U.S. Dollar Trading (USD) stocks crashed around in Europe as Italian bond yields broke above the key 7% level and sent panic throughout the markets. US stocks opened down over 200 points and continued to fall finally ending over 3% down. The European debt crisis has taken a serious turn for the worse with many seeing Italy as too big to fail. In US stocks, DJIA -389 points closing at 1780, S&P -46 points closing at 1229 and NASDAQ -105 points closing at 2621. Looking ahead, Jobless Claims forecast at 400k vs. 397k previously. Also Fed Chairman Bernanke Speaks.

The Euro (EUR) Europe was in the Eye of the storm and the Euro took the brunt of the Italian debt crisis falling from 1.3800 to 1.3500. Italian debt yield on the 10 year bonds broke above the key 7% level which has sparked bailouts in the past. The IMF has suggested it can help and make sure austerity reforms are pushed through. Looking ahead, October German CPI forecast at 0.0% m/m.

The Japanese Yen (JPY) USD/JPY was a bastion of calm compared to the rest of the market with the major keeping to a 30 pip range. EUR/JPY and AUD/JPY fell sharply as their majors retreated on global risk aversion. The outlook is linked to the new Italian debt saga which is unfolding currently and could lead to massive investor losses.

The Sterling (GBP) held up for a little while as EUR/GBP selling supported cable but when stock losses mounted the GBP/USD crashed through 1.6000 and headed to 1.5900 in sharp selling. September Trade Balance blew out to -9.8bn vs. 8.6bn previously. Looking ahead, Bank of England rate meeting forecast to hold at 0.5% and the QE held at 275bn.

The Australian Dollar (AUD) The Aussie came heavy selling pressure as the Euro and stocks started dropping sharply. Support was found at 1.0100 but has so far failed to bounce very far. October Unemployment change was 10k as forecast and the Unemployment rate dropped to 5.2% vs. 5.3% initially.

Oil & Gold (XAU) Gold tested $1800 for a second day before falling back to $1765 as investors cashed out of gold. Oil was extremely volatile shrugging off the first sell off to $95 to bounce back to $97 in the US session before sellers once again pushed the pair lower with stock markets.

Pairs to watch

EUR/USD Italy to sink the Euro?

AUD/USD to fall to 1.000 on Risk off trade?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3346

1.3406

1.3545

1.3871

1.4003

USD/JPY

76.95

77.54

77.80

78.42

78.98

GBP/USD

1.5825

1.5877

1.5920

1.6120

1.6203

AUD/USD

1.0000

1.0071

1.0145

1.0398

1.0567

XAU/USD

1714.00

1748

1756

1802

1816

OIL/USD

94.00



95.00

95.50

97.00

100.00

Euro - 1.3545

Initial support at 1.3406 (76.4% retrace of 1.3146-1.4247) followed by 1.3346 (Oct 10 low). Initial resistance is now located at 1.3871 (Nov 1 high) followed by 1.4003 (61.8% retrace of 1.4247-1.3609)



Yen - 77.80

Initial support is located at 77.54 (50% retrace of 75.57-79.50) followed by 76.34 (76.4% retrace of 75.35-79.53). Initial resistance is now at 78.42 (Nov 2 high) followed by 78.98 (Nov 1  high).

Pound - 1.5920

Initial support at 1.5877 (Nov 3 low) followed by 1.5825 (38.2% retrace of 1.5272-1.6167). Initial resistance is now at 1.6120 (Nov 9 high) followed by 1.6203 (Sep 5 high).



Australian Dollar - 1.0145

Initial support at 1.0071 (50% retrace of 0.9388-1.0753) followed by the 1.0000 (Round Number). Initial resistance is now at 1.0398 (Nov 9 high) followed by 1.0567 (Nov 1 high).

Gold - 1756

Initial support at 1748 (Nov 4 high) followed by 1714 (Nov 2 low). Initial resistance is now at 1802 (Nov 8 high) followed by 1816 (Sep 21 high).



Oil - 95.50

Initial support at 95.00 (Intraday Support) followed by 94.00 (Intraday Support). Initial resistance is now at  97.00 (Intraday resistance) followed by 100.00 (Intraday Resistance).





Written by Anthony Darvall