Gold Hits Fresh Year Highs as Rally Resumes

U.S. Dollar Trading (USD) lack of conviction was the main story in the markets yesterday with a brief rally in Asia and Europe reversing later in the US session with stocks closing slightly negative. The notable exception was Gold which broke to fresh year highs on a combination of alternative investment and safe haven demand with tensions in the Middle East continuing to simmer and could escalate at any moment. The Euro (EUR) EUR/USD kept to a 50 point range in quiet trade with little direction and mixed headlines out of Europe. With stocks up and down and the Greece saga settling down traders took a break from the single currency. In US stocks, DJIA -27 points closing at 12938, S&P -4 points closing at 1344 and NASDAQ -15 points closing at 2933. Looking ahead, Weekly Jobless Claims forecast 354k vs. 348k previously. Crude Oil Inventories forecast at 0.9mln vs. -0.2mln previously.

The Japanese Yen (JPY) USD/JPY broke above Y80 but there were little fireworks and only a small and gentle move higher to Y80.30. The moves are slow but in one direction with little pull back seen in the last 3 weeks. The outlook is for more gains and daily we are seeing more rhetoric from the Japanese government regarding new measures to stoke inflation and economic activity. The Sterling (GBP) was a big mover in quiet markets reacting to the surprise minutes of the last MPC meeting where 2 members dissented arguing for even more asset purchases above the agreed upon 50bn pounds announced. EUR/GBP was notable breaking above 0.8450. Australian Dollar (AUD) the AUD/USD tried to rally but once again eased in the US session with the usual support seen for the commodity currency lacking even as Gold surged higher. Some traders suggest the political risk that is unraveling in the challenge to PM Gillard from a former Prime minister as the reason for yesterday’s underperformance. Looking ahead, February German IFO Business Climate forecast at 108.8 vs. 108.3 previously.

Oil & Gold (XAU) Gold broke above $1760 resistance in late US trade with aggressive moves higher hitting $1780 into the last hour before the close. The rally is now targeting the previous rally’s high at $1800 which held last August. OIL/USD consolidated above $106 supported by continued Iranian Tensions. OIL/USD consolidated above $106.

Pairs to watch

OIL/USD to continue the Iran Rally?

XAU/USD to test $1800oz?

TECHNICAL COMMENTARY