CURRENCY TRADING SUMMARY 02/07/2012
Sterling- dollar was lifted on Thursday and Friday last week on US dollar weakness as the EU summit gave the market confidence to take on more risk and unwind long USD safe haven positions. The pair rallied from 1.5488 up to 1.5714 towards the New York close. The Asian open gapped lower and came to trade in the mid-1.56s. However, the UK PMI for manufacturing surprised with a better result at 48.6 vs. 46.5 expected which has given sterling short-term support bouncing back to 1.5693. This break opens up the resistance level 1.5710. Looking ahead a stronger resistance is seen at 1.5734 (as reported by UBS and Trading Central) and a break of this may open the way to 1.5775 (20th June high). At 15:00 BST the US ISM for manufacturing will be released this is expected to be 52.0 which will indicate a positive outlook (since the figure is above 50).
Euro-dollar rocketed on Thursday evening and then again on Friday in reaction to the progress made at the EU summit; the Eurozone intends to use bailout facilities to buy sovereign bonds in the secondary markets, which should boost liquidity, Spanish banks got some relief as bail-out loans to them will no longer be senior to debts owed to private sector bondholders and lastly it is clearer now that the recapitalizations of banks directly using Euorpean funds is a long term project. EUR/USD made its way to 1.2692 high from the 1.2408 low. This morning PMI figures from Germany and Europe have been released slightly higher than expected and the unemployment level ticks 0.1% higher to 11.1%, which is a record high. Looking ahead the markets are still somewhat bearish in this pair and we could see some gentle euro moves lower. The events this week include the July 4th US holiday on Wednesday, the ECB rate decision and press conference on Thursday and non-farm payrolls (NFP) on Friday, the latter may prevent the pair from a sharp correction to the lows seen last week.
Dollar-yen came to challenge the 80.00 resistance level on Friday and again in the Asian open last night. The pair could not break higher and in the late Asia/ early EU session it was pushed down to 79.50. Looking ahead technical analysis on a 30min bar chart indicates a pivot point at 79.45 and have a preference to buy with the initial profit target set at 80.00. If 79.45 breaks there the next area of interest is 79.20/10.
Aussie-dollar moved up on Thursday and Friday along with the other majors. The move took the pair from 0.9995 lows to 1.0267 highs. Now, following a retrace to1.0215 it has come to test the high again and currently trades at 1.0269. A break of the 1.0270 resistance opens up a move to 1.0300, where stronger offers and stops are seen.
XAU/USD experienced huge gains on Friday on the back of positive outcomes from the EU economic summit taking the precious metal from Asian session lows of 1553, to New York session highs of 1607. Overnight trading seems to have been an opportunity for some investors to book some of that profit with gold opening at 1597 and proceeding to move lower to hit an overnight session low of 1589 before closing at 1594. Markets will be eagerly watching for any move from the ECB to cut rates on Thursday and a possible increase in the Non-farm payroll from the US due on Friday. Technical analysis is pointing to a lower day for gold with a pivot of 1607 and supports at 1580, 1574 and 1562.
OIL/USD enjoyed the biggest daily rally in the last 3 months on Friday and moved in a similar way to most other commodities. Fresh Iranian sanctions are set to take effect today and could push oil prices higher in the medium term. Overnight trading, however, seemed to be a good time for some traders to book profits with oil opening at 85.00 and moving lower to achieve a session low of 83.51 and finally closing the session at 83.58. Technical analysis has a preference to buy oil at a pivot of 82.00 with resistance at 85.25, 86.50 and 87.30.
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