Dollar Sharply Lower Across The Board

The positive effects of QE3 were seen for a second day with the US dollar continuing to be sold aggressively against most currencies. Global Stocks also enjoyed nice gains with European and US stocks both printing new highs. The UoM Consumer Sentiment gained to 79 vs. 74 forecast in September. US August CPI was as forecast 1.7% y/y. Looking ahead, September NY Fed Manufacturing forecast at -2 vs. -5.85.

The Euro (EUR)
EUR/USD heading in one direction hit highs above 1.3150 in another stellar day for the European Currency. The ECB Bond Buying Program and the ESM seemed to have put a lid on the crisis for now and the relief rally is continuing as US monetary policy puts pressure on the Dollar. EUR/JPY has recovered to Y103 and is a source of support for the major.

The Sterling (GBP)
GBP/USD broke above 1.6200 as the strength continued but were not matching the gains of the EUR/USD so the EUR/GBP hit new rally highs above 0.8100. Ongoing "risk on" trade is likely to see the GBP/USD push even higher. Looking ahead, EU Current account forecast at 10.9bn vs. 12.7bn previously.

The Japanese Yen (JPY)
More talk of BOJ rate checks on Friday as the USD/JPY slumped to new cycle lows just above Y77 and then a bounce to above Y78. The outlook is for further USD weakness but the major has always been a slow grinder and we are unlikely to see dramatic moves lower. The last intervention point was at Y75.50.

Australian Dollar (AUD)
Potentially important failure at 1.0600 has left the AUD/USD vulnerable to the downside this week with the recent rally seen overdone and some real negative stories emerging regarding the mining boom in Australia and the slowdown in the China. Looking ahead, Japanese Bank Holiday.

Oil And Gold (XAU)
Gold tumbled along the $1775 level for most of the day in quiet but strong trade. OIL/USD briefly hit $100 a barrel on Friday before we saw heavy profit taking from the key psychological level.

Pairs To Watch
EUR/USD: Overbought, time for Correction lower?

XAU/USD: $1800 or pullback first?

TECHNICAL COMMENTARY