Weak stocks reverse Dollar gains as risk aversion spikes higher

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) with little data out today the Dollar took its cue from stocks and commodities. Initial speculation that the G8 would try to tackle the high cost of oil buoyed the Dollar during the Asian and European sessions before reversing on US stock weakness. More concerns from the banking sector lead by mortgage lenders Fannie Mae and Freddie Mac sent stocks spiraling lower dragging the dollar down as well. In the U.S. share markets, the NASDAQ was down 2 points (-0.09%) and the Dow Jones was down 56 points (-0.50%). Crude Oil closed down $3.70 ending the New York session at $141.20 per barrel. Looking ahead, Pending Home Sales are forecast to fall -2.4% in May from a 6.3% rise in April. Fed Chief Bernanke also speaks tonight.

European Euro

The Euro (EUR) touched day lows as oil was sold off from last weeks record highs and ECB
President Trichet reiterated his “no bias” on rates comments. The Euro was able to recover as US Equities nosedived in the US session and oil and gold recovered some of there losses. Eurozone data was discouraging with German Industrial Production falling a surprising -2.4% in May after falling -0.2% in April. Overall the EUR/USD traded with a low of 1.5612 and a high of 1.5754 before closing the day at 1.5725 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) was well offered during the Asian and European sessions as equities gained on falling oil. A spike in risk aversion from more banking woes in the US though reversed these gains and left most crosses on the back foot. EUR/JPY performed well reclaiming the 168 handle and holding it throughout the day. Overall the USDJPY traded with a low of 106.62 and a high of 107.75 before closing the day around 107.20 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) had a very volatile day, initially sold throughout the Asian session the losses gained momentum as more UK data came in weaker than forecasted. Both the Industrial (-0.8%) and Manufacturing (-0.5%) Output disappointed in May with both expecting a more modest -0.1% decline. The Cable was able to recover as the Euro bounced in the US session. Overall the GBP/USD traded with a low of 1.9796 and a high of 1.9848 before closing the day at 1.9928 in the New York session. Looking ahead, May Industrial Output (April, 0.2%) and Manufacturing Output (April, 0.1%) both expected at -0.1% m/m.

Australian Dollar (AUD)

The Australian Dollar (AUD) took a break from recent strength falling hard across the board as commodities slumped on a stronger USD. Rising risk aversion hurt the AUD/JPY and EUR/AUD made good gains as the Euro recovered. Overall the AUD/USD traded with a low of 0.9515 and a high 0.9635 before closing the day at 0.9560.

Gold

Gold (XAU) bowed to general USD strength and falling Oil although the sharp fall in US stocks allowed gold to pare losses as safe haven flows increased. Overall trading with a low of USD$915 and high of USD$936.5 ending the New York session at USD$925 an ounce.

Technical Analysis: Weak Stocks Reverse Dollar Gains

Euro (EUR)

Euro – 1.5730 : Initial support at 1.5606 (50% retracement 1.5303 to 1.5910) followed by 1.5535 (61.8% retracement 1.5303 to 1.5910). Initial resistance is now located 1.5754 (July 7 high) at followed by 1.5910 (July 3 high).

Yen (JPY)

Yen – 107.00 : Initial support is located at 106.61 (July 4 low) followed by 105.78 (Jul 3 low). Initial resistance is now at 107.76 (July 7 high) followed by 108.19 (Jun 26 high).

Pound Sterling (GBP)

Pound – 1.9760 : Initial support at 1.9637 (61.8% retracement of 1.9410 to 2.008 rally) followed by 1.9586 (Jun 23 low). Initial resistance is now at 1.9829 (July 7 high) followed by 1.9849 (July 4 high)

Australian Dollar (AUD)

Australian Dollar – 0.9560 : Initial support at 0.9512 (July 1 low) followed by 0.9459 (61.8% retracement of the 0.9328 to 0.9670 advance). Initial resistance is now at 0.9642 (July 7 high) followed by 0.9670 (Jun 30 trend high).

Gold (XAU)

Gold – 925 : Initial support at 910.6 (Jun 27 low) followed by 885.1 (Jun 26 low). Initial resistance is now at 936.5 (July 4 high) followed by 946.5 (July 3 high).