Australian FOREX Daily Outlook 26/02/2008

US Shares rally boosting demand for JPY crosses. German IFO to test Euro outlook.

CURRENCY TRADING SUMMARY – 26 FEBRUARY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) traded sideways on Monday against a number of majors for much of the Asian and European sessions. The Dollar did find relief on news that a rescue plan for troubled U.S. bond insurer Ambac Financial Group may soon be announced that would maintain Ambac’s AAA credit rating, which is jeopardized by losses on securities linked to unpaid housing mortgages. On the data front, Existing Home Sales fell by 0.4% for the month of January coming in at 4.89mln, with the previous revised upwards to 4.91mln. In U.S. share markets the NASDAQ was down by 145.25 points (+1.60%) whilst the Dow Jones was also higher by 189.20 points (1.53%). Crude oil rose by US$0.44 a barrel to US$99.25. Looking ahead, a heavy data day is scheduled out of the US with the release of Core PPI figures (Forecast: 0.2% Prior: 0.2%) whilst Consumer Confidence and Richmond Fed Manufacturing will also generate much interest.

·The Euro (EUR) remained firm versus the USD for much of Monday’s session of trade. ECB Trichet spoke of emerging markets growth and financial market turmoil, whilst colleague Stark sounded increasingly hawkish, stating that he was “highly dissatisfied” with current inflation levels in the Eurozone. The EURUSD traded with a low of 1.4794 and a high of 1.4845 before closing the day at 1.4823 in the New York session. Key data in the form of the German IFO index is scheduled for release with forecasts at 102.9, lower then the previous 103.4.

·The Japanese Yen (JPY) suffered as equity prices rebounded late in the day adding pressure to the low interest bearing currency. Overall the USDJPY traded with a low 107.20 and a high of 108.22 before closing the day at 108.06 in the New York session.

·The Sterling (GBP) was marginally higher against the dollar as Bank of England Monetary Policy Committee member Barker reiterated “Recession remains outside the main possibilities. We have got this combination of shocks coming from abroad and it’s difficult. We certainly expect a period of greater volatility this year.” Overall the GBPUSD traded with a low of 1.9623 and a high of 1.96692 before closing the day at 1.9673 in the New York session.

·The Australian Dollar (AUD) edged higher on growing confidence in financial markets, boosted by rallying stocks. The AUDUSD traded with a low of 0.9220 and a high of 0.9276 before closing the day at 0.9270 in the New York session. In other news the NZDUSD traded at a fresh record high, since the currency first floated 22 years ago, trading at a high of 0.8139.

·Gold (XAU) fell the most in almost two weeks after the U.S. said it would back “limited” sales of bullion reserves by the International Monetary Fund, the third largest holder of the precious metal. XAU traded with a low of 933.60 and a high of 951.90

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 – 108.10

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 – 1.9665

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 – 0.9285

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 – 938.40

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)