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EU summit aftermath: The ECB still holds the key to recovery

Daily Outlook - 12th December 2011

Written by Zoe Fiddes

CURRENCY TRADING SUMMARY 12/12/2011

Sterling / U.S Dollar (GBP / USD):

GBP/USD has had a good start today on GBP strength; the pair has moved from 1.5540 to 1.5620 and EURGBP has fallen from 0.8550 to 0.8495. It seems the market has taken David Cameron’s veto as a positive move on the Eurozone chess board. There is no UK data out today and across the Atlantic we have the US monthly budget statement at 19:00 hence prices may follow technical levels more closely until then. GBP/USD has moved above the 1.5600 pivot point and this may trigger further moves to the next resistance 1.5650 or if the pair drop below the big figure the initial support lies at 1.5520.

Euro / U.S Dollar (EUR / USD):

EUR/USD fell this morning as the euro is under pressure across the board unable to hold on to Friday’s gains; the EU summit has not been enough to convince investors and action is needed other the euro is likely to slide further. There is much speculation that Middle East investors have been propping up the euro in the last few months but they are becoming more cautious and are shying away from the EU bond market. This in turn is a sign the euro could be valued lower in the coming weeks.  There is little news on the financial calendar from the EU today and from a technical stance the initial support lies at 1.3255 followed by 1.3220 and to the topside the pivot point is 1.3350.

U.S. Dollar / Japanese Yen (USD / JPY):

USD/JPY broke free of its downward channel from last week during London Opening hours this morning. It is testing the Y77.90 mark and if it breaks then last weeks high of Y78.10 is next in line before Y78.30.

The channel itself provides the support and a drop down to Y77.70 could signify a continuation of last week’s downtrend. Stocks rose by 1.37% in the Nikkei amid general Asain bullishness, tempered only by some weak figures in China. In the longer term, the pair has created a bearish diamond on the daily chart and this could indicate a push to record lows before, or unless there is, Band of Japan intervention.

Australian Dollar / U.S. Dollar (AUD / USD):

AUD/USD came lower on the Asia open moving from 1.0200 to 1.0090. In Australia homes loans only increased by 0.7% in October and the trade balance came out lower at 1595mln vs. 2000mln expected, 2249mln last – a sign that exports are getting hurt. The RSI advocates for further downside with the pivot point at 1.0155 and the initial support at 1.0050.

Gold (XAU):

XAU/USD  was range bound much of Friday’s European and U.S. trading sessions (1703.30/1716.60) breaking briefly to achieve a high of 1724.40 before rapidly falling again within the range.  Overnight trading in Asia saw gold break the range to the downside and achieve a session low of 1681.50.  Technical analysis is pointing to a lower trading day for gold with a pivot point of 1703 and support levels of 1684 and 1675.

Oil:

OIL/USD (Crude)  was range bound for much of Friday’s trading sessions (97.44/98.97) briefly breaking the range to achieve a high of 99.69 before finally closing at 99.06.  Oil opened in Asia at 99.21 and traded sideways with reduced volatility achieving a session low of 98.50 before closing at 98.75.  Technical analysis is pointing to a higher trading day for oil, with a preference to buy above the pivot point of 98.50 with resistance at 100.25 and 101.05.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5520  1.5600  1.5613  1.5650  1.5690
EUD/USD  1.3220  1.3255  1.3529  1.3350  1.3390
USD/JPY  77.45  77.55  77.82  77.90  78.00
USD/CHF  0.9215  0.9240  0.9296  0.9325  0.9375
AUD/USD  0.9970  1.0050  1.0108  1.0155  1.0190
NZD/USD  0.7615  0.7635  0.7669  0.7710  0.7755
XAU/USD  1665.0  1671.5  1678.2  1690.0  1703.0
OIL/USD  96.85  97.30  97.99  99.20  99.90

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