Eyes on ECB and BoE rate announcement today

Rebound in US stock prices provides stability on the market. Eyes on ECB and BoE rate announcement today.

CURRENCY TRADING SUMMARY
U.S. Dollar Trading (USD) rallied late Asian and early European session to pair its gains in the New York session ensuring that it slid against a basket of majors. The greenback failed to find support on an ISM Manufacturing reading showing showed that the key index was down on expectations. U.S. equities were mostly higher on Wednesday, as energy shares rose as U.S. oil futures hit a record high after data showed U.S. crude oil stocks fell. The fall in U.S. shares on Tuesday, after American Home Mortgage Investment said it could not fund home loans and might have to liquidate assets, battered European equities on Wednesday. In U.S. share markets the NASDAQ was up 7.6 points (+0.30%) whilst the Dow Jones was also up 150.38 points (1.14%). Crude Oil eased from its recent highs to US$1.66 a barrel to US$76.55.

The Euro (EUR) rebounded against the USD on Wednesday as equities stabilized, and poor data out of the U.S. did little to sustain any further strength on the dollar. In data news PMI manufacturing came in slightly better than expected at 54.9 (Forecast at 54.8). Overall the EURUSD traded with a range of a low 1.3638 and a high of 1.3710 before closing the day at 1.3655 in the New York session. Looking ahead plenty of focus will be shifted to the Eurozone with PPI for the month of June expected at a flat 0.3%, ahead of the ECB rate announcement later on, where the majority of the market is expecting rate to be kept on hold. Once again post decision commentary will be heard attentively, waiting for any indication on future policies.    

The Japanese Yen (JPY) initially gained throughout the day as ongoing uncertainty had ensured the Yen was continually relieved of its pressure reaching a three month low of 117.60. With confidence returning to all markets, the USD gained 0.3% Vs. Japanese Yen. Overall the USDJPY traded with a range of a low 117.60 and a high of 118.98 before closing the day at 118.53 in the New York session.   

The Sterling (GBP) gained against the USD bouncing off a two month low earlier in the session. In data news, UK PMI survey rose to a three-year high of 55.7 in July but the data had little impact on the market. Overall the GBPUSD traded with a range of a low 2.0206 and a high of 2.0350 before closing the day at 2.0279 in the New York session. Looking ahead the BoE will conclude its two day MPC meeting with the majority of the market expecting rate to remain unchanged.

The Australian Dollar (AUD) was volatile through out the day as Retail Sales for the month of June came in better than expected at 1.4%. In other data the Trade Balance widened from -807 mill to -1721 mill largely on the back of a drop in exports. Overall the AUDUSD traded with a low of 0.8448 and a high of 0.8552 before closing the day at 0.8487 in the New York session.

Gold (XAU) fell US$3.50 an ounce to US$675.90 in response to stronger oil prices.

CURRENCY PAIR IN FOCUS
AUD/JPY The Australian dollar fell 0.4 percent to 101.17 yen, recovering from a two-month low of about 99.52 yen. Australia's Macquarie Bank warned investors of losses in two bond funds after the credit market troubles in July. This event, along with a spike in credit spreads, prompted currency traders to cut exposure to riskier assets by buying back the low-yielding yen and selling higher-yielding currencies like the Australian and New Zealand dollars.

Euro 1.3655
Initial support at 1.3608 (July 30 low) followed by 1.3567 (Jul 6 low). Initial resistance is now located at 1.3730 (Jul 31 high) followed by 1.3771 (July 26 trend high).

Yen 118.75
Initial support is located at 117.60 (Apr 19 low) followed by 117.28 (76.4% retracement of the 115.15 to 124.17 advance). Initial resistance is now at 119.18 (Aug 2 high) followed by 119.51 (Jul 31 high).

Pound  2.0290
Initial support at 2.0180 (Jul 30 low) followed by 2.0134 (July 30 low). Initial resistance is now at 2.0380 (Jul 31 high) followed by 2.0418 (50% of the 2.0656 to 2.0180 decline)

Australian Dollar  0.8520
Initial support a 0.8446 (Aug 1 low) followed by 0.8435 (61.8% retracement of the 0.8163 to 0.8875 advance). Initial resistance is now at 0.8570 (Aug 2 high) followed by 0.8616 (Jul 31 trend high)

Gold  664.60
Initial support at 657.16 (Jul 27 low) followed by 653.80 (Jul 9 low). Initial resistance is now at 676.77 (Jul 26 high) followed by 687.40 (Jul 24 high)