Oil Surges and Stocks Rally

U.S. Dollar Trading (USD) the Dollar was sold in all sessions yesterday as Global stock markets rallied and economic data improved. December ISM Manufacturing jumped to 53.9 vs. 52.7 previously. The FOMC Minutes were also released and continued to support the view interest rates would be kept low until 2013. In US stocks, DJIA +179 points closing at 12397, S&P +19 points closing at 1219 and NASDAQ +43 points closing at 2648.  Looking ahead, November Factory Orders forecast at 1.7% vs. -0.4% previously.

The Euro (EUR) broke above 1.3000 with the change in sentiment clear from the start of the day in Asia. The market is still heavily short and good news has the chance to spark a relief rally with 1.3300 seen as a possible target for bulls in the short term. Ratings downside risks still remain but for now we will be looking to stocks markets and todays PMI data. Looking ahead, December PMI Services forecast at 52.7.

The Japanese Yen (JPY) USD/JPY struggled and fell further back as the USD weakness overwhelmed the Yen weakness in the ‘risk on’ rally. EUR/JPY was able to bounce from multi-year lows and reclaim Y100. AUD/JPY is targeting Y80 and if US data continues to be strong then USD/JPY could reverse direction and the Yen once again become the funding currency of choice.

The Sterling (GBP) moved higher in line with most other pairs and remained well supported against the Euro testing 0.8330 supports. GBP/USD is near 1.5700 and a break above would open up a move to 1.6000. UK PMI manufacturing jumped 49.6 vs. 47.6 and help support the move higher. Looking ahead, November Mortgage approvals at 52.3k vs. 52.7k previously.

The Australian Dollar (AUD) the Aussie led the market higher gaining against all the majors with the commodity currency the first choice to express positive risk appetite. EUR/AUD is still at all-time lows near 1.2500 and GBP/AUD is moving towards 1.5000 and then 1.4800 all-time lows. Little economic data this week so we continue to look to the stocks markets and US Jobs data on Friday.

Oil & Gold (XAU) continued to move higher breaking and closing above $1600 an ounce. OIL/USD was relentless as the weak USD and increasing Iranian threats supported a sharp move to $103 a barrel.