Dubai Bailout Spurs Risk Appetite

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U.S. Dollar Trading (USD) stocks shot to year highs as the market reacted to Abu Dhabi's $10bn backing of Dubai World. Risky currencies shot higher but the market failed to follow through with the USD remaining well supported as an aftershock to Friday's major gains. DJIA +29 points closing at 10501, S&P +7 points closing at 1114 and NASDAQ +21 points closing at 2212. Looking ahead, December NY FED forecast at 24 vs. 23.5 previously. Also released, November PPI is forecast at 0.8% vs. 0.3% previously.

The Euro (EUR) remained well supported above the 1.4600 level all day but struggled to trade near the 1.4700 level as concerns about Greece, Spain and Ireland contained the rebound for now. EUR/JPY responded to the Dubai news but failed to close above the 130 Yen level whilst EUR/GBP was very volatile as the Pound bounced around. Overall the EUR/USD traded with a low of 1.4607 and a high of 1.4687 before closing at 1.4655. Looking ahead, December ZEW sentiment survey forecast at 50 vs. 51.1 previously.

The Japanese Yen (JPY) was stronger against most currencies although gains were pared back after the Dubai news. USD/JPY was sluggish slipping below 89 to find support in the lower 88 yen region. AUD/JPY was able to finish roughly unchanged as the high yielder benefited the most from the improved risk appetite. Japanese December Big Manufacturing Tankan Index improved to -24 vs. -33 previously. Overall the USDJPY traded with a low of 88.31 and a high of 89.30 before closing the day around 88.60 in the New York session.

The Sterling (GBP) gained initially on the Dubai news with the UK banking sector which is heavily exposed to the region's debt breathing a sigh of relief. Gains were capped however with the market extremely nervous about getting to long into a falling market. November House Prices showed a -2.2% drop with the higher end the most heavily affected. Overall the GBP/USD traded with a low of 1.6188 and a high of 1.6328 before closing the day at 1.6310 in the New York session. Looking ahead, November CPI is forecast at 0.25 vs. 0.25 previously. Also released, November RPI forecast at 0.2% vs. 0.35 previously.

The Australian Dollar (AUD) was under pressure early in the day as AUD/JPY selling mounted before reversing sharply with stocks on the Dubai news. Gold also rallied and this helped underpin the rally in the US session. AUD/NZD is still on the offered side leading the NZD to outpace any gains of the Aussie. Overall the AUD/USD traded with a low of 0.9053 and a high of 0.9177 before closing the US session at 0.9170. Looking Ahead, December RBA minutes released.

Oil & Gold (XAU) managed to rally for most of the day as the market rebounded from heavy selling over the past several sessions. Overall trading with a low of USD$1112 and high of USD$1128 before ending the New York session at USD$1126 an ounce. Continued to trade under the $70 level although further losses were avoided. Crude Oil was down -$0.07 ending the New York session at $69.60.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.4481

1.4586

1.4650

1.4782

1.4905

USD/JPY

87.37

88.20

88.60

89.81

90.46

GBP/USD

1.6126

1.6168

1.6310

1.6375

1.6516

AUD/USD

0.8947

0.9016

0.9170

0.9195

0.9323

XAU/USD

1101.00

1109

1125.00

1142.00

1147.00

OIL/USD

68.50

69.00

69.70

70.00

72.50

Euro – 1.4650

Initial support at 1.4586 (Dec 11 low) followed by 1.4481 (Oct 2 low). Initial resistance is now located at 1.4768 (Dec 9 high) followed by 1.4905 (Dec 7 high)

Yen – 88.60

Initial support is located at 88.20 (Dec 11 low) followed by 87.37 (Dec 9 low). Initial resistance is now at 89.81 (Dec 11 high) followed by 90.46 (Dec 7 High).

Pound – 1.6310

Initial support at 1.6168 (Dec 9 low) followed by 1.6126 (Sept 30 low). Initial resistance is now at 1.6375 (Dec 10 high ) followed by 1.6516 (Dec 7 high).

Australian Dollar – 0.9170

Initial support at 0.9016 (Dec 9 low) followed by the 0.8947 (Nov 27 low). Initial resistance is now at 0.9195 (Dec 11 high) followed by 0.9322 (Dec 3 high).

Gold – 1125

Initial support at 1109 (Dec 11 low) followed by 1101 (Nov 13 low). Initial resistance is now at 1142 (Dec 11 high) followed by 1147 (Dec 09 high) .

Oil – 69.70

Initial support at 69.00 (Intraday support) followed by 68.50 (Intraday support). Initial resistance is now at 70.00 (Key Psychological Level) followed by 72.50 (Intraday resistance).

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