Market Insights 18 May 2011

Headlines
USD/JPY breaks higher for the first time in weeks as the BOJ calls the economy in a “severe” state.
UK inflation hits highest on record at 4.5% seeing GBP surge higher.
US housing starts fall indicating the US economy is far from recovering.
US treasury yields drop to 2011 lows as the economy fails to improve and traders start to consider the
possibility of QE3.
Commodities have down day on US growth concerns.
US equity markets had a mixed night with the Dow up 0.55% and S&P500 and Nasdaq finishing the session
flat.

AUD/USD
Resistance
1.0630/40
Support
1.0500/20
Market Sentiment

Bearish
(with a tight stop)

AUD failed yet again to get through 1.0500 and the reversal was swift on the release of the US housing data and AUD quickly
bounced back to the highs. Traders seem content to play the range from the short side and with 1.0630/40 resistance so
close it is tempting the sellers first up in Asia, but they are keeping a tight stop as a break of 1.0660 is quite bullish.

XAU/USD
Resistance
1490.00
Support
1470.00
Market Sentiment

Bearish
(while under 1500)

Commodities struggled yet again overnight and the failure to get back through 1500 has kept those with bearish sentiment
very happy. This being said the failure to convincingly go on with it through 1480 is important and in most traders minds it is
now a matter of waiting for the break for confirmation of the downward move or buying the break of 1500.
 EUR/USD
Resistance
1.4300/10
Support
1.4150/60
Market Sentiment

Cautiously Bullish

EUR finally broke out of the downward trend last night with the bad US housing starts giving enough impetus for traders to
momentarily forget about the issues in Europe. From here traders seem to be cautiously trading it from the long side but very
aware that the problems in the Eurozone could come back to haunt them and the bullish sentiment could disappear quickly.

GBP/USD
Resistance
1.6300/10
Support
1.6200/10
Market Sentiment

Bullish
(While above 1.6200)

CPI in the UK came out the highest on record running at 4.5% seeing GBP aggressively bought up from 1.6200 through to
1.6300 extremely quickly. From there is has been in a wide range in a choppy trading session. Traders now seem to be happy
buying the dip towards 1.6200 in the short term looking for a rally towards longer term resistance of 1.6400

USD/JPY
Resistance
81.80/90
Support
81.00/10
Market Sentiment

Bullish
(buying the dip)

As mentioned in yesterday’s report, a break through 81.00 cause a major sentiment shift and the bulls took USD/JPY higher
towards 82.00 as the BOJ mentioned that the Japanese economy is in a “severe” state. It was a very significant move
yesterday and traders now see keen to play the range from the long side looking to buy the dip back towards 81.00
 AUD/JPY
Resistance
86.60/70
Support
85.00/10
Market Sentiment

Bearish
(while below 86.70)

AUD/JPY broke through 86.00 resistance initially on the BOJ comments and volatility ensued for the rest of the overnight
session. We open in Asia today neat the top of a wide range and sellers are expected initially around these levels and further
towards 87.20 with traders keen to play the range from the short side unless we break through there.

OIL
Resistance
98.00/50
Support
95.00/50
Market Sentiment

Bearish
(while below 98.50)

Oil traders continue to hold bearish sentiment although there seems to be decent buying interest continuing around the
95.00/50 region that held on the third occasion last night. From here traders are still calling for a test lower and eventually
break through the buying interest and push through to 92.00 in the coming weeks.

Economic Calendar & Pivot Points

F/Cast Last F/Cast Last
» GBP: Claimant Count Change 0.4K 0.7K » USD: FOMC Member Fisher
» GBP: MPC Meeting Minutes 3-0-6 3-0-6 » USD: FOMC Meeting Minutes
» GBP: Unemployment Rate 7.9% 7.8% »
» »
» »
Pivot Points AUD/USD XAU/USD EUR/USD GBP/USD USD/JPY AUD/JPY CRUDE OIL
Open 1.0624 1486.01 1.4235 1.6247 81.42 86.51 97.57
R3 1.0807 1524.92 1.4477 1.6439 82.84 88.47 101.51
R2 1.0723 1511.24 1.4376 1.6371 82.31 87.59 99.66
R1 1.0674 1499.02 1.4322 1.6310 81.90 87.10 98.69
PP 1.0590 1485.34 1.4221 1.6242 81.37 86.22 96.84
S1 1.0541 1473.12 1.4167 1.6181 80.96 85.73 95.87
S2 1.0457 1459.44 1.4066 1.6113 80.43 84.85 94.02
S3 1.0408 1447.22 1.4012 1.6052 80.02 84.36 93.05

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