Daily Outlook 23rd September 2010

Dollar Selling Continues

U.S. Dollar Trading (USD) reaction to the Fed easing comments continued into Europe with EUR/USD taking another leg higher and keeping the USD on the back foot. The USD index broke through the key 80 level and contributed to the broad weakness. July HPI fell -0.5%. In US stocks, DJIA -21 points closing at 10739, S&amp P -5 points closing at 1134 and NASDAQ -14 points closing at 2334. Looking ahead, Weekly Jobless Claims forecast at 451k vs. 450k previously. August Existing Home Sales are forecast at 4.11m vs. 3.83m previously.

The Euro (EUR) was well supported breaking the medium resistance at 1.3300 quite comfortably and 1.3400 tested in New York. The market has been quite neutral to short on the Euro given the recent debt troubles but has turned quite aggressively long in recent sessions. July Industrial Orders fell -2.4% vs. -1.2% forecast m/m. EUR/USD traded with a low of 1.3266 and a high of 1.3442 before closing at 1.3400. Looking ahead,

The Japanese Yen (JPY) Y85 was breached as the expected BOJ Yen selling failed to eventuate and the market searched for support throughout the European and US session. With the Japanese on holiday today some trader speculate the thin trading conditions will be perfect for further intervention. Overall the USDJPY traded with a low of 84.26 and a high of 85.02 before closing the day around 84.50 in the New York session.

The Sterling (GBP) was well supported but underperformed the rest of the market as resistance above 1.5700 proved too strong and EUR/GBP broke higher. September BoE minutes were largely as expected with the 8-1 split once again as Sentence voted for a rate hike. Overall the GBP/USD traded with a low of 1.5602 and a high of 1.5719 before closing the day at 1.5665 in the New York session. Looking ahead, August BBA Mortgage Approvals forecast at 32.3k vs. 33.7k previously.

The Australian Dollar (AUD) tapped out above 0.9600 to fall quickly back to lower 0.9500 supports. AUD/JPY selling pressure was noted in the pullback as USD/JPY broke lower. Further upside is seen as the market is extremely bullish. Overall the AUD/USD traded with a low of 0.9440 and a high of 0.9567 before closing the US session at 0.9550.

Oil &amp Gold (XAU) pushed towards $1300 but found sellers lined up in the high $1290’s. Overall trading with a low of USD$1286 and high of USD $1296 before ending the New York session at USD$1291 an ounce. Oil slipped below $75 on bearish US Oil data. WTI Oil Closed -$0.26 at $74.80 a barrel.

TECHNICAL COMMENTARY

Euro – 1.3400

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 – 1.5665

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 – 0.9570

Initial support at 0.9351 (Sept 17 low) followed by the 0.9171 (Sep 9 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 – 74.70

Initial support at 72.50 (Intraday Support) followed by 71.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 76.00 (Intraday Resistance).

Written by Anthony Darvall