Equity Rally moves into 6th Day

Written by Anthony Darvall

U.S. Dollar Trading (USD) positive sentiment and continuation of gains in the US session saw risk currencies and the Euro trade at fresh month highs. May's Trade balance was weak at -42bn vs. -39bn forecast but this was overlooked as company earnings from Intel beat estimates. In US stocks, DJIA +146 points closing at 10363, S&P +16 points closing at 1095 and NASDAQ +43 points closing at 2242. Looking ahead, June Retail Sales are forecast at -0.2% vs. -1.2% previously. Also Released, Weekly Crude Oil Inventories are forecast at -1.1mn vs. -5mn previously.

The Euro (EUR) was under pressure in Asia as the market worried about Eurozone Government debt again after S&P downgraded Portugal. July German ZEW was also weak at 21 vs. 28 previously but the market overlooked both these pieces of news to surge on the back of the successful Greece Bond Auction. Resistance above 1.2700 is targeted but further gains can not be ruled out with the market still short. EUR/USD traded with a low of 1.2522 and a high of 1.2740 before closing at 1.2720. Looking ahead, May Industrial Production is forecast at 1.2% vs. 0.8%.

The Japanese Yen (JPY) was under pressure across the board as sentiment soared. EUR/JPY and GBP/JPY led the market high but the USD/JPY struggled as the market also sold the Greenback aggressively. Overall the USDJPY traded with a low of 88.01 and a high of 88.89 before closing the day around 88.70 in the New York session.

The Sterling (GBP) had another dip below 1.5000 as the market sold off in Asia but was bought up aggressively after strong CPI readings and strong European stock markets. EUR/GBP was able to test 0.8320 as the Pound outpaced the Euro higher before rebounding in the US session. Overall the GBP/USD traded with a low of 1.4963 and a high of 1.5203 before closing the day at 1.5180 in the New York session. Looking ahead, June Claimant Count is forecast at -20k vs. -30k previously.

The Australian Dollar (AUD) broke above resistance at 0.8800 as commodities and stocks rallied in Europe and the US. Some profit taking was seen in Asia as China stocks slumped on property tightening concerns but this proved short lived providing traders a good opportunity to buy. Overall the AUD/USD traded with a low of 0.8681 and a high of 0.8846 before closing the US session at 0.8830. Update July Consumer Sentiment at 11.1% vs. -5.7%.

Oil & Gold (XAU) rallied on the weak USD with demand for the precious metal overwhelming profit taking. Overall trading with a low of USD$1196 and high of USD$1218 before ending the New York session at USD$1212 an ounce. Oil Resumed the uptrend surging higher with US stocks. WTI Oil Closed +$2.20 at $77.15 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2194

1.2480

1.2710

1.2807

1.3094

USD/JPY

86.97

88.33

88.90

89.42

89.98

GBP/USD

1.4857

1.5000

1.5200

1.5242

1.5391

AUD/USD

0.8450

0.8622

0.8840

0.8859

0.9000

XAU/USD

1166.00

1185

1211

1214

1244.00

OIL/USD

75

77.00

77.20

78.00

80.00

Euro - 1.2710

Initial support at 1.2480 (July 6 low) followed by 1.2194 (July 1 low). Initial resistance is now located at 1.2807 (76.4% retrace of 1.3094-1.1877) followed by 1.3094 (May 10 high)

Yen - 88.90

Initial support is located at 88.33 (July 9 low) followed by 86.97 (July 1 low). Initial resistance is now at 89.42 (June 28 high) followed by 89.98 (June 24 high).

Pound - 1.5200

Initial support at 1.5000 (Psychological level) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5242 (38.2% retrace of 1.6878-1.4231) followed by 1.5391 (April 30 high).

Australian Dollar - 0.8840

Initial support at 0.8622 (July 8 high) followed by the 0.8450 (June 7 high). Initial resistance is now at 0. 8859 (June 21 high) followed by 0.9000 (Big Level).

Gold - 1211

Initial support at 1185 (July 7 low) followed by 1166 (May 21 low). Initial resistance is now at 1214 (July 5 high) followed by 1244 (July 1 high).

Oil - 77.20

Initial support at 77.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).