Australian FOREX Daily Outlook 29/02/2008

Another day of record highs across the board. Core PCE in focus

CURRENCY TRADING SUMMARY – 29 FEBRUARY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) remained battered against a number of majors yesterday as Bernanke reconfirmed that major slowdowns in the economy. US economic growth was unrevised at an annual pace of 0.6 % in the 4th quarter which was weaker than the forecasted 0.7 % due to subsiding home sales and slumping inventories. GDP grew 2.2 % for all of 2007, which was the slowest since 2002, adding to further concerns on a fully blown recession. In U.S. share markets, NASDAQ was down by -22.21 points (-0.94%) whilst the Dow Jones was also down -112.10 points (-0.88%). Crude oil rose by US$3.15 a barrel to record highs of US$102.80. Looking ahead, key data in the form of Core PCE figures, Chicago PMI and Michigan Sentiment Survey are sure to create plenty of interest in final trading day for February.

·The Euro (EUR) continued to strengthen against the dollar with signs of a weakening US labor market pointing to further rate cuts by the Fed. Analysts forecast Euro momentum to continue unless weak Euro-Zone data is reported. Overall the EURUSD traded with a low of 1.5071 and a high of 1.5230 before closing the day at 1.5218 in the New York session.

·The Japanese Yen (JPY) strengthened against the dollar following a gloomy outlook in the U.S. Bank of Japan board member Atsushi Mizuno expressed concern about the side effects than the merits of any interest rate cuts, and speculated that bringing Japan’s low rates to normal levels would be necessary in the long run. Overall the USDJPY traded with a low of 105.07 and a high of 106.55 before closing the day at 105.22 in the New York session. A heavy data day is scheduled for Japan, with the release of Household spending, CPI (both Nationwide and Core) and Unemployment Rate.

·The Sterling (GBP) gains were capped with ongoing concerns over UK banking sectors. Royal Bank of Scotland posted in-line earnings and raised its dividend, but also raised its write downs on assets to GBP 2.13 billion. Central bank deputy governor John Gieve indicated that the development of inflation will be the key driver to whether the BoE would be cutting rates. Overall the GBPUSD traded with a low of 1.9759 and a high of 1.9948 before closing the day at 1.9921 in the New York session.

·The Australian Dollar (AUD) continued its charge to post fresh multi-year highs. The Aussie Dollar was further boosted by private capital expenditure which rose by 5.1% for the 4^th quarter. Overall the AUDUSD traded with a low of 0.9364 and a high of 0.9499 before closing the day at in the New York session

·Gold (XAU) Gold surged to new records of almost 970 along with OIL at 102 levels on inflation fears and a weak USD. XAU traded with a low of 953.65 and a high of 969.85

TECHNICAL COMMENTARY

·Euro – 1.5195

Initial support at 1.4778 (Feb 26 low) followed by 1.4702 (Feb 21 low). Initial resistance is now located at 1.5050 (Feb 27 high) followed by 1.5096 (1.4440 plus 1.4311 to 1.967).

·Yen – 105.30

Initial support is located at 106.73 (Feb 22 low) followed by 106.35 (Feb 11 low). Initial resistance is now at 108.22 (Feb 25 high) followed by 108.67 (38.2% retracement of the 114.66 to 104.97 decline)

·Pound – 1.9880

Initial support at 1.9644 (Feb 26 low) followed by 1.9611 (Feb 22 low). Initial resistance is now at 1.9876 (Feb 26 high) followed by 1.9960 (Jan 30 reaction high)

·Australian Dollar – 0.9475

Initial support a 0.9216 (Feb 25 low) followed by 0.9167 (Feb 21 low). Initial resistance is now at 0.9400 (Round Number) followed by 0.9500 (Round Number)

·Gold – 970.10

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)