Daily Outlook - Japan Downgraded, Yen Drops

By @ibtimes on

U.S. Dollar Trading (USD) the dollar was able to fund support overnight after S&P downgraded Japan and stock markets stalled. Weekly Jobless Claims were weak jumping to 454k vs. 405k forecast and Durable Goods also fell -2.5% in December. In US stocks, DJIA +4 points closing at 11989, S&P +3 points closing at 1299 and NASDAQ +15 points closing at 2755. Looking ahead, Q4 GDP forecast at 3.5% vs. 2.6% previously Q/Q.

The Euro (EUR) pushed higher into the 1.3700 region as sentiment towards the single currency continues to improve with traders noticing CEB's Bini-Smaghi comments that the recent rise in inflation is hard to ignore. EUR/USD traded with a low of 1.3635 and a high of 1.3760 before closing at 1.3730. Looking ahead, December M3 Money Growth forecast at 2% vs. 1.9% previously.

The Japanese Yen (JPY) was a big mover yesterday as S&P downgraded Japan to AA- on the back of a 'lack of a coherent strategy' to deal with their debt situation. USD/JPY moved from Y82 to Y83 very quickly before consolidating the move for the rest of the session. Overall the USDJPY traded with a low of 82.00 and a high of 83.23 before closing the day around 82.75 in the New York session.

The Sterling (GBP) pushed towards 1.6000 before reversing into the close on USD strength and market wide profit taking. GBP/JPY was boosted by the Japanese downgrade and is well positioned for further upside. Overall the GBP/USD traded with a low of 1.5878 and a high of 1.5994 before closing the day at 1.5930 in the New York session.

The Australian Dollar (AUD) was hurt by the Japanese Downgrade and pullback in Gold overnight falling below 0.9900 after testing parity in Asia. Also weighing on the Aussie was the proposed flood levy announced yesterday but the Federal government. Overall the AUD/USD traded with a low of 0.9873 and a high of 1.0003 before closing the US session at 0.9915.

Oil & Gold (XAU) continued to find heavy selling pressure in the US session on further liquidation from investors. Overall trading with a low of USD$1310 and high of USD $1348 before ending the New York session at USD$1315 an ounce. Oil's volatility continued down towards the key $85 level. WTI Oil Closed -$1.69 at $85.60 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3541

1.3637

1.3710

1.3786

1.3825

USD/JPY

81.61

81.89

82.75

83.22

84.11

GBP/USD

1.5618

1.5702

1.5890

1.6017

1.6059

AUD/USD

0.9753

0.9864

0.9890

1.0009

1.0077

XAU/USD

1290.00

1300

1310

1353

1371

OIL/USD

82.50

85.00

85.60

87.00

88.00

Euro - 1.3710

Initial support at 1.3637 (Jan 27 low) followed by 1.3541 (Jan 24 low). Initial resistance is now located at 1.3786 (Nov 22 high) followed by 1.3825 (Nov 10 high)

Yen - 82.75

Initial support is located at 81.89 (Jan 5 low) followed by 81.61 (Jan 4 low). Initial resistance is now at 83.22 (Jan 27 high) followed by 84.11 (Dec 20 high).

Pound - 1.5890

Initial support at 1.5702 (50 % retrace of 1.5345-1.6059) followed by 1.5618 (61.8% retrace of 1.5345-1.6059). Initial resistance is now at 1.6017 (Jan 25 high) followed by 1.6059 (Jan 18 High).

Australian Dollar - 0.9890

Initial support at 0.9864 (Jan 24 low) followed by the 0.9753 (Dec 8 low). Initial resistance is now at 1.0009 (Jan 20 High) followed by 1.0077 (Jan 19 high).

Gold - 1310

Initial support at 1300 (Round Number) followed by 1290 (Intraday). Initial resistance is now at 1353 (Jan 24 high) followed by 1371 (Jan 20 high).

Oil - 85.60

Initial support at 85.00 (Intraday Support) followed by 82.50 (Intraday Support). Initial resistance is now at 87.00 (Intraday Resistance) followed by 88.00 (Intraday Resistance).

Written by Anthony Darvall

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