U.S. Dollar Trading (USD) sentiment reversed again last night with Italian bond yields once again heading towards 7% and negative headlines out of Europe prompting risk off trade. Also dampening sentiment is a growing trade spat between the US and China as the two superpowers clash over the strength of the Chinese Yuan. In US stocks, DJIA +259 points closing at 12153, S&P +24 points closing at 1263 and NASDAQ +53 points closing at 2678. Looking ahead, October Retail Sales forecast at 0.3% vs. 1.1% previously.
The Euro (EUR) The came under heavy selling pressure after opening on a strong footing after news on the weekend of a new Italian Government. When yields did not fall at the start of Europe the market sold the Euro aggressively and a solution to the crisis does not seem clear. Support was found under 1.3600 but sentiment is negative. Looking ahead, Q3 GDP forecast at 0.2% vs. 0.2%.
The Japanese Yen (JPY) the USD/JPY fell back and tested support under Y77 but closed above and is very stable. The grind lower is seen continuing but as we fall closer to the intervention rate at Y75.50 the sellers will become more skittish after taking heavy losses when the Central bank intervened last time. Q3 GDP was shown to be solid at 1.5% with earthquake reconstruction providing a boost.
The Sterling (GBP) the GBP/USD fell with the rest of the majors back to 1.5900 supports on the rising risk aversion. EUR/GBP was very stable at the 0.8570 level with the two European majors moving in lockstep together. Today CPI data is very important with the y/y still above 5%. Looking ahead, October CPI forecast at 5.5% vs. 5.6%.
The Australian Dollar (AUD) the Aussie fell back with stocks as the risk currency still tracks the main indices for direction. The European Crisis threatens to the derail the global recovery and this would hurt the AUD more than other currencies. The RBA Minutes released Tuesday in Asia showed the central bank almost left rates on hold at 4.75% but the slowing inflation and increasing Global risks prompted a cut.
Oil & Gold (XAU) Gold failed to test $1800 instead fell back on USD strength finding support at $1775. Oil was similar to Gold failing to test its key level instead falling back on rising risk aversion in global markets.
Pairs to watch
EUR/USD Watching Italy Yields for Direction in Europe
GBP/USD Inflation data to stop BOE QE?
|Currency||Sup 2||Sup 1||Spot||Res 1||Res 2|
Euro - 1.3635
Initial support at 1.3578 (Nov 11 low) followed by 1.3484 (Nov 10 low). Initial resistance is now located at 1.3815 (Nov 14 high) followed by 1.4003 (61.8% retrace of 1.4247-1.3609)
Yen - 77.10
Initial support is located at 76.34 (76.4% retrace of 75.35-79.53) followed by 75.35 (Oct 31 low). Initial resistance is now at 77.29 (Nov 14 high) followed by 77.68 (Nov 11 high).
Pound - 1.5910
Initial support at 1.5896 (Nov 11 low) followed by 1.5825 (38.2% retrace of 1.5272-1.6167). Initial resistance is now at 1.6096 (Nov 14 high) followed by 1.6167 (Oct 31 high).
Australian Dollar - 1.0220
Initial support at 1.0106 (Nov 11 high) followed by the 1.0000 (Round Number). Initial resistance is now at 1.0350 (Nov 14 high) followed by 1.0405 (Nov 8 high).
Gold - 1781
Initial support at 1736 (Nov 11 high) followed by 1728 (61.8% retrace of 1681.73-1802.93). Initial resistance is now at 1802 (Nov 8 high) followed by 1816 (Sep 21 high).
Oil - 98.35
Initial support at 97.00 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 99.00 (Intraday resistance) followed by 100.00 (Intraday Resistance).
Written by Anthony Darvall