Pakistan Opposition Leader Bhutto Assassinated. Heavy data for Japan.

U.S. Dollar Trading (USD) was subject to an extremely volatile session, as political distress in Pakistan reached it’s pinnacle with the assassination of opposition leader Benazir Bhutto only days out from an election. In data news, Durable Goods were released on the softer side adding to the dollar woes, as speculation of further rate cuts from the Federal Reserve in the first quarter of 2008 gained in momentum. Durable goods were seen at 0.1% for the month of November, well short of the 2% forecast. Interest-rate futures on the Chicago Board of Trade indicate 84% odds that the Fed will reduce its benchmark interest rate a quarter-percentage point to 4% at its Jan. 30 meeting, compared with a 68% likelihood yesterday. In U.S. share markets the NASDAQ was down -47.62 points (-1.75%) whilst the Dow Jones also fell by -192.80 (-1.42%). Crude oil continued to rise over the holiday period, up by US$0.87 a barrel to US$96.84. Looking ahead, Chicago PMI and New Home Sales will be released out of the US.   

The Euro (EUR) rallied as investors looked to flee the dollar amidst the political chaos in Pakistan. Following the assassination of Former Pakistan Prime-Minister Bhutto, the Euro jumped in excess of 60 pts. Overall the EURUSD traded with a low of 1.4470 and a high of 1.4640 before closing the day at 1.4628 in the New York session. German CPI data the only thing worthy of noting for the Euro zone on Friday.

The Japanese Yen (JPY) was relieved against a number of majors, as traders endorsed a risk aversion view. Overall the USDJPY traded with a low of 113.59 and a high of 114.66 before closing the day at 113.69 in the New York session. Data out of Japan on Friday morning was mixed, as unemployment fell to 3.8% (Forecast: 4.0%), PMI Manufacturing rose to 52.3 (Prior: 50.8), Retail Sales increased to 1.6% (Forecast: 0.9%), and Core CPI was up to 0.4% (Forecast: 0.3%), although Household spending declined -0.6% (Forecast: 0.4%)      

The Sterling (GBP) was a surprise performer on Thursday despite falling to a fresh record low versus the Euro. Although risk aversion initially was a cause for the GBP to weaken, a broadly weaker USD pushed the GBP above 1.9900 once again. Overall the GBPUSD traded with a low of 1.9828 and a high of 1.9965 before closing the day at 1.9840 in the New York session. Nationwide House prices will be released from the UK for the month of December.  

The Australian Dollar (AUD) was subject to a sell off amidst risk aversion trading on the back of other currencies, before the currency was buoyed by poor US data. Overall the AUDUSD traded with a low of 0.8712 and a high of 0.8792 before closing the day at 0.8791 

Gold (XAU) rose on energy costs and higher oil prices. Gold also gained after a suicide bomb attack killed Pakistan's former Prime Minister Benazir Bhutto. The U.S. backed a partnership between Bhutto and Pakistan's President Pervez Musharraf in hopes of containing a growing Islamist threat in the nuclear-armed country. XAU traded with a low of 821.80 and a high of 831.20.
 
TECHNICAL COMMENTARY

Euro – 1.4615
Initial support at 1.4470 (Dec 27 low) followed by 1.4392 (Dec 26 low). Initial resistance is now located at 1.4642 (Dec 27 high) followed by 1.4658 (Dec 14 high).
 
Yen – 114.15
Initial support is located at 113.58 (Dec 27 low) followed by 112.75 (Dec 19 low). Initial resistance is now at 114.79 (Nov 7 high) followed by 115.42 (76.4% retracement of the 117.95 to 107.23 decline)
 
Pound – 1.9965
Initial support at 1.9826 (Dec 27 low) followed by 1.9756 (Dec 24 low). Initial resistance is now at 1.9986 (Dec 20 high) followed by 2.0196 (Dec 17 high)
 
Australian Dollar – 0.8775
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 – 826.10
Initial support at 793.80 (Dec 20 low) followed by 785.66 (Dec 17 low). Initial resistance is now at 831.25 (Dec 27 high) followed by 837.0 (November 26 high)