U.S. Dollar Trading (USD) the recovery rally accelerated last night with investors seemingly convinced about the Sarkozy/Merkal announcement to do whatever it takes to save the EU with a “comprehensive package” to be announced before November. Banking Stocks led US stocks is a +3% rally which dented demand for the USD and encouraged commodities/risk assets to soar. In US stocks, DJIA +330 points closing at 11433, S&P +39 points closing at 1194 and NASDAQ +86 points closing at 2566.
The Euro (EUR) the EUR/USD once again was the main leader in the market as sellers exited on the raft of supporting comments coming from European officials. The sentiment has changed drastically in the last 4 days and we are now looking for resistance after breaking 1.3500 and surging to 1.3700 overnight. Looking ahead, ECB President Trichet Speaks.
The Japanese Yen (JPY) broad USD weakness sent USD/JPY to the bottom of the Y76.50 –Y77 range but most currencies gained against the safe haven Yen with EUR/JPY in particular showing strength. EUR/JPY hit resistance at Y105 but is still well supported on dips.
The Sterling (GBP) was caught up in the frenzy stock market led rally gaining from 1.5500 to test 1.5700 in the US session but underperformed relative to the Euro and this allowed the EUR/GBP to move back above 0.8700. The GBP/JPY has reclaimed the key Y120 level and could signal further gains.
The Australian Dollar (AUD) the 5th day of rally has seen a staggering recovery for the risk sensitive Australian dollar. AUD/USD tested parity overnight trading above the key 1.0000 level before easing back into the close. AUD/JPY is one way action with very shallow pullbacks as the advance continues. The 5 day rally is nearing overbought levels as only last Tuesday the pair was trading at 0.9400.
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