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Market awaits the FOMC minutes

Daily Outlook - 22nd August 2012

Written by Zoe Fiddes

CURRENCY TRADING SUMMARY 22/08/2012

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

The pair pushed to trade above 1.5800 in the London open reaching 1.5815 highs as bids came in at the support level 1.5760. The euro slipped lower early on weighing on EUR/GBP taking it below the Asian base at 0.7896. This provide cable buoyancy and explains the move higher. Looking ahead technical analysis sticks with a preference to buy from 1.5740 with resistance at 1.5820 followed by 1.5845. It is noted that the initial resistance is under pressure. US news this afternoon include homes sales, crude oil inventories and the highly anticipated FOMC minutes. Any indication of a change in the Feds monetary policies is likely to spark US dollar movement.

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

Euro pushed higher in yesterday’s trading and remains comfortable above 1.2450 in a tight range with 1.2480 highs. There was a lot of market chatter suggesting Dutch PB and Asian sovereign have placed sell orders between 1.2480 – 1.2500 and failure to push higher triggered long speculators to cover ahead of the NY open. Any leaks from the crucial EU leader meetings today on the Greece crisis is likely to affect euro pricing and the FOMC minutes, at 19:00 BST, will also bring volatility to the pair.

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

USD/JPY fell back from 79.31 through the overnight low of 79.23 to 79.17. It bounced later with very good bids noted from around the 200-day moving average at 79.22 and towards the support at 79.12. More bids are seen below with further tech support at 78.90 and 78.79.  Europe’s sovereign debt crisis and a slowdown in China were said to have dragged down exports while higher oil prices were said to have given imports a boost, which were said to have been reflected in the Japanese trade balance figure of -0.33till compared to a market expectation of -0.46trill.  Technical analysis is pointing to a lower day for USD/JPY with a pivot of 79.50 and support at 79.05 and 78.80.

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

The Aussie has not been able to hold on to its uptrend in the short-term as it falls off the 1.0520 highs down to 1.0435. Technical analysis indicates a preference to sell from 1.0490 with the initial support noted at 1.0405 with a high risk of the price breaking lower. Currently the pair is falling in tandem with EUR/USD. There may be corporate demand at 1.0430 with further bids at 1.0425/20. Through this more demand is reported at the 1.0400 barrier with large stops set below.

Gold (XAU):

XAU/USD managed to rally from a European session low of 1621 to a high of 1641 yesterday on the back of renewed speculation and optimism regarding an outlook for Europe, finding good resistance at 1640.  Overnight trading saw it drift lower to 1636 but later managing a climb back up to the 1640 area and finally closing at 1644.  Looking ahead, traders will watch the European meetings taking place today with great interest and attention will shift to the release of the latest FOMC meeting minutes. Going forward, technical analysis has a preference to buy gold with a pivot of 1633 and resistance at 1641 and 1657.

Oil:

OIL/USD opened in Asia at 96.91 and was very much range bound between 96.59/98 for the entire session and finally closed at 96.90.  Oil traders will no doubt pay close attention to the crude oil inventories release from the US today and may anticipate a drop in the price due to the market expectation of the US increasing their crude stockpiles from -3.7 m/b to 0.1 m/b.  Technical analysis currently has a bias towards the buy side with a pivot of 96.00 and resistance at 97.80n and 98.15.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5715  1.5740  1.5784  1.5820  1.5845
EUR/USD  1.2385  1.2425  1.2447  1.2505  1.2540
USD/JPY  78.80  79.05  79.24  79.50  79.70
AUD/USD  1.0380  1.0405  1.0439  1.0490  1.0520
XAU/USD  1626.0  1633.0  1637.8  1645.0  1657.0
OIL/USD  96.00  96.45  96.42  97.80  98.15

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