Australian FOREX Daily Outlook 09/01/2008

XAU rockets to fresh record highs, as U.S. stock plunge.

CURRENCY TRADING SUMMARY –09 JANUARY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was subject to an extremely volatile session on Tuesday as Financial Markets had plenty of influence on the market. In US share markets ongoing repatriation of USD denominated assets, causing stock prices to fall as traders prepare for a fully blown recession in the worlds largest economy. The NASDAQ closed lower by NASDAQ -59 (-2.36%) whilst the Dow Jones also fell -238 (-1.86%). In other data Pending Home Sales fell by -2.6% for the month of November well below forecast of -0.5%. Crude oil rose by US$1.24 a barrel to US$96.33 following a major attack on a Nigerian oil plant.

·The Euro (EUR) retail sales out of the Eurozone fell by -0.5% for the month of November well short of the expectations that the figure would rise by 0.5%, showing fresh signs of consumer spending weakness. Overall the EURUSD traded with a low of 1.4681 and a high of 1.4750 before closing the day at 1.4707 in the New York session. Looking ahead, GDP for the third quarter is expected to be confirmed at 0.7%.

·The Japanese Yen (JPY) was best served with the plunge in stock prices as risk aversion took center stage as speculation is rife of a fully blown recession in the U.S, despite high yielder’s being in favor in the late part of the Asian session. The USDJPY traded with a low of 109.00 and a high of 109.84 before closing the session at 109.22 in the New York session.

·The Sterling (GBP) gained against the dollar as investors judged its recent decline to a five-month low to be excessive, and as traders reduced bets on how many times the Bank of England will lower interest rates in 2008. Overall the GBPUSD traded with a low of 1.9702 and a high of 1.9827 before closing the day at 1.9715 in the New York session.

·The Australian Dollar (AUD) rose from lows in the late part of the Asian session on AUDJPY buying, before US stock prices ensured high yielder’s were paired to end the session. Overall the AUDUSD traded with a low of 0.8748 and a high of 0.8834 before closing the day at 0.8805 in the New York session. Looking ahead, Retail Sales data for the month of November is expected to come in at 0.5% (Previous: 0.2%). UPDATE: Retail Sales for November seen at 0.8%

·Gold (XAU) advanced to a record and energy, metals and agricultural commodities rose as a weakening dollar sparked demand for alternative assets. XAU traded with a low of 857.40 and a high of 881.10 in the New York session.

TECHNICAL COMMENTARY

·Euro – 1.4710

Initial support at 1.4659 (Jan 7 low) followed by 1.4570 (Dec 31 low). Initial resistance is now located at 1.4825 (Jan 4 high) followed by 1.4859 (Nov 28 high).

·Yen – 109.00

Initial support is located at 108.4 (Jan 7 low) followed by 107.91 (Jan 4 low). Initial resistance is now at 109.73 (Jan 7 high) followed by 109.76 (Jan 3 high)

·Pound – 1.9715

Initial support at 1.9653 (Aug 17 reaction low) followed by 1.9623 (Jun 8 reaction low). Initial resistance is now at 1.985 (Jan 4 high) followed by 1.9898 (Jan 2 high)

·Australian Dollar – 0.8790

Initial support a 0.8667 (61.8% retracement of the 0.8553 to 0.8852 advance) followed by 0.8624 (76.4% retracement of the 0.8553 to 0.8852 advance). Initial resistance is now at 0.8749 (Jan 7 high) followed by 0.8852 (Jan 2 high)

·Gold – 888.80

Initial support at 853.60 (Jan 3 low) followed by 833.90 (Jan 2 low). Initial resistance is now at 890.0 (Round Number Resistance) followed by 899.35 (Jan open + Dec range)