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U.S. Dollar Trading (USD) sentiment has begun to improve in recent session and we are seeing fresh year highs for stocks and USD safe haven selling. US Housing data is starting to pick up with January NAHB Housing market index rising to 3 year highs at 25 vs. 21 previously. In US stocks, DJIA +96 points closing at 12579, S&P +14 points closing at 1308 and NASDAQ +41 points closing at 2769. Looking ahead, December Core CPI forecast at 0.1% vs. 0.2% m/m previously.

The Euro (EUR) supportive news from the IMF that they are looking to increase lending capacity from 385bn to 1trn helped fuel a rally in the European session after day lows were seen on Fitch Italy rating warnings. The outlook is stabilizing with a Greece debt deal imminent and expected in next two days. Traders are expecting a relief rally if the yields on Portugal and Italian debt continue to fall. Looking ahead, November Current Account forecast at 0.5bn vs. -7.5bn previously.

The Japanese Yen (JPY) the USD/JPY was steady but nearly all the crosses rallied overnight tracking stocks and the EUR/JPY surge. AUD/JPY was notable breaking above Y80 a historically important level and could spark a further rally for the carry trade. Japanese retail investors are a major player in the speculative market and if they believe the EUR/JPY downside is over then Yen downside is very large from these levels. Japanese officials and Business leaders are getting more vocal on the Yen strength and more intervention is very possible.

The Sterling (GBP) GPD/USD made good gains above 1.5400 and remained well supported above the figure for the rest of the trading session. Talk of more QE from the Bank of England is capping gains and the Unemployment rate jumped to a 17 year high at 8.4% in November. The UK Claimant count rose 1k in December vs. 9k forecast.

Australian Dollar (AUD) the AUD/USD pushed back above 1.0400 and is looking to test 1.0500 in coming session as the uptrend begins to develop. Supported by strong stocks and commodities the outlook is continuing to improve as the downside risks to China begin to mitigate. Any good news from the Eurozone is also going to support while bad news is only having a limited effect. UPDATE December Employment dropped -29k vs. +10k forecast.

Oil & Gold (XAU) Gold was whippy falling to fresh multiday lows before reversing new day highs above $1660. Tested $100 before reversing to new highs.

Pairs to watch

EUR/USD above 1.2860 to 1.3000 now?

AUD/USD to rally above 200 day moving average?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2588

1.2734

1.2850

1.2879

1.3080

USD/JPY

76.00

76.58

76.75

77.74

78.98

GBP/USD

1.5125

1.5272

1.5435

1.5501

1.5526

AUD/USD

1.0044

1.0229

1.0390

1.0450

1.0567

XAU/USD

1605.00

1630

1660

1662

1677

OIL/USD

99.00

100.00

101.30

101.50

103.50

Euro – 1.2850

Initial support at 1.2734 (Jan 13 low) followed by 1.2588 (Aug 24 2010 low). Initial resistance is now located at 1.2879 (Jan 13 high) followed by 1.3080 (Dec 28 high)

Yen – 76.75

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 – 1.5435

Initial support at 1.5272 (Aug 6 low) followed by 1.5125 (Jul 21 2010 low). Initial resistance is now at 1.5501 (Jan 10 high) followed by 1.5526 (Jan 6 high).

Australian Dollar – 1.0390

Initial support at 1.0229 (Jan 5 low) followed by the 1.0044 (Dec 29 low). Initial resistance is now at 1.0450 (Jan 17 low) followed by 1.0567 (Mar 3 high).

Gold – 1660

Initial support at 1630 (Jan 11 low) followed by 1605 (Jan 9 low). Initial resistance is now at 1667 (Jan 17 high) followed by 1677 (Dec 13 high).

Oil – 101.30

Initial support at 100.00 (Intraday Support) followed by 99.00 (Intraday Support). Initial resistance is now at 101.50 (Intraday resistance) followed by 103.50 (Intraday Resistance).

Written by Anthony Darvall