EUR/USD Hits Year Lows

U.S. Dollar Trading (USD) Stock markets rallied aggressively in the US session after a poor lead from Europe on better than expected ISM manufacturing in May which fell to 59.7 vs. 60.4 previously. Also strong, April Construction spending jumping 2.7% vs. 0.1% previously. News that Lebanon had fired on Israeli Planes late in the US session sent risk aversion higher sent stocks sharply lower and Dollar higher. In US stocks, DJIA -122 points closing at 10024, S&P -18 points closing at 1070 and NASDAQ -7 points closing at 2222. Looking ahead, April Pending Home Sales Change forecast at 5.0 vs. 5.3%.

The Euro (EUR) broke through year lows at 1.2140 to test fresh lows before staging a solid recovery rally on the stock market gains at the start of the US session. German Unemployment Change was good at -45k vs. -20k forecast but EU Unemployment rate jumped to 10.1% vs. 10.0%. EUR/USD traded with a low of 1.2110 and a high of 1.2356 before closing at 1.2230. Looking ahead, April PPI is forecast at 0.7% vs. 0.6% previously.

The Japanese Yen (JPY) risk aversion was met by bargain hunters and the prospect of political turmoil in Japan. The USD/JPY gyrated around the Y91 level although solid US data did push the pair higher. GBP/JPY was the stand out performer as the Pound led the recovery. Overall the USDJPY traded with a low of 90.52 and a high of 91.47 before closing the day around 91.10 in the New York session. UPDATE PM Hayotama Resigns.

The Sterling (GBP) continued to outperform the rest of the market as the collapse of the Prud/AIG deal was seen as a major GBP positive and EUR/GBP broke to fresh multi-year lows. Cable soared above resistance at 1.4600 to test 1.4700 before weakness at the end of the US stock session prompted profit taking. May Manufacturing PMI remained at 58.0. Overall the GBP/USD traded with a low of 1.4437 and a high of 1.4726 before closing the day at 1.4670 in the New York session. Looking ahead, April Mortgage Approvals are forecast at 49k vs. 48.9k previously.

The Australian Dollar (AUD) continued with recent volatility breaking below 0.8300 at the height of the Euro weakness before rebounding on solid US data. AUD/JPY buying on dips is providing support as the high yielder is still seen as the key carry trade. The RBA held at 4.5% but did provide a upbeat statement. Overall the AUD/USD traded with a low of 0.8280 and a high of 0.8447 before closing the US session at 0.8330. UPDATE Q1 GDP is 0.5% vs. 0.6% forecast but revisions of Q4 2009 were at 1.1% Q/Q.

Oil & Gold (XAU) pushed higher on Euro concerns and alternate investment demand. Overall trading with a low of USD$1215 and high of USD$1229 before ending the New York session at USD$1224 an ounce. Crude Oil was softer on concerns about EU and China Demand. WTI Oil Closed $1.39 at $72.50 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2000

1.2110

1.2215

1.2453

1.2587

USD/JPY

89.81

90.61

91.15

91.88

92.97

GBP/USD

1.4231

1.4366

1.4670

1.4722

1.4918

AUD/USD

0.8067

0.8202

0.8325

0.8552

0.8579

XAU/USD

1185.00

1202

1225

1229

1250.00

OIL/USD

69.50

70.00

72.35

75.00

76.00

Euro - 1.2215

Initial support at 1.2110 (June 1 low) followed by 1.2000 (Round Number). Initial resistance is now located at 1.2453 (May 28 high) followed by 1.2587 (May 24 high)

Yen - 91.15

Initial support is located at 90.61 (May 28 low) followed by 89.81 (May 27 low). Initial resistance is now at 91.88 (May 20 low) followed by 92.97 (May 18 high).

Pound - 1.4670

Initial support at 1.4366 (Mary 27 low) followed by 1.4231 (May 20 low). Initial resistance is now at 1.4722 (June 1 High) followed by 1.4918 (May 13 high).

Australian Dollar - 0.8325

Initial support at 0.8202 (May 27 low) followed by the 0.8067 (May 25 low). Initial resistance is now at 0. 8552 (May 28 low) followed by 0.8579 (Feb 5 low).

Gold - 1225

Initial support at 1202 (May 28 low) followed by 1185 (May 25 low). Initial resistance is now at 1229 (Key level) followed by 1250 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 72.35

Initial support at 70.00 (Intraday Support) followed by 69.50 (Intraday Support). Initial resistance is now at 72.50 (Intraday Resistance) followed by 75.00 (Intraday Resistance).