U.S. Dollar Trading (USD) some weak European economic data and more Fed talk dimming the prospects of QE3 sent stocks and most risk assets lower in the US session Friday. Fed member Bullard who noted the US economy was improving and the ECB LTRO has stabilized the Eurozone and the US Fed must be ready to adjust its low rate commitments. The Euro (EUR) the EUR/USD continued its slide to test 1.3200 on Friday with the USD resurgent and news mildly Euro negative. Talk emerged on Friday that Greece may need a third bailout and Spain’s budget deficit has come under scrutiny given its large revised negative forecast. German Retail Sales dropped -1.6% in January in a sharp deterioration and added to the Euro selling. Looking ahead, US February ISM Services forecast at 56 vs. 56.8 previously.

The Japanese Yen (JPY) USD/JPY continued to trend higher taking advantage of the USD strength to push to fresh year highs above Y81.50. The Crosses are more mixed with the majors in most pairs failing to counter the USD/JPY move higher. EUR/JPY is pivoting the Y108 level lately but strong support has been seen towards Y107.60 and a break would have to be seen to upset the bullish outlook. The Sterling (GBP) even the resurgent GBP/USD could not avoid the selloff seen across most markets on Friday with the topside attempts abandoned and we saw a pullback to 1.5850. Most still look for a 1.6000 attempt but the EUR/USD is struggling in last two days. Australian Dollar (AUD) the Aussie pulled back to 1.0730 from 1.0800 with the RBA ahead tomorrow the main risk event for the week with most looking for a hold at 4.25%. Looking ahead, UK February PMI services forecast at 54.9 vs. 56 previously.

Oil & Gold (XAU) Gold went to sleep Friday in a quiet $10 range around $1720oz. OIL/USD continued to be volatile falling sharply to $106 as the Saudi rumor spike higher was reversed. Israel’s war of words with Iran continued over the weekend and traders will continue to focus on the unstable Middle East situation.

Pairs to watch

EUR/USD 1.3180 to provide support?

XAU/USD which way now? Uptrend over?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3231

1.3291

1.3200

1.3487

1.3548

USD/JPY

79.86

80.02

81.60

81.39

82.23

GBP/USD

1.5800

1.5897

1.5845

1.5991

1.6050

AUD/USD

1.0598

1.0729

1.0725

1.0856

1.1007

XAU/USD

1680.00

1690

1710

1750

1802

OIL/USD

105.00

106.50

107.00

108.00

110.00