Daily Outlook – Markets Rally back to life

U.S. Dollar Trading (USD) the US Dollar was on the back foot as stock markets surged on improvement in manufacturing surveys around the globe. January Chinese Manufacturing PMI jumped to 50.5 vs. 49.8 forecasts, UK PMI jumped to 52.1 vs. 49.7 previously and finally the January US manufacturing 54.1 vs. 53.9 previously in a positive sign for world growth. In US stocks, DJIA +83 points closing at 12716, S&P +11 points closing at 1324and NASDAQ +34 points closing at 2848. Looking ahead, Weekly Jobless Claims forecast at 375k vs. 377k.

The Euro (EUR) the EUR/USD continued to gyrate violently throughout the trading day down in Asia and hitting fresh week lows under 1.3050 before reversing and catching the market short heading back to 1.3200. Talk continued that a Greece debt deal was very close but as of writing nothing had been finalized. The market is in two minds with the bears expecting more downgrades and trouble in the Eurozone while the bulls are looking higher on hopes the worst is behind us. Looking ahead, December PPI forecast at -0.2% vs. 0.2% previously.

The Japanese Yen (JPY) the USD/JPY reversed to fresh lows near Y76 but remained above the figure as cross buying supported the major. The EUR/JPY reclaimed above the Y100 level and the AUD/JPY found support under Y81 before reclaiming and pushing higher once again as US stocks rallied. The outlook for most cross is constructive with USD/JPY expected to find support at Y75.

The Sterling (GBP) the GBP/USD broke easily above 1.5800 as the remarkable rally continued. The market has been up daily for nearly two weeks and has decoupled with the Euro. EUR/GBP is close to testing the lows near 0.8250 and a break would suggest the 0.8000 in coming weeks. Looking ahead, Construction PMI forecast at 52.6 vs. 53.2 previously.

Australian Dollar (AUD) the AUD/USD was well supported on dips and reversed more aggressively than most to fresh month and 2012 highs above the 1.0700 key resistance. The 1.1100 all-time highs are in view but the stock market will have to continue to stretch gains with local economic data mixed enough to allow the central to consider cutting rates.

Oil & Gold (XAU) Gold tested but failed above $1750 before easing to $1745. Oil broke down after the outside day reversal yesterday.

Pairs to watch

• OIL/USD breaking down technically
• EUR/CHF SNB has to act soon to protect 1.2000 target

TECHNICAL COMMENTARY

Euro – 1.3175

Initial support at 1.3000 (Big Figure Support) followed by 1.2931 (Jan25 low). Initial resistance is now located at 1.3244 (38.2% retrace of 1.4247-1.2624) followed by 1.3386 (Dec 12 high)

Yen – 76.15

Initial support is located at 76.00 (big figure) followed by 75.35 (Big Figure). Initial resistance is now at 77.49 (Jan 27) followed by 77.82 (Jan 26 high).

Pound – 1.5845

Initial support at 1.5642 (Jan 27 low) followed by 1.5517 (Jan 23 low). Initial resistance is now at 1.5889 (Nov 18 high) followed by 1.5932 (Nov 15 high).

Australian Dollar – 1.0725

Initial support at 1.0573 (Jan 23 high) followed by the 1.0428 (Jan 4 low). Initial resistance is now at 1.0765 (Sept 1 high) followed by 1.1007 (Aug 2 high).

Gold – 1748

Initial support at 1700 (Big figure resistance) followed by 1681 (Jan 23 high). Initial resistance is now at 1763 (Dec 2 high) followed by 1790 (former trendline support drawn off Oct 20 low).

Oil – 97.50

Initial support at 97.00 (Intraday Support) followed by 95.00 (Intraday Support). Initial resistance is now at 98.50 (Intraday resistance) followed by 100.00 (Intraday Resistance).

Labels: china PMI, Downgrades, japanese yen, market outlook, stock markets, weekly jobless claims