U.S. Dollar Trading (USD) US stocks continued their rally extending to fresh 5year highs with all time highs on the horizon. Adding to optimism was a drop inUS initial Jobless Claims to 330k vs. 360k forecast. US 10yr Bond Yieldsincreased to 1.85% and has a direct correlation with the USD and the USD/JPY inparticular. Indeed most of the USD buying was done against the Yen overnight. Looking ahead, US New Home Sales forecast at 387k vs. 377kpreviously.
The Euro (EUR) The EUR/USD had a mixed day against the USD withsome selling in Europe reversed later in the US session. European PMI Surveys showed a sharp drop in Frenchmanufacturing but a rise in the German reading. The major rallied to 1.3380 onthe back of strong EUR/JPY and EUR/AUD buying. Bulls are targeting the 1.3400but the resurgent Dollar had mad range trading more likely. The Sterling (GBP) fresh selling emerged overnight with GBP/USDbreaking below 1.5800 even as it’s neighbor in the EUR/USD rallied in the USsession. The EUR/GBP cross highlighted the different direction hitting amultimonth high above 0.8450. GBP/JPY was able to rally to Y143 but is theweakest. Lookingahead, Preliminary Q4 GDP forecast at-0.1% vs. 0.9% previously.
The Japanese Yen (JPY) was the main game in town with everyone watching theUSD/JPY and Yen crosses moving sharply lower. EUR/JPY traded in a 350 rangewith the market liquidating the Yen after the Government jawboned againyesterday ending 3 days of Yen strength. USD/JPY broke above Y90 and is lookingto extend gains after Japanese Trade Minister Nishimura suggesting Y100 is noissue with concern only at the Y110-120 levels. Australian Dollar(AUD) the AUD/USD brokeout of the recent range to the downside bowing to the USD strength even asChinese Manufacturing picked up in January according the HSBC PMI Survey. AUD/USDbroke through 1.0500 and 1.4080 support which had held for the past two weeks.
Oil & Gold (XAU) Gold reacted negatively to the strong US economicdata with risk appetite unable to match increased demand for the Dollar itself.Oil was relatively quiet overnight gaining to $96 with strong US datasuggesting the world’s largest economy and consumer of Oil was improving.
Pairs to watch
AUD/USD Broken majorsupport, new downtrend?
USD/JPY Overbought but holdingat highs above Y90