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U.S. Dollar Trading (USD) the USD gave up gains from the Asian session and weakened by the end of the day as stocks continued to hold up well despite the ongoing EU debt crisis. Little fresh news was released with the markets still waiting on Greece debt deal news and on any new developments between Sarkozy and Merkal meetings. In US stocks, DJIA +32 points closing at 12392, S&P +2 points closing at 1280 and NASDAQ +2 points closing at 2676. Looking ahead, January IBD Economic Optimism previously at 42.8.

The Euro (EUR) the market opened very weak on Greece default fears but then reversed in Europe on short covering and bargain hunting in crosses. EUR/JPY was below Y98 and even though Japan was on holiday’s demand was found and the pair rallied back above the figure into Europe. EUR/AUD is the exception holding under 1.25 and threatening to continue its dramatic fall.

The Japanese Yen (JPY) kept to a 20 pip range under the Y77 to Y76.80. EUR/JPY fell to fresh 12 year lows before reversing in Europe but the downside bias remains and this is keeping a drag on the USD/JPY. Hopes of intervention will be based upon the BOJ verbal threats continuing to be ignored with USD/JPY 75 and EUR/JPY 95 seen as possible lines in the sand. UPDATE Chinese Trade Balance at 16.5bn vs. 8.78bn forecast

The Sterling (GBP) grinded higher throughout the day lifting off 1.5400 and closing at highs near 1.5460. The outlook is linked with EUR/USD and requires confidence the worst is behind us for a sustained rally. EUR/GBP is receiving a lot of attention as it pivots the 0.8250.

Australian Dollar (AUD) the AUD/USD reversed above 1.0200 and rallied with US stock able to shrug off worse than expected retail sales. November Retail Sales at 0.0% vs. 0.3% forecast. The selling recently has been subdued and the Aussie is showing resilience in an equity bear market that bodes well for longer term AUD Bulls. UPDATE November Building Permits 8.4% vs. 7% forecast.

Oil & Gold (XAU) kept to a very tight range above $1610 with consolidation the main theme. OIL/USD initially dipped as the Iran threat shock continued to wear off but rebounded to opening levels in the US session.

Pairs to watch

EUR/USD Sell Rallies?

EUR/CHF to test the SNB 1.2000 Floor?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2588

1.2644

1.2760

1.2813

1.3080

USD/JPY

76.00

76.58

76.80

77.74

78.98

GBP/USD

1.5272

1.5402

1.5475

1.5526

1.5629

AUD/USD

1.0044

1.0127

1.0290

1.0387

1.0567

XAU/USD

1561.00

1592

1616

1641

1662

OIL/USD

99.00

100.00

101.50

102.50

105.00

Euro – 1.2760

Initial support at 1.2644 (Sept 10 2010 low) followed by 1.2588 (Aug 24 2010 low). Initial resistance is now located at 1.2813 (Jan 6 high) followed by 1.3080 (Dec 28 high)

Yen – 76.80

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 – 1.5475

Initial support at 1.5402 (Dec 30 low) followed by 1.5272 (Oct 6 low). Initial resistance is now at 1.5526 (Jan 6 high) followed by 1.5629 (Jan 5 high).

Australian Dollar – 1.0280

Initial support at 1.0127 (Dec 30 low) followed by the 1.0044 (Dec 29 low). Initial resistance is now at 1.0387 (Jan 3 low) followed by 1.0567 (Mar 3 high).

Gold – 1616

Initial support at 1592 (Jan 4 low) followed by 1561 (Jan 2 low). Initial resistance is now at 1641 (Dec 21 low) followed by 1662 (50% retrace of 1802.93-1522.65).

Oil – 101.50

Initial support at 100.00 (Intraday Support) followed by 99.00 (Intraday Support). Initial resistance is now at 102.50 (Intraday resistance) followed by 105.00 (Intraday Resistance).

Written by Anthony Darvall