1.10.13 Draghi Sparks Euro Rally

U.S. Dollar Trading (USD) traders enjoyed a very volatile trading day in the currency markets with the Euro leading the majors higher against the Greenback after the ECB meeting yesterday. Stock markets rallied around the world supported on the back of strong China Trade data yesterday. Weekly Jobless Claims rose to 371k vs. 361k forecast. Looking ahead, November Trade Balance forecast at -41bn vs. -42bn previously. Also December FED Budget released.

The Euro (EUR) the ECB meeting resulted in a much more hawkish ECB than forecast with Draghi commenting no further easing was on the table and that he expects the work already done by the ECB to filter through to the economy later in 2013. He noted that there was now ‘positive contagion’ in the European debt markets with yields falling on Spanish and Italian bonds in recent months. The Sterling (GBP) was rescued by the sharp EUR/USD rally to climb away from the 1.6000 support. GBP/JPY buying also supported and we moved above 1.6150 in the US session. The BOE held at 0.5% and kept QE at 375bn as widely expected.Looking ahead, UK November Industrial Orders forecast 0.8% vs. -0.8% m/m.

The Japanese Yen (JPY) USD/JPY soared overnight with breaking to fresh highs above Y88.50 and we are testing resistance above Y89 in Asia Friday. The biggest mover was the EUR/JPY which combined the USD/JPY and EUR/USD moves to surge over 300pips on the day closing above Y118. The market is awaiting news of a new government stimulus package and BOJ inflation targets. Australian Dollar (AUD) the AUD/USD broke above resistance at 1.0525 in the Asian session yesterday after strong Chinese Trade Balance put the ‘risk on’. EUR/AUD was more interesting down in Asia before surging on the ECB back above key resistance at 1.2500. Looking ahead, China CPI forecast at 0.5% vs. 0.1% previously.

Oil & Gold (XAU) Gold took advantage of the USD weakness to break above $1670 and be well positioned to test higher once again. Oil tracked the stocks higher hitting $94.70 a barrel before easing back to the figure.

Pairs to watch

EUR/USD 1.3300 on the cards now no ECB easing?

USD/JPY Y90 to act like magnet in coming sessions?

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3120	13170	1.3260	1.3300	1.3368
USD/JPY	88.02	88.48	88.95	89.15	90.59
GBP/USD	1.5962	1.6006	1.6155	1.6170	1.6255
AUD/USD	1.0495	1.0545	1.0585	1.0604	1.0637
XAU/USD	1600.00	1625	1675	1684	1700
OIL/USD	90.00	92.80	93.90	94.70	95.00