‘Risk On’ As US Stocks Rally

The dollar had a mixed day gaining in Asia before reversing sharply during the US session as stocks rallied. Better than expected US data and earning is helping keep risk appetite strong and this is pressuring the safe haven USD. US September Retail Sales gained 1.1% vs. -0.8% forecast m/m. Looking ahead, September Industrial Output forecast at 0.2% vs. -1.2% previously. Also September Core CPI forecast at 0.2% vs. 0.1% previously.

The Euro (EUR)
The EUR/USD found support under 1.2900 and reversed direction to close at 1.2960 and within striking distance of the key topside resistance at 1.3000. The EU Summit later this week may contain headlines that move the market with Greece and Spain issues still unresolved.

The Sterling (GBP)
The GBP/USD was quiet in a 50 pip range between 1.6030 and 1.6080. The Pound is following the lead of the euro and will do well if EUR/USD breaks above 1.3000. Little economic data this week means the stock market will be the main source of movement. Looking ahead, October German ZEW Survey forecast at -15 vs. -18 previously.

The Japanese Yen (JPY)
USD/JPY led the yen crosses higher with strong US data underpinning the recent rally from Y78 to Y78.80. EUR/JPY rallied past Y102 and some traders have been caught short on the important cross as it fell towards Y100 last week.

Australian Dollar (AUD)
The AUD/USD underperformed most majors yesterday as the market continues to price in RBA rate cuts next month. Support was found at 1.0200 and we ended the day at 1.0250 and well supported on the strong US stock performance. The RBA minutes are released today and will be closely watched for clues about November’s meeting.

Oil And Gold (XAU)
Gold’s cleanout continued with the market sold from the open to fall to $1730 supports in the US session. The longer term uptrend is under threat with support being tested. OIL/USD gained but was not aggressive closing just under $92 a barrel.

Pairs To Watch
EUR/USD: To test 1.3000?

XAU/USD: $60 oz fall since Friday to spark bargain hunting?

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