Last week's currency trading review

The Dollar had a dramatic reversal of fortunes as the Euro led a major rebound against the USD last week and left the reserve currency venerable in the new Year. A solid Fed Beige book and very strong US stocks sent the market into 'risk on' mode and Oil rallied while Gold plummeted. December Retail Sales fell to 0.6% vs. 0.8% previously. The Euro was the best performer of the week on the back of a hawkish ECB President Trichet and strong showing in Bond auctions easing fears of a further Debt Crisis. Also helping sentiment is talk that the ECB may expand the ESFS. The ECB held at 1.0% as widely expected. The EUR/USD gained +3.59% closing at 1.3387, after opening the week at 1.2906.

The Japanese Yen remained inside the recent range although was under pressure due to dollar weakness pushing down to Y82.50 support. Crosses did well however with EUR/JPY regaining the Y110 level. The USD/JPY fell -0.34% closing at 82.85, after opening at 83.13. The GBP surged with the Euro as the European neighbor enjoyed the sentiment change. EUR/GBP edged up back above 0.8400 but could still return to its recent downtrend if the BOE steps up inflation fighting rhetoric. The BOE held at 0.5% as widely expected. The GBP/USD gained +2.04% closing at 1.5867 after opening at 1.5544. The AUD was unable to take advantage of the weak USD environment as economic data weakened unexpectedly and Flash Floods threatened devastation on the commodity powerhouse's third biggest city. December Unemployment was at +2.3k vs. +25k forecast. The AUD/USD fell -0.71% closing at 0.9885 after opening at 0.9955.

The Forex Trading Week Preview

In the States; On Monday, Fed's Plosser Speaks. On Tuesday, TIC Flows forecast at 40bn vs. 27.6bn previously. On Wednesday, December Housing starts forecast -0.9% vs. 3.9% previously. On Thursday, Weekly Jobless Claims are forecast at 425k vs. 445k previously. Also December Existing Home Sales forecast 3.6% vs. 5.6%. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, German Zew Survey forecast at 83.4 vs. 82.6 previously. On Thursday, EU Consumer Confidence forecast at -12 vs. -11 previously. On Friday German IFO January Businiess Climate forecast at 110 vs. 109.9 previously. In the UK, On Tuesday, December CPI is forecast at 3.3% vs. 3.3% previously. On Wednesday, December Claimant Count forecast at -1.5k vs. -1.2k previously. The November ILO Unemployment Rate is forecast at 7.9%. On Friday, December Core Retail Sales are forecast at -0.3% vs. 0.3% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Tuesday, November Industrial Production previously at 5.8%. In Australia; On Thursday, NZ CPI is forecast at 2.3% Q/Q. On Friday, NZ November Retails Sales are forecast at 1.2% vs. -2.5% previously. 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

1.2962

1.3089

1.3355

1.3457

1.3499

USD/JPY

81.61

81.89

82.95

83.15

84.11

GBP/USD

1.5513

1.5719

1.5870

1.5911

1.5965

AUD/USD

0.9753

0.9804

0.9890

1.0000

1.0076

XAU/USD

1348.00

1352

1362

1396

1417

OIL/USD

89.00

90.00

91.50

92.50

95.00





Euro - 1.3355

Initial support at 1.3089 (Jan 13 low) followed by 1.2962 (Jan 12 low). Initial resistance is now located at 1.3457 (Jan 14 high) followed by 1.3499 (Dec 14 high)



Yen - 82.95

Initial support is located at 81.89 (Jan 5 low) followed by 81.61 (Jan 4 low). Initial resistance is now at 83.15 (Jan 13 high) followed by 84.11 (Dec 20 high).

Pound - 1.5870

Initial support at 1.5719 (Jan 13 Low) followed by 1.5513 (Dec 30 low). Initial resistance is now at 1.5911 (Dec 14 high) followed by 1.5965 (Dec 23 high).

Australian Dollar - 0.9890

Initial support at 0.9804 (Jan 12 low) followed by the 0.9753 (Dec 8 low). Initial resistance is now at 1.0000 (Big Figure) followed by 1.0076 (Jan 5 high).

Gold - 1362

Initial support at 1352 (Jan 7 low) followed by 1348 (Nov 22 low). Initial resistance is now at 1396 (61.8% retrace of 1352.70-1424.05) followed by 1417 (Jan 4 High).



Oil - 91.50

Initial support at 90.00 (Intraday Support) followed by 89.00 (Intraday Support). Initial resistance is now at 92.50 (Intraday Resistance) followed by 95.00 (Intraday Resistance).





Written by Anthony Darvall