China Tightens Bank Lending


U.S. Dollar Trading (USD) gained heavily in Asia as risk aversion spiked on confirmation the Chinese government had asked banks to slow down lending. US stocks shrugged this off however as bargain hunters jumped in at lower levels and economic data improved. November Case Shiller House prices at -0.2% forecast 0.1% m/m whilst January Consumer Confidence improved to 55.9 vs. forecast at 53.5. DJIA -2 points closing at 10194, S&P -4 points closing at 1092 and NASDAQ -7 points closing at 2203. Looking ahead, December New Home Sales forecast at 0.37mln vs. 0.355mln previously. January FOMC forecast to hold rates at 0.25%.

The Euro (EUR) fell back on heavy EUR/JPY selling with Asian stocks slumping on the Chinese news. The pair stabilized in Europe with the German IFO beating expectations at 95.1 in January. EUR/GBP soared as UK GDP missed expectations. Overall the EUR/USD traded with a low of 1.4041 and a high of 1.4181 before closing at 1.4080.

The Japanese Yen (JPY) was once again the strongest currency as the USD/JPY slipped below Y90 and crosses came under heavy selling pressure. EUR/JPY broke through Y126 and AUD/JPY tested Y80. The BOJ held at 0.1% as widely expected. Overall the USDJPY traded with a low of 89.32 and a high of 90.57 before closing the day around 89.60 in the New York session. UPDATE December Japanese Trade Balance at Y545bn.

The Sterling (GBP) fell back across the board after Q4 GDP came in lower than expected but still showed the UK has emerged from recession. Q4 GDP at 0.1% vs. 0.4%. Support was found at 1.6100 and a mild recovery was seen as US stocks lifted off lows. Overall the GBP/USD traded with a low of 1.6091 and a high of 1.6271 before closing the day at 1.6130 in the New York session. Looking Ahead, January CBI distributive trades forecast at 8 vs. 13.

The Australian Dollar (AUD) came under heavy pressure as China Concerns resurfaced and the risk sensitive currency tracked stock markets lower. AUD/JPY was especially heavy as the market continued its track lower. Speculation that the RBA may raise rates on Feb 2nd are been ignored for now. Overall the AUD/USD traded with a low of 0.8935 and a high of 0.9086 before closing the US session at 0.9015.

Oil & Gold (XAU) remained in familiar ranges with buyers supporting into the $1080's once again. Overall trading with a low of USD$1085 and high of USD$1104 before ending the New York session at USD$1099 an ounce. Fell back to $74 support as sentiment soured. Crude Oil was up -$1.08 ending the New York session at $74.71.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.4029

1.4043

1.4075

1.4194

1.4218

USD/JPY

88.97

89.30

89.65

90.56

91.87

GBP/USD

1.6038

1.6078

1.6140

1.6312

1.6372

AUD/USD

0.8902

0.8939

0.8995

0.9093

0.9146

XAU/USD

1074.00

1082

1099.00

1104

1117.00

OIL/USD

72.50

74.00

74.60

75.00

77.00

Euro - 1.4075

Initial support at 1.4043 (Jan 26 low) followed by 1.4029 (Jan 21 low). Initial resistance is now located at 1.4194 (Jan 25 high) followed by 1.4218 (Dec 22 high)

Yen - 89.65

Initial support is located at 89.30 (0.500 of 84.83 - 93.77) followed by 89.30 (50% retracement of 84.86 - 93.75). Initial resistance is now at 90.56 (Jan 22 high) followed by 91.87 (Jan 14 high).

Pound - 1.6140

Initial support at 1.6078 (Jan 22 low) followed by 1.6038 (Jan 11 low). Initial resistance is now at 1.6312 (Jan 21 high) followed by 1.6372 (Jan 20 high).

Australian Dollar - 0.8995

Initial support at 0.8939 (Jan 21 low) followed by the 0.8902 (Dec 30 low). Initial resistance is now at 0.9093 (Jan 25 high) followed by 0.9146 (Jan 21 high).

Gold - 1099

Initial support at 1082 (Jan 22 low) followed by 1074 (Dec 22 low). Initial resistance is now at 1104 (Jan 25 high) followed by 1117 (Jan 21 high).

Oil - 74.60

Initial support at 74.00 (Intraday support) followed by 72.50 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 77.00 (Intraday Resistance).