‘Risk On’ Global Rally Continues

The affirmation of Spanish rating by Moody’s helped Spanish bonds yields fall yesterday ahead of the EU summit. The EUR/USD continued to push higher and lead the rest of the FX majors higher. US Stocks have enjoys strong gains so far this week and could retest year highs if the rally continues. US Housing Data was strong with a 15% jump in September Housing starts and 11% jump in permits. Looking ahead, Weekly Jobless Claims forecast at 365k vs. 339k previously. Also October Philly Fed index forecast at 1 vs. -1.9 previously.

The Euro (EUR)
Improving optimism towards the future of the eurozone helped the EUR/USD push above 1.3100. Risk still exists though with a Spanish 10 year bond auction later today and the EU summit beginning. Any strong German opposition to softening Greece or Spanish bailout requirements could prompt euro selling. Most expect Spain to request access to EU bond buying program sometime this year.

The Sterling (GBP)
The pound found resistance at 1.6180 overnight before easing back to 1.6140 be the close. The outlook is positive with strong global stock markets supporting. The MPC minutes showed a 9-0 vote as expected to leave things unchanged. Looking ahead, UK September Retail Sales forecast at 0.4% vs. -0.2% previously.

The Japanese Yen (JPY)
USD/JPY broke above Y79 as the yen selling accelerated overnight and has become the funding country of choice recently. EUR/JPY and AUD/JPY in particular were very strong with both gaining over 100 pips yesterday and remain technically bullish.

Australian Dollar (AUD)
AUD/USD played catch-up with the rest of the risk rally and we saw a move above 1.0300 to 1.0380 in the US session. China Data released today is the main risk event for the Aussie this week with the largest trading partner’s slowdown to be measured with the GDP later today. Looking ahead, China Q3 GDP forecast at 7.4% vs. 7.6% previously.

Oil And Gold (XAU)
Gold consolidated at the $1750 level not participating in today’s USD weakness. OIL/USD was also sidelined pulling back just below $92 a barrel.

Pairs To Watch
EUR/USD: Retest of September highs at 1.3170?

AUD/USD: China GDP Critical for next direction

TECHNICAL COMMENTARY