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Daily outlook - 14th May 2012 (00:30GMT)

CURRENCY TRADING SUMMARY 14th May 2012

Written by Anthony Darvall

U.S. Dollar (USD)

U.S. Dollar Trading (USD) the markets have opened mixed on Monday with the risk off trading during Friday continuing but with very little follow-through selling. The China RRR rate cut over the weekend is supporting we could see a reversal of fortunes if stock markets rally. On Friday we saw stocks fall following JPMorgan losses but the selling contagion to other banks has been limited so far. Looking ahead, No US data tonight.

Euro (EUR)

The Euro (EUR) the EUR/USD is constantly in play with the Greek political drama continued unresolved over the weekend and the German leader Merkal coming under pressure herself as local elections see her conservative party’s support base drop dramatically. The mood change sweeping through Europe towards less austerity threatens to reignite the bond vigilante’s attacks on loose spending governments.

Japanese Yen (JPY)

The Japanese Yen (JPY) is finding constant support from the issues threatening global markets and is competing with the USD as the safe haven of choice. The USD/JPY itself is still contained in a tight range under Y80 and is waiting for BOJ intervention talk/measure or fresh US data to pick a new direction. The crosses are in a different story with all falling to new lows on Friday and testing support as risk trades continue to be sold.

Sterling (GBP)

The Sterling (GBP) the GBP/USD was not immune to the risk off trade falling back under the 1.6100 handle with the EUR/GBP failing to break 0.8000 and the market playing catch up by selling on the risk sensitive Cable. GBP/JPY is struggling and could break down lower as it moves towards Y128. Looking ahead, March EU Industrial Production forecast at 0.4% vs. 0.5% previously.

Australian Dollar (AUD)

Australian Dollar (AUD) opened up Monday stronger on the Chinese Rate cuts but this was reversed sharply towards the parity level as the EUR/USD fell on Greece concerns. So far the 1.000 level has held and there has been strong support so far at the level. Stops are seen below but the sellers are also wary of a short squeeze as the AUD will rally on any good news. Looking ahead, March Australian Home Loans forecast at -1.7% vs. -2.5% previously.

Oil & Gold (XAU)

Oil & Gold (XAU) XAU/USD fell to fresh lows on Friday near $1575 before finding support and is attempting to rally in Asia so far in Monday trade back towards $1585. OIL/USD tested 97.00 before reversing lower and closing near $95.70.

TECHNICAL COMMENTARY