Banking defaults hurt the Dollar and Stocks.

U.S. Dollar Trading (USD) gave into continued stock weakness as the market focused back on US Financials. With two more banks failing on Friday and Merrill Lynch reporting a new $5.7 Billion writedown the USD took on an offered tone. A gloomy IMF report did little to help stocks with the fund cautioning that it saw no bottom to the US Housing Market. In the U.S. share markets, the NASDAQ down 46 points (-2.00%) and the Dow Jones was down 239 points (-2.11%). Crude Oil closed up $1.47 ending the New York session at $124.73 per barrel. Lookinh ahead, the May case schiller house Price index is seen down -1% m/m and -16% y/y. July Consumer Confidence is expected to fall to 50 from 50.4 in June.

The Euro (EUR) grinded higher but moves were muted as the market waits for economic data later in the week. A Nigerian rebel attack on Oil pipe lines helped to lift Crude Oil which in turn supported the Euro. Recent poor Eurozone data has reignited the decoupling debate with the Eurozone now seen following the US into a period of slow growth. German Consumer confidence fell to 2.1 in August vs. expectations of 3.5. Overall the EUR/USD traded with a low of 1.5684 and a high of 1.5768 before closing the day at 1.5744 in the New York session.  

The Japanese Yen (JPY) traded in tight range gaining slightly as stocks continued to weaken but strong buying on the crosses kept the USD/JPY contained. EUR/JPY continues to trade above 169 within striking distance of the critical 170 level. June Unemployment at 4.1% was slightly higher than the 4.0% expected. Japanese Retail Sales beat forecasts coming in positive 0.3% vs. forecasts of -0.2%. Overall the USDJPY traded with a low of 107.35 and a high of 108.08 before closing the day around 107.45 in the New York session.  

The Sterling (GBP) gained against a weakened USD recovering well from negative housing data released during the Asian session. GBP/JPY once again provided much needed support but also the EUR/GBP cross showed that the Pound strength was broad based. Overall the GBP/USD traded with a low of 1.9840 and a high of 1.9965 before closing the day at 1.9945 in the New York session.  Looking ahead, June Consumer Credit seen at 1.1 Billion down from 1.38 Billion in May along with July CBI orders expected to fall to -15  from -9 in June. June Mortgage data is released with Approvals expected at 37K down from 42K in May and total lending expected to dip to 3.85Bln from 4.07Bln in May.

The Australian Dollar (AUD) traded in a tight range with the market contained to the 0.95 handle. Soft equities and the recent rout in commodities prices have kept AUD buyers on the sidelines for the time being. Overall the AUD/USD traded with a low 0.9527 and a high of 0.9595 before closing the US session at 0.9570
Gold (XAU) gold traded higher but movements were muted as markets await key data later in the week. Overall trading with a low of USD$923.40 and high of USD$932.80 ending the New York session at USD$930 an ounce.
 
 
TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.5629	1.5684	1.5750	1.5769	1.5799
USD/JPY	106.08	106.58	107.45	108.08	108.59
GBP/USD	1.9754	1.9815	1.9950	1.9990	2.0077
AUD/USD	0.9477	0.9527	0.9580	0.9637	0.9675
XAU/USD	908.65	912.90	932.00	949.25	976.00

Euro – 1.5750

Initial support at 1.5684 (July 28 low) followed by 1.5629 (July 24 low). Initial resistance is now located 1.5769 (July 24 high) at followed by 1.5799 (July 16 High).

Yen – 107.45

Initial support is located at 106.58 (July 25 low) followed by 106.06 (July 22 low). Initial resistance is now at 108.08 (Jun 28 high) followed by 108.59 (Jun 16 high).

Pound – 1.9950

Initial support at 1.9815 (July 14 low) followed by 1.9754 (July 11 low). Initial resistance is now at 1.9990 (July 24 high) followed by 2.0077 (July 22 high).

Australian Dollar – 0.9580

Initial support at 0.9527 (July 28 low) followed by 0.9477 (Jun 9 low). Initial resistance is now at 0.9637 (July 14 low) followed by 0.9675 (June 17 low).

Gold – 932

Initial support at 912.9 (July 8 low) followed by 908.65 (Jun 19 low). Initial resistance is now at 949.25 (July 23 high) followed by 976 (July 22 high).