Rebounding global stocks boost appeal for carry trade. BoE poised to cut rates in 2008

U.S. Dollar Trading (USD) eased against a basket of majors despite sturdy Retail Sales data out of the U.S for the month of October. Retail sales in the U.S. rose 0.2% last month, after increasing a revised 0.7% in September, according to the Commerce Department in Washington. U.S. headline Producer Prices rose by just 0.1% in October, whilst Core figures were flat despite economists having forecasted a rise of 0.2%. In other news, Chairman Bernanke confirmed that the Central Bank will now release economic projections annually on four separate occasions yet will not introduce inflation targeting, when speaking on FOMC communications on Wednesday. Many of the downside moves on the dollar were attributed to higher stock prices in Europe and Asia, which prompted investors to re-ignite demand for high yielding currencies, weighing heavy on the greenback. In U.S. share markets the NASDAQ was down -29.33 (-1.10%) whilst the Dow Jones was also down by -76.08 (-0.57%). Crude oil rose on Wednesday by US$2.66 a barrel to US$93.83 on views that supplies may be falling. Looking ahead, key inflationary measures await release on Thursday with Core figures expected to come in at 0.2%/2.2% for the month of October. Weekly release of initial jobless claims is also scheduled for release on Thursday.

The Euro (EUR) moved higher on a broadly weaker dollar and reports which confirmed economic growth had gained 0.7% in the third quarter. The Euro was able to gain 0.4% against the USD following an increase in corporate investment, boosting GDP figures. Overall the EURUSD traded with a low of 1.4600 and high of 1.4689 before closing the day at 1.4683 in the New York session. Consumer prices will be released out of the Eurozone on Thursday with HICP figures for the month of October forecasted to come in at 0.5%/2.6%.

The Japanese Yen (JPY) fell across the board as confidence returns to the market as concerns of sub-prime issues spreading eased. The USDJPY traded with a low of 110.83 and a high of 111.53 before closing the day at 111.39 in the New York session. Thursday saw the release of tertiary industry figures which came out at -1.6%.

The Sterling (GBP) eased to a four year low on Wednesday as momentum gained surrounding views the BoE will look to cut interest rates at least once in 2008 in an attempt to stimulate the economy. The BoE quarterly inflation report emphasized that risk to price pressures remained “balanced” compounded by Governor King views that the “central projection is for growth to slow sharply” in 2008. Overall the GBPUSD traded with a low of 2.0704 and a high of 2.0840 before closing the day at 2.0827 in the New York session. Retail Sales figures for the UK will be released on Thursday.

The Australian Dollar (AUD) did well to trade above 90 cents once again before easing in the latter part of the day. Overall the AUDUSD traded with a low of 0.8949 and a high of 0.9058 before closing the day at 0.9050 in the New York session.

Gold (XAU) Gold rose for the first time in four sessions after a drop in the dollar boosted the appeal of the precious metal as an alternative investment. XAU traded with a low of 800.50 and high of 815.60.
 
TECHNICAL COMMENTARY

Euro - 1.4645
Initial support at 1.4569 (Nov 13 reaction low) followed by 1.4521 (Nov 13 low). Initial resistance is now located at 1.4753 (Nov 9 trend high) followed by 1.4782 (Nov open + (Oct range * 0.618).
 
Yen 111.30
Initial support is located at 109.13 (Nov 12 low) followed by 108.99 (May 17, 2006 reaction low). Initial resistance is now at 111.76 (Nov 14 high) followed by 112.88 (Nov 8 high)
 
Pound – 2.0525
Initial support at 2.0427 (Oct 24 low) followed by 2.0243 (Oct 12 low). Initial resistance is now at 2.0846 (Nov 14 high) followed by 2.0918 (61.8% retracement of the 2.1161 to 2.0524 decline)
 
Australian Dollar – 0.8965
Initial support a 0.8754 (Nov 13 low) followed by 0.8749 (Oct 22 reaction low). Initial resistance is now at 0.9125 (Nov 12 high) followed by 0.9153 (61.8% retracement of the 0.9400 to 0.8754 decline)
 
Gold – 813.60
Initial support at 791.00 (Nov 13 low) followed by 788.40 (Nov 2 low). Initial resistance is now at 845.80 (Nov 7 trend high) followed by 846.15 (Nov open + (October range * 0.618)