Rally Stalls ahead of EU Plan

U.S. Dollar Trading (USD) more mixed trading at highs overnight with stocks doing well in the European session but reversing later in the US session with concerns that France and Germany were at loggerheads over certain parts of the Grand Plan bailout. September CPI increased 0.3% m/m as forecast. In US stocks, DJIA -72 points closing at 11504, S&P -15 points closing at 1210 and NASDAQ -53 points closing at 2653. Looking ahead, Weekly Jobless Claims forecast at 400k vs. 404k previously.

The Euro (EUR) traded day highs in Europe but reversed lower later in the day on talk Sarkozy had flown to Berlin for emergency talks after differences over aspects of the new debt plans hit issues. News late in the day that the money set aside for bank recapitalization was much lower than expected/needed. Looking ahead, September PPI forecast at 0.2% vs. -0.3% m/m.

The Japanese Yen (JPY) was sidelined for another day with little news directly impacting either the USD or Yen. EUR/JPY is where most of the traders are taking positions with quite a split between the bulls and bears given the potential outcome at the weekend EU summit.

The Sterling (GBP) the MPC minutes came in at 9-0 voting for the expansion of the QE program at October's meeting. The market was less keen to sell the GBP though and we saw EUR/GBP edging lower for most of the day. GBP/USD broke above 1.5800 before stabilizing. Looking ahead, September Retail Sales forecast at 0.0% vs. -0.2%.

The Australian Dollar (AUD) the Aussie climbed back above 1.0300 and retested the month highs at 1.0350 forming a double top before reversing aggressively and falling with the change in mood in the US session. The outlook is closely linked with the stock markets direction and the EU summit this weekend.  

Oil & Gold (XAU) Gold was weak for most of the day sold on rallies back to $1630 supports. The failure to get above $1700 is hurting the precious metal technically. Oil was hit heavily after the FED beige book outlined a softer picture of the US economy going forward.

Pairs to watch

EUR/USD Debt Deal Issues?

AUD/USD to follow stocks lower?



TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3566

1.3653

1.3765

1.3937

1.4013

USD/JPY

75.95

76.31

76.80

77.86

78.60

GBP/USD

1.5667

1.5722

1.5775

1.5869

1.5991

AUD/USD

0.9866

1.0102

1.0245

1.0372

1.0440

XAU/USD

1596.00

1627

1630

1674

1704

OIL/USD

85.00



85.00

86.35

88.00

90.00



Euro - 1.3765

Initial support at 1.3685 (Oct 13 low) followed by 1.3566 (Oct 11 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 - 76.80

Initial support is located at 76.31 (Oct 12 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 - 1.5775

Initial support at 1.5722 (Oct 14 low) followed by 1.5667 (Oct 13 low). Initial resistance is now at 1.5869 (Sept 15 high) followed by 1.5991 (Sep 9 low).



Australian Dollar - 1.0245

Initial support at 1.0102 (Oct 13 low) followed by the 0.9866 (Oct 12 low). Initial resistance is now at 1.0372 (Oct 17 high) followed by 1.0440 (76.4% retrace of 1.0765-0.9388).

Gold - 1630

Initial support at 1627 (Oct 7 low) followed by 1596 (Oct 4 low). Initial resistance is now at 1676 (Oct 18 high) followed by 1704 (Aug 25 low).



Oil - 86.35

Initial support at 86.00 (Intraday Support) followed by 85.00 (Intraday Support). Initial resistance is now at  88.00 (Intraday resistance) followed by 90.00 (Intraday Resistance).





Written by Anthony Darvall