China Revaluation Talks Buoying markets

U.S. Dollar Trading (USD) ended the week little loved with most pairs remaining at week highs against the greenback. With little data out, the markets turned to US Equities which finished at month highs. Risk appetite was further boosted over the weekend with China announcing they would 'enhance renminbi flexibility'. In US stocks, DJIA +16 points closing at 10450, S&P +1 points closing at 1117 and NASDAQ +2 points closing at 2309.

The Euro (EUR) traded in a tight and quiet range close to the 1.2400 level with the market supported on dips. Germany's PPI jumped to 0.9% in May y/y from 0.6% previously. The Single currency gapped higher on Monday morning following China's move and will be looking to test 1.2500 if the positive environment continues. EUR/USD traded with a low of 1.2355 and a high of 1.2417 before closing at 1.2390. Looking ahead, ECB President Trichet speaks.

The Japanese Yen (JPY) was strong against the USD as the USD/JPY remained heavy towards the close struggling to gain traction under Y91. Most Crosses were buoyant however in the 'risk on' environment. GBP/JPY remains near Y135 and AUD/JPY in striking distance of Y80. Overall the USDJPY traded with a low of 90.45 and a high of 90.85 before closing the day around 90.70 in the New York session.

The Sterling (GBP) was not immune to quiet trading into the weekend with a rally in Europe sold back to support under 1.4800. UK Public Debt borrowing was 16bn in May, slightly less then 18.2bn forecast. Preliminary Mortgage Approvals came in near expectations at 51k vs. 48k previously. Overall the GBP/USD traded with a low of 1.4775 and a high of 1.4885 before closing the day at 1.4800 in the New York session.

The Australian Dollar (AUD) was the best performing currency on Friday and surged at the Monday open as the heavily Chinese linked economy was supported from the revaluation talk. The news is positive also in reducing trade tensions with the US. Overall the AUD/USD traded with a low of 0.8652 and a high of 0.8725 before closing the US session at 0.8720.

Oil & Gold (XAU) Fresh year high again on Friday, surging on the break above $1250. Overall trading with a low of USD$1243 and high of USD$1262 before ending the New York session at USD$1257 an ounce. Maintained recent strength extending the rally slightly higher. WTI Oil Closed +$0.39 at $77.18 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2045

1.2242

1.2385

1.2453

1.2672

USD/JPY

88.87

89.81

90.75

91.09

92.12

GBP/USD

1.4505

1.4646

1.4820

1.4918

1.5054

AUD/USD

0.8427

0.8506

0.8770

0.8865

0.9027

XAU/USD

1210.00

1227

1257

1280

1300.00

OIL/USD

75

78.00

78.10

79.50

80.00

Euro - 1.2385

Initial support at 1.2242 (June 17 low) followed by 1.2045 (June 11 low). Initial resistance is now located at 1.2453 (May 28 high) followed by 1.2672 (May 21 high)

Yen - 90.75

Initial support is located at 89.81 (May 27 low) followed by 88.97 (May 20 low). Initial resistance is now at 91.09 (June 18 high) followed by 92.12 (June 14 high).

Pound - 1.4820

Initial support at 1.4646 (Jun 17 low) followed by 1.4505 (Jun 11 low). Initial resistance is now at 1.4918 (May 13 high) followed by 1.5054 (May 10 high).

Australian Dollar - 0.8770

Initial support at 0.8506 (June 15 low) followed by the 0.8427 (June 10 low). Initial resistance is now at 0. 8865 (May 17 high) followed by 0.9027 (May 17 high).

Gold - 1257

Initial support at 1227 (June 16 low) followed by 1210 (June 7 low). Initial resistance is now at 1280 (1241.97 plus 1.618 of 1227.09- 1251.18) followed by 1300 (Round Number).

Oil - 78.10

Initial support at 78.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 79.50 (Intraday Resistance) followed by 80.00 (Intraday Resistance).