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Oil Surges and Stocks Rally

U.S. Dollar Trading (USD) the Dollar was sold in all sessions yesterday as Global stock markets rallied and economic data improved. December ISM Manufacturing jumped to 53.9 vs. 52.7 previously. The FOMC Minutes were also released and continued to support the view interest rates would be kept low until 2013. In US stocks, DJIA +179 points closing at 12397, S&P +19 points closing at 1219 and NASDAQ +43 points closing at 2648. Looking ahead, November Factory Orders forecast at 1.7% vs. -0.4% previously.

The Euro (EUR) broke above 1.3000 with the change in sentiment clear from the start of the day in Asia. The market is still heavily short and good news has the chance to spark a relief rally with 1.3300 seen as a possible target for bulls in the short term. Ratings downside risks still remain but for now we will be looking to stocks markets and todays PMI data. Looking ahead, December PMI Services forecast at 52.7.

The Japanese Yen (JPY) USD/JPY struggled and fell further back as the USD weakness overwhelmed the Yen weakness in the ‘risk on’ rally. EUR/JPY was able to bounce from multi-year lows and reclaim Y100. AUD/JPY is targeting Y80 and if US data continues to be strong then USD/JPY could reverse direction and the Yen once again become the funding currency of choice.

The Sterling (GBP) moved higher in line with most other pairs and remained well supported against the Euro testing 0.8330 supports. GBP/USD is near 1.5700 and a break above would open up a move to 1.6000. UK PMI manufacturing jumped 49.6 vs. 47.6 and help support the move higher. Looking ahead, November Mortgage approvals at 52.3k vs. 52.7k previously.

The Australian Dollar (AUD) the Aussie led the market higher gaining against all the majors with the commodity currency the first choice to express positive risk appetite. EUR/AUD is still at all-time lows near 1.2500 and GBP/AUD is moving towards 1.5000 and then 1.4800 all-time lows. Little economic data this week so we continue to look to the stocks markets and US Jobs data on Friday.

Oil & Gold (XAU) continued to move higher breaking and closing above $1600 an ounce. OIL/USD was relentless as the weak USD and increasing Iranian threats supported a sharp move to $103 a barrel.

Pairs to watch

XAU/USD back to $1600 but buyers in control?

OIL/USD Overbought will buyers take profit?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2828

1.2860

1.3050

1.3119

1.3197

USD/JPY

76.00

76.58

76.65

77.74

78.98

GBP/USD

1.5337

1.5502

1.5640

1.5692

1.5728

AUD/USD

1.0196

1.0233

1.0360

1.0447

1.0567

XAU/USD

1522.00

1561

1603

1616

1641

OIL/USD

100.00

102.50

103.30

105.0

108.00

Euro – 1.3050

Initial support at 1.2860 (Jan 10 low) followed by 1.2828 (Sept 14 2010 low). Initial resistance is now located at 1.3119 (Dec 22 high) followed by 1.3055 (Dec 28 high)

Yen – 76.65

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 – 1.5640

Initial support at 1.5502 (Jan 3 low) followed by 1.5337 (Dec 19 low). Initial resistance is now at 1.5692 (Dec 28 high) followed by 1.5728 (Dec 22 high).

Australian Dollar – 1.0360

Initial support at 1.0233 (Jan 3 low) followed by the 1.0196 (Jan 2 low). Initial resistance is now at 1.0447 (Dec 8 low) followed by 1.0567 (Mar 3 high).

Gold – 1603

Initial support at 1544 (Dec 44 low) followed by 1500 (Big Figure). Initial resistance is now at 16316 (Dec 22 low) followed by 1641 (Dec 14 high).

Oil – 103.30

Initial support at 102.50 (Intraday Support) followed by 100.00 (Intraday Support). Initial resistance is now at 105.00 (Intraday resistance) followed by 108.00 (Intraday Resistance).

Written by Anthony Darvall