U.S. Dollar Trading (USD) markets came under heavy selling pressure across the board overnight as German Official Seibert cautioned the market about expecting a final solution from this weekend's EC Summit. Adding to this was soft earnings from US companies and we saw US stocks down over -2%. The USD did well gaining against all with the exception of the other safe haven, the Japanese Yen. In US stocks, DJIA -247 points closing at 11397, S&P -23 points closing at 1200 and NASDAQ -52 points closing at 2614. Looking ahead, September PPI forecast at 0.2% vs. 0% m/m previously. Also Fed Chief Bernanke speaks.
The Euro (EUR) was hit hard by the German comments with the overbought EUR/USD reversing from 1.3900 to 1.3750. The market was looking for a reason to correct lower after 9 days of steady gains. The market is still expected quite aggressive news from the Summit on the weekend and the price action today is a warning of what will happen if they fail to deliver. Looking ahead, October German ZEW forecast at -45 vs. -43.3 previously.
The Japanese Yen (JPY) the move above Y77 on USD/JPY was once again reversed after heavy cross selling led by the EUR/JPY. The failure of the USD/JPY to continue higher above Y77 is frustrating longs who have been patiently waiting for intervention back to Y80. Risk appetite is going to remain the key catalyst short term direction but only a change in US monetary policy seen pushing the USD/JPY out of its range.
The Sterling (GBP) hit day highs in Europe at 1.5850 before reversing with the rest of the market on the German comments. The EUR/GBP fell from 0.8770 to 0.8725 as the Euro selling outpaced the Pound. GBP/USD support is seen under 1.5700 with the recent rally being under threat if this support is broken. Looking ahead, September CPI forecast at 0.4% vs. 0.6% previously.
The Australian Dollar (AUD) The Aussie led the market on the way up and when the profit taking started the AUD/USD collapsed from 1.0370 to 1.0180 in sharp selling. The outlook is mixed with speed of the run up keeping buyers cautious to buy aggressively on dips. Looking ahead, October RBA Minutes. Chinese Q3 GDP forecast 9.2% vs. 9.5% previously.
Oil & Gold (XAU) Gold tested new month highs before reversing in the US session to $1670 as daily volatility continued. Oil tested $88 in Europe but failed to hold onto the gains before reversing back to $86 a barrel.
Pairs to watch
AUD/USD China Data to support or hurt?
USD/JPY Range Trading Y76.50 to Y77.50 to continue?
|Currency||Sup 2||Sup 1||Spot||Res 1||Res 2|
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