XAU traded at record high of 891.40 as stock prices rebound

U.S. Dollar Trading (USD) was revived overnight as a number of majors lost ground versus the greenback. Much of the dollar strength was attributed to St. Louis Federal Reserve Bank President William Poole, who said the dollar won't “go way south” and predicted that economic growth will accelerate as the year progressed. In U.S. share markets the NASDAQ was higher on Wednesday, up by 98.61 points (+1.06%) whilst the Dow Jones followed suit gaining by 146.24 points (+1.16%). Crude oil also fell by US$0.80 to US$95.63 a barrel despite inventory falling by 6.8 million barrels to the lowest level since October 2004. Looking ahead, the weekly release of Initial Jobless claims will hold importance before Chairman Bernanke is scheduled to discuss the outlook on the U.S. economy.

The Euro (EUR) eased on a string of poor data as German Industrial Production and Retail Sales declined to -0.9% (Consensus: 0.5%) and -1.3% (Consensus: 1.1%) respectively for the month of November, suggesting growth in Europe’s largest economy is slowing. The EURUSD traded with a low of 1.4647 and a high of 1.4743 before closing the day at 1.4668 in the New York session. The ECB is widely expected to keep interest rates on hold, with 4% the expectation at 1245 GMT.

The Japanese Yen (JPY) came under pressure on reports that the Bush administration was planning a fiscal stimulus package in the face of mounting fears that US economy was headed for recession. With confidence in the market resuming, the appetite for risk increased fuelling demand for the high yielding carry trade ensuring the Yen remained pressured. Overall the USDJPY traded with a low of 108.79 and a high of 109.95 before closing the day at 109.87 in the New York session.  

The Sterling (GBP) declined to a fresh record low against the Euro of 0.7449 after an industry report showed U.K. consumer confidence dropped to the lowest in almost a year. Further more, the GBP fell to 9 ½ month low versus the dollar as traders added to bets that the BoE will cut interest rates by 25 bps on Thursday in an attempt to spur economic activity. The GBPUSD traded with a low of 1.9554 and a high of 1.9763 before closing the day at 1.9586 in the New York session. The BoE is expected to ease its monetary policy to 5.25% (cutting by 0.25%) at 1200 GMT. 

The Australian Dollar (AUD) strengthened on the back of Wednesday buoyant retail sales readings, coming in at 0.8% for the month of November, well above the forecast 0.5%. The AUD remained firm through out the day as high yielding currencies returned to favor. The AUDUSD traded with a low of 0.8786 and high of 0.8858 before closing the day at 0.8824 in the New York session. Thursday morning sees the release of Trade Balance for November, in which the deficit is widely expected to narrow from -2983 mln, to -2500 mln. 

Gold (XAU) traded at a fresh record high of 891.40 during the Asian session of trade, buoyed by the opening of the Shanghai’s Futures exchange now offering gold contracts. XAU traded with a low of 872.30 and a high of 891.40.

TECHNICAL COMMENTARY

Euro – 1.4665
Initial support at 1.4659 (Jan 7 low) followed by 1.4570 (Dec 31 low). Initial resistance is now located at 1.4825 (Jan 4 high) followed by 1.4859 (Nov 28 high).
 
Yen – 109.95
Initial support is located at 108.80 (Jan 9 low) followed by 108.40 (Jan 7 low). Initial resistance is now at 109.83 (Jan 8 high) followed by 110.49 (38.2% retracement of the 114.66 to 107.91 decline)
 
Pound – 1.9570
Initial support at 1.9653 (Aug 17 reaction low) followed by 1.9623 (Jun 8 reaction low). Initial resistance is now at 1.985 (Jan 4 high) followed by 1.9898 (Jan 2 high)
 
Australian Dollar – 0.8835
Initial support a 0.8705 (Jan 8 low) followed by 0.8667 (61.8% retracement of the 0.8553 to 0.8852 advance). Initial resistance is now at 0.8859 (Jan 9 high) followed by 0.8877 (38.2% retracement of the 0.9400 to 0.8553 decline)
 
Gold – 879.80
Initial support at 853.60 (Jan 3 low) followed by 833.90 (Jan 2 low). Initial resistance is now at 891.47 (Jan 9 high) followed by 899.35 (Jan open + Dec range)