China Rally Fades in the US Session

U.S. Dollar Trading (USD) the markets enthusiasm for the China story ran out of steam as officials in the US only gave a measured response. Profit taking turned to selling when the US stock markets turned negative. Large drops in Gold and the Euro helped keep the Dollar remained well supported. In US stocks, DJIA -8 points closing at 10442, S&P -4 points closing at 1113 and NASDAQ -20 points closing at 2389. Looking ahead, May Existing Home Sales forecast at 6.12mn vs. 5.77mn previously.

The Euro (EUR) reversed aggressively from the mid 1.24's as sentiment turned negative and EUR/CHF slumped in the US session. Swiss National Bank President spoke and noted that deflationary pressures have largely disappeared and that there is no need to intervene right now. EUR/CHF slipped form 1.3750 to fresh all time lows at 1.3660. EUR/USD traded with a low of 1.2302 and a high of 1.2469 before closing at 1.2325. Looking ahead, June German IFO Climate forecast at 101.2 vs. 101.5 previously.

The Japanese Yen (JPY) opened up weak in the low Y90 region before rallying over a Yen to 91.50 on solid USD demand and strong crosses in Europe. The momentum faded however with US stocks and most pairs fell back to finish roughly unchanged on the day. Overall the USDJPY traded with a low of 90.32 and a high of 91.49 before closing the day around 91.10 in the New York session.

The Sterling (GBP) hit fresh June highs above 1.4900 going into Europe but fell back quickly on profit taking and Euro linked weakness. June UK Right-move house prices improved 0.3%. GBP/JPY touched noted resistance at Y136. Overall the GBP/USD traded with a low of 1.4736 and a high of 1.4940 before closing the day at 1.4780 in the New York session.

The Australian Dollar (AUD) traded as high as 0.8860 before falling with the rest of the market and collapse in gold. The market will be following stock markets in Asia and looking for more information from china given there was no change in the official USD/YUAN rate yesterday. Overall the AUD/USD traded with a low of 0.8751 and a high of 0.8862 before closing the US session at 0.8770.

Oil & Gold (XAU) tested fresh highs before slumping over $30 a ounce on heavy profit taking. Overall trading with a low of USD$1230 and high of USD$1265 before ending the New York session at USD$1235 an ounce. Rallied on the Chinese news but pared back gains into the US close on stock market weakness. WTI Oil Closed +$0.64 at $77.82 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2045

1.2242

1.2345

1.2453

1.2672

USD/JPY

88.87

89.81

91.05

91.48

92.12

GBP/USD

1.4505

1.4646

1.4790

1.4918

1.5054

AUD/USD

0.8582

0.8753

0.8810

0.8865

0.9027

XAU/USD

1210.00

1227

1239

1280

1300.00

OIL/USD

75

78.00

78.70

79.50

80.00

Euro - 1.2345

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 - 91.05

Initial support is located at 89.81 (May 27 low) followed by 88.97 (May 20 low). Initial resistance is now at 91.48 (June 21 high) followed by 92.12 (June 14 high).

Pound - 1.4790

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 - 0.8810

Initial support at 0.8753 (June 21 low) followed by the 0.8582 (June low). Initial resistance is now at 0. 8865 (May 17 high) followed by 0.9027 (May 17 high).

Gold - 1239

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 - 78.70

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).