Relief Rally as US Stocks Soar

U.S. Dollar Trading (USD) gave up recent gains in a risk on environment as global stocks rallied and risk aversion eased. Weekly Jobless Claims were steady at 456k vs. 453k previously and April's Trade Balance was close to expectations at -40.3bn previously. In US stocks, DJIA +277 points closing at 10172, S&P +31 points closing at 1086 and NASDAQ +59 points closing at 2218. Looking ahead, May Retail Sales are forecast at 0.2% vs. 0.4% previously.

The Euro (EUR) broke above 1.2000 in Asia as the head of the Chinese Pension Fund stated that the Euro will whether the Crisis and that he was more concerned with US debt holdings. This positive news combined with comments from ECB's Trichet (ECB held at 1.0%) concerning upgraded GDP growth forecasts. EUR/USD traded with a low of 1.1956 and a high of 1.2144 before closing at 1.2130. Looking ahead, May German WPI previously at 1.7%.

The Japanese Yen (JPY) weakened as the crosses rallied especially on the AUD/JPY and NZD/JPY. USD/JPY was hardly changed as the USD remained under pressure and speculation of a Chinese Yuan revaluation kept the outlook mixed. Q1 GDP was finalized at 1.2% Q/Q. Overall the USDJPY traded with a low of 90.84 and a high of 91.57 before closing the day around 91.30 in the New York session.

The Sterling (GBP) did well in the risk on environment with cable breaking above 1.4700 and GBP/JPY heading for a test of Y135. The BOE held at 0.5% and did little to surprise the market holding the Asset Purchase program at 200bn. Overall the GBP/USD traded with a low of 1.4507 and a high of 1.4733 before closing the day at 1.4705 in the New York session. Looking ahead, May Core PPI is forecast at 0.5% vs. 1.1% previously.

The Australian Dollar (AUD) staged a second day of major gains with the May Unemployment coming in super strong at +27k vs. +17k forecast and the Unemployment Rate dropped the 5.2% vs. 5.4% previously. Combined with the stock market rally the Aussie broke above 0.8300 and then 0.8400 to test 0.8500 late in the US session. Overall the AUD/USD traded with a low of 0.8273 and a high of 0.8512 before closing the US session at 0.8490.

Oil & Gold (XAU) ended the day unchanged as reduced safe haven demand was countered by the weak USD. Overall trading with a low of USD$1215 and high of USD$1234 before ending the New York session at USD$1220 an ounce. Crude Oil surged for the 3rd Day. WTI Oil Closed +$1.10 at $75.48 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.1640

1.1881

1.2110

1.2214

1.2327

USD/JPY

89.81

90.54

91.70

92.08

92.97

GBP/USD

1.4260

1.4510

1.4710

1.4771

1.4878

AUD/USD

0.8067

0.8195

0.8475

0.8552

0.8579

XAU/USD

1197.00

1211

1220

1252

1261.00

OIL/USD

72.50

75.00

75.50

76.00

78.00

Euro - 1.2110

Initial support at 1.1881 (June 7 low) followed by 1.1640 (Nov 2005 low). Initial resistance is now located at 1.2214 (June 4 high) followed by 1.2327 (June 3 high)

Yen - 91.70

Initial support is located at 90.54 (June 1 low) followed by 89.81 (May 27 low). Initial resistance is now at 92.08 (June 7 high) followed by 92.97 (May 13 high).

Pound - 1.4710

Initial support at 1.4510 (Jun 10 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4771 (June 2 high) followed by 1.4878 (50% 0f 1.5544-1.4231).

Australian Dollar - 0.8475

Initial support at 0.8195 (June 9 low) followed by the 0.8067 (May 25 low). Initial resistance is now at 0. 8552 (May 28 high) followed by 0.8579 (Feb 5 low).

Gold - 1220

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 75.50

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 76.00 (Intraday Resistance) followed by 78.00 (Intraday Resistance).