ISM Manufacturing contracts as oil trades at $100 a barrel

U.S. Dollar Trading (USD) tumbled against a number of majors extending its 2007 decline of 10% versus the Euro. Much of the moves were attributed to a poor release in ISM manufacturing for the month of December contracted below the 50 level coming in at 47.7, well short of expected 50.4 figures. This confirmed the lowest reading since April 2003 to ensure a significantly weaker dollar. Compounded the dollar woes were dovish minutes released by the Federal Reserve which highlighted the view that the Credit Crunch was expected to crimp economic growth requiring sizeable interest rate cuts. In U.S. share markets the NASDAQ was down fell -63.57 points (-1.65%) whilst the Dow Jones also fell by -220.86 points (-1.67%). Crude oil was major contributor to market volatility, trading at a record high on Wednesday. Following fears of supply distribution from OPEC nations, Crude jumped above US$100 a barrel to before ending the session at US$99.62. Data scheduled for release on Thursday includes ADP Employment, Initial Jobless claims, and Factory Orders. 

The Euro (EUR) gained on significantly battered dollar, as PMI manufacturing data came in slightly higher then consensus, whilst manufacturing data out of the US was on the opposite end of the scale. Overall the EURUSD traded with a low of 1.4590 and a high of 1.4750 before closing the day at 1.4725 in the New York session. 

The Japanese Yen (JPY) rallied on risk aversion as futures priced imminent rate cuts from the Fed.  Overall the USDJPY traded with a low of 109.21 and a high of 112.05 in the New York session. Other wise Japanese markets were closed for bank holidays. 

The Sterling (GBP) The U.K. currency dropped to the lowest in a week versus the dollar as an industry report showed manufacturing grew at a slower pace than forecast in December. Overall the GBPUSD traded with a low of 1.9774 and a high of 1.9898 before closing the session at 1.9810.

The Australian Dollar (AUD) traded on the back of other majors gaining versus a broadly weaker dollar to trade with a low of 0.8780 and a high of 0.8835

Gold (XAU) extending a seven-year rally to the highest price since 1980, as a weakening dollar and higher energy costs boosted demand for a hedge against inflation. XAU traded with a low of 835.10 and a high of 861.10 in the New York session.
 
TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.4470	1.4570	1.4720	1.4785	1.4859
USD/JPY	108.27	108.98	109.40	112.15	112.67
GBP/USD	1.9770	1.9775	1.9825	1.9898	2.0102
AUD/USD	0.8690	0.8759	0.8835	0.8852	0.8907
XAU/USD	824.90	833.90	856.10	861.30	874.27

Euro – 1.4720
Initial support at 1.4570Dec 28 low) followed by 1.4470 (Dec 27 low). Initial resistance is now located at 1.4727 (Dec 28 high) followed by 1.4751 (Dec 11 high).
 
Yen – 109.40
Initial support is located at 112.68 (Dec 28 low) followed by 111.82 (38.2% retracement of the 107.23 to 114.66 advance). Initial resistance is now at 114.01 (Dec 28 high) followed by 114.66 (Dec 27 high)
 
Pound – 1.9825
Initial support at 1.9904 (Dec 28 low) followed by 1.9826 (Dec 27 low). Initial resistance is now at 2.0022 (Dec 28 high) followed by 2.0045 (23.6% retracement of the 2.1161 to 1.9700 decline)
 
Australian Dollar – 0.8835
Initial support a 0.8660 (Dec 24 low) followed by 0.8553 (Dec 18 low). Initial resistance is now at 0.8795 (Dec 14 high) followed by 0.8907 (Dec 12 reaction high)
 
Gold – 856.10
Initial support at 821.70 (Dec 27 low) followed by 805.20 (Dec 25 low). Initial resistance is now at 840.05 (Dec 28 high) followed by 845.8 (November 8 trend high)