Australian FOREX Daily Outlook 14/07/2008

Pound crashes on BOE Inflation report

CURRENCY TRADING SUMMARY – 14^th August 2008 (00:30GMT)

·U.S. Dollar Trading (USD) had a busy trading day with multiple themes present. During the Asian session stock weakness provoked an unwinding of the JPY carry trades with the AUD/JPY and NZD/JPY taking the brunt of the pressure. In the European session heavy Cable sales supported the Dollar but stock weakness capped gains. Crude Oil shot higher in New York as US oil inventories fell more than expected at -0.4M barrels. US Retail Sales in July were weak but as expected at -0.1% and 0.4% (0.5%) Core. A warning from Merrill Lynch weighed on the stock market. In the U.S. share markets, the NASDAQ was down 2 points (-0.08%) and the Dow Jones was down 109 points (-0.94%). Crude Oil closed up $2.99 ending the New York session at $116.00 per barrel. Looking ahead, July CPI is seen up 0.4% or 5.1% y/y and the weekly Jobless claims are seen at 432K.

·The Euro (EUR) spent most of the day pivoting the 1.4900 level with little impetus to break either way as large offers above 1.5000 and option protection at the 1.4800 levels limited action. Industrial Production weakened to 0.0% in June vs. expectations of 0.3%. Overall the EUR/USD traded with a low of 1.4840 and a high of 1.4980 before closing the day at 1.4930 in the New York session. Looking ahead, July CPI is seen at -0.1% and 4.1% Y/Y. German Q2 is seen at -0.8 after a strong 1.5% in Q1.

·The Japanese Yen (JPY) heavy unwinding of the carry trades early in Asia yesterday preceded a gradual rally that lasted into US close for almost all crosses except GBY/JPY. AUD/JPY fell over two big figures along with the NZD/JPY at the height of the panic selling. The June Japanese Tertiary Industry Activity Index fell -0.8% vs. expectations for a -0.3%. Overall the USDJPY traded with a low of 108.35 and a high of 109.74 before closing the day around 109.30 in the New York session.

·The Sterling (GBP) dropped 3 big figures after the BoE Inflation Report predicted that CPI in the UK will fall back to 2.0% in two years time and that growth projection for the H1 in 2009 has been dropped to 0.0%. July CPI jumped 0.6% to 4.4% y/y. The Claimant Count Change jumped to 20.1K above forecast of 17.K. Overall the GDP/USD traded with a low of 1.8639 and a high of 1.9037 before closing the day at 1.8700 in the New York session.

·The Australian Dollar (AUD) came under server pressure as heavy AUD/JPY sales pushed the Aussie through 86 cents.A recovery in Gold and Oil allowed some relief to the commodity currency during the European and American session. Overall the AUD/USD traded with a low of 0.8590 and a high of 0.8772 before closing the US session at 0.8730.

·Gold (XAU) Jumped as Oil surged on the US inventory data and financial concerns flared up. Overall trading with a low of USD$805.90 and high of USD$830 ending the New York session at USD$826 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.4890

Initial support at 1.4842 (Aug 13 low) followed by 1.4715 (Aug 12 low). Initial resistance is now located 1.4981 (Aug 13 high) at followed by 1.5084 (Aug 11 high).

·Yen – 109.40

Initial support is located at 108.22 (Aug 6 low) followed by 107.29 (Aug 7). Initial resistance is now at 109.39 (Aug 13 high) followed by 110.40 (Aug 11 high).

·Pound – 1.8670

Initial support at 1.8619 (61.8% retrace 1.7048 to 2.1161) followed by 1.8518 (Oct 11 2006). Initial resistance is now at 1.9036 (Aug 13 high) followed by 1.9123 (Aug 12 high).

·Australian Dollar – 0.9695

Initial support at 0.8593 (Aug 13 low) followed by 0.8513 (Jan 22 low). Initial resistance is now at 0.8743 (Aug 13 low) followed by 0.8846 (Aug 12 high).

·Gold – 830

Initial support at 803 (AUG 12 low) followed by 789.9 (61.8% retrace 640.00 to 1032.5). Initial resistance is now at 846 (May 2 support) followed by 865 (Aug 11 high).