Australian FOREX Daily Outlook 3/03/2008

Equity markets cause risk aversion, as US consumer confidence at 16 year low

CURRENCY TRADING SUMMARY – 03 MARCH 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was mixed versus a number of majors, as equity markets was a cause for plenty of volatility on Friday. On the data front, inflation reported by the PCE deflator accelerated to its fastest pace in over two years, yet consumer confidence was at its lowest level in 16 years with the Michigan sentiment survey, whilst Chicago PMI was at 6 year lows. However the big mover in the markets was from reports that the world’s largest insurer, American International Group reported 5.3bln quarterly loss, prompting a broad sell off in equities. In U.S. share markets the NASDAQ was down by -60.09 points (-2.58%) whilst the Dow Jones also fell by -315.19 points (-2.51%). Crude oil fell by US$0.80 a barrel to US$101.79. Looking ahead, ISM manufacturing figures are scheduled for release with forecasts lying at 48 for the month February, lower then the previous 50.7.

·The Euro (EUR) held firm against the Dollar, despite a number of other majors suffering on a cross yen sell off. Nonetheless the Euro held close to record highs trading with a low of 1.5144 and a high of 1.5240 before closing the day at 1.5189 in the New York session. Key data out of the Eurozone will include PMI data and CPI figures.

·The Japanese Yen (JPY) rallied to fresh three year lows on the back of risk aversion prompting the Japanese Yen to trade at fresh three year lows. Overall the USDJPY traded with a low of 103.83 and high of 105.37 before closing the day at 103.82.

·The Sterling (GBP) paired back its week gains also on the back of a sizeable GBPJPY sell off on global stocks plunging. Overall the GBPUSD traded with a low of 1.9786 and a high of 1.9922 before closing the day at 1.9881 in the New York session.

·The Australian Dollar (AUD) was one of the worst performing currencies on Friday, as the high yielder was sold rapidly on the back of lower equity markets, ensuring the Aussie remained well shy from its recent multi year highs. Overall the AUDUSD traded with a low of 0.9319 and a high of 0.9472 before closing the session at 0.9323 in New York.

·Gold (XAU) traded at a fresh record high of US$978.50, before succumbing to profit taking during the US session. XAU gained by US$7.50 an ounce to US$975.00

TECHNICAL COMMENTARY

·Euro – 1.5200

Initial support at 1.5074 (Feb 28 low) followed by 1.4971 (Feb 27 low). Initial resistance is now located at 1.5239 (Feb 29 high) followed by 1.5304 (1.4311 plus 0.618 of 1.3361 to 1.4967).

·Yen – 103.05

Initial support is located at 103.36 (Feb 2005 low) followed by 101.67 (Jan 1995 reaction low). Initial resistance is now at 105.39 (Feb 29 high) followed by 106.65 (Feb 28 high)

·Pound – 1.9840

Initial support at 1.9763 (Feb 28 low) followed by 1.9644 (Feb 22 low). Initial resistance is now at 1.9975 (Feb 27 high) followed by 2.0000 (Round Number)

·Australian Dollar – 0.9320

Initial support a 0.9266 (23.6% retracement of the 0.8513 to 0.9499 advance) followed by 0.9122 (38.2% retracement of the 0.8513 to 0.9499 advance). Initial resistance is now at 0.9500 (Round Number) followed by 0.9555 (Open + Last week range * 1.618)

·Gold – 976.10

Initial support at 953.48 (Feb 28 low) followed by 949.00 (Feb 27 low). Initial resistance is now at 976.14 (Feb 29 high) followed by 1000.00 (Round Number)