Better than expected reading of Existing Home Sales on Friday spurred another upmove in stock market around the globe fueling hopes for soon recovery and indicating building sector is bottoming out. The risk appetite is back on agenda, as usual with weakness for safe-haven assets, like USD. CRB and yields also heading higher supporting our view that the pair hasn’t topped out yet and another wave should be expected. In a view of the above analysis we look to buy single currency approaching  1.42 level which seen as strong support. 

Falling stock and commodities markets brought more strength to dollar and future downward move is expected to follow. Crude oil takes out 66 level with the gold breaching 940 suggesting the change in sentiments can be seen and safe-haven currencies will have additional demand with the outflow from risky assets. In a view of this above analysis we are looking to sell cable on recovery from the previous support level which turned to support.

1. Short Term Bias to Risk Assets AUD, NZD, CAD, EUR, COMMODITIES) as stocks, risk appetite rise due to positive Manufacturing PMI data from China, Swiss, UK, US.  In Risk of pullback due to strength of rally compared to underlying news/fundamentals suggests traders should be ready to go long safe-haven currencies if stocks and other risk assets pull back, most at or near 2009 highs,  S&P breaks 1000, should make some pullback soon unless Friday's non-farms payroll data is positive.

2. US PMI especially positive since showed improved employment, suggests Friday's non farms payroll, the key economic event this week by far, could be positive, which could sustain the current rally.

3. Bloomberg reported overnight that Nouriel Roubini said today (Monday) in Australia that Commodity prices will rise in 2010 as the global recession eases. “As the global economy goes toward growth as opposed to a recession you are going to see further increases in commodity prices especially next year,” he said. “There is now potentially light at the end of the tunnel. ”The Reuters/Jefferies CRB Index jumped 3.9 percent on July 30 to 253.14, the biggest gain since March 19.

CONCLUSION

Enough positive news continues to keep the global rally going. Hints of improvement in unemployment in US PMI are very significant because they suggest Friday's 'Main Event" of the week non farms payrolls data may also please the markets. Given the markets' recent ability to rise on very mixed data and ignore the negative, genuinely good news could really move up. However, given that global markets are already at or near 2009 highs they remain vulnerable to pullback if there are negative surprises, especially from employment data, which appears to be the weak link in thus far.