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Yesterday, equity markets were soft. The S&P 500 closed 0.05% lower for its fourth consecutive loss, albeit small, as economic data failed to meet expectations. Consumer confidence came in lower than expected while the ISM business activity index came in lower than even the most pessimistic forecasts. Exxon Mobil fell more than 2% after reported sales trailed estimates and Amazon will open significantly lower today after profits fell more than 50%. European bourses are higher by almost 2% as manufacturing data from the US to China looks positive.

Equity markets have recovered from a soft start to the week with Asian shares rising on optimism surrounding the latest EU summit. After falling yesterday over Greek resistance to outside influence in its budgetary affairs, rising bond yields and the collapse of Spanair, European bourses are now higher by 1% mid session today. After losing ground yesterday for the third day as European leaders lectured to Greece over the nation’s second rescue package, S&P 500 futures are signalling a rise in trade today.

Commodity prices moved lower yesterday with the CRB index losing 1.6 points to 312.31 with initial gains over Euro-optimism evaporating as US economic data disappointed. In Europe, prices are making a comeback with WTI Crude gaining 0.75% to $99.20 0.35% to $98.45. Precious metals gained with with gold rising 0.5% to $1,749 while silver has gained 1.8% to $33.85.  Soft commodities are broadly stronger while copper has gained 0.8%.

GOLD continues to show strong price consol-idation to gain slightly to hold around $1,740. The range overnight was $1,724 to $1,747. The price action played perfectly within our support and resistance levels.  In what is certainly a good sign for the metal, it managed to hold onto gains even as the USD rose and equity markets fell. The strong bounce off support at $1,725 has gold maintaining its short term bullish trend and we expect another retest of $1,750 imminently. We believe that gold’s status as a store of value and as a safe haven will come to a fore this year as prices ac-celerate towards $2000 by mid year. We remain strongly bullish. Last year we saw both the USD and gold perform better than mpst other asset classes and we continue to see the same trend this year. Look for support at $1,720 to be tested today. If this level holds, our short term bullish call on the metal will be confirmed.

EUR/USD found support at 1.3025 (day low) in early London time perhaps in response to no firm progress being made in the debt restructuring negotiations between Greece and private bond holders. On the other hand, with US interest rates near zero until 2014 it isn’t that attractive to buy USD either in terms of yields.  Hence EUR/USD may be trapped between 1.3050 – 1.3150 until the market finds new information to trade with.  This may come from today’s data out of Europe (Germany PMI, EMU PMI and CPI) and the US (ADP employment change and ISM manufacturing).  We think we may have seen the low for the day but for the topside we like 1.3244 revisited.

USDJPY

USD/JPY continued its five-day losing streak in early London time as it tests the 76.00 big figure.  At the time of writing USD/JPY is 76.05 which is today’s low so far.  We hear there are stop losses (large) below this figure but margin traders are holding the support line at the moment in the hope of grabbing a bargain.  Since the US announced last week that it would keep interest rates near zero at least until late 2014, long term traders are slowly pricing in this factor by selling dollars across the board including selling dollars and buying the yen.  Specifically for today, Japanese exporters and model funds were doing most of the selling.  Again 75.76 wasn’t tested yesterday but the chances are extremely high today, then 75.55 (Oct low).  Watch out for the 75.35 post war low and also watch out for BOJ intervention – real or rumoured.  If that happens expect to see 77.12 in a hurry otherwise the trend is strongly bearish.

AUD/USD like the majors and other risk currencies preformed well during the late Asia and European session as the market grabbed at the idea of a fiscal treaty of 25 European na-tions as a positive step for the current crisis and reports that the ECB was about to release a large chunk of cheap liquidity to European Banks also helped. AUD topped out again ahead of 1.0700 selling with Fund names noted sellers. Weaker US data and a change in stance on the risk asset move saw the Euro sharply decline during the US session and AUD has followed the course. However, at this stage the slide has been limited by the recovering US equity market during the afternoon with the price closing now at 1.0615. HPI q/q and Commodity Price data are the only medium level releases today and we can’t see these hav-ing a major effect on the price action. A fall in the commodities may have an outside effect if the number is large enough only because of our two speed economy at present.

Compass Global Markets