Australian FOREX Daily Outlook 25/02/2008

Dollar continues to ease on rate cut expectations.

CURRENCY TRADING SUMMARY – 25 FEBRUARY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) ended the week lower across the board on growing recession fears. In a quiet end to the week in terms of data the greenback eased as traders added to bets that the Federal Reserve will look to cut rates on the 18^th of March by as much as 50 bps. In U.S. share markets the NASDAQ was up by 3.57 points (+0.16%) whilst the Dow Jones was also up slightly by 96.72 points (+0.79%). Crude oil edged higher once again, falling short of the $100 target, up by US$0.83 a barrel to US$99.06. Looking ahead, key data is in the form of US Existing Home Sales, with economists forecasting a decline to 4.8 mln for the month of January, from the previous 4.89 mln.

·The Euro (EUR) rallied on the back of EURJPY crosses heading to a five week high of 159.58 on Thursday. In what was otherwise a dour session, the EURUSD traded with a low of 1.4786 and a high of 1.4863 before closing the day at 1.4824 in New York. ECB president Trichet is scheduled to testify in front of Parliament on Monday

·The Japanese Yen (JPY) traded at a week high versus the USD on the back of easing equity markets. As a result the JPY ceased eight successive session of decline versus the Euro and traded at its strongest level against the USD since Feb 12. Overall the USDJPY traded with a low of 106.69 and a high of 107.57 before closing the day at 106.92 in the New York session.

·The Sterling (GBP) strengthened versus the Euro and Dollar on Friday as robust UK retail data the previous session eased expectations about the extent of monetary easing likely from the Bank of England. Overall the GBPUSD traded with a low of 1.9607 and a high of 1.9709 before closing the day at 1.9684 in the New York session.

·The Australian Dollar (AUD) failed to break key 92 cent levels for much of the Asian session before heading to a week high of 0.9240 in Europe. Despite profit taking the AUD was able to return its day highs on higher stock prices at the close of New York. Overall the AUDUSD traded with a low of 0.9168 and a high of 0.9252 before ending the day at 0.9252. In Other news neighboring currency the New Zealand Dollar tested record 22 year highs of 0.8109 on Friday trading at a high of 0.8103

·The Czech Koruna (CZK) rose to a record against the Euro and posted a fifth weekly gain on speculation the central bank will raise interest rates. Policy makers have raised the rate 1.25 percentage points to 3.75 percent over the past 10 months. “The Czech story is really very positive,” said Nicholas Kennedy, an emerging-market currency strategist at 4Cast Ltd. in London. “Everyone’s looking for a reason to pull back but it’s not giving them a reason.” It has been the world’s best-performing currency against the Euro this year, gaining 6 percent. The Czech currency also advanced to 16.916 per dollar, from 17.168 on Feb. 15. Overall the USDCZK traded with a low of 16.837 and a high of 16.98.

·Gold (XAU) fell from a record, as declining energy and commodity prices eased inflation concerns that had spurred demand for the precious metal as a hedge. Despite easing, XAU ended the week up 4.2% overall, the biggest weekly advance since November 2007. XAU traded with a low of 936.20 and a high of 949.40.

TECHNICAL COMMENTARY

·Euro – 1.4835

Initial support at 1.4702 (Feb 21 low) followed by 1.4611 (Feb 18 low). Initial resistance is now located at 1.4863 (Feb 22 low) followed by 1.4956 (Feb 1 high).

·Yen – 107.20

Initial support is located at 106.73 (Feb 22 low) followed by 106.35 (Feb 11 low). Initial resistance is now at 107.57 (Feb 22 high) followed by 108.67 (38.2% retracement of the 114.66 to 104.97 decline)

·Pound – 1.9690

Initial support at 1.9611 (Feb 22 low) followed by 1.9363 (Feb 20 low). Initial resistance is now at 1.9709 (Feb 22 high) followed by 1.9738 (Feb 14 high)

·Australian Dollar – 0.9235

Initial support a 0.9113 (Feb 20 low) followed by 0.9005 (Feb 15 low). Initial resistance is now at 0.9252 (Feb 22 high) followed by 0.9331 (Nov 8, 2007 high)

·Gold – 944.70

Initial support at 906.1 (Feb 19 low) followed by 896.50 (Feb 7 low). Initial resistance is now at 954.60 (Feb 21 high) followed by 970.73 (Bull channel resistance)