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Mario Draghi's words strengthen the euro

Daily Outlook - 26th July 2012

Written by Zoe Fiddes

CURRENCY TRADING SUMMARY 26/07/2012

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

Sterling- dollar tested 1.5470 to the downside overnight however a sterling come-back in the London open has pulled the pair back to trading just above 1.5500. This is following EUR/GBP moves down from 0.7850 to 0.7815. For cable there is a key resistance zone at 1.5545-55 and if the pair is unable to push through higher there is a preference to sell on the turn with a profit target eyed at 1.5500 followed by a more aggressive target at 1.5470. Draghi is currently leading the moves in the market and this US data from 13:30 BST includes Durable Goods Orders, Initial Jobless Claims and Pending Home Sales change all expected to be slightly down off previous figures. Then at 15:00 we have the US Treasury Secretary speaking.

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

Euro-dollar has tested 1.2160-70 resistance area numerous times in the past 24 hours. It has been unable to break higher and the most recent test this morning created a 1.2162 high before recoiling down to 1.2118. The initial support lies at 1.211020 which has held up so far. Currently technical analysts have a preference to buy from 1.2100 as long as the level holds, whilst a break may open up a down move towards 1.2035. In the news there is plenty of chatter surrounding  the topic of Greece leaving the euro and at the time of writing the ECB president, Draghi, speaks.. let’s watch his words move the price, currently his comments have an air of optimism.

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

Dollar-yen is trading in the tight range 78.00/10 to 78.20/30. Technical analysis suggests a sell in the high in the range whilst the RSI is lacking upward momentum. Keep an eye on the yen crosses such as EUR/JPY as an indication of USD/ JPY direction.

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

Aussie-dollar continues to power up following a strong bounce off 1.0180 overnight on the 25th. The pair has since blasted through the resistance zone surrounding 1.0300 and currently makes new highs of the week at 1.0348. Strong bids are seen at 1.0305 and the next resistance lies at 1.0365 followed by 1.0400, however these barriers are weak and the most significant level lie at 1.0440 the months high (July 17th). In the short term on a 30 min bar chart he RSI lacks momentum and indicates a bearish divergence.

Gold (XAU):

XAU/USD rallied yesterday a huge amount on the back of ECB member Nowotny’s comments stating that the ESM should be granted a banking license.  This comment alone took gold from 1580 at the start of the UK trading session to a high of 1610 by the end of the European session.  Overnight trading in Asia saw a somewhat more subdued reaction.  Opening at 1604, gold was range bound (1601/05) with the precious metal only slightly breaking resistance towards the end of the session and finally closed at 1603.  Technical analysis is pointing to a higher day for gold with a pivot of 1595 and resistance at 1615 and 1623.

Oil:

OIL/USD experienced a similar rally as gold yesterday moving from a mid UK session low of 86.84 to a session high of 89.33.  Overnight trading, however, saw oil drift lower to hit an Asian session low of 88.91.  Looking forward technical analysis has a preference to buy oil at a pivot of 89.00 with resistance at 90.90 and 92.10.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5410  1.5445  1.5548  1.5550  1.5595
EUR/USD  1.2035  1.2100  1.2173  1.2180  1.2215
USD/JPY  77.75  77.90  78.12  78.45  78.65
AUD/USD  1.0180  1.0250  1.0368  1.0365  1.0400
XAU/USD  1589.0  1595.0  1608.9  1615.0  1623.0
OIL/USD  86.75  87.75  88.82  89.00  89.80

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