U.S. Dollar Trading (USD) stocks soared in the last hour of US trade on a UK guardian report that France and Germany had agreed to increase the EFSF to EUR2 Trillion to help safeguard against debt contagion. US Stocks soared and risk appetite picked up leading to USD selling on most pairs. In US stocks, DJIA +180 points closing at 11577, S&P +24 points closing at 1225 and NASDAQ +42 points closing at 2657. Looking ahead, September CPI forecast at 0.3% vs. 0.4% previously m/m. Also released, September Housing Starts forecast at 0.59mln 0.571mln.

The Euro (EUR) continued selling in Europe saw the EUR/USD below 1.3700. The mood changed dramatically after a report in UK guardian that France and Germany had reached an agreement. This deal was denied a few hours later but the Euro was already back above 1.3800. Selling did come back into the frame however after Moody's downgraded Spain in line with the other two rating agencies. German October ZEW slumped to -48 vs. -43 forecast.

The Japanese Yen (JPY) was range trading Y76.70-Y76.90 with the action kept to the crosses with the downside tested on EUR/JPY and AUD/JPY before reversing sharply on the EU deal talk.

The Sterling (GBP) September CPI came in hot at 5.2% vs. 4.9% previously. The potential for the Bank of England to raise rates to counter inflation is limited because of the weakness in the UK recovery. The GBP/USD rallied late in the US session with the other majors as the market reacted to the EU news. Looking ahead, October MPC Minutes forecast at 9 unchanged.

The Australian Dollar (AUD) the AUD/USD was volatile hitting support at 1.0100 before rallying back to 1.0300 at the height of the US stock market reaction to EU debt deal news. The Chinese GDP earlier in the day missed slightly at 9.1% vs. 9.3% forecast.

Oil & Gold (XAU) Gold dropped aggressively $40 an ounce from $1670 to $1630 but was able to close at $1660 after recovering in the US session. Oil Contract expired overnight. The market moved aggressively higher to test $89 before easing back to $88.50 into the close.

Pairs to watch

EUR/USD Debt Deal Done?

OIL/USD Are we on the way to test $90 a barrel?



TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3566

1.3685

1.3770

1.3937

1.4013

USD/JPY

75.95

76.31

76.70

77.86

78.60

GBP/USD

1.5667

1.5722

1.5725

1.5869

1.5991

AUD/USD

0.9866

1.0102

1.0140

1.0372

1.0440

XAU/USD

1596.00

1627

1662

1704

1726

OIL/USD

86.00



88.00

88.10

89.00

90.00



Euro - 1.3770

Initial support at 1.3685 (Oct 13 low) followed by 1.3566 (Oct 11 low). Initial resistance is now located at 1.3937 (Sept 15 high) followed by 1.4013 (61.8% retrace of 1.4549-1.3146)



Yen - 76.70

Initial support is located at 76.31 (Oct 12 low) followed by 75.95 (Aug 19 low). Initial resistance is now at 77.86 (Sep 9 high) followed by 78.60 (61.8% retrace of 80.24-75.95).

Pound - 1.5725

Initial support at 1.5722 (Oct 14 low) followed by 1.5667 (Oct 13 low). Initial resistance is now at 1.5869 (Sept 15 high) followed by 1.5991 (Sep 9 low).



Australian Dollar - 1.0140

Initial support at 1.0102 (Oct 13 low) followed by the 0.9866 (Oct 12 low). Initial resistance is now at 1.0372 (Oct 17 high) followed by 1.0440 (76.4% retrace of 1.0765-0.9388).

Gold - 1662

Initial support at 1627 (Oct 7 low) followed by 1596 (Oct 4 low). Initial resistance is now at 1704 (Aug 25 high) followed by 1726 (50% retrace of 1921.15-1532.72).



Oil - 88.10

Initial support at 88.00 (Intraday Support) followed by 86.00 (Intraday Support). Initial resistance is now at  89.00 (Intraday resistance) followed by 90.00 (Intraday Resistance).





Written by Anthony Darvall