Last week's currency trading review

The Dollar hit multi-month highs on Monday and Tuesday but when the market reversed direction on late Tuesday and the USD was sold heavily back to opening levels. Economic data was better than expected and this added to the easing fears in the market. September Services PMI at 53.0 and Manufacturing PMI at 51.6 vs. 50.5. September Non Farm Payrolls at 103k vs. 55k forecast. The Euro was the major catalyst first for the downside and then the large rally later in the week. On Tuesday the heavy selling was reversed on an announcement that Belgium bank Dexia will be bailed out by the French and Belgium governments. Add to this was a commitment from the EU leaders to do whatever it takes to stabilize the EU and  the Euro rallied aggressive back above 1.3500. The end of the week saw some selling come back in however as Fitch downgraded Spain and Italy and kept the two troubled large European countries rating on negative watch. The ECB kept rates at 1.5% as forecast and Trichet committed to EU banks if they needed liquidity. The EUR/USD is down -0.06% currently at 1.3379, after opening the week at 1.3387.

The Japanese Yen kept inside the recent range with little intent to leave. The action was kept on the crosses with EUR/JPY testing towards Y100 at the height of risk aversion earlier in the week before bouncing with the majors on bailout optimism. The USD/JPY is up -0.34% currently at 76.73, after opening at 76.99. The GBP hit fresh multi month lows against the USD after the BOE unexpectedly hiked the Asset purchase program from 200bn to 275bn. This UK QE program dented the recovery rally and say the GBP sold on crosses. Cable finished roughly unchanged against the dollar in the end after a large rally post BOE lows. The BOE held at 0.5% as widely expected. The GBP/USD is down -0.15% currently at 1.5559 after opening at 1.5583. The AUD was under pressure as the RBA was dovish on the global turmoil and noted the next Interest rate move would come from Q3 inflation data. The central bank of Australia held at 4.75%. The AUD/USD did well in the 'risk on' rally trade later in the week bouncing from 0.9400 to 0.9700. August Retail Sales gained 0.6% vs. 0.3% m/m previously. The AUD/USD is down +1.08% currently at 0.9764 after opening at 0.9659.

The Forex Trading Economic Data Ahead Preview

In the States; On Tuesday, FOMC Minutes Released. On Thursday, August Trade Balance forecast at -46 vs. -44.8 previously. Also, Weekly Jobless Claims forecast at 405k. On Friday, September Retail Sales forecast at 0.4% vs. 0.0% previously. October UoM Consumer Confidence forecast at 60.0 vs. 59.4 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, ECB Trichet Speaks. On Wednesday, August Industrial Production forecast at -0.8% vs. 0.9% previously m/m. On Thursday, September CPI forecast at 2.6% vs. 2.6% previously. On Friday, EU CPI forecast at 1.5% vs. 1.2% previously y/y. In the UK, On Tuesday, Industrial Production forecast at -1.0% vs. -0.7% previously y/y. On Wednesday, September Jobless Claims forecast at 24.0k vs. 20.3k previously. On Thursday, August Trade Balance forecast at -8.7bn vs. -8.9bn previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Wednesday, BOJ Minutes Released. In Australia; On Thursday, September Employment Change forecast at 10k vs. -9.7k previously. Also released, September Unemployment Rate forecast unchanged at 5.3%. 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

1.3242

1.3336

1.3650

1.3690

1.3797

USD/JPY

75.95

76.11

76.65

77.28

77.86

GBP/USD

1.5423

1.5525

1.5665

1.5716

1.5781

AUD/USD

0.9622

0.9728

0.9990

1.0080

1.0239

XAU/USD

1596.00

1620

1677

1704

1726

OIL/USD

83.50



85.00

85.95

88.00

90.00



Euro - 1.3650

Initial support at 1.3346 (Oct 10 low) followed by 1.3242 (Oct 6 low). Initial resistance is now located at 1.3690 (Sept 28 high) followed by 1.3797 (Sept 21 high)



Yen - 76.65

Initial support is located at 76.11 (Sep 22 low) followed by 75.95 (Aug 19 low). Initial resistance is now at 77.28 (Sep 15 high) followed by 77.86 (Sep 9 high).

Pound - 1.5665

Initial support at 1.5525 (Oct 10 low) followed by 1.5423 (Oct 7 low). Initial resistance is now at 1.5716 (Sept 29 high) followed by 1.5781 (Jul 12 low).



Australian Dollar - 0.9990

Initial support at 0.9728 (Oct 7 low) followed by the 0.9622 (Oct 6 low). Initial resistance is now at 1.0080 (Sep 22 high) followed by 1.0239 (61.8% retrace of 1.0765-0.9388).

Gold - 1677

Initial support at 1620 (Oct 10 low) followed by 1596 (Oct 4 low). Initial resistance is now at 1704 (Aug 25 high) followed by 1726 (50% retrace of 1921.15-1532.72).



Oil - 85.95

Initial support at 85.00 (Intraday Support) followed by 83.50 (Intraday Support). Initial resistance is now at  88.00 (Intraday resistance) followed by 90.00 (Intraday Resistance).





Written by Anthony Darvall