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U.S. Dollar Trading (USD) the Dollar was under pressure as the EUR/USD and stocks rallied on the ECB rate cut and good Weekly Jobless claims but then gained heavily as stocks reversed sharply when ECB President Draghi refused to increase the bond buying operations of the European central bank. In US stocks, DJIA -198 points closing at 11997, S&P -26 points closing at 1234 and NASDAQ -52 points closing at 2596. Looking ahead, October International Trade is forecast at -43.5bn vs. -43.1bn previously.
The Euro (EUR) the rally above 1.3450 was brief and the reversal very sharp with traders disappointed that no new measures were announced and the skeptical that the EU leaders would be able to work out a new deal at their 2 day summit finishing Friday. A lot of pressure is on the leaders to come up with new ways to support the market but Germany is resistant to many of the ideas. Looking ahead, EU Summit Conclusion.
The Japanese Yen (JPY) the USD/JPY moved lower with the USD weakness as the Euro and other risk assets rallied but support was found under Y77.20 and the major bounced back to Y77.70. EUR/JPY had a very sharp drop on the day back to Y103 at one point. The EUR/JPY dropping below Y100 may prompt more intervention from Japanese authorities with the European export market very important for many Japanese firms.
The Sterling (GBP) the BOE held at 0.5% as widely expected and the GBP/USD flowed the Euro higher and then lower after the Draghi disappointment. EUR/GBP tested 0.8500 briefly at the height of the EUR/USD weakness but this level held and we saw a small bounce into the close. GBP/USD was able to hold above 1.5600 and will follow the Euro again today for movement. Looking ahead, October Trade Balance forecast at -9.4bn vs. -9.8bn previously.
The Australian Dollar (AUD) weak Australian Job numbers in November with a -6k change vs. +10k forecast sent the AUD/USD lower in Asia but optimism in Europe saw the risk pair rally to 1.0380 before once again reversing aggressively on the ECB disappointment. The outlook is closely linked to the stock market but also Chinese data which is released today and could further suggest that the Asian giant is slowing down. Looking ahead, Chinese CPI forecast at 4.4% vs. 5.5% y/y previously.
Oil & Gold (XAU) Gold and most commodities slumped overnight with the preciously metal slumping over 2% with the ECB refusing to print money. Oil fell back below $100 in a large move on the back of risk off trade and USD strength.
Pairs to watch
EUR/USD EU leaders to reach deal?
OIL/USD the uptrend over?
Euro – 1.3345
Initial support at 1.3334 (Dec 6 low) followed by 1.3212 (Nov 25 low). Initial resistance is now located at 1.3487 (Dec 5 high) followed by 1.3548 (Dec 2 high)
Yen – 77.70
Initial support is located at 77.01 (Nov 24 low) followed by 76.84 (Nov 22 low). Initial resistance is now at 77.86 (Dec 6 high) followed by 78.42 (Nov 2 high).
Pound – 1.5640
Initial support at 1.5595 (Dec 7 low) followed by 1.5459 (Nov 28 low). Initial resistance is now at 1.5780 (Nov 30 high) followed by 1.5883 (61.8% retrace of 1.6167-1.5423).
Australian Dollar – 1.0180
Initial support at 1.0151 (Dec 1 high) followed by the 1.0000 (Round Number). Initial resistance is now at 1.0233 (Dec 7 low) followed by 1.0447 (Nov 3 high).
Gold – 1712
Initial support at 1701 (Nov 30 high) followed by 1728 (61.8% retrace of 1681.73-1802.93). Initial resistance is now at 1720 (Dec 7 high) followed by 1755 (Dec 5 high).
Oil – 98.30
Initial support at 98.00 (Intraday Support) followed by 97.00 (Intraday Support). Initial resistance is now at 100.00 (Intraday resistance) followed by 101.00 (Intraday Resistance).
Written by Anthony Darvall