US Stock plunge. CPI data out of the US and EZ today

U.S. Dollar Trading (USD) saw another session of volatility as markets once again paid attention to the equity prices as a gauge for market stability. As traders added to bets that the Federal Reserve would move to slash rates at the end of the month by 75 bps in order to sustain economic growth the Dollar played second fiddle to the low yielding Japanese Yen as High yielding carry trades were reversed, in-turn supporting the dollar against a number of majors. On the data front Retail Sales for the month of December came in significantly worse than the forecast, whilst PPI was released worse off as well the NY Fed Manufacturing Survey. Following bank earnings released last night, Citibank reported a loss of 9.8bln almost double the forecasted figures. As a result the share markets were dragged down by the record quarterly loss from the US’s largest bank ensuring the NASDAQ closed down by -267.17 points (-2.83%) whilst the Dow Jones also fell by -277.04 points -2.17%. Crude oil by US$2.36 a barrel to US$91.84. Looking ahead, Core CPI data is expected to come in at 0.2%/2.4% (Prior: 0.3%/2.3%) as well as TIC Flows. It must be noted that further banks will be releasing their profit earnings, none bigger than JP Morgan Chase.       

The Euro (EUR) fell versus the USD on the back of EURJPY sell off trading at a low of 158.34. Overall the EURUSD traded with a low of 1.4822 and a high of 1.4923 before closing the day at 1.4827 in the New York session. CPI data out of the Eurozone will be released on Wednesday.

The Japanese Yen (JPY) was best served with the plunge in stock prices overnight ensuring that the JPY has been able to gain 13% versus the dollar in the past six months. Much of the strength was on the back of carry trades being reversed. Overall the USDJPY traded with a low of 106.60 and a high of 108.34 before closing the day at 106.82 in the New York session.

The Sterling (GBP) rose the most against the dollar in a month and rebounded from a record low versus the Euro as inflation unexpectedly held above the BoE’s 2% target for a third month, reducing pressure on policy makers to cut interest rates. Overall the GBPUSD traded with a low of 1.9528 and a high of 1.9741 before closing the day at 1.9644 in the New York session. Unemployment rate is expected to remain unchanged at 5.3% on Wednesday.

The Australian Dollar (AUD) fell on the back of risk aversion triggered by a plunge in stock prices. Overall the AUDUSD traded with a low of 0.8852 and a high of 0.9018 before closing the day at 0.8955 in the New York session. 

Gold (XAU) fell from a record after the dollar rebounded against the Euro and energy costs eased, reducing the appeal of the precious metal as an alternative investment. Traded with a low 894.10 and a high of 913.80.
 
TECHNICAL COMMENTARY

Euro – 1.4795
Initial support at 1.4762 (Jan 14 low) followed by 1.4640 (Jan 9 low). Initial resistance is now located at 1.4922 (Jan 14 high) followed by 1.4968 (Nov 23 high).
 
Yen – 106.65
Initial support is located at 106.52 (Jun 2005 low) followed by 105.94 (Nov 26 trend low). Initial resistance is now at 108.98 (Jan 14 high) followed by 110.12 (Jan 9 high)
 
Pound – 1.9580
Initial support at 1.9484 (Jan 11 low) followed by 1.9432 (Mar 20 low). Initial resistance is now at 1.9763 (Jan 9 high) followed by 1.9829 (Jan 8 high)
 
Australian Dollar – 0.8825
Initial support a 0.8782 (Jan 16 low) followed by 0.8705 (Jan 8 low). Initial resistance is now at 0.9022 (Nov 15 high) followed by 0.9076 (61.8% retracement of the 0.9400 to 0.8553 decline)
 
Gold – 896.60
Initial support at 887.90 (Jan 11 low) followed by 866.5 (Jan 10 low). Initial resistance is now at 914.40 (Jan 14 high) followed by 925 (Round number resistance)