U.S. Dollar Trading (US) extreme volatility gripped the market on Monday as traders reacted to the S&P downgrade for US long-term debt. The historic downgrade sent US stock futures down 300 points at the Asian open but this has been largely reversed as we enter the European session given an emergency G7 meeting and aggressive ECB action. In US stocks on Friday, DJIA +60 points closing at 11444, S&P -1 points closing at 1199 and NASDAQ -23 points closing at 2532.

The Euro (EUR) opened strong, trading above 1.4400 on the EUR/USD given the US rating downgrade and talk over the weekend that the ECB would expand their bond buying to include Italian and Spanish debt. This initial bounce was reversed during the Asian as the EUR/JPY reacted to the heavy stock market sell off and EUR/CHF fell on safe haven demand.

The Japanese Yen (JPY) gapped lower on the USD/JPY from Y78.50 to under Y78 but found support on BOJ/MOJ comments that G7 will take appropriate action on FX and keep markets liquid. Intervention risks are noted under Y78 and could prompt sharp movements higher similar to Thursday and Friday last week.

The Australian Dollar (AUD) The Aussie was sold aggressively today in Asia as the risk sensitive currency broke key support at 1.0380 and tested 1.0300. AUD/JPY is close the Y80 level a very important support in recent trading history.

Oil & Gold (XAU) surged above $1700 to all-time highs as the alternative currency found fresh buying on the US rating downgrade. Oil fell another $3 a barrel in Asia towards $84 on concerns the global economy was slipping towards recession given a global debt crisis.

Pairs to watch

USD/JPY and USD/CHF on intervention risks

EUR/USD on official ECB Bond buying announcements



TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3951

1.4014

1.4390

1.4454

1.4536

USD/JPY

76.25

76.61

77.90

80.00

80.24

GBP/USD

1.6121

1.6224

1.6455

1.6473

1.6547

AUD/USD

1.0205

1.0289

1.0380

1.0500

1.0600

XAU/USD

1603.00

1616

1705

1731

1750

OIL/USD

80.00



82.50

84.55

85.00

87.00



Euro - 1.4390

Initial support at 1.4014 (July 18 low) followed by 1.3951 (Jul 13 low). Initial resistance is now located at 1.4454 (Aug 1 high) followed by 1.4536 (Jul 27 high)



Yen - 77.90

Initial support is located at 76.61 (79.60 minus 81.48-78.47) followed by 76.25 (Mar 17 low). Initial resistance is now at 80.00 (Key level) followed by 80.24 (Aug 4 high).

Pound - 1.6455

Initial support at 1.6224 (Aug 2 low) followed by 1.6121 (Jul 21 low). Initial resistance is now at 1.6473 (Jun 7 high) followed by 1.6547 (May 31 high).



Australian Dollar - 1.0380

Initial support at 1.0289 (Apr 5 low) followed by the 1.0205 (Mar 29 low). Initial resistance is now at 1.0500 (Previous support) followed by 1.0600 (Big figure).

Gold - 1705

Initial support at 1616 (Aug 2 low) followed by 1603 (Jul 28 low). Initial resistance is now at 1731 (1462.45 plus 1308.25-1577.57) followed by 1750 (Psychological level).



Oil - 84.55

Initial support at 82.50 (Intraday Support) followed by 80.00 (Intraday Support). Initial resistance is now at 85.00 (Intraday resistance) followed by 87.00 (Intraday Resistance).





Written by Anthony Darvall