Gold Confuses Traders with Sharp Drop

U.S. Dollar Trading (USD) with stock markets continuing to press higher again
yesterday with the safe haven Dollar sold and riskier currencies bought. Gold
bucked the trend however crashing over $30oz as investors pulled money out of
the precious metal and into higher yielding stocks/currencies. Traders are
upbeat that progress on a fiscal cliff deal was being made. Looking ahead, November Housing Starts forecast at 0.873mn vs.
0.894mn previously.

The Euro (EUR) the EUR/USD broke above 1.3180 in the US session and we closed
at fresh month highs near 1.3230. The Euro was strong across the board gaining
heavily against the AUD and JPY. While the debt crisis was on the Euro lost a
lot of value and is trading near historical low exchange rates against many of
its trading partners. The Sterling (GBP) pushed to 1.6270 before consolidating and closing at
1.6250. EUR/GBP edged higher to 0.8140 close to the highs for the month seen at
0.8150. CPI came in pretty hot at 2.7% y/y and hinders the BOE ability to expand
QE. Also ahead, MPC Minutes. Also December CBI Distributive Trades forecast at 25 vs. 33.

The Japanese Yen (JPY) USD/JPY found support on the dip towards Y83.50 on Monday
before resuming the uptrend yesterday. USD/JPY closed at Y84.30 close to the month
highs at Y84.50. EUR/JPY led the charge higher overnight up above Y111.50 and is
holding gains in Asia Wednesday. Australian Dollar (AUD) the AUD/USD seemed ran out of steam overnight unable
to track the EUR/USD higher and instead left to orbit 1.0550. Some analysts
pointed to the large Gold selloff as the reason for the underperformance.

Oil & Gold (XAU) Gold finally moved to the downside falling $1660 a
previous strong support before recovering some of the losses. Oil found strong
support under $88 and we closed the day at opening levels.  

Pairs to watch

EUR/USD one way action,
overbought caution?

XAU/USD $1660-$1730
range, hold or break?

TECHNICAL
COMMENTARY

By Anthony Darvall (TonyD)