Last week's currency trading review

The Dollar was the strongest currency in the market supported by the collapse in the Euro and intervention in the Swiss franc by the SNB earlier in the week. The drastic intervention in the Swiss Franc has left the USD the safe haven of choice with concerns the USD/JPY also has intervention risks and that gold's rally was overdone. Economic data was mixed with September Services PMI stronger than expected at 53.3 vs. 51.2 and Weekly Jobless Claims slightly higher at 414k vs. 407k forecast. The Euro was hit hard down dramatically on Thursday and Friday with the ECB cutting growth and inflation forecast and then talk on that the German government was preparing for a Greek default as the indebted nation failed to show progress in reigning in their budget gap. Earlier in the week the German High Court found the German participation in the EU bailout was not unconstitutional. The EUR/USD is down -4.05% currently at 1.3650, after opening the week at 1.4203.

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The Japanese Yen the BOJ held at 0.1% and offered little new measures to support the Japanese economy. The G7 also did not endorse a coordinated intervention in the Yen but would allow japan to intervene if it did so unilaterally. The volatility lately has been very contained with USD/JPY in a 200 pip range for the last month. The USD/JPY is up +0.97% currently at 77.54, after opening at 76.79. The GBP was sold in the risk off environment caught up in the Eurozone sell off but able to find support from the EUR/GBP cross which fell to months lows at 0.8600. The BOE held at 0.5% as expected and did not expand the Asset purchase program. Of concern was the August, Services PMI which dropped sharply to 51.1 vs. 54.3 previously. The GBP/USD is down -2.14% currently at 1.5873 after opening at 1.6212. The AUD fell violently on Thursday and Friday but from a higher level as earlier in the week some strong economic data supported. The RBA held at 4.75% and was quite neutral as they deferred to the global events remained on the sidelines. The Q2 GDP increased to 1.2% vs. 1.0% forecast. On Thursday, August Jobs Surprised to the downside falling -9.7k vs. -4.1k previously and highlights a weakening employment outlook. The AUD/USD is down -1.69% currently at 1.0465 after opening at 1.0642.

The Forex Trading Economic Data Ahead Preview

In the States; On Tuesday, August Retail Sales forecast at 0.2% vs. 0.5% previously. Also August, PPI forecast at -0.1% vs. 0.2% previously. On Thursday, Weekly Jobless Claims forecast at 410k vs. 414k previously. Also August CPI forecast at 0.3% vs. 0.5% previously. Also ahead, August Industrial Production forecast at 0.1% vs. 0.9% previously. On Friday, September UoM Consumer Sentiment forecast at 56.2 vs. 55.7 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; ON Wednesday, July Industrial Production is forecast at 1.5% m/m vs. -0.7% previously. On Thursday, August CPI is forecast at 2.5% vs. 2.5% previously. On Friday, ECB President Trichet speaks. In the UK, On Tuesday, August CPI forecast at 4.5% vs. 4.4% previously. Also released, July Trade Balance forecast at -8.5n vs. -8.9bn previously. On Wednesday, Claimant Count Change forecast at 34.6 vs. 37.1k previously. On Thursday, August Retail Sales forecast at -0.2% vs. +0.2% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Wednesday, Revised July Industrial Production forecast at 0.6% m/m. In Australia; On Wednesday, Consumer Sentiment previously -3.5%. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3300

1.3525

1.3585

1.3937

1.4149

USD/JPY

76.43

77.07

77.50

77.86

78.47

GBP/USD

1.5752

1.5781

1.5855

1.6083

1.6203

AUD/USD

1.0200

1.0363

1.0400

1.0500

1.0666

XAU/USD

1757.00

1805

1852

1885

1921

OIL/USD

83.00

85.0

86.00

88.00

90.00

Euro - 1.3585

Initial support at 1.3525 (Feb 22 low) followed by 1.3300 (Big figure support). Initial resistance is now located at 1.3937 (Sept 9 high) followed by 1.4149 (Sept 7 high)

Yen - 77.50

Initial support is located at 77.07 (Sep 7 low) followed by 76.43 (Aug 31 low). Initial resistance is now at 77.86 (Aug 9 high) followed by 78.47 (Aug 8 high).

Pound - 1.5855

Initial support at 1.5781 (Jul 12low) followed by 1.5752 (Jan 25 low). Initial resistance is now at 1.6083 (Sept 8 high) followed by 1.6203 (Sep 5 high).

Australian Dollar - 1.0400

Initial support at 1.0363 (Aug 22 low) followed by the 1.0200 (Big Figure Support). Initial resistance is now at 1.0500 (Big Figure Support) followed by 1.0666 (Sept 5 high).

Gold - 1852

Initial support at 1805 (Sept 8 low) followed by 1757 (Aug 29 low). Initial resistance is now at 1885 (Sept 9 high) followed by 1921 (Sept 6 high).

Oil - 86.00

Initial support at 85.00 (Intraday Support) followed by 83.00 (Intraday Support). Initial resistance is now at 88.00 (Intraday resistance) followed by 90.00 (Intraday Resistance).

Written by Anthony Darvall