Funny day. Commodities are melting down all of a sudden. Oil was above $83 earlier in the day; now were down a buck, down to $81.15. Gold is down at $1100 support again…

No clue what to blame it all on, though it does suggest risk aversion.

How to fund the coming European bailouts? Sell the family jewels. err, gold...Dennis Gartman says.

Financial markets are still in operation 18 months after the big GFC melt-down and it looks like some players are finally starting to exit their so-called Armageddon trades, the primary one which was long Gold. Other trades, which probably seemed like good ideas at the time, were stockpiling copper and other commodities. Good luck getting out of those!

The ultimate trade in the FX markets has been to be long the AUD and other commodity currencies against the ‘old-economy’ currencies like the EUR, GBP and the USD. They say that a currency pair always looks it’s absolute worst and most bearish right at the bottom. I must say that GBP/AUD looked very very bad yesterday. I wonder?

I’m not sure of the catalyst but gold has come under intense pressure over the last 45 minutes. It broke modest intraday support around the $1120 level after reaching session highs of $1127 just moments before..Stronger support at $1110 has given way as well. 1088 is the next decent area of support.We trade now at $1108 after bottoming at $1104.

UPDATE: We’re hearing speculation from AUD/USD traders that there has been central bank selling in gold in the last hour…

Comments from China’s SAFE overnight that gold will not be a huge part of their reserves going forward took more steam out of the sales of the yellow metal, pushing prices as low as $1110 this morning. A stronger dollar is contributing to weaker gold, just as weaker gold is contributing to a stronger dollar. Keep an eye on that relationship today.

AUD/USD dipped briefly below the 0.9060 level where the 100-day moving average lies. Small stops lie below that level while larger ones are perched in the 0.8935/40 area, traders say.

• S.Korea fx authorities buying dollars to curb won’s strength – traders
• Russia central bank shifts lower bondary of rouble band to 34.55 vs basket after buying $700 mln – traders. Shifts bondary second time during morning to 34.50
• French January trade balance -3.681 bln euros, slightly better than median forecast of -4.0 bln – customs office
• Swiss February CPI +0.1% m/m, +0.9% y/y, slightly weaker than median forecasts +0.2%, +1.0% respectively
• UAE FinMin: Expects Dubai debt issues to be resolved soon
• French EconMin Lagarde: Idea of European Monetary Fund is interesting, but not short-term priority. Still working on technical proposals on CDS market
• Fitch: UK sovereign credit profile has deteriorated.  UK needs stronger fiscal adjustment. Among larger AAA sovereigns, urgency greatest for UK, Spain and France
• Fitch: UK still within tolerance of AAA rating, but uncomfortable with fiscal adjustment path set out by UK authorities
• Fitch: Portugal’s gradual approach to fiscal consolidation to 2013 is a concern.  Short-term outlook for Greece probably OK, longer-term outlook more open to question. Possible to have a sovereign default in the euro zone
• Fitch: United States vulnerable to interest rate shocks
• UK January global trade balance -7.987 bln, worse than median forecast -7.0 bln, biggest shortfall since August 2008

Risk aversion has picked up this morning, European stocks lower, oil off over a buck and gold lower. Fitch’s various prognostications (see above) hardly helped matters.  USD and especially JPY the beneficiaries.  JPY also aided by ongoing reports of fiscal year end repatriation flows.

EUR/USD started around 1.3615. Dipped early, briefly below 1.3600 before bouncing with reports circulating that Russia and BIS had been notable buyers.  The recovery didn’t last long and sell orders tipped at 1.3640/50 never came into play.  We were soon back below 1.3600, downbeat comments from Fitch Rating (see above) pressuring the pairing.  We’ve been as low as 1.3562 so far, presently at 1.3570.

EUR/JPY is down at 121.75 from early 122.50.

Cable has had a bad day.  Started around 1.5010 and was under pressure fairly quickly. Poor RICS housing data out overnight, Times poll showing Labour and Conservatives running neck and neck in key marginal seats and Moody’s warning of possible downgrades to UK banks/lenders among factors weighing. 

The sell-off accelerated as comments from Fitch Rating hit the wires (see above) and as data came out showing UK’s trade picture worse than expected (see above) We’ve been as low as 1.4940 so far, talk of sovereign buying below 1.4950 lending some very tenuous support.  We’re presently at 1.4952.

USD/JPY has seen a more active morning, down at 89.80 from early 90.30 amid heightened risk aversion and ongoing reports of fiscal year end repatriation flows.  A US investment bank seen notable seller this morning.  We’ve been as low as 89.63 so far, just above tipped buy orders at 89.50/60.

European stocks are coming under accelerated selling pressure, helping pressure EUR/USD.  We’re presently posting session low 1.3580 as risk aversion picks up.  Oil off three quarters of a buck, gold near session low.

Earlier there was talk of sovereign buy interest from 1.3585 to 1.3570, including apparently China.  Lets see if they turn up as scripted.

Elsewhere cable down at 1.4960.  Earlier there was talk of sovereign bids down around 1.4950.

Seems like market against the sovereigns, just for a change.

The comments earlier today from the Chinese SAFE head, Yi Gang, seemed to me to be a little bearish for gold. He said that they were continuing to buy but were wary of ‘constraints’ and being seen to be too active as the price could run away. These comments have had little effect on the spot market, down 0.2% at $1122/oz.

Gold is not the only commodity trading with a soft tone as the US session wears on. Oil has rolled over and now trades lower on the day after trading as high as $82.41 earlier in the morning. We’re now a dollar lower.

Copper is down half a percent and gold trades down at $1121.

EUR/USD trades at 1.3635 as the market is reminded that there are no quick-fixes for Greece…

Gold is not trading as part of the risk trade today, slumping to the $1125 level at last look. Volatility in the yellow metal has been very low in recent weeks, surprising given the upheaval in the euro zone. Perhaps we can take gold’s weakness as a sign that the Greek crisis is moving toward a back-burner issue. I’m open to ideas from readers as I have no solid feel for that market at the  moment…

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