Futures and FX Report 23/08/2012

US Markets

My observations below should be viewed as general advice and may not be right for you. 

US Indices spent the majority of the session in the negative. After a lower open due to weakness in European markets, stocks traded in a tight range until the release of FOMC minutes. There was a small bounce post the minutes as details emerged that some policy makers favoured more stimulus soon. It was interesting that the bounce was not stronger despite members saying “that additional monetary accommodation would likely be warranted fairly soon.” The S&P500 registered a flat close with the Nasdaq outperforming, closing higher by +0.2%. We are now seeing this bounce extend after hours with the S&P500 Eminis trading 1417 last which is +4 pts from the cash close. Whether or not Ben Bernanke commits to a fresh round of stimulus remains to be seen and the stage is set for his speech at a forum for central bankers in Jackson Hole on the 31^st August. Certainly the price action in Gold and the US Dollar seem to justify imminent stimulus as Gold broke out above the 1640 resistance zone and the EUR surged, breaking well above 1.24.

From a technical standpoint, nothing has really changed from my recent posts. US markets continue to test major overhead resistance levels and we are seeing early signs of a distribution process. Please find my recent post regarding these patterns here: http://fpmarkets.blogspot.com.au/2012/08/double-tops.htm.  No doubt it is too early to start calling a top of any sort and the short term trend remains up. The key support level for me remains 1395 and breaches of this would confirm a deeper pullback and possible new trend lower. For now the short term trend grinds perilously higher. 

The non-confirmations across asset classes remain with markets such as the Hang Seng, Copper and the Australian Dollar all struggling at these levels and well off their previous highs. To me, this is not indicative of a healthy trend.

S&P500 Daily:

The S&P500 tested its previous highs last night and failed with a potential reversal candle. This needs follow through to confirm. 

Emini S&P500 60mins:

The 1420/1425 zone is the key short term resistance. A break above this zone would certainly put the double top scenario in jeopardy.

Emini S&P500 15mins:

The pullback last night came right into short term support and a bounce subsequently ensued. The trade tonight is looking for retests of that 1425 level that fails.

S&P500 Emini Key Levels:

Support Levels: 1395/1390, 1350

Resistance Levels: 1415/1420, 145

Europe

European stock markets suffered broad-based losses Wednesday, as investors grew jittery ahead of a series of meetings this week involving Greece's prime minister and European leaders. Energy and mining shares weighed heaviest on the pan-European index. 

France's Total lost 1.6%, while Italy's ENI gave up 1.7% and the U.K.'s BP fell 0.8%.  BHP Billiton slid 1.7 percent to 1,947 pence after saying that it will not approve any further spending on major projects this fiscal year.  Rio Tinto Group, the world’s third-biggest mining company, declined 2.7 percent to 2,979.

From a technical standpoint, this zone remains a huge zone of resistance as shown in the Eurostoxx Daily chart below. A strong move back below DAX 7000 and EUROSTOXX 2400 would signal a potential reversal and end to this uptrend. These keys levels were tested and held overnight so keep these firmly on your radar for potential breakdowns.

Eurostoxx Daily:

This is a clear resistance zone at 2500. If the markets were to reverse here, a potential Head and Shoulder topping pattern could be playing out.

Eurostoxx 15mins:

The key support level remains 2450 in the short term. There was a potential Double top pattern yesterday at 2495 but only a break below the 2450 level would open up increased momentum to the downside.  

DAX 60mins:

The trend remains up with the key support coming in at 7000. 

FX Majors

The Australian dollar once again rose strongly yesterday out of the $1.04 support level, rallying to a high of 1.052. The catalyst was the minutes of the Federal Reserve’s latest policy meeting showed officials remain supportive of more stimuli unless the economy shows signs of expansion. The EUR also continued its strong advance above 1.24 and this looks like a strong breakout pattern for now. The dollar fell to $1.2539 against the euro, its weakest since July 5, and ended New York trading at $1.2528, from $1.2472 Tuesday.

From a technical standpoint, AUD initially struggled at the formidable resistance zone shown on the Daily chart but has now bounced firmly out of the upward trendline shown. Thus, the clear range is 1.04 to 1.06 and traders should trade this zone until a clear breakout either way.

AUDUSD Daily:
After failing out of the 1.06 resistance level, AUD has hit and bounced off the upward trendline. Thus, The Daily trend remains up unless 1.04 breaks to the downside.

AUDUSD 15mins:
Possible short term Head and Shoulders or topping pattern is forming. This will be triggered only on a break of $1.040. There is strong resistance at $1.055 and then $1.060 coming into tonight.

AUDJPY Daily

This 82.20 is a key zone for the bulls. If this fails to hold than this sends a big warning sign to risk assets and would signal a potential breakdown.

EURUSD 60mins:

EUR continued its recent breakout above 1.24. This is a meaningful move after such a prolonged base pattern and turns the short term trend firmly to up.

Commodities

Yesterday I highlighted the price action I Gold as the precursor to a more meaningful breakout. This breakout pattern was triggered last night after the FED sent another strong signal that it is moving closer to launching QE3.

Gold Daily:

Breakout above the first major resistance shelf. Now a key testing of the downward trendline. 

Gold December 60mins:

Breakout above the recent resistance zone. Only a move back down below this zone would be bearish for now. Look for retracements to get into this uptrend.