Futures Market Blog

USD/JPY Daily Commentary for 2.24.09

The USD/JPY is continuing its incredible surge to the upside as the Yen loses its luster as a safe haven.  The Carry Trade has obviously unwound, and investors are beginning to judge the currency based on the comparative health of the two economies.  With Japan being the poorest performing economy in the world at present, the U.S. Dollar is experiencing a rapid appreciation against the Yen.  Paradoxically, the depreciation of the Yen provides a much needed relief for Japanese manufacturers and exporters.  Since these companies compose the heart of Japan’s economy, the rise of the USD/JPY greatly aides Japan.  Therefore, if the U.S. economy continues to destruct while the USD/JPY rises, we may see an improvement in Japan and a subsequent stabilization of the currency pair.  Considering the breakout in the USD/JPY, we maintain our positive stance until the currency pair reaches another stabilization point.  Fundamentally, we find resistances of 96.71, 97.22, 97.66, and 98.25.  To the downside, we see supports of 95.95, 95.43, 95.02, and 94.56.  The USD/JPY is currently exchanging at 96.48.

EUR/USD Daily Commentary for 2.24.09

The EUR/USD sold off on Monday, exercising its positive correlation with U.S. equities.  However, the currency pair found comfort in our previous 1.2669 bottom-end support.  The EU released a plethora of economic data on Tuesday.  While the German Ifo Business Climate was worse than expected, the EU’s Current Account came in strong.  However, it remains to be seen if the better than expected Current Account balance was more a result of rising exports or declining imports.  While rising exports could indicate an upturn in global demand and consumption, dwindling imports would forewarn of an increasingly cash-strapped consumer.  Since Germany is the largest economy of the EU, the fact business managers are increasingly pessimistic is a discouraging sign.  Therefore, a substantial rate cut at the ECB’s next meeting seems imminent.  This detracts from the attractiveness of the long rate payoff of the EUR/USD.  Even though the EUR/USD stabilized above February lows, the currency pair still faces multiple downtrend lines to the upside.  Furthermore, if the S&P futures should fall below 2008 lows, then the EUR/USD will likely follow suit.  Consequently, we maintain our negative outlook on the EUR/USD.  Fundamentally, we maintain our supports of 1.2725 and 1.2669 with fresh bottom-end support of 1.2596.  To the topside, our 1.2725 support turns resistance, with additional resistances of 1.2806, 1.2846, and 1.2883.  The 1.30 serves as a key psychological barrier.  The EUR/USD is currently exchanging at 1.2720.

GBP/USD Daily Commentary for 2.24.09

The Cable failed to reach our 3rd tier resistance on Monday as crashing U.S. equities dragged the currency pair lower.  The GBP/USD is presently dropping below our 2nd tier downtrend line despite better than expected housing and consumer spending data.  The downturn of the Cable while ignoring positive data shows the currency pair is expressing concern over the condition of the U.S. economy.  Since the British and American economies are so intertwined, particularly in the financial industry, further deterioration in America should ultimately bleed into Britain.  Therefore, all eyes will be on U.S. equities to see if the S&P’s 2008 lows can hold.  However, considering our negative outlook for the S&P futures, we maintain our negative stance on the GBP/USD.  On a positive note, the Cable still has the 12/12-12/20 base to fall back on to the downside.  Fundamentally, we find resistances of 1.4505, 1.4569, 1.4660, and 1.4742.  To the downside, we see supports of 1.4392, 1.4328, 1.4242, and 1.4142.  The psychological 1.40 area is turning into a cushion while 1.45 serves as a strong barrier to the upside once again.  The GBP/USD is currently exchanging at 1.4402.