US Consumer Still Weak, House Prices Continue Falling

U.S. Dollar Trading (USD) news in Asia that ‘significant progress’ had been made in the Greece debt negotiations spurred a risk on rally that continued into Europe. The US session saw a reversal of the stock markets and risk appetite after economic data missed expectations. November Case Shiller House Price Index fell -3.7% in November. In US stocks, DJIA -20 points closing at 12632, S&P -1 points closing at 1312 and NASDAQ +1 points closing at 2802. Looking ahead, January PMI Manufacturing forecast at 54.5 vs. 53.9 previously. January ADP National Employment forecast at 185k vs. 325k previously.

The Euro (EUR) the EUR/USD moved to 1.3200 on the back of the positive Greece news but then reversed for the rest of the day as US stocks turned negative. Support was found at 1.3080 on the major but some highlighted the European job situation which saw December Unemployment increase to 10.4% previously. Looking ahead, January PMI Manufacturing forecast at 48.7. January Inflation forecast to remain at 2.7%.

The Japanese Yen (JPY) The USD/JPY continued to slip lower falling to low Y76 on USD weakness and then some mild EUR/JPY selling which broke below Y100. The technical outlook continues to provide bearish signals for the major and unless US interest rate expectations or data improves considerable it is hard to get sustained rallies. The next biggest form of support is the risk of intervention near Y75.

The Sterling (GBP) bucked the trend of the other majors able to rally sharply and take advantage of the Euro weakness. December UK Mortgage approvals gained to 52.9k vs. 52.6k previously but are still at very low levels historically. The GBP/USD tested 1.5800 and EUR/GBP fell to 0.8300. Looking ahead, January Nationwide House prices forecast at 0 vs. -0.2% previously.

Australian Dollar (AUD) the Aussie rallied in Asia but failed for a third time at 1.0680 and fell back with US stock markets. The Continued failure is suggesting the rally has run out of steam and either consolidation or a pull back are in store. Next Tuesdays RBA rate announcement the main risk event going forward for the longer term uptrend with some analysts calling for more rate cuts.

Oil & Gold (XAU) Gold range traded between $1745 and $1725 in sideways trade. Oil spikes to $101 before reversing violently to below $98.50 in a weak technically signal.

Pairs to watch

OIL/USD the rally over?

EUR/CHF getting very close to the SNB 1.2000 Floor

TECHNICAL COMMENTARY

Euro – 1.3070

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 – 76.25

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 – 1.5750

Initial support at 1.5642 (Jan 27 low) followed by 1.5517 (Jan 23 low). Initial resistance is now at 1.5811 (61.8% retrace of 1.6167-1.5235) followed by 1.5889 (Nov 18 high).

Australian Dollar – 1.0615

Initial support at 1.0573 (Jan 23 high) followed by the 1.0428 (Jan 4 low). Initial resistance is now at 1.0688 (Jan 26 high) followed by 1.1007 (Aug 2 high).

Gold – 1735

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 – 98.80

Initial support at 98.50 (Intraday Support) followed by 97.00 (Intraday Support). Initial resistance is now at 100.00 (Intraday resistance) followed by 101.00 (Intraday Resistance).

Written by Anthony Darvall