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Stocks Bounce, Dollar Strong

U.S. Dollar Trading (USD) in a rare move the USD strengthened even as Stocks rose around the world after concerns about the Eurozone flared up once again. Oil reversed direction on rumors Gaddafi would step down and OPEC was considering a special meeting. In US stocks, DJIA +124 points closing at 12214, S&P +11 points closing at 1321 and NASDAQ +20 points closing at 2745. Looking ahead, Weekly Crude Oil Inventories forecast at 0.8% vs. -0.4%.

The Euro (EUR) was in focus last night as traders sold the single currency on fresh EU debt fears and comments from S&P that a Greek default was possible. January German Industrial Orders up 2.9% vs. -3.6% previously. Overall the EUR/USD traded with a low of 1.3861 and a high of 1.3990 before closing the day around 1.3890 in the New York session. Looking ahead, January Industrial Output forecast at 1.8% vs. -1.5% previously.

The Japanese Yen (JPY) was weaker on the general USD strength and on strong demand for Yen crosses. AUD/JPY is the traditional carry trade and is well supported above Y83. Also helping the USD/JPY to move higher is the increase in US Bond Yields, closely watched for an indication of medium term interest rate expectations. Overall the USD/JPY traded with a low of 82.19 and a high of 82.88 before closing the day around 82.80 in the New York session.

The Sterling (GBP) was soft all day as the market waited for the BOE rate announcement on Thursday with plenty of commentary from analysts on the speed of rate hikes this year. Given the hawkish ECB last week more talk exists that the MPC may have to raise rates sooner than later. Overall the GBP/USD traded with a low of 1.6123 and a high of 1.6211 before closing the day at 1.6165 in the New York session. Looking ahead, January Trade Balance forecast at -8.5bn vs. -9.25bn previously.

The Australian Dollar (AUD) was unable to gain even as the US stocks rallied with the Euro and GBP on the back foot. The market is keenly awaiting the New Zealand Rate Announcement tomorrow morning with a chance of a rate hike given the major earthquake. Overall the AUD/USD traded with a low of 1.0051 and a high of 1.0136 before closing the day at 1.0085 in the New York session. Looking ahead, RBA Governor Stevens Speaks and RBNZ Rate Call forecast at 2.5% vs. 3.0%.

Oil & Gold (XAU) Consolidated recent gains ending slightly lower. Overall trading with a low of USD$1423 and high of USD $1437 before ending the New York session at USD$1429 an ounce. Oil fell on OPEC meeting talk and hope the Libyan crisis will ease. WTI Oil Closed -$0.58 at $104.85 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3744

1.3833

1.3895

1.4036

1.4086

USD/JPY

81.13

81.73

82.80

83.07

83.98

GBP/USD

1.6072

1.6151

1.6165

1.6344

1.6458

AUD/USD

0.9982

1.0002

1.0080

1.0202

1.0256

XAU/USD

1389.00

1409

1427

1450

1458

OIL/USD

102.50

104.0

104.80

105.00

107.00

Euro – 1.3895

Initial support at 1.3833 (Mar 3 low) followed by 1.3744 (Mar 2 low). Initial resistance is now located at 1.4036 (Mar 7 high) followed by 1.4086 (Nov 8 high)

Yen – 82.80

Initial support is located at 81.73 (Mar 3 low) followed by 81.13 (Feb 4 low). Initial resistance is now at 83.07 (Mar 4 high) followed by 83.98 (Feb 16 High).

Pound – 1.6165

Initial support at 1.6151 (61.8% retrace of 1.6031-1.6344) followed by 1.6072 (Feb 28 low). Initial resistance is now at 1.6344 (March 2 low) followed by 1.6458 (Jan 19, 2010 high).

Australian Dollar – 1.0080

Initial support at 1.0002 (Feb 24 low) followed by the 0.9982 (Feb 23 low). Initial resistance is now at 1.0202 (Mar 1 high) followed by 1.0256 (Dec 31 high).

Gold – 1427

Initial support at 1409 (Mar 1 low) followed by 1389 (Feb 21 low). Initial resistance is now at 1450 (psychological resistance) followed by 1458 (1410.32 plus 1392.65-1440.32).

Oil – 104.80

Initial support at 104.00 (Intraday Support) followed by 102.50 (Intraday Support). Initial resistance is now at 105.00 (Feb Spike High) followed by 107.00 (Big Figure resistance).

Written by Anthony Darvall