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U.S. Dollar Trading (USD) the Dollar was on the back foot until the final few hours of the US trading session as positive Chinese German data helped spark a relief rally in Global stocks. The EUR/USD and most risk assets rallied before paring these gains into the day’s close on fresh Greece Debt deal concerns. US January NY FED Index rose to 13.5 vs. 8.2 and the Bank of Canada held rates at 1.0%. In US stocks, DJIA +60 points closing at 12482, S&P +4 points closing at 1293 and NASDAQ +17 points closing at 2728. Looking ahead, December PPI forecast at 0.1% m/m and December Industrial Output forecast at 0.5% vs. -0.2%.

The Euro (EUR) the EUR/USD moved sharply higher from 1.2650 to 1.2800 on the back of the stunning drop in the January German ZEW survey and the better than expected Chinese GDP at 8.9% vs. 9.1% forecast. The German ZEW fell from -53.8 to -21.6 for the biggest improvement in the 20 year history of the Survey. Spanish bond auctions were also successful and the yields on longer term Italian debt fell slightly.

The Japanese Yen (JPY) the USD/JPY dipped on USD weakness to fresh multi week lows at Y76.55 but then reversed sharply on strong buying and warning of EUR/JPY intervention from Japanese officials. The EUR/JPY squeezed higher above Y98 briefly but closed below the figure. More downside is expected over the medium term as the crisis continues but the market has stabilized and more gains in the short term are very possible. AUD/JPY flirted with the key Y80 level but failed to hold above the figure.

The Sterling (GBP) the GBP/USD rallied to test 1.5400 but as soon as some weakness came into US stocks traders quickly reversed these gains back to opening levels. EUR/GBP is taking advantage of the underperformance to lift off recent lows to 0.8330 currently. The longer downtrend is still in effect but range trading is expected for the next few sessions.

Australian Dollar (AUD) the Aussie managed to break above the 200 day SMA overnight but failed to close above the key technical indicator. The Chinese GDP data underpinned the move higher and is looking to move higher now the recent range has been broken. Unemployment data tomorrow is the main risk event for the week. AUD/JPY is looking to break above Y80 but requires the help of USD/JPY.

Oil & Gold (XAU) Gold broke to fresh highs above $1660 before reversing back to $1650 support at the close. Oil broke back above $100 a barrel as Middle Eastern concerns supported along with strong stocks.

Pairs to watch

EUR/USD relief rally?

OIL/USD to move higher now above $100?

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2588

1.2644

1.2675

1.2879

1.3080

USD/JPY

76.00

76.58

76.80

77.74

78.98

GBP/USD

1.5125

1.5272

1.5325

1.5410

1.5501

AUD/USD

1.0044

1.0229

1.0330

1.0387

1.0567

XAU/USD

1605.00

1630

1645

1662

1677

OIL/USD

97.50

99.00

99.70

100.00

101.00

Euro – 1.2675

Initial support at 1.2644 (Sept 10 2010 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 – 76.80

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 – 1.5325

Initial support at 1.5272 (Aug 6 low) followed by 1.5125 (Jul 21 2010 low). Initial resistance is now at 1.5410 (Jan 6 high) followed by 1.5501 (Jan 10 high).

Australian Dollar – 1.0330

Initial support at 1.0229 (Jan 10 low) followed by the 1.0044 (Dec 29 low). Initial resistance is now at 1.0387 (Jan 3 low) followed by 1.0567 (Mar 3 high).

Gold – 1645

Initial support at 1630 (Jan 11 low) followed by 1605 (Jan 9 low). Initial resistance is now at 1662 (50% retrace of 1802.93-1522.65) followed by 1677 (Dec 13 high).

Oil – 99.70

Initial support at 99.00 (Intraday Support) followed by 97.50 (Intraday Support). Initial resistance is now at 100.00 (Intraday resistance) followed by 101.00 (Intraday Resistance).

Written by Anthony Darvall