Australian FOREX Daily Outlook 28/05/2010

China Rethinking Euro Investments

CURRENCY TRADING SUMMARY – 27th May (00:30GMT)

U.S. Dollar Trading (USD) gained on renewed Euro selling after the relief rally in US stocks ran out of steam. Economic data was strong with April Durable Goods Orders +2.9% vs. -1.2% and April New Home Sales at 504k vs. 425k previously. In US stocks, DJIA -69 points closing at 9974, S&amp P -6 points closing at 1067 and NASDAQ -15 points closing at 2195. Looking ahead, Q1 GDP forecast at 3.4% vs. 3.2%. Also released, Weekly Jobless claims are forecast at 455k vs. 471k previously.

The Euro (EUR) was sold aggressively in the US after remaining stable for most the day on news that china’s SAFE was reviewing it investment in European bonds. The Market plunged to support at year lows near 1.2150 and sentiment is very negative. EUR/GBP broke lower. June GFK German Confidence slumped to 3.5 vs. 3.7 previously as the Greece Crisis takes it toll. EUR/USD traded with a low of 1.2152 and a high of 1.2347 before closing at 1.2170. Looking ahead, BUBA President Weber Speaks.

The Japanese Yen (JPY) traded above Y90.50 on strong US data before heavy EUR/JPY selling forced the major lower. EUR/JPY slumped below the key Y110 level and is threatening to push lower further. April’s Trade Balance was strong at 742bn vs. 710bn previously. Overall the USDJPY traded with a low of 89.80 and a high of 90.69 before closing the day around 89.90 in the New York session.

The Sterling (GBP) was resilient to the Euro sell off as EUR/GBP broke lower and GBP/JPY buying on dips below Y130 supported. The weight of the significant US stock sell off late in the US session sent the pair back below 1.4400 albeit on grudgingly. Overall the GBP/USD traded with a low of 1.4328 and a high of 1.4446 before closing the day at 1.4395 in the New York session. Looking ahead, May CBI Distributive Trades forecast at 12 vs. 13 previously.

The Australian Dollar (AUD) jumped to day highs on the back of reports that the proposed super profit mining tax would be relaxed before being sold heavily to lower 0.8200 region on the back the US stock market slump and weakness in Euro. AUD/JPY is fluctuating widely as sentiment shifts on a hourly basis. Overall the AUD/USD traded with a low of 0.8187 and a high of 0.8393 before closing the US session at 0.8240. Looking ahead, Q1 CAPEX forecast at 1.4% vs. 5.5% previously.

Oil &amp Gold (XAU) continued to grind higher $1200’s as Eurozone concerns underpin. Overall trading with a low of USD$1200 and high of USD$1217 before ending the New York session at USD$1211 an ounce. Enjoyed a relief rally from oversold conditions. WTI Oil Closed +$2.10 at $71.50 a barrel.

TECHNICAL COMMENTARY

Euro – 1.2200

Initial support at 1.2144 (May 19 low) followed by 1.2135 (0.50 of 0.8232-1.6039). Initial resistance is now located at 1.2587 (May 24 high) followed by 1.2747 (May 12 high)

Yen – 90.05

Initial support is located at 88.97 (May 20 low) followed by 87.95 (May 6 low). Initial resistance is now at 91.88 (May 20 low) followed by 92.97 (May 18 high).

Pound – 1.4400

Initial support at 1.4231 (Mary 20 low) followed by 1.4111 (March 18 2009 low). Initial resistance is now at 1.4517 (May 18 High) followed by 1.4918 (May 13 low).

Australian Dollar – 0.8250

Initial support at 0.8000 (Big Figure) followed by the 0.7828 ( 2009 low). Initial resistance is now at 0. 8499 (May 18 low) followed by 0.8725 (May 19 high).

Gold – 1211

Initial support at 1166 (May 21 low) followed by 1146 (April 27 low). Initial resistance is now at 1229 (Key level) followed by 1250 (1123.90 plus 1.618 of 1085.3-1170.1).

Oil – 70.90

Initial support at 69.50 (Intraday Support) followed by 68.00 (Intraday Support). Initial resistance is now at 72.50 (March high) followed by 75.00 (Intraday Resistance).