Chinese Manufacturing Bounces Back; Dollar Weakens

a weak equity close was seen on Friday after US Fiscal Cliff negotiations showed signs of stalemate. A big week of economic data ahead will be critical for sustaining the recent gains and we expect a lot of volatility. Friday’s NonFarm Payrolls will be the highlight and could be negatively affected by Hurricane Sandy last month. Looking ahead, November ISM Manufacturing forecast 51.2 vs. 51.7 previously.

The Euro (EUR) the EUR/USD hugged the 1.3000 on Friday with little incentive to push higher given profit taking on stocks. Germany approved bailout money for Greece but October EU Unemployment hit 11.7% vs. 11.6% previously for a fresh all-time euro era high.

The Sterling (GBP) reversed from 1.6060 to tested 1.6000 during the US session on Friday with weak Canadian GDP and US income figures putting a dampener on the final session. Over the weekend we saw good Chinese data but US politicians seem no closer to a fiscal cliff compromise. Looking ahead, November EU PMI Manufacturing forecast at 46.2 vs. 46.2 previously.

The Japanese Yen (JPY) USD/JPY pressed higher in Asian on Friday but we stalled across the whole yen complex in the US session and pulled back to Y82.40 support. The uptrend is in play and longs are targeting the Y83 resistance. Talk in the market that Japan will embark on aggressive monetary easing to stimulate the economy has been the main cause of yen weakness of late.

Australian Dollar (AUD) remained supported on dips so far with AUD/USD falling from 1.0480 to 1.0410 Friday as Gold fell sharply and long traders took profit ahead of Tuesday’s RBA meeting which is now pricing in an 80% chance of a rate cut. Looking ahead, October Retail Sales forecast 0.4% vs. 0.5%

Oil And Gold (XAU) Gold tapped out at key resistance near $1730 on Friday before pulling back to $1710. OIL/USD is well supported on dips targeting $90 a barrel which is a key topside resistance in the past month.

PairsTo Watch
OIL/USD: $90 Key Level upside test ahead?

USD/JPY: Uptrend while Y81.70 holds

TECHNICAL COMMENTARY