Currency Updates:
U.S. Dollar Trading (USD) stocks enjoyed another day of gains even as Fed Chief Bernanke was quiet on QE3 with investors remained upbeat after China cut interest rates to spur slowing growth. Bernanke noted the FED was ready to act if necessary but that rates were already low and the US budget deficit was at unsustainable levels. Also ahead, April Trade Balance forecast at -49.5 vs. -51.8 previously.
The Euro (EUR) the Spanish bond auction was a success and we saw a rally briefly above 1.2600 before the Bernanke testimony and Spanish downgrade reversed the gains back to opening levels. The outlook is mixed with hope vs. fear in a daily battle with most headlines negative but work being done in the background to get aid to Spanish banks under pressure. We are moving close to the Greece elections as well which also reenter traders’ minds as they vote to stay in the EU.
The Japanese Yen (JPY) the lack of QE3 talk form Bernanke inspired a move higher to Y79.80 on the major USD/JPY but the Yen Crosses were under pressure as much of the risk rally was reversed later in the US session. Today in Asia most crosses are under pressure as risk and profit taking flows mount.
The Sterling (GBP) the BOE held as forecast and didn’t expand their QE program so the GBP/USD rallied on the back of China rate cut news to above 1.5600 before reversing with the Euro lower later in the day. Traders are cautious getting long at these levels as the longer term trend is still negative the relief rally has been on for 4 days already. Looking ahead, May PPI output forecast at 0.7% vs. 0.1% previously. April German Trade Balance forecast at 13.5bn vs. 13.7bn previously.
Australian Dollar (AUD) the AUD/USD had a volatile trading day up to 1.0000 at the height of positive momentum after the China rate cut. The disappointing Bernanke speech and stocks losses in the Asian session Friday has seen the AUD/USD fall back to 0.9850 under heavy selling pressure. The trend is still down and 0.9580 may be tested if the European debt crisis continues to fester.
Oil & Gold (XAU) Gold has been sold off dramatically since QE3 was not mentioned by FED Chief Bernanke overnight with much of the recent rally based upon hopes of expansion of the US QE program. Support has been found at $1553 in Asia so far. OIL/USD moved back below the $85 support and is heading lower with Asian stock sell off Friday.
