US Fiscal Cliff Hanger Sparks 2013 ‘Risk On’

Traders have returned to a new year of Trading with bulls firmly in control after the US fiscal cliff crisis was adverted in a last minute deal between Republicans and President Obama. Risk assets from Oil to stocks have all rallied aggressively in Asia on Wednesday. Looking ahead, December ISM Manufacturing forecast at 50.2 vs. 49.5 previously.

The Euro (EUR)
The EUR/USD tested 1.3300 resistance in the post fiscal cliff deal rally in Asia. The upside range has been at 1.3300 over the last few months and a break and close above could lead to further gains. EUR/JPY is leading the pack higher with a 170pip rally in Asia. The resistance at Y116 held on the first attempt but traders have been very aggressive on the EUR/JPY lately so it could be just a matter of time before we break higher.

The Sterling (GBP)
The pound has surged back to life in the last 2 trading days moving from 1.6150 to 1.6350 as the bears were caught on the wrong side of the market and GBP/JPY soared higher. The pound had been out of favor since the Bank of England signaled it could still do more aggressive easing in coming months. Looking ahead, December EU PMI Manufacturing forecast at 46.3. Also UK December PMI forecast at 49.2.

The Japanese Yen (JPY)
USD/JPY is heading in only one direction lately and we opened Asia with even more gains breaking above Y87 on the back of the fiscal cliff news. EUR/JPY is leading the yen crosses and is the strongest trend in the market.

Australian Dollar (AUD)
The aussie is a risk sensitive currency so even with the technical pointing for downside test last week we have found ourselves dragged higher by outside factors. Some crosses are even gaining as the market has got caught short AUD in the last few days. For the AUD/USD we are watching the 1.0500 level as the next major resistance.

Oil and Gold (XAU)
Gold is back on the front foot after finding support last week is grinding higher taking advantage of USD weakness. Oil is soaring as well, above $92 a barrel now in multiple dollar gains over the last few sessions.

Pairs to watch
EUR/USD: To test 1.3300 now traders return?

USD/JPY: Above Y87 will we see a pullback soon?

TECHNICAL COMMENTARY