Dust settles from Emergency rate cut. Aussie CPI above comfort band

Currency Trading Summary

U.S. Dollar Trading (USD) paired losses against a number of majors following Wednesdays decline. The Fed rate cut did little to calm investor’s fears of a U.S. recession and its effect on the broader global economy. US share markets saw stock prices rebound with the NASDAQ was up by 144.51 pints (+1.67%) whilst the Dow Jones was also up by 298.98 (+2.50%). Whilst Crude Oil prices were lower on by US$2.22 a barrel to US$86.99. Looking ahead, Initial Jobless claims, and Existing Home sales for the month of December will prove to be the key data releases on Thursday, with forecasts lying at 4.95mln (Prior: 5.00 mln)  

The Euro (EUR) gave up its previous session gains versus the greenback, despite the emergency rate cut from the Federal Reserve. In data news Eurozone services sector fell to 52 for the month of January, whilst the Manufacturing rose to 52.6. More importantly ECB President Trichet said he's committed to fighting inflation, attempting to quash speculation he'll follow the U.S. Federal Reserve in cutting interest rates after stocks plunged. Overall the EURUSD traded with a low of 1.4510 and a high of 1.4685 before closing the day at 1.4609 in the New York session. Looking ahead, the German IFO index is the key piece of data out of the EZ today with forecasts lying at 102.30, lower than the previous 103.00.

The Japanese Yen (JPY) advanced on Wednesday as investors reduced carry trades on global economic outlook. The USDJPY pair fell to a low of 104.98 during the day, confirming the lowest level since May 2005. Overall the USDJPY traded with a low of 104.98 and a high 107.38 before closing the day at 105.93 in the New York session.

The Sterling (GBP) fell against the dollar after a government report showed the U.K. economy grew at the slowest pace in more than a year in the fourth quarter, adding to the case for the Bank of England to cut interest rates. The BoE minutes confirmed the MPC had voted by 8 to 1 for keeping rates on hold on January 10 as inflation concerns remained. Overall the GBPUSD traded with a low 1.9467 and a high of 1.9644 before closing the day at 1.9542 in the New York session.

The Australian Dollar (AUD) was initially buoyed by positive CPI in at 0.9% for the fourth quarter boosting inflation towards the 3.6% on a yearly scope, coinciding with the highest inflationary figures in 16 years, and well above the RBA target band of 2% to 3%. Nonetheless any further upside moves were limited with ongoing concerns in equity markets. The AUDUSD traded with a low of 0.8613 and a high of 0.8742 before closing the day at 0.8703 in the New York session.  

Gold (XAU) pared most of its losses in volatile trade on Wednesday on safe heaven buying and bargain hunting at lower price levels. XAU traded with a low of 877.10 and a high of 895.60. 
 
TECHNICAL COMMENTARY

Euro – 1.4605
Initial support at 1.4511 (Jan 23 low) followed by 1.4488 (61.8% retracement of the 1.4366 to 1.4685 advance). Initial resistance is now located at 1.4685 (Jan 23 high) followed by 1.4710 (61.8% retracement of the 1.4922 to 1.4366 decline).
 
Yen – 106.65
Initial support is located at 104.97 (Jan 23 low) followed by 104.91 (May 11, 2005 low). Initial resistance is now at 107.59 (Jan 18 high) followed by 107.95 (Jan 16 high)
 
Pound – 1.9540
Initial support at 1.9445 (61.8% retracement of the 1.9338 to 1.9645 advance) followed by 1.9338 (Jan 22 low). Initial resistance is now at 1.9645 (Jan 23 high) followed by 1.9727 (Jan 18 high)
 
Australian Dollar – 0.8725
Initial support a 0.8513 (Jan 22 low) followed by 0.8488 (Sep 19, 2007 low). Initial resistance is now at 0.8748 (Jan 23 high) followed by 0.8768 (50% retracement of the 0.9022 to 0.8513 decline)
 
Gold – 890.80
Initial support at 849.50 (Jan 22 low) followed by 845.90 (61.8% retracement of 775.50 to 914.30 advance). Initial resistance is now at 895.95 (Jan 23 high) followed by 899.75 (Jan 16 high)