U.S. Dollar Trading (USD) led by a recovery in global banking stocks the markets had another positive day yesterday. The dollar was sold as safe haven demand was pared back. In economic data, September ISM services came in at 53.0 vs. 52.9 forecast and ADP September Employment +91k vs. 75k forecast. In US stocks, DJIA +131 points closing at 10940, S&P +20 points closing at 1143 and NASDAQ +55 points closing at 2460. Looking ahead, Weekly Jobless Claims forecast 410k vs. 391k previously.

The Euro (EUR) was well supported on dips with the panic leaving the market and stocks rallying. September PMI services fell to 48.8 vs. 49.1 previously. August Retail Sales fell -0.3%m/m as forecast. Sentiment was helped by German Chancellor Merkel comments her government was ready recapitalize banks if needed. Looking ahead, ECB Interest Rate Decision forecast to hold at 1.5% and Press Conference from President Trichet.

The Japanese Yen (JPY) USD/JPY tested Y77 as crosses lifted in the US session but was unable once again to break the key topside resistance and the major fell back into the recent range. EUR/JPY and AUD/JPY continued to edge higher with stocks well off Tuesday's lows. The recent downtrend could be under threat if shorts begin to cover aggressively.

The Sterling (GBP) the Pound struggled to fully take advantage of the positive mood in the market after failing to break 1.5500. Hurting sentiment was the downgrade of Q2 GDP to 0.1% from 0.2% Q/Q originally. Looking ahead, Bank of England Rate meeting expected to hold at 0.5%.

The Australian Dollar (AUD) some strong August Retail sales (0.6% vs. 0.3% forecast) helped the AUD/USD to rally above 0.9600 in a solid performance in the European and US sessions. Most crosses saw AUD gains with buying notable on the AUD/JPY which is a favorite of investors when mood improves.

Oil & Gold (XAU) Gold Tested $1600 before rallying up to $1650 and stabilizing near the key resistance. Crude Enjoyed solid gain back towards $80 a barrel tracking stock market direction closely.

Pairs to watch

EUR/USD Will the ECB cut interest rates to support the Eurozone?

AUD/USD Can stock markets rally for a third day?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3000

1.3146

1.3345

1.3389

1.3601

USD/JPY

75.00

76.11

76.70

77.28

77.86

GBP/USD

1.5328

1.5400

1.5470

1.5597

1.5666

AUD/USD

0.9331

0.9406

0.9645

0.9706

0.9810

XAU/USD

1583.00

1596

1637

1678

1704

OIL/USD

75.00



78.00

79.60

80.00

82.00



Euro - 1.3345

Initial support at 1.3146 (Oct 4 low) followed by 1.3000 (Big Figure support). Initial resistance is now located at 1.3389 (Oct 3 high) followed by 1.3601 (Sept 30 high)



Yen - 76.70

Initial support is located at 76.11 (Sep 22 low) followed by 75.00 (Psych Support). Initial resistance is now at 77.28 (Sep 15 high) followed by 77.86 (Sep 9 high).

Pound - 1.5470

Initial support at 1.5400 (big figure support) followed by 1.5328 (Sept 22 low). Initial resistance is now at 1.5597 (Oct 3 high) followed by 1.5666 (Sept 30 high).



Australian Dollar - 0.9645

Initial support at 0.9406 (channel lower drawn off Aug 1 high) followed by the 0.9331 (Sep 16,2010 low). Initial resistance is now at 0.9706 (Mar 17 high) followed by 0.9810 (Sep 30 high).

Gold - 1637

Initial support at 1596 (Oct 4 low) followed by 1583 (Sept 29 low). Initial resistance is now at 1678 (Oct 4 high) followed by 1704 (Aug 25 low).



Oil - 79.60

Initial support at 78.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at  80.00 (Intraday resistance) followed by 82.00 (Intraday Resistance).





Written by Anthony Darvall