Optimism Returns, Risk Trades Back On
Written by Anthony Darvall
U.S. Dollar Trading (USD) was sold across the board as demand for the safe haven eased and the market bought stocks and commodities aggressively. Company Earnings were strong but economic data was a little weak with Weekly Jobless Claims at 464k vs. 449k previously. In US stocks, DJIA +201 points closing at 10322, S&P +24 points closing at 1093 and NASDAQ +58 points closing at 2245.
The Euro (EUR) rallied aggressively after some strong economic data and improvement in sentiment helped lift the pair back to the 1.2900 level. The market is eagerly awaiting the European stress tests released at 1400 GMT. July EU Manufacturing PMI jumped 56.5 vs. 55.2. EUR/USD traded with a low of 1.2736 and a high of 1.2934 before closing at 1.2890. Looking ahead, German July IFO forecast at 101.5 vs. 101.8 previously.
The Japanese Yen (JPY) had a volatile day with the market testing Y110 support on the EUR/JPY and month lows on the USD/JPY at Y86.30 before profit taking and a reversal of stock market direction ignited a fierce short covering rally. Overall the USDJPY traded with a low of 86.32 and a high of 87.25 before closing the day around 87.10 in the New York session.
The Sterling (GBP) led the market higher in Europe after solid June Retail Sales at 0.7% vs. 0.5% forecast. Resistance at 1.5200 was broken and the pair rallied to 1.5300 before running out of steam. Overall the GBP/USD traded with a low of 1.5148 and a high of 1.5299 before closing the day at 1.5280 in the New York session. Looking ahead, Q2 GDP 0.6% vs. 0.3% previously.
The Australian Dollar (AUD) was the strongest currency on the day after breaking above 2 month resistance at 0.8860 to close above 0.8900. RBA Rate hike speculation and surging commodities combined to provide the perfect environment for the Aussie to break higher. Overall the AUD/USD traded with a low of 0.8735 and a high of 0.8955 before closing the US session at 0.8930.
Oil & Gold (XAU) Gold rallied in sympathy with Oil testing $1200 but failing to break the key psychological level. Overall trading with a low of USD$1180 and high of USD $1201 before ending the New York session at USD$1195 an ounce. Oil surged with the change in investor mood with $80 a barrel now the bulls target. WTI Oil Closed +$2.80 at $79.20 a barrel.
Euro - 1.2895
Initial support at 1.2709 (July 15 low) followed by 1.2480 (July 6 low). Initial resistance is now located at 1.3094 (May 10 high) followed by 1.3416 (April 27 high)
Yen - 87.05
Initial support is located at 86.27 (July 16 low) followed by 85.87 (Nov 30 2009 low). Initial resistance is now at 88.50 (July 15 high) followed by 89.16 (July 12 high).
Pound - 1.5265
Initial support at 1.5125 (July 20 low) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5472 (38.2% retrace of 1.6878-1.4231) followed by 1.5816 (Feb 17 high).
Australian Dollar - 0.8930
Initial support at 0.8622 (July 8 high) followed by the 0.8450 (June 7 high). Initial resistance is now at 0. 9077 (76.4% retrace of 0.9389-0.8067) followed by 0.9389 (April 12 high).
Gold - 1194
Initial support at 1175 (July 20 low) followed by 1157 (May 5 low). Initial resistance is now at 1218 (July 13 high) followed by 1244 (July 1 high).
Oil - 79.30
Initial support at 78.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.50 (Intraday Resistance).