Sentiment Improving, Investors buying on Dips

U.S. Dollar Trading (USD) the markets extended gains overnight with improving investor sentiment after positive EU developments and more talk of QE3 from NY FED's Dudley. Earlier in Asia we saw the China PMI come in strong at 51.1 vs. 49.9 previously and this added fuel to the equity rally globally. In US stocks, DJIA +104 points closing at 11913, S&P +15 points closing at 1254 and NASDAQ +61 points closing at 2699. Looking ahead, August Case Shiller forecast at 0.4% vs. 0.9% previously.

The Euro (EUR) as we approach Wednesday's deadline we find the market optimism continuing to grow that a substantial rescue plan is about to be announced. Germany's Merkal overnight has been reported as asking for a leveraged bailout fund to the amount of 1trn. Oct Flash PMI Manufacturing dropped to 47.3 vs. 48.5 previously. Oct PMI Services dropped to 47.3 vs. 48.8 previously. Looking ahead, November Consumer Sentiment forecast at 5.1 vs. 5.2 previously.

The Japanese Yen (JPY) the excitement dies down on the USD/JPY which had hit fresh all-time lows on Friday and found support at Y76 twice overnight. Yen crosses helped support the major with EUR/JPY and AUD/JPY both extending gains.a

The Sterling (GBP) the GBP/USD tested 1.6000 for most of the US session consolidating just under the big figure. EUR/GBP remained steady with the two majors moving in lock step. The outlook is largely linked to the Euro still and most traders are sidelined ahead of the EU summit announcements. Looking ahead, Q2 Current Account forecast at -9.3bn vs. -9.35bn previously.

The Australian Dollar (AUD) the Aussie was the strongest currency in the market breaking above 1.0400 and then surging to test 1.0500 in the US session as stocks extended gains. Strong Chinese data helped in the Asian session and the QE3 talk hurt the USD later. Looking ahead, On Wednesday Q3 CPI forecast at 0.7% vs. 0.9% q/q.

Oil & Gold (XAU) broke above $1650 and range traded around the figure for the rest of the day as the rally extended. Oil broke above $90 a barrel and extended to $91 on the back of the US stock rally. The outlook is largely determined by stock markets movements still with Middle East tensions easing.

Pairs to watch

EUR/USD quiet ahead of the announcement?

OIL/USD Overbought? Time for correction?



TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3566

1.3704

1.3905

1.3954

1.4013

USD/JPY

74.44

75.00

76.10

77.09

77.49

GBP/USD

1.5681

1.5754

1.5990

1.6104

1.6203

AUD/USD

1.0102

1.0203

1.0450

1.0500

1.0666

XAU/USD

1583.00

1603

1654

1665

1676

OIL/USD

89.00



90.00

91.35

92.50

95.00

Euro - 1.3905

Initial support at 1.3704 (Oct 21 low) followed by 1.3566 (Oct 11 low). Initial resistance is now located at 1.3954 (Oct 24 high) followed by 1.4013 (61.8% retrace of 1.4549-1.3146)



Yen - 76.10

Initial support is located at 75.00 (big figure Support) followed by 74.44 (77.86 minus 0.618 of 81.48-75.95). Initial resistance is now at 77.09 (Oct 20 high) followed by 77.49 (Oct 12 high).

Pound - 1.5990

Initial support at 1.5754 (Oct 21 low) followed by 1.5681 (Oct 20 low). Initial resistance is now at 1.6104 (61.8% retrace of 1.6618-1.5272) followed by 1.6203 (Sep 5 high).



Australian Dollar - 1.0450

Initial support at 1.0203 (Oct 21 low) followed by the 1.0102 (Oct 13 low). Initial resistance is now at 1.0500 (Big Figure) followed by 1.0666 (Sept 5 high).

Gold - 1654

Initial support at 1603 (Oct 20 low) followed by 1583 (Sept 29 low). Initial resistance is now at 1665 (Oct 19 high) followed by 1676 (Oct 18 low).



Oil - 91.35

Initial support at 90.00 (Intraday Support) followed by 89.00 (Intraday Support). Initial resistance is now at  92.50 (Intraday resistance) followed by 95.00 (Intraday Resistance).





Written by Anthony Darvall