Euro Rebounds Off Year Lows

U.S. Dollar Trading (USD) was volatile ending the day slightly higher than Friday's close but well off intraday highs. In Asia, fresh year lows on the EUR/USD due to Eurozone break up fears saw stock markets and risk taken off the table. A solid bounce ensued but volatility remained for the rest of the day. May NY FED Factory Index fell to 19 vs. In US stocks, DJIA +5 points closing at 10625, S&P +1 points closing at 1136 and NASDAQ +7 points closing at 2354. Looking ahead, April PPI forecast at 0.1% vs. 0.7% previously m/m. Also released, April Housing starts previously at 1.6% m/m.

The Euro (EUR) Monday opened in the same theme as Friday with the Euro under pressure from the get go. The market broke through two year lows at 1.2330 and fell quickly to low 1.22's before staging a mild recovery for the rest of the day. News from the ECB they will be taking deposits helped alleviate fears of quantitative easing. EUR/USD traded with a low of 1.2233 and a high of 1.2416 before closing at 1.2345.

The Japanese Yen (JPY) was generally stronger especially in Asia but gave up most the gains by the end of the US session. Japanese stocks were down over 2% and this helped support the safe haven Yen. EUR/JPY was volatile trading in a 3 Yen range. March Machinery Orders up 5.4% m/m. Overall the USDJPY traded with a low of 91.75 and a high of 92.71 before closing the day around 92.55 in the New York session.

The Sterling (GBP) opened under even more pressure than the Euro as the market responded to concerns over the weekend that the outgoing labor government had spending black holes and the government fiscal situational was worse than first thought. The Bounce into Europe was stirred from news that a new plan to save 6bn Pounds being initiated by the new government. Overall the GBP/USD traded with a low of 1.4249 and a high of 1.4513 before closing the day at 1.4460 in the New York session.

The Australian Dollar (AUD) risk aversion pushed the pair lower in Asia before AUD/JPY buying in Europe pushed the Aussie back above 0.8800. EUR/AUD rebounded from below 1.4000 and kicked higher again in the US session as Oil came under pressure. Overall the AUD/USD traded with a low of 0.8684 and a high of 0.8856 before closing the US session at 0.8760.

Oil & Gold (XAU) kept Broadly to Friday's Range with gains in Asia on Eurozone concerns pared back in Europe after the ECB term deposit announcement. Overall trading with a low of USD$1218 and high of USD$1243 before ending the New York session at USD$1225 an ounce. Oil tested below $70 a barrel throughout the day but ended back above the key psychological level with the US stock market rallying into the close. WTI Oil Closed -$1.53 at $70.08 a barrel.

TECHNICAL COMMENTARY

       

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2000

1.2102

1.2340

1.2597

1.2747

USD/JPY

90.28

91.52

92.40

94.19

94.99

GBP/USD

1.3845

1.4111

1.4435

1.4703

1.4918

AUD/USD

0.8579

0.8686

0.8730

0.9028

0.9136

XAU/USD

1171.00

1198

1225.00

1250

1261.00

OIL/USD

68.50

70

70.40

72.5

75.00

Euro - 1.2340

Initial support at 1.2102 (April 2006 low) followed by 1.2000 (Round Number Support). Initial resistance is now located at 1.2597 (May 14 high) followed by 1.2747 (May 12 high)

Yen - 92.40

Initial support is located at 91.52 (0.382 of 88.26-93.54) followed by 90.28 (0.618 of 88.26-93.54). Initial resistance is now at 94.19 (May 6 low) followed by 94.99 (May 5 high).

Pound - 1.4435

Initial support at 1.4111 (March 30 2009 low) followed by 1.3845 (March 18 2009 low). Initial resistance is now at 1.4703 (May 14 High) followed by 1.4918 (May 13 low).

Australian Dollar - 0.8730

Initial support at 0.8686 (May 17 low) followed by the 0.8579 (Feb 2 low). Initial resistance is now at 0.9028 (May 13 high) followed by 0.9136 (April 28 high).

Gold - 1225

Initial support at 1198 (May 11 low) followed by 1171 (May 6 low). Initial resistance is now at 1250 (Key level) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 70.40

Initial support at 70.00 (Intraday Support) followed by 68.50 (Intraday Support). Initial resistance is now at 72.50 (March high) followed by 75.00 (Intraday Resistance).