Central Bank QE Rallies To Last?

The dollar enjoyed small gains overnight with the EUR/USD and OIL/USD leading the currency markets lower. US data was mixed with solid housing data including existing home sales up 7.8% m/m. Crude oil inventories showed a major upside surprise and we saw OIL/USD fall below $92 in a sharp spike lower. Looking ahead, Weekly Jobless Claims forecast at 375k vs. 382k previously. Also September Flash Manufacturing PMI forecast at 51.5 vs. 51.5 previously.

The Euro (EUR)
The EUR/USD tested 1.3000 during the European session before bouncing to 1.3080 later in the US session. The outlook is mixed with some of the euphoria from the central bank QE around the world fading overnight. The Trioka reported that Greece had agreed to more spending cuts overnight and this supported the EUR/USD bounce.

The Sterling (GBP)
The MPC minutes released overnight showed more QE was on the cards from the UK central bank if needed. The GBP/USD fell but found support under 1.6200 and this highlighted the strength the pound is receiving lately. A bigger pullback would still help the GBP/USD continue higher if buyers were given a better level to re-enter. Looking ahead, September European Flash Manufacturing PMI forecast at 45.5 vs. 45.1 previously. Flash Services PMI was forecast at 47.5 vs. 47.2 previously.

The Japanese Yen (JPY)
The USD/JPY had an extremely volatile trading day up above Y79 before reversing sharply later back to the low Y78 levels. The initial rally was on the back of the BOJ announcing Y10 Trillion more Bond Purchases and removing the minimum yield on long term Bonds that they buy. The market reversed the BOJ led gains when the topside rally failed and the EUR/JPY and AUD/JPY yen crosses came under pressure.

Australian Dollar (AUD)
The AUD/USD is giving traders great two way opportunities lately with the QE3/ECB/BOJ Fueled risk on rally dragging the aussie higher. Sellers are banking on the slowdown from China and the local Australian economy to lead to RBA rate cuts and AUD downside. Looking ahead, Chinese HSBC PMI previously at 47.6.

Oil and Gold (XAU)
Gold hit fresh rally highs above $1780 but was unable to hold onto the gains and fell back to $1770. OIL/USD was crushed lower for a second day after US inventories rose by more than expected and Saudi Arabia announced it was increasing supply to meet any demand.

Pairs To Watch
EUR/USD: Found support at 1.3000 to rally again?

XAU/USD: Rally showing signs of slowing, $1800 still the target?

TECHNICAL COMMENTARY