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Last week’s currency trading review

The Dollar was very weak as risk came roaring back into the markets and the safe haven was dumped. The FOMC minutes suggested that more QE3 was possible in the Future as two members voted for extra stimulus. September Retail Sales surged 1.1% vs. 0.5% previously. US stocks rallied over 5% in one of the best weeks on record as confidence increased that European leaders would agree to a grand bailout plan. The Euro surged higher as more comments from European leaders suggested a dramatic intervention in the market was coming from the EU Summit. The EU President Barroso outlined a series of measure including bank recapitalization and Greek debt haircuts and the markets responded with aggressive buying. The EUR/USD is up +3.6% currently at 1.3878, after opening the week at 1.3379.

The Japanese Yen was the weakest currency as good US data and risk on trading say some crosses surged +5% in value. AUD/JPY led the pack higher up 6%. The USD/JPY gains were very modest however with little aggression in the buying above Y77. The USD/JPY is up +0.58% currently at 77.18, after opening at 76.73. The GBP rallied against the safe havens but lost ground against the rest as the market continued to react to the unexpected increase in UK QE during the October Bank of England meeting. August Unemployment increased to 8.1% vs. 7.9%. The GBP/USD is up +1.64% currently at 1.5819 after opening at 1.5559. The AUD was the strongest currency in the market traders choosing the commodity currency to show confidence going forward. Strong employment data helped the AUD/USD break above 1.0000 with September employment change at +20.4k. The AUD/USD is up +5.53% currently at 1.0336 after opening at 0.9764.

The Forex Trading Economic Data Ahead Preview

In the States; On Tuesday, Fed Chief Bernanke Speaks. On Wednesday, September CPI forecast at 0.4% vs. 0.4% previously m/m. ON Thursday, Weekly Jobless Claims previously at 400k. Also released, September Existing Home Sales forecast at -2.6% vs. 7.7% m/m previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, German ZEW Survey forecast at -45.0 vs. -43.3 previously. On Friday, October German IFO forecast at 106.5 vs. 107.5 previously. Also on Friday, EU Finance Ministers Meet and ECB Trichet set to speak. In the UK, On Tuesday, September CPI forecast at 4.9% vs. 4.5% previously y/y. On Wednesday, Bank of England Minutes released. On Thursday, September Retail Sales forecast at 0.5% vs. 0.0% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; no major data this week. In Australia; On Tuesday, RBA Minutes released from October meeting. On Friday, Q3 Import Prices forecast at 0.5% vs. 0.8% previously. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3566

1.3685

1.3750

1.3937

1.4013

USD/JPY

75.95

76.31

76.80

77.86

78.60

GBP/USD

1.5667

1.5722

1.5750

1.5869

1.5991

AUD/USD

0.9866

1.0102

1.0180

1.0372

1.0440

XAU/USD

1627.00

1654

1675

1704

1726

OIL/USD

83.00

85.00

86.25

88.00

90.00


Euro – 1.3750

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 – 76.80

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 – 1.5750

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 – 1.0180

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 – 1675

Initial support at 1654 (Oct 11 low) followed by 1627 (Oct 7 low). Initial resistance is now at 1704 (Aug 25 high) followed by 1726 (50% retrace of 1921.15-1532.72).

Oil – 86.25

Initial support at 85.00 (Intraday Support) followed by 83.00 (Intraday Support). Initial resistance is now at 88.00 (Intraday resistance) followed by 90.00 (Intraday Resistance).

Written by Anthony Darvall