Volatility in markets as credit market woes grow. Japanese Yen key contributor

U.S. Dollar Trading (USD) continued its previous session gain as ongoing credit related losses triggered further risk aversion within the market. Despite recent speculation on rate cuts out of the Federal Reserve materializing, majors were not able to sustain gains as high yielding carry trades were fled. In U.S. share markets the NASDAQ was down -43.81 points (-1.67%) whilst the Dow Jones -55.19 points (-0.42%). Crude oil was eased on profit taking by US$1.67 a barrel to US$94.65. Tuesday sees the release of Pending Home sales for the month of September, with expectations that plenty of attention to will emanate as the market tries to gain a clearer indication of the U.S. housing slump.    
 
The Euro (EUR) continued to slide against the green back, as markets minimized their exposure in a volatile market. Overall the EURUSD traded with a low of 1.4526 and a high of 1.4679 before closing the day at 1.4548 in the New York session. Looking ahead, Industrial Production data will be made public, with forecasts at -0.2% (previous: 1.2) for the month of September.
 
The Japanese Yen (JPY) was the main contributor to market volatility overnight as ongoing credit woes prompted traders to square positions against the JPY. Much of the moves ensured that high yielder’s were summoned to a significant sell off on the back of a drop in global stock prices. The Japanese Yen was therefore able to trade at a 1.5 year high against the USD. Overall the USDJPY traded with a low of 109.12 and a high of 110.78 before closing the day at 109.90 in the New York session. Looking ahead, the BoJ is expected to keep rates at a low 0.5% on Tuesday following the it’s two day meeting which began on Monday.
 
The Sterling (GBP) eased from last weeks 26 year highs against the USD, and traded at a three month low versus the Japanese Yen, as speculators reduced their holdings in high yielding carry trade. The Sterling Pound also dropped the most in 3 ½ years versus the dollar after Morgan Stanley downgraded HSBC Holdings Plc on concern its provisions for U.S. loan defaults will rise. Overall the GBPUSD traded with a low of 2.0590 and a high of 2.0870 before closing the day at 2.0638 in the New York session.
 
The Australian Dollar (AUD) was extremely volatile free falling as AUDJPY crosses were sold rapidly. Recognized as a highly attractive yield, the AUD suffered from risk aversion in a falling market. Overall the AUDUSD traded with a low of 0.8790 and a high of 0.9088 before closing the day at 0.8853 in the New York session.
 
Gold (XAU) tumbled 3.2 percent, the most in 13 months, after the yen strengthened against major currencies, slowing the pace of investment in the precious metal and other commodities. Silver also plunged. XAU traded with a low of 798.30 and a high of 830.60
 
TECHNICAL COMMENTARY

Euro 1.4545
Initial support at 1.4467 (Nov 6 low) followed by 1.4419 (Nov 2 low). Initial resistance is now located at 1.4731 (Nov 7 high) followed by 1.4782 (Nov open + (Oct range * 0.618)
                                        
Yen 109.90
Initial support is located at 109.13 (Nov 12 low) followed by 108.99 (May 17, 2006 reaction low). Initial resistance is now at 112.88 (Nov 9 high) followed by 113.38 (Nov 1 high).
 
Pound – 2.0560
Initial support at 2.0427 (Oct 24 low) followed by 2.0304 (Oct 23 low). Initial resistance is now at 2.0922 (Nov 12 high) followed by 2.1161 (Nov trend line)
 
Australian Dollar – 0.8845
Initial support a 0.8749 (Oct 22 low) followed by 0.8714 (Nov 1 reaction low). Initial resistance is now at 0.9331 (Nov 8 high) followed by 0.9400 (Nov 7 trend high).
                                                                                
Gold – 793.80
Initial support at 788.40 (Nov 2 low) followed by 784.40 (Nov 1 low). Initial resistance is now at 845.80 (Nov 7 trend high) followed by 846.15 (November open + (October range * 0.618)