U.S. Dollar Trading (USD) we saw sentiment improve another notch on Friday extending the substantial gains already seen during the week in Stock markets and risk assets. The USD did poorly as demand for the safe haven eased and traders invested their money into higher yielding currencies such as the Australian Dollar. September Retail Sales increased 1.1% vs. 0.5% m/m forecast in another positive for the markets. In US stocks, DJIA +166 points closing at 11644, S&P +20 points closing at 1224 and NASDAQ +47 points closing at 2667. Looking ahead, September Industrial Production forecast at 0.2% m/m.

The Euro (EUR) broke above 1.3800 in the European session and tested 1.3900 as the recovery rally extended on hopes that the G20 and EU would create a Grand Plan to solve the debt crisis gripping the continent. Traders are looking to the October 23rd European Council meeting for a detailed plan that may include Greek Debt Haircuts and European Banking Recapitalization and possibly EFSF expansion.

The Japanese Yen (JPY) Strong US data and Yen crosses helped lift the USD/JPY back above Y77 and the could see the major rally if we can hold above the key level. Talk that the BOJ will push for a weaker Yen at the G20 meeting and that intervention of some form is still on the table is adding to the topside risks.

The Sterling (GBP) the uptrend continued but the GBP underperformed most currencies with EUR/GBP edging higher and GBP/USD struggling to make headway above the 1.5800 level. The Outlook is mixed with trader choosing safer currencies to express risk and the UK QE expansion still fresh on traders mind. GBP/JPY is a bright spot as the cross pushes above Y122.

The Australian Dollar (AUD) was the darling of the market with the AUD/USD breaking above 1.0300 as stocks continued to rally. AUD/JPY surged towards Y80 a key level in the last 12 months. China inflation data was ok but traders are still cautious on the Chinese economy. On Tuesday we get Q3 GDP from the emerging giant and this will be closely watched for any slowdown.

Oil & Gold (XAU) Gold rallied in Europe and the US session staying into a range of $1684-$1670 for the rest of the day. Oil enjoyed a 4% gain on Friday from $84 to $87 as sentiment remained strong all day and US retail sales improved.

Pairs to watch

AUD/USD Can we continue higher with not pullback?

EUR/USD Test 1.4000 soon as confidence returns?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3566

1.3685

1.3865

1.3937

1.4013

USD/JPY

75.95

76.31

77.25

77.86

78.60

GBP/USD

1.5667

1.5722

1.5815

1.5869

1.5991

AUD/USD

0.9866

1.0102

1.0310

1.0399

1.0440

XAU/USD

1627.00

1654

1681

1704

1726

OIL/USD

83.00



85.00

87.35

88.00

90.00



Euro - 1.3865

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 - 77.25

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 - 1.5815

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 - 1.0310

Initial support at 1.0102 (Oct 13 low) followed by the 0.9866 (Oct 12 low). Initial resistance is now at 1.0399 (Sept 16 high) followed by 1.0440 (76.4% retrace of 1.0765-0.9388).

Gold - 1681

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 - 87.35

Initial support at 85.00 (Intraday Support) followed by 83.00 (Intraday Support). Initial resistance is now at  88.00 (Intraday resistance) followed by 90.00 (Intraday Resistance).





Written by Anthony Darvall