U.S. Dollar Trading (USD) the USD was on the back foot with risk on trade continuing until Fed Chief Bernanke testimony overnight in which he failed to talk about further stimulus and disappointed those expecting more support from the Central bank. Stock markets fell heavily and the USD strengthened sharply across the board. Gold was the biggest mover falling over $70oz as the precious metal was bought previously on expectations of further printing of money out of the United States. The Euro (EUR) the big news in the European session was the second LTRO which saw 530bn lent out to 800 European banks. The market didn’t really react however as 500bn was expected and had already rallied to the day before. The failure to break above 1.3500 and the stronger USD in the US session sent the major on a dramatic fall to 1.3300. The uptrend is under threat and a break below 1.3300 could lead to further losses while stabilization should lead to a new short term range been formed. Also ahead, February PMI forecast at 49. Also January Unemployment forecast at 10.4%. From the US, Weekly Jobless Claims forecast at 351k vs. 351k previously. February ISM manufacturing is forecast at 54.5 vs. 54.1 previously. Also Fed Chief Bernanke speaks again before the Senate Banking Committee.
The Japanese Yen (JPY) USD/JPY rallied aggressively with the strong US data and lack of QE3 talk from the FED chairman. USD/JPY broke above Y81 and is in striking distance of Y81.50 the previous high on Monday. The outlook is for more losses for the Yen if the US economic data continues to outperform Japans. The Sterling (GBP) held above the 1.5900 level and gained heavily against other currencies especially against the Euro. EUR/GBP fell below 0.8400 and next support is 0.8280. Australian Dollar (AUD) the AUD/USD broke to fresh year highs above 1.0845 but only briefly as US stocks and the Euro fell heavily in New York. The market is still strong but cannot rally alone and if stocks fall then AUD/USD will be under pressure. Support is seen at 1.0650. Looking ahead, February UK PMI Manufacturing forecast at 51.8 vs. 52.1 previously.
Oil & Gold (XAU) Gold was hammered as the chance of more Quantitative easing out of the US fell dramatically overnight with the Chairman of the FOMC failing to mention it in his bi-annual testimony to Congress. OIL/USD dipped for a third day down to $105 before buyers emerged and we say a move back above $107 by late US trade.
Pairs to watch
USD/JPY to resume uptrend ahead of Friday’s Non Farm Payrolls?
AUD/JPY safest way to buy the Aussie given strong US data?