•   A weak or two without a crisis or a perceived crisis can go along way for the EURUSD. Yesterday we had a very successful Spanish bond issue which sparked some healthy risk seeking in the FX markets. The Swiss National bank added to this confidence following his hawkish comments on the Swiss economy as well as the news that the EU will back the publishing of ”bank stress tests”. The importance of publishing bank stress tests will help bring confidence back to the markets as the current jitters are caused by lack of knowledge of which bank owns whose debt. Overall price action for the EURUSD was between 1.2239 - 1.2412.
•  In the US yesterday we had a batch of disappointing economic reports out of the US which seemed to cap the risk appetite caused by the surge in the EUR. Initial jobless claims jumped to 472K for the week indicating that job creation is struggling in the states denting the optimistic recovery in consumer spending. We also had a weak CPI figure yesterday which increased concerns of possible deflation in the US which also caped the risk appetite from the surge in EUR, CPI fell over all by 0.2% and Philly Fed disappointed expectations as the reading was way below consensus. USDJPY price action was between 90.50 - 91.40 as the weak economic data caused a bout of selling in the USDJPY pair.    

  Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.2250 with a preference to enter into Long positions at 1.260
• § The USDJPY pivot point is at 91.10 with a preference to enter Short positions at 91.05

Today’s calendar and market movers:

• § UK PSNCR for May expected at 20.25bio
• § Canada Leading Indicators for May expected at 0.7%

 Equity Markets:

•  US equities closed positive yesterday with the S&P500 up by 0.13% and the DJIA up by 0.24%. The European bourses were mixed yesterday with the FTSE up 0.30% the DAX and the CAC closing at 0.53% and 0.19% respectively. The NIKKEI and the HSI at the time of writing is -0.04% and 0.75% respectively.

U.S. Dollar Trading (USD) mixed data and the lack of major news to move the markets saw consolidation of the recent rally and range trading for most of the day. May Housing Starts sank to 593k vs. 672k previously. May Industrial Output gained 1.2% vs. 0.9% forecast. In US stocks, DJIA +4 points closing at 10409, S&P -1 points closing at 1114 and NASDAQ +1 points closing at 2306. Looking ahead, Weekly Jobless Claims are forecast at 450k vs. 456k previously. Also, May CPI forecast at -0.2% vs. -0,1% previously.

The Euro (EUR) was well supported on dips as concerns about Spain was countered by persistent short covering and stable stocks. May Inflation was at expectations at 1.6% y/y. ECB’s Juncker stated that ‘no indication that Spain needs a financial bailout despite press reports’. EUR/USD traded with a low of 1.2253 and a high of 1.2355 before closing at 1.2280. Looking ahead, Swiss Libor Rate forecast to remain at 0.25%.

The Japanese Yen (JPY) strengthened into the European session after USD/JPY found resistance at 91.80 and fell back to Y91.10. Crosses are providing more movement and are tracking the ebbs and flows in the stock markets. Overall the USDJPY traded with a low of 91.06 and a high of 91.72 before closing the day around 91.40 in the New York session. Update June Tankan DI 9 vs. 4 previously.

The Sterling (GBP) traded above 1.4840 before sliding into the end of the US session on a combination of bearish news. BP canceled dividends for the rest of the year and BOE King was cautious as always in a speech supports new UK government measure on financial regulation. On a positive note, May UK Claimant Count fell 31k in May vs. forecasts of 20k. Overall the GBP/USD traded with a low of 1.4703 and a high of 1.4859 before closing the day at 1.4730 in the New York session. Looking ahead, May Retail Sales are forecast at 0.1% vs. 0.3% previously.

The Australian Dollar (AUD) consolidated the gains from Tuesday closing above 0.8600 but failing to pass resistance at 0.8665. AUD/JPY struggled to make fresh gains as well as USD/JPY stutters and will need fresh news to break above the key Y80 level. Overall the AUD/USD traded with a low of 0.8580 and a high of 0.8676 before closing the US session at 0.8620.

Oil & Gold (XAU) little action on gold overnight keeping to within a $10 an ounce range. Overall trading with a low of USD$1216 and high of USD$1238 before ending the New York session at USD$1233 an ounce. Maintained recent strength extending the rally slightly higher. WTI Oil Closed +$0.73 at $77.67 a barrel.

TECHNICAL COMMENTARY

Euro – 1.2310

Initial support at 1.2168 (June 15 low) followed by 1.2045 (June 11 low). Initial resistance is now located at 1.2368 (0.618 of 1.2672-1.1877) followed by 1.2453 (May 28 high)

Yen – 91.25

Initial support is located at 90.84 (June 11 low) followed by 90.54 (June 1 low). Initial resistance is now at 92.12 (June 14 high) followed by 92.97 (May 18 high).

Pound – 1.4690

Initial support at 1.4506 (Jun 11 low) followed by 1.4347 (Jun 11 low). Initial resistance is now at 1.4856 (June 16 high) followed by 1.4918 (May 13 high).

Australian Dollar – 0.8595

Initial support at 0.8506 (June 15 low) followed by the 0.8427 (June 10 low). Initial resistance is now at 0. 8728 (0.505 retrace of 0.9388 - 0.8068) followed by 0.8865 (May 17 high).

Gold – 1233

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil – 77.80

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).

U.S. Dollar Trading (USD) the Euro led the majors higher against the Dollar with US stocks markets extending the recent rally and ending in the overall positive territory for the first time this month. June US NAHB Housing market index fell to 17 vs. 22 in a substantial weakening of home builders sentiment. Tonight’s housing data will be checked to see whether this drop in sentiment has translated into actual numbers. In US stocks, DJIA +213 points closing at 10404, S&P +25 points closing at 1115 and NASDAQ +61 points closing at 2305. Looking ahead, May Industrial Output is forecast at 0.9% vs. 0.8% previously. Also Released, May Housing Starts are forecast at 0.65mn vs. 0.672mn previously.

The Euro (EUR) shrugged off an awful German Zew survey in June which dropped to 28.7 vs. 48.7 the sharpest drop since Lehman’s Brothers Collapse. The Pair tested support under 1.2200 going into Europe but from that point on it was all one way action up to 1.2350 highs. Helping Sentiment was solid Bond Auctions in Spain and Ireland. EUR/USD traded with a low of 1.2167 and a high of 1.2351 before closing at 1.2330. Looking ahead, May Inflation forecast at 0.1% vs. 0.5% previously m/m.

The Japanese Yen (JPY) was once again contained versus the USD but lost ground against all the other currencies with risk appetite surging with equities. The BOJ held at 0.1% and offered a small new lending facility to try and spur further activity in growth industries. Overall the USDJPY traded with a low of 91.06 and a high of 91.72 before closing the day around 91.40 in the New York session.

The Sterling (GBP) pushed higher but struggled to match the pace of the Euro as May CPI came in weaker then expected at 3.2% vs. 3.5% forecast. EUR/GBP broke above 0.8300 as the market rebounded after weeks of selling. Overall the GBP/USD traded with a low of 1.4680 and a high of 1.4839 before closing the day at 1.4800 in the New York session. Looking ahead, May Claimant Count is forecast at 20k vs. 27.1k previously.

The Australian Dollar (AUD) broke back above 0.8600 as stocks continued to push higher throughout the US session able to shrug off neutral RBA minutes released earlier in the day that suggested interest rates were appropriate for now. AUD/JPY settled above Y79 and is in striking distance of the Key Y80. Overall the AUD/USD traded with a low of 0.8504 and a high of 0.8664 before closing the US session at 0.8640.

Oil & Gold (XAU) Grinded higher on weak USD and alternative investment demand after finding solid support under $1220. Overall trading with a low of USD$1219 and high of USD$1237 before ending the New York session at USD$1233 an ounce. Oil rallied over $2 a barrel tracking stocks higher. WTI Oil Closed +$2.30 at $77.10 a barrel.

TECHNICAL COMMENTARY

Euro – 1.2320

Initial support at 1.2103 (June 14 low) followed by 1.1881 (June 7 low). Initial resistance is now located at 1.2368 (0.618 of 1.2672-1.1877) followed by 1.2453 (May 28 high)

Yen – 91.55

Initial support is located at 91.24 (June 11 low) followed by 90.54 (June 1 low). Initial resistance is now at 92.97 (May 18 high) followed by 93.64 (May 13 high).

Pound – 1.4805

Initial support at 1.4505 (Jun 11 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4878 (50% 0f 1.5544-1.4231) followed by 1.4918 (May 13 high).

Australian Dollar – 0.8645

Initial support at 0.8427 (June 11 low) followed by the 0.8263 (June 10 low). Initial resistance is now at 0. 8728 (0.505 retrace of 0.9388 - 0.8068) followed by 0.8865 (May 17 high).

Gold – 1232

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil – 77.10

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).

•  Markets seemed to shun the fear of an EU wide debt crisis yesterday as global risk appetite picked up. It seems that no news is good news especially when the market was heavily pricing in risks of defaults. With a record number of short positions feeling a little anxious on the day and a fantastic Industrial production report coming in higher than expected at 0.8%, markets scrambled to cover their shorts as well as short term spec accounts dipping their toes in some long positions. The report is considered as a forward looking report on the health of an economy as it reacts quickly to changes in the business cycle as well as consumer confidence and employment levels. As the session went on and the EURUSD climbed to 1.2297 Moody’s decided to downgrade Greece is debt to junk status giving the much needed excuse to offload those short term speculative long positions just before the London Fix was coming to an end. Overall price action on the day was between 1.2162 - 1.2297.
•  In the US yesterday we saw Fed President Bullard reject speculation that the European debt crisis will push back any Fed policy decisions. He says that policy will be dictated by the actual US economic recovery however he says the recovery will have to develop further before any rate hikes are delivered. US stocks traded in line with European wide sentiment with the S&P making highs of just above the 1105 level however as the session went on and the Moody’s downgrade was announced traders rushed for the exit once more and the market ended up closing down 0.2% at 1091 points. USDJPY price action yesterday was between 91.39 - 92.11.
•  In the UK the focus will be on the latest CPI figures so as to gauge the direction of UK inflation pressures. Last CPI reading stubbornly showed a year on year figure of 3.7% prompting assumptions that the BoE may be forced to enter a preemptive rate hike so as to tame such price pressures. GBPUSD price action was between 1.4501 - 1.4808. 

 Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.2275 with a preference to enter into Short positions at 1.2265
• § The USDJPY pivot point is at 91.75 with a preference to enter Short positions at 91.70

Today’s calendar and market movers:

• § UK Consumer Price Index for expected at 3.5% year in year ending May
• § EU Employment for Q1 with last month reading as -0.2%
• § EU Trade for April expected at 3.7 bio
• § US NAHB for June forecasted at 21

 Equity Markets:

•  US equities closed negative yesterday with the S&P500 down by -0.2% and the DJIA down by -0.18%. The European bourses were positive yesterday with the FTSE up 0.74% the DAX and the CAC closing at 1.28% and 1.98% respectively. The NIKKEI and the HSI at the time of writing is 0.08% and 0.20% respectively.

The Dollar was on the backfoot for most of the week as stock markets staged an impressive rebound. Heavily overbought, the USD was ripe for profit taking and the market did so in a broad based fashion. April’s Trade Balance was -40.3bn vs. -40.8bn forecast and US Retail Sales Slumped -1.2% vs. 0.2% forecast for the first negative reading in 8 months. On a Positive note, UoM Consumer Confidence soared to a 2 year high at 75.5 in June. The Euro was bought up quite aggressively on comments from the head of the Chinese pension Fund that the Euro will survive the crisis and that the he was more concerned about their US debt holdings. Also helping sentiment towards the single currency was the improvement in the ECB’s GDP outlook and positive comments from President Trichet after the ECB Rate Meeting where they at 1.0%. The EUR/USD gained +1.19% closing at 1.2119, after opening the week at 1.1967.

The Japanese Yen lost ground against most currencies but stayed in a range against the USD as the two safe haven currencies competed for the weakest performance of the week. AUD/JPY soared in the ‘risk on’ environment up over 3Yen and EUR/JPY also did very well reclaiming the Y110 level after testing support at 108 in recent weeks. Q1 GDP was confirmed at 1.2% Q/Q. The USD/JPY fell -0.29% closing at 91.63, after opening at 91.90 previously. The GBP made small gains but underperformed as heavy EUR/GBP buying on Friday hurt the Pound going into the weekend. The market is paying close attention to the new government’s fiscal outlook and the coming budget will by closely scrutinized. The GBP/USD gained +0.66% closing at 1.4548 after opening at 1.4452. The AUD was the best performing currency in the market as the fundamentals of the commodity based economy continued to outshine the rest of the market and it was only risk aversion keeping the Aussie at lower levels. With the rebound in stocks the market covered shorts quickly testing 0.8500 into the weekend. May Employment change was very strong at 26k vs. 20k forecast and the Unemployment rate dropped to 5.2% vs. 5.4% previously. The AUD/USD gained +3.18% closing at 0.8501 after opening at 0.8231.

The forex trading week preview

In the States; On Tuesday, Net Long Term TIC Flows previously at 140.5bn. On Wednesday, May Housing Starts are forecast at 650k vs. 672k previously. Also released, May Industrial Production forecast at 0.9% vs. 0.8% previously. Also Fed Chief Bernanke speaks. On Thursday, Weekly Jobless Claims are forecast at 453k vs. 456k previously. Also released, June Philly Fed forecast at 21 vs. 21.4 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, German ZEW Survey forecast at 42 vs. 45.8 previously. On Wednesday, May CPI is forecast at 0.8% y/y. On Thursday, ECB Monthly Report Released. In the UK; On Tuesday, May CPI is forecast at 3.5% vs. 3.7% previously y/y. On Thursday, May Core Retail Sales forecast at 0.4% vs. 0.1% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Tuesday, BoJ Target Rate is forecast unchanged at 0.1%. On Friday, BoJ Monetary Policy Minutes. In Australia; On Tuesday, June RBA Minutes Released. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro - 1.2220

Initial support at 1.2103 (June 14 low) followed by 1.1881 (June 7 low). Initial resistance is now located at 1.2327 (June 3 high) followed by 1.2453 (May 28 high)

Yen - 91.60

Initial support is located at 91.24 (June 11 low) followed by 90.54 (June 1 low). Initial resistance is now at 92.97 (May 18 high) followed by 93.64 (May 13 high).

Pound - 1.4740

Initial support at 1.4505 (Jun 11 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4809 (June 14 high) followed by 1.4918 (May 12 high).

Australian Dollar - 0.8590

Initial support at 0.8427 (June 11 low) followed by the 0.8263 (June 10 low). Initial resistance is now at 0. 8728 (0.505 retrace of 0.9388 - 0.8068) followed by 0.8865 (May 17 high).

Gold - 1223

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 74.80

Initial support at 72.50 (Intraday Support) followed by 70.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 76.00 (Intraday Resistance).

U.S. Dollar Trading (USD) Global stocks continued to rebound early Monday with positive sentiment sending the Dollar lower across the board. The mood changed however late in the US session after moody cut Greece Credit rating to Junk in a widely expected move. US stocks finished slightly lower after being up for most of the day. In US stocks, DJIA -20 points closing at 10190, S&P -2 points closing at 1089 and NASDAQ +1 points closing at 2243. Looking ahead, TIC Long Term Purchase forecast at 77bn vs. 140bn previously.

The Euro (EUR) took advantage of the positive risk environment to surge above resistance at 1.2215 and push towards 1.2300. The moody’s downgrade took the wind out of the rally and the pair finished near support. April’s Industrial Production beat expectation at 0.8% vs. 0.5% forecast. EUR/USD traded with a low of 1.2109 and a high of 1.2300 before closing at 1.2220. Looking ahead, June German Zew Survey forecast at 42 vs. 45.8 previously.

The Japanese Yen (JPY) was able to test Y92 on strong cross buying especially in the AUD/JPY and EUR/JPY but the failure to push higher and the reversal in US stocks sent the pair back to more familiar levels near 91.50. Overall the USDJPY traded with a low of 91.40 and a high of 92.14 before closing the day around 91.60 in the New York session. Looking ahead, June BOJ Rate Decision forecast to remain at 0.1%.

The Sterling (GBP) surged after under-performing on Friday as the risk currency played catch up to rally nearly 200 pips on the day. Resistance at 1.4750 was broken in Europe as BoE member Sentence was quoted over the weekend as supporting a rate hike in the second half of 2010. Overall the GBP/USD traded with a low of 1.4545 and a high of 1.4812 before closing the day at 1.4730 in the New York session. Looking ahead, May CPI is forecast at 3.5% vs. 3.7% y/y.

The Australian Dollar (AUD) tracked stocks higher breaking above major resistance at 0.8580 to surged in Europe to fresh month highs. AUD/JPY rallied and fell just short of the key Y80 level as the favorite risk currency enjoyed widespread support. Overall the AUD/USD traded with a low of 0.8501 and a high of 0.8669 before closing the US session at 0.8580. Looking ahead, June RBA Minutes Released.

Oil & Gold (XAU) lost ground as safe haven demand eased and profit takers took control. Overall trading with a low of USD$1215 and high of USD$1234 before ending the New York session at USD$1221 an ounce. Oil Rallied to above resistance at $75 before settling just under the figure late in the US session. WTI Oil Closed +$1.34 at $74.80 a barrel.

TECHNICAL COMMENTARY

Euro - 1.2220

Initial support at 1.2103 (June 14 low) followed by 1.1881 (June 7 low). Initial resistance is now located at 1.2327 (June 3 high) followed by 1.2453 (May 28 high)

Yen - 91.60

Initial support is located at 91.24 (June 11 low) followed by 90.54 (June 1 low). Initial resistance is now at 92.97 (May 18 high) followed by 93.64 (May 13 high).

Pound - 1.4740

Initial support at 1.4505 (Jun 11 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4809 (June 14 high) followed by 1.4918 (May 12 high).

Australian Dollar - 0.8590

Initial support at 0.8427 (June 11 low) followed by the 0.8263 (June 10 low). Initial resistance is now at 0. 8728 (0.505 retrace of 0.9388 - 0.8068) followed by 0.8865 (May 17 high).

Gold - 1223

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 74.80

Initial support at 72.50 (Intraday Support) followed by 70.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 76.00 (Intraday Resistance).

•  Markets on Friday saw volatility pick up across the board with the EURUSD’s trading range over 100 pips. Retail sales on Friday came in weaker than expected for the month at -1.2% however this is not expected to have a great impact on underlying GDP as the report is ex-auto sales. This report spurred a bout of risk aversion and some USD strength pushing the Euro to 1.2045 lows. As the session went on we had the University of Michigan report come out showing a print of 75.5 beating expectations of 74.5. Markets have also shifted their expectations of the next Fed Rate hike to January 2011 from September 2010 given the Euro zone debt crisis. Stocks in the US closed the session in positive territory almost half a percent higher on continued hope that the US will stubbornly continue to grow despite the happenings on the other side of the Atlantic. USDJPY price action was between 91.17 - 91.96.
•  In Europe on Friday rumors circulated that Spain was considering tapping part of the EU’s stabilization fund which caused part of the initial sell off in the pair. The rumors were discarded as unfounded considering the extreme austerity measures that the country is undertaking. Later in the day we had ECB Member Nowotny say that the Central bank will continue to support the EU debt markets until a certain degree of stabilization is seen. Looking ahead the markets are shifting focus to EU CPI readings as the ECB repeatedly highlights price stability as its main objective. Also focus will be given to Ireland’s debt issue tomorrow of 5 year paper for Eur1-1.5 bio. EURUSD price action is between 1.2044 - 1.2208.  
•  In Japan the 2 day policy meeting begins today were new information should be released regarding the latest BoJ lending scheme which is designed to lend to small business finding it difficult to raise funds. Initial estimates are that the scheme will add as much as 3 trillion Yen to the system. Japans Prime Minister Kan went on later in the day saying that Japan risks defaulting on its debt if Japans fiscal difficulties are not tackled. Kan says that by the end of June hbe will present a medium to long term plan on how to reduce Japans deficit

 Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.2125 with a preference to enter into Long positions at 1.2135
• § The USDJPY pivot point is at 91.55 with a preference to enter Long positions at 92.10

Today’s calendar and market movers:

• § Eurozone Industrial Production for April expected at 0.5%
• § Australia RBA minutes
• § Japan BoJ Rate Decision expected to remain unchanged at %0.1

 Equity Markets:

•  US equities closed positive yesterday with the S&P500 up by 0.38% and the DJIA up by 0.44%. The European bourses were mixed yesterday with the FTSE up 0.61% the DAX and the CAC closing at -0.14% and 1.11% respectively. The NIKKEI and the HSI at the time of writing is 1.80% and 0.88% respectively.

U.S. Dollar Trading (USD) remained on the weak side as stocks and most currencies pushed higher into the weekend overcoming weak US Retail Sales data. May Retail Sales slumped -1.2% vs. +0.2% forecast. The data was countered however by a rise in US Consumer Confidence to a 2 year high at 75.5 vs. 73.6 previously. In US stocks, DJIA +35 points closing at 10211, S&P +4 points closing at 1090 and NASDAQ +24 points closing at 2243. Looking ahead, Fed Member Bullard Speaks.

The Euro (EUR) remained well supported as the market continued to rebound after weeks of heavy selling. Positive risk sentiment and strong cross buying especially on the EUR/GBP underpinned the move higher. May German WPI increased 0.3% as expected. EUR/USD traded with a low of 1.2046 and a high of 1.2152 before closing at 1.2090. Looking ahead, April Industrial Production is forecast at 0.5% vs. 1.3% previously.

The Japanese Yen (JPY) USD/JPY grinded higher for most of the day on solid cross buying. Some volatility after the US retail sales saw day lows but better Consumer Confidence numbers allowed the rally to resume. AUD/JPY continued it recent rally up above. Overall the USDJPY traded with a low of 91.20 and a high of 91.78 before closing the day around 91.71 in the New York session.

The Sterling (GBP) was very volatile hitting 1.4750 going into Europe before reversing hard on EUR/GBP buying and weak economic data. Manufacturing and Industrial Production both posted -0.4%m/m in May vs positive expectations. The pair settled under 1.4600 unable to take advantage of the risk on environment. Overall the GBP/USD traded with a low of 1.4505 and a high of 1.4758 before closing the day at 1.4550 in the New York session.

The Australian Dollar (AUD) broke and closed above 0.8500 in the US session but was range bound in Europe and Asia. AUD/JPY buying on the back of the US Consumer Confidence numbers helped lift the Aussie and sentiment towards the pair has turned quite bullish as the relief rally continues. Overall the AUD/USD traded with a low of 0.8418 and a high of 0.8504 before closing the US session at 0.8503. Looking ahead, Holiday in Australia.

Oil & Gold (XAU) gold continued to trade in range finding support at $1215 but struggled to bounce. Overall trading with a low of USD$1215 and high of USD$1231 before ending the New York session at USD$1226 an ounce. Crude Oil slipped as weak retail sales prompted profit taking on the recent rally. WTI Oil Closed -$1.70 at $73.78 a barrel.

TECHNICAL COMMENTARY

Euro - 1.2180

Initial support at 1.1881 (June 7 low) followed by 1.1640 (Nov 2005 low). Initial resistance is now located at 1.2214 (June 4 high) followed by 1.2327 (June 3 high)

Yen - 91.80

Initial support is located at 90.54 (June 1 low) followed by 89.81 (May 27 low). Initial resistance is now at 92.08 (June 7 high) followed by 92.97 (May 13 high).

Pound - 1.4590

Initial support at 1.4510 (Jun 10 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4771 (June 2 high) followed by 1.4878 (50% 0f 1.5544-1.4231).

Australian Dollar - 0.8560

Initial support at 0.8195 (June 9 low) followed by the 0.8067 (May 25 low). Initial resistance is now at 0. 8579 (Feb 5 low) followed by 0.8728 (505 retrace of 0.9388 - 0.8068).

Gold - 1230

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 74.50

Initial support at 72.50 (Intraday Support) followed by 70.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 76.00 (Intraday Resistance).

U.S. Dollar Trading (USD) gave up recent gains in a risk on environment as global stocks rallied and risk aversion eased. Weekly Jobless Claims were steady at 456k vs. 453k previously and April’s Trade Balance was close to expectations at -40.3bn previously. In US stocks, DJIA +277 points closing at 10172, S&P +31 points closing at 1086 and NASDAQ +59 points closing at 2218. Looking ahead, May Retail Sales are forecast at 0.2% vs. 0.4% previously.

The Euro (EUR) broke above 1.2000 in Asia as the head of the Chinese Pension Fund stated that the Euro will whether the Crisis and that he was more concerned with US debt holdings. This positive news combined with comments from ECB’s Trichet (ECB held at 1.0%) concerning upgraded GDP growth forecasts. EUR/USD traded with a low of 1.1956 and a high of 1.2144 before closing at 1.2130. Looking ahead, May German WPI previously at 1.7%.

The Japanese Yen (JPY) weakened as the crosses rallied especially on the AUD/JPY and NZD/JPY. USD/JPY was hardly changed as the USD remained under pressure and speculation of a Chinese Yuan revaluation kept the outlook mixed. Q1 GDP was finalized at 1.2% Q/Q. Overall the USDJPY traded with a low of 90.84 and a high of 91.57 before closing the day around 91.30 in the New York session.

The Sterling (GBP) did well in the risk on environment with cable breaking above 1.4700 and GBP/JPY heading for a test of Y135. The BOE held at 0.5% and did little to surprise the market holding the Asset Purchase program at 200bn. Overall the GBP/USD traded with a low of 1.4507 and a high of 1.4733 before closing the day at 1.4705 in the New York session. Looking ahead, May Core PPI is forecast at 0.5% vs. 1.1% previously.

The Australian Dollar (AUD) staged a second day of major gains with the May Unemployment coming in super strong at +27k vs. +17k forecast and the Unemployment Rate dropped the 5.2% vs. 5.4% previously. Combined with the stock market rally the Aussie broke above 0.8300 and then 0.8400 to test 0.8500 late in the US session. Overall the AUD/USD traded with a low of 0.8273 and a high of 0.8512 before closing the US session at 0.8490.

Oil & Gold (XAU) ended the day unchanged as reduced safe haven demand was countered by the weak USD. Overall trading with a low of USD$1215 and high of USD$1234 before ending the New York session at USD$1220 an ounce. Crude Oil surged for the 3^rd Day. WTI Oil Closed +$1.10 at $75.48 a barrel.

TECHNICAL COMMENTARY

Euro - 1.2110

Initial support at 1.1881 (June 7 low) followed by 1.1640 (Nov 2005 low). Initial resistance is now located at 1.2214 (June 4 high) followed by 1.2327 (June 3 high)

Yen - 91.70

Initial support is located at 90.54 (June 1 low) followed by 89.81 (May 27 low). Initial resistance is now at 92.08 (June 7 high) followed by 92.97 (May 13 high).

Pound - 1.4710

Initial support at 1.4510 (Jun 10 low) followed by 1.4347 (Jun 8 low). Initial resistance is now at 1.4771 (June 2 high) followed by 1.4878 (50% 0f 1.5544-1.4231).

Australian Dollar - 0.8475

Initial support at 0.8195 (June 9 low) followed by the 0.8067 (May 25 low). Initial resistance is now at 0. 8552 (May 28 high) followed by 0.8579 (Feb 5 low).

Gold - 1220

Initial support at 1211 (June 7 low) followed by 1197 (June 4 low). Initial resistance is now at 1252 (Jun 8 high) followed by 1261 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil - 75.50

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 76.00 (Intraday Resistance) followed by 78.00 (Intraday Resistance).

•  As the trading session got under way yesterday we saw an initial spike in risk appetite both in equities and FX pairs. The Euro managed to break above the 1.2000 psychological level and traded above these levels for most of the EU trading session. As New York got its trading underway risk aversion returned to the markets and equities lost plenty of their earlier gains and the DJIA fell 0.4%. The Euro also got hammered and traded back down to 1.1955 from 1.2074 previous highs. Ben Bernanke who is the Chairman of the Federal Reserve testified before the House of Budget Committee on the Economy however overall his comments were expected and he said nothing new or market moving. He reiterated the recovery will be sustainable despite ‘’significant restraints” the long run inflation expectations are stable and that the Fed will begin raising interest rates as the job market recovers.
•  In the EU we saw both German and Portuguese bond issues run smoothly despite the surge in funding costs faced by Southern EU members’ states. No major data out of the region yesterday with the biggest market moving event been Chinas comments that it will continue to support the Euro followed by a 50% surge in Chinese exports which spurred a bout of risk appetite buying and short covering. The Euro managed to trade back up to 1.2055 from the previously mentioned lows of 1.1955. Trichet made some comments overnight saying that the ECB’s mandate is price stability and it will deliver he also made calls for further EU integration in terms of policy.
•  In Japan we saw another surge in capital expenditure of 4% indicating a gradual increase in demand on the other hand we saw a sharp decline in bank lending for the country showing that much of Japans demand still comes from its export orientated economy. USDJPY price action was between 91.66 - 91.04.

 Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.1995 with a preference to enter into Long positions at 1.2005
• § The USDJPY pivot point is at 90.85 with a preference to enter Long positions at 90.90

Today’s calendar and market movers:

• § Germany Consumer Price Index expected to gain by 0.1% for May
• § Bank Of England Rate Decision expected to remain unchanged at 0.5%
• § European Central Bank Rate decision expected to remain unchanged at 1%
• § US Jobless Claims for the week expected at 4.64 mio
• § US International Trade for April expected to drop by $41 bio

 Equity Markets:

•  US equities closed negative yesterday with the S&P500 down by -0.59% and the DJIA down by -0.59%. The European bourses were positive yesterday with the FTSE up 1.15% the DAX and the CAC closing at 1.98% and 1.96%. The NIKKEI and the HSI at the time of writing is 1.03% and 0.49% respectively.