Bulls Return in Force

U.S. Dollar Trading (USD) was sold off aggressively in the European and US sessions as the Dow Jones posted its biggest rally since May. The only currency the Greenback could gain against was the other safe haven in the Japanese Yen with traders scrambling to cover positions given the dramatic shift in investor sentiment. In US stocks, DJIA +274 points closing at 10018, S&P +32 points closing at 1060 and NASDAQ +65 points closing at 2159. Looking ahead, Weekly Jobless Claims are forecast at 460k vs. 472k previously.

The Euro (EUR) was well supported but struggled to make fresh gains as resistance above 1.2600 proved tough going for the single currency. Q1 GDP was confirmed at 0.2% but May German Factory orders slumped -0.5% for the first drop this year. EUR/JPY did reclaim the Y110 comfortably and is poised just below Y111. EUR/USD traded with a low of 1.2552 and a high of 1.2665 before closing at 1.2620. Looking ahead, May German Trade Balance is forecast at 13.5bn vs. 13.1bn previously. ECB rate Decision forecast to hold at 1%.

The Japanese Yen (JPY) tested Y87 in Early Europe but when stock markets began to rally and support from crosses kicked in the major was able to move back towards Y88. AUD/JPY led the market higher surging nearly 3 Yen on the Day. Overall the USDJPY traded with a low of 87.00 and a high of 87.86 before closing the day around 87.80 in the New York session. Update Machine Orders -9.1% vs. -3.1% forecast.

The Sterling (GBP) was buoyant after finding support in Europe to test resistance above 1.5200 once again in the US session. The pair is finding fresh gains difficult however with the market cautious ahead of the BOE/ECB double tonight. GBP/JPY was able to reclaim Y133 and close above the figure. Overall the GBP/USD traded with a low of 1.5079 and a high of 1.5222 before closing the day at 1.5210 in the New York session. Looking ahead, May Industrial Output is forecast at 0.4% vs. -0.4% previously. BOE Rate decision forecast to remain at 0.5%.

The Australian Dollar (AUD) once again led the market higher after the risk currency took full advantage of the rally in stock markets to surge to fresh week highs above 0.8600. Resistance at 0.8660 held true but the sentiment has shifted in the last few days and more upside is likely. Overall the AUD/USD traded with a low of 0.8448 and a high of 0.8666 before closing the US session at 0.8620. Update June Employment change +45.9k vs. 17.5k forecast. June Unemployment Rate 5.1% vs. 5.2% previously.

Oil & Gold (XAU) was hurt from comments from china that gold would never be a major investment channel but was able to rally in the US on significant weakness in the Dollar. Overall trading with a low of USD$1184 and high of USD$1206 before ending the New York session at USD$1204 an ounce. Rallied from last month lows as investor confidence improved. WTI Oil Closed +$2.09 at $74.07 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2045

1.2194

1.2660

1.2672

1.2803

USD/JPY

85.87

86.97

88.40

88.56

89.42

GBP/USD

1.4857

1.5000

1.5195

1.5242

1.5391

AUD/USD

0.8566

0.8664

0.8730

0.8865

0.9000

XAU/USD

1185.00

1189

1205

1214

1265.00

OIL/USD

70

72.50

74.20

75.00

77.00

Euro - 1.2660

Initial support at 1.2194 (July 1 low) followed by 1.2045 (June 11 low). Initial resistance is now located at 1.2672 (May 21 high) followed by 1.2803 (May 11 high)

Yen - 88.40

Initial support is located at 86.97 (July 1 low) followed by 85.87 (Nov 30, 2009 low). Initial resistance is now at 88.56 (July 1 high) followed by 89.42 (June 28 high).

Pound - 1.5195

Initial support at 1.5000 (Psychological level) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5242 (38.2% retrace of 1.6878-1.4231) followed by 1.5391 (April 30 high).

Australian Dollar - 0.8730

Initial support at 0.8664 (July 7 high) followed by the 0.8566 (June 30 high). Initial resistance is now at 0. 8865 (may 17 high) followed by 0.9000 (Big Level).

Gold - 1205

Initial support at 1189 (July 6 low) followed by 1185 (May 25 low). Initial resistance is now at 1214 (July 5 high) followed by 1265 (June 25 high).

Oil - 74.20

Initial support at 72.50 (Intraday Support) followed by 70.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 77.00 (Intraday Resistance).