Australian FOREX Daily Outlook 08/02/2008

BoE cut rates by 25 bps, as ECB hold citing slowing growth.

CURRENCY TRADING SUMMARY – 08 JANUARY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) rallied trading on the back of other markets, as recent US economic slow down causing jitters in other markets. With limited data out of the US, Pending Home Sales fell to 85.9K for the month December, from the previous 87.6K. In U.S. share markets the NASDAQ was higher by 14.28 points (0.63%) whilst the Dow Jones was also higher by 46.90 points (+0.38%). Crude oil was also higher by US$0.13 a barrel to US$88.24.

·The Euro (EUR) saw the ECB hold rates at 4% on Thursday as concerns surrounding inflation remain prominent. The Euro fell to the lowest level in more than two weeks against the Dollar as European Central Bank President Jean-Claude Trichet said the U.S. economic slowdown may curb growth in Europe. The central bank remained concerned about a potential wage-price spiral. Inflation in the 15 countries sharing the euro accelerated to 3.2 percent in January. As a result the Euro headed for it biggest weekly loss versus the dollar in 1 ½ years. Overall the EURUSD traded with a low 1.4438 and a high of 1.4653 before closing the day at 1.4483 in the New York session.

·The Japanese Yen (JPY) once again tracked stock prices supported by risk aversion on dovish central banks. Overall the USDJPY traded with a low of 105.89 and a high of 107.81 before closing the day at 107.49 in the New York session. Machine orders fell by -3.2% for the month of December (Forecast: -0.9% Prior: -2.8%)

·The Sterling (GBP) saw the Bank of England cut rates by 0.25% as widely expected citing slowing global growth and tighter credit conditions. The nine-member Monetary Policy Committee, led by Governor Mervyn King, reduced borrowing costs a quarter-percentage point for the second time since December to shore up Europe’s second-biggest economy, while acknowledging “upside risks” to inflation. Overall the GBPUSD traded with a low of 1.9388 and a high of 1.9625 before closing the day 1.9431 in the New York session.

·The Australian Dollar (AUD) was choppy on the back of other majors, as growing concerns of tighter global conditions, and dovish moves/comments from other central banks. However with equity prices in the black, the AUD found support once again on a return to high yielder. Overall the AUDUSD traded with a low of 0.8871 and a high of 0.8976 before closing the day at 0.8944 in the New York session

·Gold (XAU) was also choppy trading with a low of 896.55 and a high of 911.25

TECHNICAL COMMENTARY

·Euro – 1.4440

Initial support at 1.4661 (Jan 25 low) followed by 1.4592 (Jan 24 low). Initial resistance is now located at 1.4799 (Jan 28 high) followed by 1.4859 (Jan 16 high).

·Yen – 107.35

Initial support is located at 106.01 (Jan 28 low) followed by 104.97 (Jan 23 low). Initial resistance is now at 107.89 (Jan 25 high) followed by 107.95 (Jan 16 high)

·Pound – 1.9440

Initial support at 1.9814 (Jan 29 low) followed by 1.9731 (Jan 28 low). Initial resistance is now at 1.9929 (Jan 29 high) followed by 2.0034 (38.2% retracement of 2.1161 to 1.9338 decline)

·Australian Dollar – 0.8955

Initial support a 0.8768 (Jan 28 low) followed by 0.8691 (Jan 24 low). Initial resistance is now at 0.8907 (Jan 29 high) followed by 0.9022 (Jan 15 reaction high)

·Gold – 910.00

Initial support at 908.10 (Jan 23 low) followed by 876.80 (Jan 23 high). Initial resistance is now at 933.30 (Jan 29 high) followed by 950.0 (Psychological round number)