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U.S. Dollar Trading (USD) Risk was on overnight but the safe haven USD held up well against most currencies with US data improving and the Euro struggling to hold gains. Weekly Jobless Claims dropped for a third week to 364k and are beginning to trend lower. December Consumer Confidence picked up 69.9 vs. 67.7 previously. In US stocks, DJIA +61 points closing at 12169, S&P +10 points closing at 1254 and NASDAQ +21 points closing at 2599. Looking ahead, November New Home Sales forecast at 0.313mn vs. 0.307mn previously. Also November Durable Goods forecast at 2% vs. -0.5% previously.

The Euro (EUR) the Euro had a rally above 1.31 in Europe but struggled to hold onto the gains as Bond yields in Italy and Spain remain stubbornly high. The market is very cautious and does not want to be caught long if the market continues to push yield higher on Italian debt. This is making it very hard for the EUR/USD to rally with stocks. Looking ahead, ECB President Draghi speaks.

The Japanese Yen (JPY) the USD/JPY is starting to edge higher testing the topside of the recent range and threatening to breakout as US data impresses. The Japanese economy is expected to remain weak for the foreseeable future and as such any US pick up would help the bullish case that many analysts expect next year for the USD/JPY. Crosses are more beholden to stock markets and AUD/JPY finished quite strong.

The Sterling (GBP) rallied in Europe on the back of upgrades to Q3 GDP to 0.6% vs. 0.5% previously. Resistance was found at 1.5770 and reversed back to opening levels near 1.5680. The outlook is mixed but improving as risk aversion dies down. We are still quite low on GBP/USD historically as the Pound has underperformed in the last few years due to a weak UK economy and QE from the bank of England.

The Australian Dollar (AUD) the Aussie was able to rally as stocks moved higher with the commodity currency enjoying support in recent sessions. The RBA may not have to cut rates next year and if stocks rally the Aussie with its 4.25% interest rate will outperform. AUD/JPY is above Y79 but the key level Y80 as risk is slowly increased in the popular carry trade.

Oil & Gold (XAU) tested $1600 before stabilizing above $1605 in calm trading ahead of Christmas. Crude Oil tested $100 twice but failed to follow through falling back in late New York on profit taking.

Pairs to watch

AUD/USD to rally again?

XAU/USD Are buyers coming back now things stable?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2983

1.3025

1.3060

1.3237

1.3386

USD/JPY

76.84

77.49

78.20

78.29

78.98

GBP/USD

1.5465

1.5557

1.5680

1.5889

1.5932

AUD/USD

0.9861

1.0052

1.0145

1.0225

1.0380

XAU/USD

1560.00

1583

1610

1643

1677

OIL/USD

95.00

98.00

99.45

100.00

101.00

Euro – 1.3060

Initial support at 1.3025 (Dec 21 low) followed by 1.2983 (Dec 19 low). Initial resistance is now located at 1.3237 (Dec 13 high) followed by 1.3386 (Dec 12 high)

Yen – 78.20

Initial support is located at 77.49 (Dec 9 low) followed by 76.84 (Nov 22 low). Initial resistance is now at 78.29 (Nov 29 high) followed by 78.98 (Nov 1 high).

Pound – 1.5680

Initial support at 1.5557 (Dec 16 low) followed by 1.5465 (Dec 19 low). Initial resistance is now at 1.5889 (Nov 18 high) followed by 1.5932 (Nov 15 high).

Australian Dollar – 1.0145

Initial support at 1.0052 (Dec 21 high) followed by the 0.9861 (Dec 15 low). Initial resistance is now at 1.0225 (Dec 9 low) followed by 1.0380 (Dec 8 high).

Gold – 1610

Initial support at 1583 (Dec 19 high) followed by 1560 (Dec 15 low). Initial resistance is now at 1642 (Dec 12 low) followed by 1677 (Dec 13 high).

Oil – 99.45

Initial support at 98.00 (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