Daily Outlook 24th September 2010

Profit taking Put Sellers in Rare Control

U.S. Dollar Trading (USD) had a good day as markets came under mild selling pressure with the recent stock rally seen by some analysts as a little overdone. August Existing Home Sales jumped +7.6% vs. -27% in July. Weekly Jobless Claims crept higher to 465k vs. 453k previously. In US stocks, DJIA -76 points closing at 10662, S&amp P –9 points closing at 1125 and NASDAQ -7 points closing at 2327. Looking ahead, August New Home Sales are forecast at 0.29m vs. 0.276mn previously. Also released, August Durable Goods Orders are forecast at -1.0% vs. 0.4% previously.

The Euro (EUR) took the brunt on the selling as the markets reacted to poor PMI data with September EU Services falling 2.3 to 53.6. The market found support at 1.3300 and stabilized. EUR/GBP fell back below 0.8500 and EUR/JPY fell 1 Yen from highs. Concerns in the market linger with Ireland and Portugal Debt continuing to be sold off. EUR/USD traded with a low of 1.3290 and a high of 1.3415 before closing at 1.3320. Looking ahead, September IFO is forecast at 104 vs. 105.2 previously.

The Japanese Yen (JPY) the market tested Wednesday’s low although it was only tentative selling and positive US housing data allowed some stabilization. Crosses were under more pressure as stocks fell back but there is a lot of interest in buying the dips now given the Japanese Government intervention last week. Overall the USDJPY traded with a low of 84.25 and a high of 84.69 before closing the day around 84.50 in the New York session.

The Sterling (GBP) was very strong given the stock market weakness with EUR/GBP selling and Cable testing 1.5700 once again. BBA Mortgage approvals were at 31.8k in August vs. 34.2k in July. Overall the GBP/USD traded with a low of 1.5609 and a high of 1.5745 before closing the day at 1.5680 in the New York session.

The Australian Dollar (AUD) came under selling pressure as the rally stalled and risk was taken off the table. The AUD/JPY slipped back to test Y80 but this support held firm on multiple occasions. The market is still heavily long the Aussie so the possibility of further pull backs is very real given any change in sentiment. Overall the AUD/USD traded with a low of 0.9464 and a high of 0.9578 before closing the US session at 0.9490.

Oil &amp Gold (XAU) the market found resistance at $1296 for the second day but is well supported on Quantitative easing concerns. Overall trading with a low of USD$1286 and high of USD $1296 before ending the New York session at USD$1293 an ounce. Oil recovered from Wednesday’s weakness for mild gains. WTI Oil Closed +$.47 at $75.18 a barrel.

TECHNICAL COMMENTARY

Euro – 1.3350

Initial support at 1.3248 (Sep 22 low) followed by 1.2919 (Sep 6 low). Initial resistance is now located at 1.3509 (50% retrace of 1.5141-1.1877) followed by 1.3818 (Mar 18 high)

Yen – 84.55

Initial support is located at 84.04 (61.8% retrace of 1.5999-1.5297) followed by 82.88 (Sept 15 low). Initial resistance is now at 85.93 (Sep 16 high) followed by 86.70 (38.2% retrace of 92.89-81.88).

Pound – 1.5695

Initial support at 1.5449 (Sept 15 low) followed by 1.5297 (Sep 7 low). Initial resistance is now at 1.5731 (61.8% retrace of 1.5999-1.5297) followed by 1.5999 (Aug 6 high).

Australian Dollar – 0.9520

Initial support at 0.9442 (Sept 21 low) followed by the 0.9314 (Sep 14 low). Initial resistance is now at 0.9637 (July 24 2008) followed by 0.98500 (July 15, 2008 high).

Gold – 1293

Initial support at 1263 (Sept 15 low) followed by 1232 (Aug 31 low). Initial resistance is now at 1300 (Round Number) followed by 1324 (1263.20 plus 1.618 of 1236.80-1274.95).

Oil – 75.10

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 76 (Intraday Resistance) followed by 78.00 (Intraday Resistance).

Written by Anthony Darvall