Currency Updates:
U.S. Dollar Trading (USD) the US markets were closed for a bank holiday so had little reaction to the downgrades from Friday in Europe. The EFSF was also downgraded by one notch but this was widely expected and also had a muted reaction. The market is still very short the EURO and any good news would once again prompt a short covering rally as the downside begins to look exhausted in the short term. In US stocks, closed. Looking ahead, January NY FED forecast at 11mn vs. 9.5mn
The Euro (EUR) support was solid at Friday’s low near 1.2625 and the market crept higher for the rest of the day. The downgrade of EFSF could mean that Germany would have to bear a bigger burden with its AAA rating to give more confidence to the markets. Looking ahead, Spanish Bond Auctions. January German ZEW forecast at -50 vs. -53 previously.
The Japanese Yen (JPY) the USD/JPY traded the Y76.70 to Y76.90 range with the holding pattern seen continuing while the action remains on the Crosses. EUR/JPY held above Y97 with a small bounce in holiday affected markets. The outlook is still negative but traders are always wary of intervention and short covering rally. The AUD/JPY is still well supported and could be looking for a test of Y80 if stocks remain strong.
The Sterling (GBP) the GBP/USD kept above the 1.5300 and move up to 1.5340 in quiet trade during the European session. The market is still looking to push EUR/GBP lower but is struggling to break 0.8250. Some traders believe that the UK rating may come into question soon so are cautious on expressing any improvement in risk appetite through buying the GBP/USD.
Australian Dollar (AUD) the Aussie continues to receive support on dips but is not breaking to the topside. Traders suggest a move above the 200day moving average at 1.0400 would support the AUD/USD and could put 1.10 back on the table. Commodities led by Gold and Oil are expected to do well going forward and are part of the bullish Aussie story. More important in the short term and we have a raft of Chinese data today that may inspire fresh movement. Looking ahead, Q4 Chinese GDP forecast at 8.7% vs. 9.1% previously.
Oil & Gold (XAU) Gold is pivoting the $1640 level in quiet trade closing for half the day with US on holiday. Oil was very quiet but grinded higher towards $100 closing just under the key level.
