Currency Updates:
U.S. Dollar Trading (USD) the Dollar was strong overnight with uncertainty regarding the Italian election outcome still hurting sentiment and generally upbeat US FED chief Bernanke’s testimony before congress helping support the USD bulls. Bernanke tried to calm market unease about the ending of QE3 too soon making the case that QE so far had been successful in helping the US recovery. December Case Shiller House Prices gained 6.8% vs. 6.7% previously. Looking ahead, Fed Chairman continues his testimony. January Durable Goods forecast at -4.4% vs. 4.3% previously.
The Euro (EUR) tried to rally but was stopped at 1.3120 on two occasions with the lingering uncertainty from the gridlock in the Italian elections encouraging sellers. The EUR/JPY downtrend added to the EUR/USD pressure with traders targeting Y118 and 1.2988 respectively. The Bernanke testimony while leaving QE3 on the table also highlighted the difference in the strength of the two economic powerhouses.
The Japanese Yen (JPY) USD/JPY bounced hard above Y92.50 in Asia after the sharp selloff to Y91 but we found ourselves under pressure in New York once again with USD/JPY falling once again but this time only to Y91.20 where solid bids help the major and Yen crosses consolidate. The outlook is mixed but some feel the market could fall back to Y90 with Japanese officials more cautious with comments of late.
The Sterling (GBP) was sold as the downtrend resumed with some very dovish comments from BOE members such as Tucker’s ‘I hope we will think about whether there are constraints to setting negative interest rates’. GBP/JPY is under heavy selling pressure back under Y140 and searching for support. Looking ahead, Q4 GDP forecast at -0.3% vs. -0.3% previously.
. Australian Dollar (AUD) the AUD/USD fell through 1.0225 range support but the bears party was stopped at 1.0200 with some very large orders from local banks and presumed option protection buyers from a large sovereign presumed to be china held the figure intact. The market tried for the 1.0200 level again today but ran into the same strong support. S&P affirmed the AAA rating during the Asian session but some focus was made on the warnings in the report about looming issues. Looking ahead, Japanese Industrial output forecast at 1.5% vs. 2.4% previously. Also Q4 CAPEX forecast at 1% vs. 2.8% previously.
Oil & Gold (XAU) Gold smashed through the $1600oz level on the pro QE3 Bernanke comments and continued sovereign risk out of Europe due to the Italian election uncertainty. OIL/USD fell back to $92 and found support again with the market continued to consolidate the recent pullback. The market may resume its uptrend if Bernanke remains upbeat again in his testimony tonight.
