German Naked Short Selling Ban Refreshes Fear

U.S. Dollar Trading (USD) weakness in Asia due to profit taking and short covering on the majors was reversed abruptly when Germany announced a ban on short selling in some German Banks and EU Bonds. US Data was overlooked but strong with April US Housing Starts jumping 5.8% m/m. In US stocks, DJIA -114 points closing at 10510, S&P -16 points closing at 1120 and NASDAQ -36 points closing at 2317. Looking ahead, April CPI forecast at 2.4% vs. 2.3%. Also Released, Weekly Crude Inventories forecast at 0.7mln vs. -1.2mln previously.

The Euro (EUR) the market traded above 1.2400 for most of the European session until the German short selling announcement fanned the fears of another Lehman brothers style crash and the Euro plunged to new year lows under 1.2200. The inability of the ECB to control the situation is worrying investors and adding to the downside spiral. EUR/USD traded with a low of 1.2143 and a high of 1.2446 before closing at 1.2205.

The Japanese Yen (JPY) was stronger across the board as risk aversion spread and key levels were broken. AUD/JPY broken through Y80 but it was EUR/JPY that led the way lower falling over 3 Yen from above Y115 and is targeting the Y110 level. USD/JPY held above 91.80 but is also under pressure. Overall the USDJPY traded with a low of 91.84 and a high of 92.99 before closing the day around 92.05 in the New York session.

The Sterling (GBP) was not immune to the general market selloff and the GBP made fresh 2010 lows below 1.4250 in late US trade. EUR/GBP was largely unchanged after testing both 0.8600 and 0.8500. GBP/JPY closed below Y131 and is targeting the Y130 major big figure level. Overall the GBP/USD traded with a low of 1.4253 and a high of 1.4525 before closing the day at 1.4255 in the New York session.

The Australian Dollar (AUD) the risk aversion hit the commodity currencies hard with AUD, CAD and NZD all falling heavily. AUD/JPY broke through Y80 and traditionally this has led to Japanese investor liquidations and sharp losses. RBA minutes signaled that the central bank may pause for a while. Overall the AUD/USD traded with a low of 0.8587 and a high of 0.8791 before closing the US session at 0.8610. Update May Consumer Confidence -7 vs. -1 previously.

Oil & Gold (XAU) was weaker as the $1218 support broke but the market did not fall far as the crash in the Euro increased demand for the alternative currency. Overall trading with a low of USD$1206 and high of USD$1229 before ending the New York session at USD$1210 an ounce. Oil continued to crash falling over $3 from day highs as investor confidence slumps. WTI Oil Closed $0.67 at $69.41 a barrel.

TECHNICAL COMMENTARY

       

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2000

1.2102

1.2215

1.2597

1.2747

USD/JPY

90.28

91.52

92.05

94.19

94.99

GBP/USD

1.3845

1.4111

1.4290

1.4703

1.4918

AUD/USD

0.8450

0.8500

0.8570

0.8626

0.8800

XAU/USD

1171.00

1198

1210.00

1250

1261.00

OIL/USD

65.00

68.00

68.70

70.00

72.00

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 - 92.05

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 - 1.4290

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 - 0.8570

Initial support at 0.8500 (big figure support) followed by the 0.8400 (big figure support). Initial resistance is now at 0.8626 (May 18 low) followed by 0.9028 (May 13 high).

Gold - 1210

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 - 68.70

Initial support at 68.00 (Intraday Support) followed by 65.00 (Intraday Support). Initial resistance is now at 70.00 (March high) followed by 72.00 (Intraday Resistance).