CURRENCY TRADING SUMMARY

U.S. Dollar Trading (USD) found strength against the Euro and JPY but lost ground against most other currencies which rebounded with improving market sentiment and rebound in commodity demand. US Construction Spending dropped by less than expected at -0.6% in November. In U.S. share markets, the NASDAQ was down 5 points (-0.26%) and the Dow Jones was down -81 points (-0.91%). Crude Oil closed up $2.47 ending the New York session at $48.81 per barrel. Looking ahead, November Durable Goods are forecast at -1% and December Non-manufacturing is expected to drop to 37 vs. 37.3 previously. Also of interest, FOMC Minutes from the December meeting released.

The Euro (EUR) fell heavily as resistance at 1.3800 gave way and some negative news emerged. ECB Member’s Constancio and Papademos both indicated that they supported cutting rates if inflation continues to drop. Overall the EUR/USD traded with a low of 1.3547 and a high of 1.3963 before closing the day at 1.3620. Looking ahead, December German PMI is forecast at 46.4 vs. 45.1 previously and Euro Zone is seen at 42 vs. 42.5.

The Japanese Yen (JPY) continued to test the upside losing value against all crosses as more risk taking entered the market and investors flooded back to high yielding currencies. AUD/JPY and CAD/JPY were major improvers overnight. Overall the USDJPY traded with a low of 91.82 and a high of 93.58 before closing the day around 93.30 in the New York session.

The Sterling (GBP) gained against the USD as support below 1.45 and then tracked Oil as it rallied in New York. The Crosses supported with large gains in GBP/JPY and heavy EUR/GBP selling the main contributors. The market is looking to Thursday’s BoE meeting as the next major market event for the pound. Overall the GDP/USD traded with a low of 1.4430 and a high of 1.4738 before closing the day at 1.4675 in the New York session. Looking ahead, December Services PMI are forecast at 39 vs. 40.1 previously and December Inflation is expected at 1.8% vs. 2.1% previously.

The Australian Dollar (AUD) continued to be well supported as commodities rallied and investors searched for Yield. AUD/JPY was very well supported and made new 2 month highs. Overall the AUD/USD traded with a low of 0.7064 and a high of 0.7205 before closing the US session at 0.7150.

Gold (XAU) dropped lower as it tracked the EURO ignoring gains in Oil. USD weakness was a major factor in Gold’s recent rally and this has evaporated in recent weeks. Overall trading with a low of USD$845 and high of USD$884 before ending the New York session at USD$855 an ounce.