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Europes Trade Balance is higher but the euro still falls!

Daily Outlook - 16th July 2012

Written by Zoe Fiddes

CURRENCY TRADING SUMMARY 16/07/2012

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

Sterling- dollar had a good run up to 1.5590 before fading as the market ran out of legs to take the pair above 1.5600. The open this week is seeing a stronger dollar and now the pair trades at 1.5530 pointing south towards the initial support at 1.5500. A break of 1.5490 could open the path to 1.5400/1.5390 (low from July 12th). Referring to the cross EUR/GBP decent support is seen at 0.7850 which is preventing GBP strength for now however a break would spill over into GBP/USD, hence cable may hold-up above 1.5500 on this with demand at 1.5525.

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

Euro-dollar met fresh lows on Friday afternoon at 1.2162 an area which was also tested the previous day. The market recoiled off this support likely to be due to short position holders running to lock in profits before the weekend. The pair made its way back to 1.2250/70 highs. The Asian session last night and through into the London has seen euro weaker with EUR/USD trading down to 1.2185 and EUR/GBP is down to 0.7850. The initial barrier to a downside move in euro-dollar is 1.2160/50 which is expected to draw some interest. Euro zone trade balance surprised with a better result at 6.9bln vs. 6 bln expected and 5.2 previous however CPI m/m is down by 0.1%. This afternoon we have retail sales from the U.S. which is expected to show slight growth at 0.1% m/m.

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

Dollar-yen has set into a downtrend following attempts to move higher in the 79.70/80.00 zone. The price has come to test the 79.00 big figure and a break lower will confirm the direction. The pair is being dragged lower by EUR/JPY as the volatile pair breaks a support at 96.40 with the next major support around 95.50. It is good practice to keep an eye on the JPY crosses when trading USD/JPY. Some are suggesting that the JPY is strengthening on the perception of reduced intervention risk due to the bank holiday today.

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

Aussie-dollar like the other majors this pair had a successful rally on Friday reaching 1.0255 highs from Thursday’s 1.0100 low (which is also the low of the month). Now as US dollar strength runs through the market the price trades at 1.0211. The initial support area and preference to buy is at 1.0180/1.0200, as long as it holds. With no news out of Australia or China on the calendar tonight moves may be dictated by US dollar and commodity (gold) pricing.

Gold (XAU):

XAU/USD drifted lower in overnight trading after experiencing a huge rally midsession on Friday, which took the precious metal to a European session high of 1596.  Opening in Asia at 1589, it fell during trading to find support at 1584 before rallying, but was only able to get as high as 1591 before falling again and finally closing the session at 1584.  Technical analysis has a preference to buy gold at a pivot of 1578 with resistance at 1598 and 1611.

Oil:

OIL/USD rallied slightly towards the end of last week on renewed concerns regarding Iran’s threats concerning a potential blockade of the Strait of Hormuz taking the commodity from a low of 83.58 to high of 87.61 over the course of three days.  Opening in Asia at 86.97, oil did little to inspire any excitement rallying to a high of approximately 87.73 and falling to find support at 86.42 and finally closing the session at 86.71.  Looking ahead, technical analysis is pointing to a higher day for oil with a pivot of 86.00 and resistance at 87.35 and 88.00.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5485  1.5500  1.5540  1.5560  1.5590
EUR/USD  1.2090  1.2150  1.2192  1.2255  1.2295
USD/JPY  78.75  78.85  78.99  79.20  79.40
AUD/USD  1.0140  1.0180  1.0219  1.0250  1.0270
XAU/USD  1565.0  1578.0  1586.2  1598.0  1611.0
OIL/USD  85.50  86.00  86.75  87.35  88.00

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