Why The Bull Run in Gold Could Just Be Getting Started

Why The Bull Run in Gold Could Just Be Getting Started

U.S. debt is skyrocketing with no end in sight. And while the dollar has recently functioned as a short-term safe haven, its long-term fundamentals are deteriorating.

To put it in perspective, U.S. public debt in 2000 was $3.4 trillion. That has now more than doubled to $8.6 trillion. The rate of increase is skyrocketing, with deficit spending of $1 trillion in 2008 and $1.9 trillion in 2009 alone. Current Congressional Budget Office estimates total debt of $5.8 trillion in 2008 to more than double to $12.6 trillion by 2014. That means in the six years (from 2008 to 2014) the country will borrow and spend as much money as it had since its founding in 1776 all the way up until 2008.

A currency is typically as strong as the economic fundamentals behind it. The Government Accountability Office (the U.S. government's auditor) recently said the United States is on a fiscally "unsustainable" path. This skyrocketing debt will likely cause a devaluation in the dollar, and many are forecasting runaway inflation if we don't get our fiscal house in order.

As a result, many predict the dollar will resume its plunge during last decade when it fell more than -40% against other major currencies.

So if the dollar can't satisfy the world's penchant for safety amongst unprecedented uncertainty, what can?

How about gold?

Gold serves as a safe-haven investment, holding intrinsic value in uncertain economic times and isn't tied to the fortunes of any country or currency.

Gold prices have more than quadrupled since 2001 when it traded for less than $300 per ounce, but this could be just the beginning. Today's uncertain markets are prompting a trickle into gold that could turn into a flood in the months and years ahead. Just this year, the price of gold has risen +23% to about $1200 an ounce from the average monthly price of $972 in 2009.

Recent strength in the price of gold portends well for the future. The last time gold had a sustained bull run, the price increased 40-fold from an average of about $35 an ounce in 1970 to a high of more than $800 an ounce in 1980.



SPDR Gold Shares (NYSE: GLD) is an exchange-traded fund (ETF) that seeks to replicate the performance of the price of gold bullion. The fund is a pure play on the price of gold as it holds the physical metal itself as opposed to equity shares of gold mining companies or other less direct gold plays. Each share represents about one tenth of an ounce of gold bullion at current market prices.

This ETF is a fantastic modern day investment that makes owning gold just as easy as buying a stock or mutual fund. Unlike the old fashioned way of investing in gold which involved taking possession and storing the actual metal, GLD enables investors to own gold through an easy to purchase vehicle with NYSE liquidity. Investors can buy or sell shares at will any time the market is open.

Gold is a great way to hedge a portfolio against inflation and a falling dollar, but it is a tricky investment. It's not necessarily a hedge against down or volatile markets. In fact, gold prices actually fell below the yearly averages in the peak months of the financial crisis in late 2008 and early 2009. As well, gold doesn't necessarily perform badly in up markets. While U.S. and world markets soared in the past decade, before the financial crisis, gold prices rallied at the same time.

More than anything else, gold is a safe haven currency substitute during times of uncertainty or inflation. And these uncertain times are enticing investor appetites. According to The Wall Street Journal, central banks are increasingly shifting money out of euros and into gold. This led to gold hitting an all time record high price of $1243 an ounce on the New York Mercantile Exchange in early July. If uncertainty continues, so could the exodus into gold.

Action to Take --> In the short term, the price of gold can be volatile and unpredictable. But, given the extraordinary degree of uncertainty in today's economy and the possibility of inflation in the future, it's a prudent hedge to have some exposure to gold. GLD is a great way to not only hedge a portfolio, but also gain exposure to a possible massive run in gold in the years ahead.

30 Jul 10 : USD under pressure

U.S. Dollar Trading (USD) risk aversion helped the USD off lows but for most of the day the world's reserve currency was under pressure with EUR/USD leading the market higher. Q2 Company results were a little weaker than expected but Weekly Jobless Claims fell to 457k vs. 464k previously. In US stocks, DJIA -39 points closing at 10497, S&P -7 points closing at 1107 and NASDAQ -23 points closing at 2264. Looking ahead, Weekly Jobless Claims are forecast at 459k vs. 464k previously.

The Euro (EUR) was strong in Europe pushing to month highs above 1.3100. The German Unemployment Rate fell to 7.6% in July with a drop of 20k unemployed. The market stalled above 1.3100 and when stocks turned negative in the US session the pair fell back to 1.3050 supports. EUR/USD traded with a low of 1.2976 and a high of 1.3109 before closing at 1.3070. Looking ahead, June German Retail Sales are forecast at -0.2% vs. 0.4% previously. Also released, July EU CPI forecast at 1.7% vs. 1.4% previously.

The Japanese Yen (JPY) dollar weakness in Europe was compounded in the US session due to stock market weakness to help the Yen perform well on the day. USD/JPY is close to the month support at Y86.30 and a break of this level targets Y85. Overall the USDJPY traded with a low of 86.55 and a high of 87.47 before closing the day around 86.70 in the New York session.

The Sterling (GBP) was strong tracking the Euro higher but the market stalled at 1.5660 twice and this prompted a pullback late in the day towards 1.5580 supports. The GBP/JPY was especially heavy falling near 2 Yen over the past 2 days. July Nationwide July House Prices fell -0.5% m/m. Overall the GBP/USD traded with a low of 1.5578 and a high of 1.5665 before closing the day at 1.5620 in the New York session.

The Australian Dollar (AUD) Broke back above 0.9000 in Europe as the market bought dips on the commodity currency aggressively. Weak US stocks put a lid on gain for now but the market is in a strong uptrend ahead of next Tuesday's RBA decision. Overall the AUD/USD traded with a low of 0.8921 and a high of 0.9045 before closing the US session at 0.9010.

Oil & Gold (XAU) Gold kept to a $10 range inside $1160-70. Overall trading with a low of USD$1159 and high of USD $1170 before ending the New York session at USD$1166 an ounce. Crude rebounded on USD weakness reversing 3 days of losses. WTI Oil Closed +$1.37 at $78.36 a barrel.

29 Jul 10 : Profit Taking Takes Place

Profit taking stalls Rally!

Weak economic data and a further pull back in Oil led the stock markets lower overnight but the selling was subdued and the sentiment remains positive. The USD continued to range trade against most majors with small gains against commodity currencies.


The Euro (EUR) market orbited the 1.3000 level after failing to break resistance forming at 1.3050. German CPI remained low at 1.1% y/y in July but support was seen from a successful 13yr Portuguese Bond Auction. EUR/USD traded with a low of 1.2951 and a high of 1.3047 before closing at 1.2990.


The Sterling (GBP) broke above 1.5600 in Asia and but was quite range bound from then on in with GBP/JPY weakness stopped further gains and the market lacked little news to work with. Overall the GBP/USD traded with a low of 1.5544 and a high of 1.5641 before closing the day at 1.5595 in the New York session.


Oil & Gold (XAU) Gold consolidated recent losses sticking to a $10 range. Overall trading with a low of USD$1156 and high of USD $1166 before ending the New York session at USD$1163 an ounce. Oil struggled with weekly inventory data showing a 7.3m barrel surged. WTI Oil Closed -$0.30 at $78.80 a barrel.
Currency to watch out for: EURUSD & GBPUSD

The EURUSD pivot point is at 1.2965 with a preference to enter into Long positions at 1.2965
The GBPUSD pivot point is at 1.5565 with a preference to enter Long positions 1.5565

28 Jul 10 : Oil and Gold Trading

U.S. Dollar Trading (USD) traders were kept on their toes with resistance met on multiple asset classes and some sharp falls in commodities. July CB Consumer Confidence forecast fell 3 points to 50.4 but May House Prices increased 0.5% m/m. In US stocks, DJIA +12 points closing at 10537, S&P - points closing at 1114 and NASDAQ - points closing at 2288. Looking ahead, June Durable Goods are forecast at 1 vs. -0.6% previously.

The Euro (EUR) the rally continued in Europe but ran out of steam late in the day as Oil losses mounted and stocks failed to extend gains. The EUR/USD closed at the 1.3000 figure with the market trading in a tight range so far this week, EUR/JPY did well but EUR/GBP fell back towards 0.8300. EUR/USD traded with a low of 1.2951 and a high of 1.3047 before closing at 1.2990. Looking ahead, July German CPI forecast at 0.2% vs. 0.1% previously.

The Japanese Yen (JPY) was broadly weaker as the market pushed higher on USD/JPY after growing impatient on the downside. Stable markets and an improving technical outlook for the crosses are both encouraging Yen selling. AUD/JPY is sitting close to the Key Y80 level and is a good barometer of risk appetite in the market. Overall the USDJPY traded with a low of 86.81 and a high of 87.99 before closing the day around 87.75 in the New York session.

The Sterling (GBP) failed above 1.5500 on its first attempt but broke higher later in the day on good EUR/GBP selling and GBP/JPY buying. GBP/JPY broke to multi-month highs above Y136 and is targeting Y140 in the short term. Overall the GBP/USD traded with a low of 1.5441 and a high of 1.5602 before closing the day at 1.5580 in the New York session. Looking ahead, BOE Governor King Speaks.

The Australian Dollar (AUD) was strong, holding above 0.9000 the whole day and testing resistance towards 0.9080 in the US session. AUD/JPY buying was the major catalyst but the market is eagerly awaiting today's CPI figures before pushing higher still. Overall the AUD/USD traded with a low of 0.8998 and a high of 0.9071 before closing the US session at 0.9020. Looking ahead, Q2 CPI forecast at 3.4% vs. 2.9% y/y.

Oil & Gold (XAU) Gold pulled back as demand subsided given the multiple failures at $1200. Overall trading with a low of USD$1187 and high of USD $1157 before ending the New York session at USD$1164 an ounce. Oil slid towards $77 on the drop in US consumer confidence. WTI Oil Closed -$0.30 at $78.80 a barrel.

Profiting from Fundamental Analysis

The forex market is by far the most suitable investment medium for realizing the full potential of fundamental analysis. We know that currencies tend to reflect the underlying long-term trends that dominate economic activity at the macro-level. And while technical tools may tell us how something happens in the marketplace, only fundamental methods will give us to confidence to exploit it for the long term, with compounded profits. Let`s take a look at how this is done.

Adapt your trade plan to the dynamics of the era

The first step that a trader must take while planning to exploit a forex price event is defining the nature of the era that a nation`s economy is going through. As national economies across the world become strongly integrated in response to advances in the communication technologies, the correlation between economic trends in individual countries also increases, and in turn, the era, the cycle, however we define it, becomes more of a general theme across nations, depending on the level of integration with the global system as a whole. This is both an advantage, and a disadvantage for the forex trader. It means, first of all, that we can predict, on a general level, the direction of types of cuyrrencies merely on the basis of their interaction with the system as a whole, or in other words, by identifying the role that they play in the wider framework of international economics. This makes identifying and exploiting opportunities easier. But also, this means that one can never think of a truely safe currency that will be totally isolated from trends on a global scale, and will provide the perfect hedging options to protect one`s protfolio from sudden, and general shocks that may influence nations across the board. In sum, in a globalized world, no hedge is a real hedge, and your only protection against speculative losses is lower leverage.

Examine and understand the cycle

Beyond understanding the general characteristics of an era, to create successful and feasible fundamenal scenarios we must examine and understand the business cycle, the phase it is going through, and the role of politics and technology in creating them. Just by understanding the cycle, and creating a solid trading strategy on the basis of that understanding we may able to trade currencies with great results on the longer term. Inquisitive traders will hardly fail to notice the years-long uptrend of the Euro after the 2001 recession, for example, or the rise of the dollar during the dot.com bubble years, or the recent phase of USD strength, each of which lasted for many years, and created low risk opportunities for those who were aware of the causes behind them, and confident enough to trade them.

In another example, we can add that it is nearly impossible to carry trade any currency pair over the long term without an understanding of what leads to the appreciation of carry pairs. The cause, of course, is to be sought in the boom-bust cycle, and the liquidity cycle as global interest rate policies become synchronized, with generalized implications for all. One of the most important consequences of the dynamics creating economic cycles, for example, relates to the role played by speculative capital. At times of tight credit (which implies general political, and social unrest, and economic uncertainty), speculators are unlikely to create bubbles in the real economy. We do not expect speculative capital, or banks (which may be playing this role), to finance a lot of new factories, or to create lots of new trading corporations at a time when there is great uncertainty with regard to the profitability of any long term endeavor. Thus, any bubbles that arise are destroyed quickly (as adverse conditions do not allow the spreading of positive rumors, barring fraud). On the other hand, when the world economy is going through a growth phase, with good employment prospects, and ample credit available to investors, good news are everywhere. At such times, it is hard to find any asset class that does not somehow constitute a bubble. A perfect example of this was experienced during the 2007-2008 economic collapse when almost every major asset class depreciated violently, as multiple bubbles burst.

What use this is knowledge? In short, during busts assets tend to be undervalued, and during boom times, just about everything is overvalued (except for the fear factor). By being aware of the phase of the cycle, forex traders can adjust leverage, risk, and the average lifetime of a trade with greater safety and confidence.

Exploit the main trends by analyzing fundamental news and data

In order to be profitable in forex trading, it is not enough to be aware of the main trends, the overarching economic currents that drive trends in economic life for two reasons. One is that economic trends tend to turn to bubbles over the long term, and an understanding of long term dynamics rarely helps one in identifying when to exit a trade before the destructive stage of the bubble begins. The other is that, since we want to build positions gradually, we need to have some idea of how prices oscillate as they trend, so that we can enter a position at a favorable price, and exit, if we desire, with sizable profits. The knowledge necessary for making this type of decision is acquired through the analysis of data and news. For example, we may know, by our analysis of the cycle, and the other major factors contributing to it, that interest rates around the world will come down over the next six, twelve, eighteen months. In other words, we may be anticipating a recession, or a slowdown at the international scale. But by being aware of high frequency data, such as commidity prices, employment data, or consumer demands, we may be able to identify a particular nation where the central bank is likely to raise rates, even as this course of action goes against the powerful background trend directing policy action in all nations of the world. We can then use this divergence in local and general trends to create a new trade, where we take a counter-trend position in the short term, anticipating that the nation`s economy will, in some time, return to become in harmony with the rest of the wolrd. In our example, for instance, we`d be believing that the central bank is committing a policy error and will have to reverse course in some short time, creating an excellent opportunity for a short position on the currency.

Choose the currency pair to trade by reading the big picture, and time your trade through analysis of news and data

We can now combine the two items above to reach a general strategy that can be applied at different zoom levels, and timeframes. In order to successfully to trade any currency pair, we must understand its interaction with the global markets. What makes it appreciate? And what reduces its appeal? Is it a liquid pair, and if it is not, how sensitive is it to market shocks? How volatile is it in comparison to a benchmark (such as the S&P 500, but much better, an anchor pair such as the EURUSD)? Within the context of volatility, is it a range pair, or a trending pair? And how long do you, as the trader, intend to hold to pair?

These questions are of great importance in determining the profitability, and safety of your trade scenarios, and they can only be determined completely through fundamental analysis. Let us see give some examples.

What makes a pair appreciate/depreciate?

A commodity pair will tend to appreciate in the boom phase of the cycle, and will be even more attractive if the main export commodity is in high demand due to certain technological innovations. For example, we would anticipate copper to appreciate as the global downturn of the 70s came to an end, but with the advent of the information revolution we would be even more bullish on the commodity, and currencies of nations exporting it. In consequence, we would be willing to invest in currencies of copper exporting nations.

Is it a liquid or illiquid pair? How sensitive is it to liquidity shocks?

Both NOKUSD, and AUDUSD are carry trade currencies, and both nations export commodities (Norway has oil, while Australia produces gold, iron, and many otherraw materials.) But because Norway is a relatively small European country, with much of its economic relations focused on the Eurozone, the NOKUSD tends to be a lot less liquid than the AUDUSD pair, which is traded around the world. Similarly, the USDJPY pair is less sensitive to market shocks than the AUDJPY pair, even though both are Yen pairs, because markets regard AUD as a riskier currency (the USD is a reserve currency, and many international loans are dollar-denominated, while AUD has no such advantage.)

How volatile is the pair?

We can measure the volatility of a currency pair by comparing it to the most liquid pair of an era. At our time, EURUSD is the pair that is in greatest demand. Thus, we can compare our favored currency pair to the EURUSD to gauge the risk that we take as a function of volatility.

What kind of patterns does the pair demonstrate?

Each trader has a desired timeframe, and strategy, and will prefer to trade currency pairs that suit best to such a strategy. Understanding and analyzing the movements of currency pairs from this perspective would make long-term decision making easier, increasing our profitability, and reducing the level of uncertainty that we have to deal with during times of volatility.

Conclusion

Fundamental analysis is the most effective tool in trading currencies for a few simple reasons. It gives trader confidence that he knows what he is doing, so surviving volatility becomes a lot easier. It makes long-term planning much more efficient, and increases profitability. Better yet, by engaging in a smaller number of long-term transactions, the broker`s fee is reduced too. Although it can be somewhat more complicated and difficult to understand at times, fundamental analysis gives us the greatest clarity, perspective and decisiveness in trade decisions, and can hardly by neglected without cost, even if you desire to be a purely technical trader.

27 Jul 10 : Stocks Continue Rally, AUD Shines

•The Euro (EUR) traders were nervous ahead of the European open but investors there embraced the bank stress tests and pushed the Euro higher back above 1.3000 before settling just below the figure. Risk appetite and EUR/JPY flows will provide the next direction although many banks are reversing parity calls and instead focusing on the topside over the next 6 months. EUR/USD traded with a low of 1.2888 and a high of 1.3007 before closing at 1.2990.


•The Sterling (GBP) resistance was found above 1.5500 with the market stalling above the key figure. Further gains are likely but the Pound has failed to make straight-line gains in recent weeks so expect volatility. EUR/GBP has resumed its medium term downtrend with 0.8300 the first target. Overall the GBP/USD traded with a low of 1.5416 and a high of 1.5523 before closing the day at 1.5490 in the New York session.


•The Australian Dollar (AUD) broke above the key 0.9000 level riding the recent rally in US stocks. The market is once again turning bullish on the AUD and further targets include 0.9080 and 0.9150. AUD/JPY is stalling at the Y78 level but Y80 is the bull's target. Overall the AUD/USD traded with a low of 0.8940 and a high of 0.9038 before closing the US session at 0.9010.


•Subsiding Eurozone fears have led to a further pullback in Gold with the market settling into an 1175-1200 range waiting for a further catalyst. Overall trading with a low of USD$1200 and high of USD $1185 before ending the New York session at USD$1190 an ounce.
Currency to watch out for: EURUSD & GBPUSD

•The EURUSD pivot point is at 1.2955 with a preference to enter into Long positions at 1.2975
•The GBPUSD pivot point is at 1.5450 with a preference to enter Long positions 1.5450
Today's calendar and market movers:

•EUR Money Supply y/y expected to drop -0.1%
•US CB Consumer Confidence expected at 51.3
•US Richmond Manufacturing Index expected at 14•US S&P / CS Composite - 20 HPI y/y estimated at 3.9%•GBP CBI Realized Sales (index) expected to increase by 2 Equity Markets:

•US equities closed positive yesterday with the DJIA and the SP500 closing 0.97%% and 1.12% respectively. The European bourses were also positive with the FTSE closing 0.72% the DAX and the CAC closing up at 0.45% and 0.81%. The NIKKEI and the HSI at the time of writing is -0.07% and 0.12% respectively.

26 Jul 10 : Euro Banks Stress Test

EU Morning Report - Euro Bank Stress Tests Released!

•The USD continued to struggle in the 'risk on' environment with US stocks extending the week's gains to over 4%. The release of the EU bank stress results did not fault the good mood with most of the action seen in the hours beforehand. In US stocks.


•The Euro was sharply lower in Europe on concerns the Bank stress tests were not tough enough. Helping support though was the release of strong German July IFO at 106 vs. 101 forecast. When the release of the bank stress tests caused little alarm (7/91 failed) and US stocks rallied the Euro was bought up back above 1.2900. EUR/USD traded with a low of 1.2794 and a high of 1.2967 before closing at 1.2909.


•The Sterling had a very strong day on the back of surprisingly strong Q2 GDP figures. Expectations were poor after the Greece Debt Crisis in May but the figures of 1.1% vs. 0.6% forecast were well received. EUR/GBP dropped below 0.8400 and Cable broke to near month highs above 1.5400. Overall the GBP/USD traded with a low of 1.5255 and a high of 1.5449 before closing the day at 1.5420 in the New York session.


•Gold Fell back after failing to hold above the $1200 level but found support at under $1190 to finish in familiar territory. Overall trading with a low of USD$1200 and high of USD $1185 before ending the New York session at USD$1190 an ounce.
Currency to watch out for: EURUSD & USDJPY

•The EURUSD pivot point is at 1.2860 with a preference to enter into Long positions at 1.2860
•The GBPUSD pivot point is at 1.5345 with a preference to enter Long positions 1.5345
Today's calendar and market movers:

•US New Home Sales expected at 0.31 million
Equity Markets:

•US equities closed positive on Friday with the DJIA and the SP500 closing 0.99%% and 0.82% respectively. The European bourses were mixed with the FTSE closing -0.02% the DAX and the CAC closing up at 0.39% and 0.18%. The NIKKEI and the HSI at the time of writing is 0.72% and 0.21% respectively.

23 Jul 10 : Risk Back On ?

U.S. Dollar Trading (USD) was sold across the board as demand for the safe haven eased and the market bought stocks and commodities aggressively. Company Earnings were strong but economic data was a little weak with Weekly Jobless Claims at 464k vs. 449k previously. In US stocks, DJIA +201 points closing at 10322, S&P +24 points closing at 1093 and NASDAQ +58 points closing at 2245.

The Euro (EUR) rallied aggressively after some strong economic data and improvement in sentiment helped lift the pair back to the 1.2900 level. The market is eagerly awaiting the European stress tests released at 1400 GMT. July EU Manufacturing PMI jumped 56.5 vs. 55.2. EUR/USD traded with a low of 1.2736 and a high of 1.2934 before closing at 1.2890. Looking ahead, German July IFO forecast at 101.5 vs. 101.8 previously.

The Japanese Yen (JPY) had a volatile day with the market testing Y110 support on the EUR/JPY and month lows on the USD/JPY at Y86.30 before profit taking and a reversal of stock market direction ignited a fierce short covering rally. Overall the USDJPY traded with a low of 86.32 and a high of 87.25 before closing the day around 87.10 in the New York session.

The Sterling (GBP) led the market higher in Europe after solid June Retail Sales at 0.7% vs. 0.5% forecast. Resistance at 1.5200 was broken and the pair rallied to 1.5300 before running out of steam. Overall the GBP/USD traded with a low of 1.5148 and a high of 1.5299 before closing the day at 1.5280 in the New York session. Looking ahead, Q2 GDP 0.6% vs. 0.3% previously.

The Australian Dollar (AUD) was the strongest currency on the day after breaking above 2 month resistance at 0.8860 to close above 0.8900. RBA Rate hike speculation and surging commodities combined to provide the perfect environment for the Aussie to break higher. Overall the AUD/USD traded with a low of 0.8735 and a high of 0.8955 before closing the US session at 0.8930.

Oil & Gold (XAU) Gold rallied in sympathy with Oil testing $1200 but failing to break the key psychological level. Overall trading with a low of USD$1180 and high of USD $1201 before ending the New York session at USD$1195 an ounce. Oil surged with the change in investor mood with $80 a barrel now the bulls target. WTI Oil Closed +$2.80 at $79.20 a barrel.

21 Jul 10 : Markets brace themselves ahead of Ben Bernanke's speech

The EURUSD yesterday started the session strong as speculation mounted on Ben Bernanke's testimony today. The talk on the street was of a dovish Ben and a downplay on US economic growth. This helped spark a selloff in the USD and the EURUSD traded to 1.3029 making a 2 month high. Part of the move was on the back of stop hunting however with no follow through. Asian supply came in at these levels and capped the gains in the pair gunned more stops on the downside below 1.2900 despite positive comments from the ECB on the EU and the stress test due on Friday. From the data front yesterday we had a very disappointing Housing starts report dropping over -5% for the month relative to the expectation of -2.7%. USDJPY price action on the day was between 87.56 - 86.72.



In the EU we had the weekly ECB refinancing auction which indicated an increased appetite for ECB financing ahead of the stress tests on Friday. Spanish, Irish and Greek auction this week and last went without incident and the Greek T-Bill yields are trading below the IMF 5% benchmark. Focus is firmly fixed on Friday's stress test results and the reaction of the market in terms of realism or not. We already know the Hypo Real Estate bank in Germany has failed the tests however Germany has promised to bail them out if needed. EURUSD price action on the day was between 1.3029 - 1.2840.



In the UK yesterday we saw a widening Public sector borrowing figure which disappointed the markets and reacted by selling the GBP from 1.5300. We also saw MPC member Posen made dovish comments and that there is a 50% chance of further policy loosening. By the end of the session the GBPUSD recovered back above 1.5300 on the back of a weak dollar. Ahead today we have MPC minutes and Retail sales.

The EURUSD pivot point is at 1.2835 with a preference to enter into Long positions at 1.2835
The USDJPY pivot point is at 86.90 with a preference to enter Long positions at 86.50
Today's calendar and market movers:

US equities closed positively yesterday with the S&P500 at 1.14% and the DJIA at 0.74%. The European bourses were negative with the FTSE down -0.17% the DAX and the CAC closing at -0.69% and -0.53% respectively. The NIKKEI and the HSI at the time of writing is -0.23% and 0.55% respectively

21 Jul 10 : Euro traded slightly above 1.3 and briefly anyway

U.S. Dollar Trading (USD) volatility was evident in a wide range of markets yesterday with sentiment turning from very negative to extremely positive over the trading day. Weak results from IBM and Housing data missing expectations sent the Dow Jones Index down at the start of trade for a test of the key 10000 level before rebounding aggressively for the rest of the day. In US stocks, DJIA +75 points closing at 10230, S&P +12 points closing at 1083 and NASDAQ +24 points closing at 2222. Looking ahead, Ben Bernanke Speaks before Congress.

The Euro (EUR) broke above 1.3000 in Early Europe on speculation the US FED may expand its easing operations to help a faltering recovery. This was played down and the Euro fell heavily on fresh worries the Eurozone bank tests were not be tough enough. EUR/USD traded with a low of 1.2838 and a high of 1.3030 before closing at 1.2890.

The Japanese Yen (JPY) was quiet at the start of the day but found solid selling on the mood change in the US session to rally above Y87 and test Y87.50 before easing slightly into the close. Crosses were well bid and the AUD/JPY led the risk currencies to day highs at the new York close. Overall the USDJPY traded with a low of 86.71 and a high of 87.59 before closing the day around 87.40 in the New York session. Update BOJ Policy Minutes - Concern H2 will slow down with withdrawal of stimulus.

The Sterling (GBP) once again weak economic data led to Cable selling at the start of Europe but strong Stocks in the US helped the market to rally above 1.5300. EUR/GBP found solid resistance at 0.8520 and slumped to 0.8430 on Euro weakness. June Public Sector Net Borrowing forecast at 13.1bn came in at 15.4bn. Overall the GBP/USD traded with a low of 1.5150 and a high of 1.5313 before closing the day at 1.5275 in the New York session. Looking ahead, June Retail Sales are forecast at 0.5% vs. 0.6% m/m.

The Australian Dollar (AUD) tracked the stocks markets for a rally in Asia, dip in Euro and rally again in the US finishing at day highs. RBA minutes offered little new with the market focused squarely on the CPI numbers next Wednesday as the decider of August's Rate decision. AUD/JPY was the most active cross up near 2 yen on the day. Overall the AUD/USD traded with a low of 0.8681 and a high of 0.8849 before closing the US session at 0.8825.

Oil & Gold (XAU) rallied on USD weakness with support being found under the $1180 level. Overall trading with a low of USD$1175 and high of USD$1194 before ending the New York session at USD$1191 an ounce. Oil traded higher after dipping in Europe. WTI Oil Closed +$0.90 at $77.44 a barrel.