US Fiscal Stimulus gets the green light. High yielder’s back in demand

Currency Trading Summary

U.S. Dollar Trading (USD) fell against a number of majors as sales of Existing Homes in the U.S. fell more than forecast in December, capping the biggest annual slump in 25 years and the first decline in prices since the Great Depression. In other news, the US congress approved 150 billion fiscal stimulus package in an attempt to stem credit woes. In U.S. share markets the NASDAQ was up by 136.57 points (+1.55%) whilst the Dow Jones was also up by +108.44 points (+0.88%). Crude oil rose by US$2.44 a barrel to US$89.43. 

The Euro (EUR) rose against the Dollar and the Yen after European Central Bank council member Axel Weber dismissed speculation of an interest-rate cut by the European Central Bank as “wishful thinking”. Weber's comments helped the European currency erase its losses as investors reduced bets the ECB will follow the Federal Reserve in lowering borrowing costs. Overall the EURUSD traded with a low of 1.4592 and a high of 1.4779 before closing the day at 1.4752 in the New York session.

The Japanese Yen (JPY) dropped against dollar and most major currencies as investors resumed borrowing in Japan to buy higher-yielding assets elsewhere. Overall the USDJPY traded with a low of 105.95 and a high of 107.03 before closing the day at 106.80 in the New York session.

The Sterling (GBP) rose against dollar and the yen, as investors became less risk averse and had more confidence to put on so- called carry trades, or purchases of high-yielding assets financed in countries where borrowing costs are lower. Overall the GBPUSD traded with a low of 1.9502 and a high of 1.9743 before closing the day at 1.9741 in the New York session

The Australian Dollar (AUD) was also buoyed by a return to high-yielding carry trades. Overall the AUDUSD traded with a low of 0.8693 and a high of 0.8798 before closing the day at 0.8794 in the New York session.

Gold (XAU) topped $900 an ounce for the first time in a week after global equities rallied on speculation the Federal Reserve will further reduce U.S. borrowing costs to avoid a recession. XAU traded with a low of 889.75 and a high of 910.50
 

TECHNICAL COMMENTARY

Euro – 1.4765
Initial support at 1.4588 (Jan 23 low) followed by 1.4507 (61.8% retracement of the 1.4366 to 1.4685 advance). Initial resistance is now located at 1.4790 (Jan 23 high) followed by 1.4859 (61.8% retracement of the 1.4922 to 1.4366 decline).
 
Yen – 107.25
Initial support is located at 104.97 (Jan 23 low) followed by 104.91 (May 11, 2005 low). Initial resistance is now at 107.38 (Jan 18 high) followed by 107.59 (Jan 16 high)
 
Pound – 1.9756
Initial support at 1.9462 (61.8% retracement of the 1.9338 to 1.9645 advance) followed by 1.9338 (Jan 22 low). Initial resistance is now at 1.9850 (Jan 23 high) followed by 1.9898 (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 – 910.20
Initial support at 876.80 (Jan 22 low) followed by 849.50 (61.8% retracement of 775.50 to 914.30 advance). Initial resistance is now at 914.20 (Jan 23 high) followed by 914.30 (Jan 16 high)