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U.S. Dollar Trading (USD) the Dollar was under pressure in Asia and Europe as stocks enjoyed solid gains and the new ECB LTRO lending facility saw good demand. The new facility lent E489bn to banks and could free up money to lend to business and buy more European bonds. Stocks reversed in the US session however and the Dollar ended higher against most currencies. In US stocks, DJIA +4 points closing at 12107, S&P +2 points closing at 1243 and NASDAQ -25 points closing at 2577. Looking ahead, Weekly Jobless Claims forecast at 375k vs. 366k previously. Also December, UoM Consumer Confidence previously at 68.
The Euro (EUR) the EUR/USD spiked higher on the excellent demand for the new ECB lending facility. After testing 1.3200 however the market reversed and fell during the US session as analysts suggested banks would not use the money to invest in European bonds. Yields on Italian debt increased as this view became more widespread. Looking ahead, no data today.
The Japanese Yen (JPY) the USD/JPY ended above Y78 returning to the top end of the recent range as the Euro selling helped the Dollar rally against all currencies. A break above Y78.30 would open up recent intervention highs near Y80 and could create a new trend after months of consolidation. AUD/JPY and EUR/JPY fell with stocks but are supported technically and would move higher if the USD/JPY rallied. The BOJ held at 0.1% as widely expected.
The Sterling (GBP) fell in the US session but at a slower pace than the Euro which pushed EUR/GBP to fresh lows near 08300. The outlook on the cross is still bearish and threatens to slip back further towards 0.8000. EUR/GBP has spent most of the past few decades below 0.8000. The MPC minutes were 0-9-0 as expected but they did discuss the potential for more QE next year. Looking ahead, Q3 GDP forecast at 0.5%.
The Australian Dollar (AUD) the AUD/USD rallied to 1.0200 but then reversed as the EUR/USD and US Stocks changed direction. The risk currency is at the mercy of other markets but the underlying strength on the Australia economy is still there and the interest rate differential creates a constant support. Support is seen below Parity with large business hedging at rates under the key level.
Oil & Gold (XAU) tested $1630 but struggled to hold onto the gains falling back to $1610. Crude Oil rallied to $99 bucking the trend of other commodities.
Pairs to watch
EUR/USD relief rally over?
OIL/USD can we get above $100 a barrel
Euro – 1.3035
Initial support at 1.2983 (Dec 19 low) followed by 1.2867 (Jan 10 low). Initial resistance is now located at 1.3327 (Dec 13 high) followed by 1.3386 (Dec 12 high)
Yen – 78.10
Initial support is located at 77.49 (Dec 9 low) followed by 76.84 (Nov 22 low). Initial resistance is now at 78.29 (Nov 29 high) followed by 78.98 (Nov 1 high).
Pound – 1.5660
Initial support at 1.5465 (Dec 19 low) followed by 1.5272 (Oct 6 low). Initial resistance is now at 1.5735 (Dec 9 high) followed by 1.5889 (Nov 18 high).
Australian Dollar – 1.0070
Initial support at 0.9920 (Dec 12 high) followed by the 0.9833 (76.4% retrace of 0.9664-1.0380). Initial resistance is now at 1.0163 (Dec 13 low) followed by 1.0225 (Dec 9 high).
Gold – 1611
Initial support at 1563 (Dec 14 high) followed by 1500 (Oct 4 low). Initial resistance is now at 1642 (Dec 12 low) followed by 1677 (Dec 13 high).
Oil – 98.70
Initial support at 96.00 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 99.00 (Intraday resistance) followed by 100.00 (Intraday Resistance).
Written by Anthony Darvall