pull of the European and American debt/economic situations trading places on the front burner.
Risk-off trading will still tend to favor the USD and Japanese Yen.
Aussie: 11Apr Today’s action displays what we regard as largely consolidating behavior. Since the Aussie’s falling trend in March began, this is the fist time the market has exhibited a new low and reversal to end the day higher. This is also the closest our Momentum indicator has come to turning positive in that time frame. Those two issues coupled put the pieces in place for at least a correction. Of concern is that despite today’s positive action there are two distinct technical issues that remain negatively biased.
First, the market has not made a new high based on yesterday’s action.
Secondly, without the market breaking out above the recent falling trend line. Until that happens, we have to assume the falling trend is still in place.
Trend is still falling but only nominally so. Momentum is still negative but is very close to going positive. ROC is clearly shifting to a less negative profile and like Momentum, is very close to going positive ROC. RSI has been rising since 4/5 other than yesterday. These show a market clearly shifting to a much less negative bias but still subject to negative global economic news.
Initial resistances are at 1.0235 and 1.0280. Support at 1.0180 and today’s low of 1.0150.
Again, paying attention to the Aussie action on its 200-day Moving Average. If it continues to Stay attuned to directional indications for global trade, especially out of Asia, as that is what Australia’s economy depends on as a commodity exporter.
Near 1.03 stands as a major level the Aussie must get and stay above for the downtrend to abate. This level coincides with the declining trend line that traces back to the failure on 3/2. 1.0150 should be seen as nearby support.
Seasonal Snapshot: The 5-year pattern is in a sustained rising seasonal trend until April 17th. It then trends generally higher until April 30th but with more day-to-day choppiness. The 15-year pattern is in a rising trend until May 4th with a 2 day downtrend from April 12-14th. The 30–Year pattern is in the same sustained rising trend bias until April 12th.
British: 11Apr The Pound’s negative bias remains in place albeit with a shift to a less negative profile. Today’s rally, on the back of better than expected UK Retail Sales data, is testing the important psychological 1.59 level.
Trend remains falling, Momentum is still negative but its ROC is shifting higher. RSI has risen steadily to mid-market levels since bottoming on 4/5.
How Sterling reacts to any further material weakness in the Euro is to be watched closely.
We still maintain a meaningful move above 1.60 would likely indicate a breakout as it is showing as a significant support and resistance level going back to late February’s peak. Additionally, during craziness of late October-early November, much of the action traded around this level.
Seasonal Snapshot: All three patterns are biased to rising action until April 30.
Canadian: 11Apr The Canadian$ remains under pressure despite today’s neutral action. .9935 shows as support going back to late January. Meaningful daily resistance does not appear until up near the falling 21-day Moving Average. Referencing that indicator, the Loonie is also pressuring the –2 STD.
Trend, Momentum, RCO and RSI are all clearly negative in bias. The .9935 support is important as it has held since January. If this dopes hold, look for upwardly biased trading until at least 1.0060.
Look for further support at .9920 and nearer-term resistance at just above .9980. Our Volatility measure remains within our Average (±1 STD) range.
Seasonal Snapshot: All three patterns are in a positive bias that lasts well into May. The 15yr takes a breather 05-14Apr, then rejoins its 5&30yr patterns again.
Dollar Index: 11Apr Consolidating action with no material fall from recent gains. However, despite today’s modestly negative pricing, the action is actually constructive. Early action took the DX down to the 21-day Moving Average; from this level the market tested the daily lows five times. After the last test, it rallied right back up to the resistance near 80.00. Since then the low has tested 79.895 twice. We regard this as consolidation ahead of tomorrow’s Jobless Claims number.
Trend and Momentum remains positive. ROC is plateauing and RSI is falling but remains over 50. All these together speak to consolidation. Volatility is low and falling.
This may be happening as a possible developing short-term Bull pennant over the last 3-4 sessions. If this plays out, the move should rally the DX past the early March highs and may put it in position to make a run at the early Jan highs.
Numerous Federal Reserve officials speaking and various media appearances throughout the week are offsetting this week’s light data release schedule.
On a negative note, the highs set up as the right shoulder of what could be construed to be a bearish Head and Shoulders pattern.
Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.
Seasonal Snapshot: All 3 patterns exhibiting choppy conditions until about April 7th when all 3 start more sustained falling action seasonal patterns until April 30th.
Euro-FX: 11Apr After a precipitous 3-day sell-off last week, the Euro has been consolidating. However, inversely to the DX, the Euro’s 4-day pattern appears to be developing a possible bearish pennant or flag pattern. If this plays out, classic analysis calls for an approximately 300-point sell off from where it breaks out below. From today’s levels this would target pricing in the bottoming pattern from mid January.
Trend and Momentum remain on the defensive. ROC and RSI are pointing to higher levels, bouncing off action from several sessions ago. RSI’s bounce is from an area from which the Euro has rallied materially in the past several months but is barely out of the Oversold zone.
Europe’s debt woes, now focused on Spain, should continue to add pressure to the Euro’s pricing. 1.3050 is near-term support. Below that, support will come in at the psychological 1.30 level. Below that support should be near 12890.
Additional technical support shows up along a gently rising Trend line extending from the 2/16 intra-day low through the 3/14 intra-day low.
Volatility is falling again and is now firmly in the Low range (-1 STD or lower below the 150-day Moving Average)
The 200-day Moving Average remains well above at about 1.3571 but remains falling.
Seasonal Snapshot: All three patterns are trending higher until the end of April.
Yen: 11Apr We see today’s action as constituting a consolidation day. New high but the market backed off a bit and settling down but on lower Volume.
All our directional Technicals point higher, and it’s likely there will be some sort of pause before tomorrow’s jobless Claims release.
With weakness abounding in numerous markets, flight to quality/safety is continuing in the Yen. With Europe’s woes continuing, the US apparently not as strong as thought, and China’s slowdown apparently worsening, the Yen is seen as stable and safe.
Pay attention to the Fibonacci 38.2% retracement. If this level offers significant resistance, downside action would target a move of 1200-1300 points. This would put the Yen in the 11200 area, where there is a broad area of support going back to late 2008. This is consistent with our previous commentary of a possible developing bearish flag pattern.
Seasonal Snapshot: All 3 patterns are now poised to bottom and head higher until approximately April 20th.
Gold: 11Apr With the positive reaction to the increasingly dire global economic news, Gold seems to have found a near-term bottom. However, before we start popping corks, there are several items that should be noted.
First, there has not been the required breakout that would indicate an actual change in Trend. If we apply our Technicals to a weekly time frame, the view is decidedly more pessimistic. The Gold market has been exhibiting a classic falling trend with lower lows and lower highs. This is true for a short-term view going back to late February and a longer view going back to September 2011’s peak.
Second, recent moves to higher Trend and Momentum figures, our primary directional indicators, have been relatively short-lived in duration. Granted, the Trend will already be in place before our indicators, which lag, will “show” as such, but that’s a reality of our indicators.
Third, the global economic situation has been remarkable in its reaction to manipulations from “authorities”. This is all geared towards keeping the “system” working. That’s generally a “solution” geared towards adding risk. That will tend to work against Gold.
For this morning, if Gold can’t break out above the 1465 resistance, look for a likely test of last week’ lows. Again, while Trend, Momentum, ROC and RSI are all headed higher, recent experience tells us it probably won’t last long.
Support below should be seen at 1647, again at 1630-1632, and then again below at the lows of 1613. The 1635 resistance also sits right at the declining 21-day Moving Average.
Today’s action, as of this writing, is setting up as a Doji with lower Volume. This speaks of consolidation. We will likely see a more concerted directional after the release of today’s Beige Book report at 2 PM EDT, if not until tomorrow’s Jobless Claims release.
Seasonal Snapshot: All three patterns consolidate with an upward bias until 23April.
Copper: 11Apr With most indicators on the global economic scene pointing to lower activity, Copper is in a serious decline of over 8% (we miscalculated and mistakenly stated over 9% yesterday) in the last 5 sessions. Today’s fall has May’s lows in the support area at about 3.6350. It again is pushing the –2 STD from the 21-day Moving Average. Below that, we see likely support at 3.5350. We see initial resistance all the way back up at 3.70-3.75
Trend, Momentum, ROC and RSI are all firmly falling. RSI is Oversold and getting more so. This, after being as high as 61 on 4/3.
Volatility is near average.
Seasonal Snapshot: A month-long rally in all three patterns gave way on 05Mar to a consolidation phase with a modest upward bias until mid April.
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