Markets Recover after heavy Selling

U.S. Dollar Trading (USD) risk off selling continued into Europe yesterday but support was found and we saw good rebounds in most markets from Gold to the Euro. US data was strong with April Industrial Production rising 1.1% vs. -0.6% previously m/m. US Stocks closed lower but only marginally. Looking ahead, Weekly Jobless Claims are forecast at 365k vs. 367k previously. Also May Philly Fed forecast at 10 vs. 8.5.

The Euro (EUR) the EUR/USD reversed from year lows under 1.2700 as the fear of Greece leaving the Eurozone subsided and profit taking lifted the major back to 1.2750 but is still under downside pressure. The G8 meet on the weekend and the EU Debt crisis will be high on the agenda. A temporary Greek PM and caretaker government have been announced while we wait for next month’s elections. The Sterling (GBP) the GBP/USD was the weakest major overnight as the Bank of England Inflation report suggested more QE was very possible going forward. Support was found at 1.5900 and we spent the rest of the day grinding higher. Looking ahead, BOE Member Wealer Speaks. Bank Holiday in France and Germany.

The Japanese Yen (JPY) the USD/JPY was well supported yesterday both on Dollar demand and rumors in the market the MOF is looking to possibly intervene again. Yen Crosses are heavily oversold and any large bounce in these pairs will help the USD/JPY rally. Australian Dollar (AUD) the AUD/USD rebounded aggressively from the 0.9870 to 0.9970 and is potentially looking to rally for a second day towards the key 1.000 level. AUD/JPY is a source of support back above Y80 and in demand from Japanese investors.  

Oil & Gold (XAU) XAU/USD fell to fresh cycle lows under $1530 an ounce but was caught up in the market wide rebound back to $1550. OIL/USD bounced but was only able to get back above the $93 level.

Pairs to watch

EUR/USD time for bigger relief rally?

USD/JPY Y81 now the target above Y80?

TECHNICAL COMMENTARY

By Anthony Darvall (TonyD)