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U.S. Dollar Trading (USD) stocks continued to rally in the US Session but the Dollar gained as the Euro came under pressure with time running out for Greece to strike a deal with bondholders on the beleaguered nation’s debt haircut. US housing data countered weakness in Google’s stock with December Housing starts rising 5%. In US stocks, DJIA +90 points closing at 12720, S&P +1 points closing at 1315 and NASDAQ -1 points closing at 2786. Looking ahead, No data today and Chinese New Year holidays begin last all week and may affect the Asian session liquidity.

The Euro (EUR) the Euro hit day highs in late Asia but reversed in the European session with a break of 1.3000 going to require a positive outcome to the Greece debt deal negotiations still ongoing. Some news over the weekend that showed the standoff was entering the final phase saw heavy selling on Monday morning with traders unwilling to risk being long. Looking ahead, January Consumer Confidence forecast at -20 vs. -21.

The Japanese Yen (JPY) the USD/JPY remained above Y77 for most of the day but with EUR/JPY stalling at Y100 before easing on the Greece debt failure risk and profit taking on the move from Y97 to Y100 throughout the week. AUD/JPY is holding onto gains however with traders looking for higher levels now the cross is above Y80. Talk in the market about possible EUR/JPY intervention has drawn the conclusion that this is unlikely without major selling at a pace faster than we have seen so far.

The Sterling (GBP) the GBP/USD broke and closed above the 1.5500 level with EUR/GBP selling allowing the major to break its normal correlation with the Euro. December Retail Sales gained 0.6% as forecast m/m. Traders will be looking to the Greece news for whether the relief rally can continue.

Australian Dollar (AUD) was able to decouple from the Euro selling on Friday and Monday morning in Asia as the commodity currency continues to receive support after breaking higher earlier in the week. AUD/JPY is providing plenty of support as is the EUR/AUD which resumed its downtrend on Friday. Stock markets are doing very well so far in 2012 and if the trend continues the AUD/USD could retest all-time highs above 1.1000 this quarter. UPDATE Q4 PPI was at 2.9% vs. 3.0% forecast y/y.

Oil & Gold (XAU) Gold tested support below $1650 before reversing and closing just under the $1670 topside resistance. Some softer comments from Iran and the peaceful movement of US navy ships through the straight of hormuz sent Oil into a sharp slump as the risk premium of war was reversed out of the price. Support was found under $98 on Monday morning.

Pairs to watch

EUR/USD Greece to accept Banks debt offer?

XAU/USD to break out of the $1650-70 range?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2734

1.2839

1.2885

1.2986

1.3197

USD/JPY

76.00

76.58

77.05

77.74

78.98

GBP/USD

1.5125

1.5311

1.5545

1.5568

1.5700

AUD/USD

1.0044

1.0359

1.0475

1.0496

1.0567

XAU/USD

1605.00

1641

1668

1670

1677

OIL/USD

96.00

97.50

98.10

99.00

100.00

Euro – 1.2885

Initial support at 1.2839 (Jan 19 low) followed by 1.2734 (Jan 18 low). Initial resistance is now located at 1.2986 (Jan 20 high) followed by 1.3197 (Dec 21 high)

Yen – 77.05

Initial support is located at 76.58 (Nov 18 low) followed by 76.00 (Big Figure). Initial resistance is now at 77.74 (Dec 30 high) followed by 78.98 (Nov 1 high).

Pound – 1.5545

Initial support at 1.5311 (Jan 17 low) followed by 1.5125 (Jul 21 2010 low). Initial resistance is now at 1.5568 (61.8% retrace of 1.5774-1.5235) followed by 1.5700 (Big figure resistance).

Australian Dollar – 1.0475

Initial support at 1.0359 (Jan 18 low) followed by the 1.0044 (Dec 29 low). Initial resistance is now at 1.0496 (76.4% retrace of 1.0753-0.9664) followed by 1.0567 (Mar 3 high).

Gold – 1668

Initial support at 1641 (Jan 17 low) followed by 1625 (Jan 13 low). Initial resistance is now at 1670 (Jan 19 high) followed by 1677 (Dec 13 high).

Oil – 98.10

Initial support at 97.50 (Intraday Support) followed by 96.00 (Intraday Support). Initial resistance is now at 99.00 (Intraday resistance) followed by 100.00 (Intraday Resistance).

Written by Anthony Darvall