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Stocks Rally as Italy and Greece Move Forward

U.S. Dollar Trading (USD) consumer sentiment in the US unexpectedly improved to 64.2 vs. 61.5 previously and this helped improve strong investor risk appetite and push stock markets higher into the weekend. The USD was sold across the board as safe haven demand increased. In US stocks, DJIA +259 points closing at 12153, S&P +24 points closing at 1263 and NASDAQ +53 points closing at 2678. Looking ahead, no major data today.

The Euro (EUR) lots of developments are supporting the EUR/USD rally after the crash earlier in the week on Italy debt crisis with the main support the heavy ECB buying in the debt markets. Also supporting was the passing of austerity measures in Italy and the formation of a new government to be led by former EU commissioner Mario Monti. Looking ahead, September Industrial Production forecast at -2.2% vs. 1.2% m/m previously.

The Japanese Yen (JPY) USD/JPY is grinding lower as the Japanese Intervention fades into memory and the USD weakness remains prevalent. AUD/JPY and EUR/JPY took advantage of the strong stocks to move towards Y80 and Y106.50 respectively. There is talk the BOJ is still in the market smoothing and just trying to slow down the USD/JPY downtrend.

The Sterling (GBP) GBP/USD surged back above 1.6000 as the rally began in Europe and held into a tight range for the rest of the US session above 1.6050. EUR/GBP has been receiving a lot of attention since it broke lower with the Euro weakness but has since been quite content to range trade near the 0.8550.

The Australian Dollar (AUD) the sentiment towards the AUD had been very negative earlier in the week on the RBA cutting rates and the Italian debt crisis but the major factor for the Aussie direction is the stock market movement and they moved higher on Friday and dragged a reluctant AUD/USD higher. Traders are very cautious on going aggressively long at these levels until the situation settles down in Europe.

Oil & Gold (XAU) Gold pushed back higher on USD weakness heading back towards the $1800 level and target. Another good day for Oil heading towards $100 on WTI after breaking resistance at $99 a barrel.

Pairs to watch

EUR/USD to lead market again but which way now?

OIL/USD to test $100 today?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3346

1.3484

1.3770

1.3871

1.4003

USD/JPY

76.95

77.54

77.20

78.42

78.98

GBP/USD

1.5825

1.5877

1.6065

1.6120

1.6203

AUD/USD

1.0000

1.0071

1.0320

1.0398

1.0567

XAU/USD

1728.00

1736

1791

1802

1816

OIL/USD

95.00

97.00

99.20

100.00

101.00

Euro – 1.3770

Initial support at 1.3484 (Nov 10 low) followed by 1.3346 (Oct 10 low). Initial resistance is now located at 1.3871 (Nov 1 high) followed by 1.4003 (61.8% retrace of 1.4247-1.3609)

Yen – 77.20

Initial support is located at 76.95 (61.8% retrace of 75.35-79.53) followed by 76.34 (76.4% retrace of 75.35-79.53). Initial resistance is now at 77.68 (Nov 11 high) followed by 77.89 (Nov 9 high).

Pound – 1.6065

Initial support at 1.5877 (Nov 3 low) followed by 1.5825 (38.2% retrace of 1.5272-1.6167). Initial resistance is now at 1.6131 (Nov 8 high) followed by 1.6167 (Oct 31 high).

Australian Dollar – 1.0320

Initial support at 1.0052 (Nov 10 high) followed by the 1.0000 (Round Number). Initial resistance is now at 1.0398 (Nov 9 high) followed by 1.0567 (Nov 1 high).

Gold – 1791

Initial support at 1736 (Nov 11 high) followed by 1728 (61.8% retrace of 1681.73-1802.93). Initial resistance is now at 1802 (Nov 8 high) followed by 1816 (Sep 21 high).

Oil – 99.20

Initial support at 97.00 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 100.00 (Intraday resistance) followed by 101.00 (Intraday Resistance).

Written by Anthony Darvall