Risk Rally Cut Short By Moody Downgrade of Greece

U.S. Dollar Trading (USD) Global stocks continued to rebound early Monday with positive sentiment sending the Dollar lower across the board. The mood changed however late in the US session after moody cut Greece Credit rating to Junk in a widely expected move. US stocks finished slightly lower after being up for most of the day. In US stocks, DJIA -20 points closing at 10190, S&P -2 points closing at 1089 and NASDAQ +1 points closing at 2243. Looking ahead, TIC Long Term Purchase forecast at 77bn vs. 140bn previously.

The Euro (EUR) took advantage of the positive risk environment to surge above resistance at 1.2215 and push towards 1.2300. The moody's downgrade took the wind out of the rally and the pair finished near support. April's Industrial Production beat expectation at 0.8% vs. 0.5% forecast. EUR/USD traded with a low of 1.2109 and a high of 1.2300 before closing at 1.2220. Looking ahead, June German Zew Survey forecast at 42 vs. 45.8 previously.

The Japanese Yen (JPY) was able to test Y92 on strong cross buying especially in the AUD/JPY and EUR/JPY but the failure to push higher and the reversal in US stocks sent the pair back to more familiar levels near 91.50. Overall the USDJPY traded with a low of 91.40 and a high of 92.14 before closing the day around 91.60 in the New York session. Looking ahead, June BOJ Rate Decision forecast to remain at 0.1%.

The Sterling (GBP) surged after under-performing on Friday as the risk currency played catch up to rally nearly 200 pips on the day. Resistance at 1.4750 was broken in Europe as BoE member Sentence was quoted over the weekend as supporting a rate hike in the second half of 2010. Overall the GBP/USD traded with a low of 1.4545 and a high of 1.4812 before closing the day at 1.4730 in the New York session. Looking ahead, May CPI is forecast at 3.5% vs. 3.7% y/y.

The Australian Dollar (AUD) tracked stocks higher breaking above major resistance at 0.8580 to surged in Europe to fresh month highs. AUD/JPY rallied and fell just short of the key Y80 level as the favorite risk currency enjoyed widespread support. Overall the AUD/USD traded with a low of 0.8501 and a high of 0.8669 before closing the US session at 0.8580. Looking ahead, June RBA Minutes Released.

Oil & Gold (XAU) lost ground as safe haven demand eased and profit takers took control. Overall trading with a low of USD$1215 and high of USD$1234 before ending the New York session at USD$1221 an ounce. Oil Rallied to above resistance at $75 before settling just under the figure late in the US session. WTI Oil Closed +$1.34 at $74.80 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.1881

1.2103

1.2220

1.2327

1.2453

USD/JPY

90.54

91.24

91.60

92.97

93.64

GBP/USD

1.4347

1.4505

1.4740

1.4809

1.4918

AUD/USD

0.8263

0.8427

0.8590

0.8728

0.8865

XAU/USD

1197.00

1211

1223

1252

1261.00

OIL/USD

70.00

72.50

74.80

75.00

76.00

Euro - 1.2220

Initial support at 1.2103 (June 14 low) followed by 1.1881 (June 7 low). Initial resistance is now located at 1.2327 (June 3 high) followed by 1.2453 (May 28 high)

Yen - 91.60

Initial support is located at 91.24 (June 11 low) followed by 90.54 (June 1 low). Initial resistance is now at 92.97 (May 18 high) followed by 93.64 (May 13 high).

Pound - 1.4740

Initial support at 1.4505 (Jun 11 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4809 (June 14 high) followed by 1.4918 (May 12 high).

Australian Dollar - 0.8590

Initial support at 0.8427 (June 11 low) followed by the 0.8263 (June 10 low). Initial resistance is now at 0. 8728 (0.505 retrace of 0.9388 - 0.8068) followed by 0.8865 (May 17 high).

Gold - 1223

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 - 74.80

Initial support at 72.50 (Intraday Support) followed by 70.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 76.00 (Intraday Resistance).