EUR/USD Bounces off 1.2880

U.S. Dollar Trading (USD) traders continued to take an optimistic view of the
global economy focusing on the stronger Chinese/US data and less on Spain/Italy
and ‘fiscal cliff’. US Stocks rallied ahead of the FOMC on Wednesday which analysts
suggest may contain further easing for the US economy. Looking ahead, US Trade Balance forecast at -42bn vs. -41bn
previously.

The Euro (EUR) the EUR/USD opened lower after Italy’s Monti
resignation timeline was announced but the selling was short lived and we have
closed New York near the key 1.2950 resistance. EUR/JPY is struggling to find
support and slipped to Y106 before stabilizing. Many traders missed the first
leg of the EUR/JPY move higher and are waiting for a dip lower. The Sterling (GBP) was stronger grinding higher to 1.6100 before
running out of steam and settling back to 1.6070. The support above 1.6000 last
week and yesterday has the topside in focus and we could retest the 1.6130
highs from last week and open up the 2012 highs near 1.6300. Looking ahead, December German ZEW forecast at 012 vs. -15
previously.

The Japanese Yen (JPY) USD/JPY found support at Y82.10 after being dragged
lower from EUR/JPY selling but we have since rebounded in Asian trade on
Tuesday. The Japanese elections are having a massive impact on the currency with
opposition promises to stimulate the economy through unlimited bond purchases. Australian Dollar
(AUD) was very subdued
yesterday in a 30 pip range finding solid sellers at 1.0500 and strong support
near 1.0460. Chinese Trade Balance fell in November to 20bn as exports were
lower than forecast. EUR/AUD is still getting attention with the important
cross finding support at 1.2300 and buoyant in Asian trade Tuesday. Update Australian
Business Confidence slumps to -9 in November near 2008 Financial crisis levels
as the business cycle peaks for the commodity powerhouse. Looking ahead, no
economic data.

Oil & Gold (XAU) Gold enjoyed a rebound from the recent heavy selling
and we traded as high as $1717 in the US session. OIL/USD fell even as stocks rallied and we traded to fresh
month lows under $86.

Pairs to watch

EUR/USD to test on topside
now support found?

USD/JPY FOMC Decision to
hurt USD and challenge uptrend?

TECHNICAL
COMMENTARY

By Anthony Darvall (TonyD)