U.S. Dollar Trading (USD) the market began a major rally in Europe overnight as the EU Commission President Barroso presented a roadmap to solve the European Debt Crisis. This combined with news Slovakia has agreed to approve the EFSF. The FOMC minutes overnight also supported with the 3 noted dissenters of more QE been countered by two members asking for more QE. Also supporting was talk that QE3 could be kept in reserve for next year if needed. In US stocks, DJIA +102 points closing at 11518, S&P +11 points closing at 1207 and NASDAQ +21 points closing at 2604. Looking ahead, Weekly Jobless Claims forecast at 405k vs. 401k previously.

The Euro (EUR) broke 1.3700 and quickly shot above 1.3800 in Europe as the roadmap was release and investor risk appetite improved. August Industrial Production gained 1.2% vs. -0.7% forecast and also added to the positive feel overnight. Looking ahead, German CPI forecast at 0.1% vs. 0.1% previously.

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The Japanese Yen (JPY) the USD/JPY was another big mover last night finally breaking out of the range to the topside above Y77. The talk in the market that Japan will ask the G20 to allow them to put a floor under the USD/JPY in a move reminiscent of the SNB and the EUR/CHF floor earlier this year. Yen Crosses all moved aggressively higher led by AUD/JPY.

The Sterling (GBP) some weak economic data was ignored overnight with the major rally in stocks and the ECB allowing the GBP/USD to move higher. The September Unemployment rate gained to 8.1% vs. 7.9% previously. Looking ahead, August Trade Balance forecast at -8.8bn vs. -8.9bn previously.

The Australian Dollar (AUD) was the best performing currency in the market overnight with the risk on rally and AUD/JPY buying pushing the major above 1.0000. Large stops sent the AUD/USD to 1.0200 by the US session in one of the biggest moves the AUD/USD has seen in recent months. Looking ahead, September Unemployment Rate forecast at 5.3% vs. 5.3% previously. Employment Change forecast at 10k vs. -9.7k previously.

Oil & Gold (XAU) gold hit new month highs above $1690 but fell back into the close on profit taking. Crude Oil failed at $86.50 and fell back to $85 in a mixed day of trading that disappointed bulls given the large moves higher in other risk assets.

Pairs to watch

AUD/USD Uptrend in place?

EUR/USD Test 1.4000 on this move higher?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3346

1.3566

1.3780

1.3937

1.4013

USD/JPY

75.95

76.11

77.15

77.86

78.60

GBP/USD

1.5423

1.5525

1.5745

1.5869

1.5991

AUD/USD

0.9728

0.9866

1.0160

1.0239

1.0313

XAU/USD

1627.00

1654

1680

1704

1726

OIL/USD

82.00

83.50

84.80

85.00

86.50

Euro - 1.3780

Initial support at 1.3566 (Oct 11 low) followed by 1.3346 (Oct 10 low). Initial resistance is now located at 1.3937 (Sept 15 high) followed by 1.4013 (61.8% retrace of 1.4549-1.3146)

Yen - 77.15

Initial support is located at 76.11 (Sep 22 low) followed by 75.95 (Aug 19 low). Initial resistance is now at 77.86 (Sep 9 high) followed by 78.60 (61.8% retrace of 80.24-75.95).

Pound - 1.5745

Initial support at 1.5525 (Oct 10 low) followed by 1.5423 (Oct 7 low). Initial resistance is now at 1.5869 (Sept 15 high) followed by 1.5991 (Sep 9 low).

Australian Dollar - 1.0160

Initial support at 0.9866 (Oct 12 low) followed by the 0.9728 (Oct 7 low). Initial resistance is now at 1.0239 (61.8% retrace of 1.0765-0.9388) followed by 1.0313 (Sept 20 high).

Gold - 1680

Initial support at 1654 (Oct 11 low) followed by 1627 (Oct 7 low). Initial resistance is now at 1704 (Aug 25 high) followed by 1726 (50% retrace of 1921.15-1532.72).

Oil - 84.80

Initial support at 83.50 (Intraday Support) followed by 82.00 (Intraday Support). Initial resistance is now at  85.00 (Intraday resistance) followed by 86.50 (Intraday Resistance).

Written by Anthony Darvall