Australian FOREX Daily Outlook 19/03/2008

FOMC cut rates by 75bps, US equity markets rally. USD gains the most against the JPY in 9 years.

CURRENCY TRADING SUMMARY – 19 MARCH 2008 (00:30GMT)

·U.S. Dollar Trading (USD) managed to recoup some losses against the majors in the overnight session on the back of the Federal Reserve decision to cut by 75bps. Markets were expecting a possible 1% cut and initially equity markets were sold off before staging a rally. The FOMC statement stated that the cut “should help to promote moderate growth over time and to mitigate the risks to economic activity” and “Downside risks to growth remain.” Also, earnings reports from Lehman Brothers and Goldman Sachs came in positive, prompting markets to seek risk. Housing starts posted a better than previous 1.065mio result compared to an expected 990k. PPI for the month of February came in as expected at 0.3%. In U.S. share markets the NASDAQ closed up by 91 points (4.2%) whilst the Dow Jones finished higher by 420 points (3.5%). Crude oil rallied higher by US$3.56 a barrel to end at US$109.24.

·The Euro (EURO) succumbed to selling pressure as the cut in interest rate in the US was viewed as positive USD, and a sign the Federal Reserve were doing everything in their power to promote growth. Overall the EURUSD traded with a low of 1.5628 and a high of 1.5823 before closing the day at 1.5633 in the New York session.

·The Japanese Yen (JPY) was sold off against the USD, the largest move higher by the dollar-yen in 9 years and coming after reaching lows not seen since 1995. Overall the USDJPY traded with a low of 96.86 and a high of 99.70 before closing the day at 97.58 in the New York session.

·The Sterling (GBP) strengthened somewhat against the USD as CPI confirmed that the Bank of England would not be quick to cut rates again. CPI for the month of February came in at 0.7%, slightly lower than the 0.8% forecasted but great than the previous of -0.7%. Overall the GBPUSD traded with a low of 1.9957 and a high of 2.0273 before closing the day at 2.0074 in the New York session.

·The Australian Dollar (AUD) was stronger in the overnight session as the Fed move coupled with the positive bank earnings reports from the US, prompted risk seeking in the financial markets. Overall the AUDUSD traded with a low of 0.9168 and a high of 0.9307, before closing the day at 0.9266 in the New York session.

·Gold (XAU) was relatively unchanged rising against the USD, tracking increases in base metals and crude oil. XAU traded higher by $1.70 an ounce to close at US$1004.30.

TECHNICAL COMMENTARY

·Euro – 1.5680

Initial support at 1.5523 (Mar 13 low) followed by 1.5345 (38.2% retracement of the 1.4441 to 1.5904 advance). Initial resistance is now located at 1.5831 (Mar 18 high) followed by 1.5904 (Mar 17 trend high).

·Yen – 99.80

Initial support is located at 96.86 (Mar 18 low) followed by 95.77 (76.4% retracement of the 79.75 to 147.6 advance). Initial resistance is now at 99.92 (Mar 18 high) followed by 101.16 (Mar 14 high)

·Pound – 2.0115

Initial support at 1.9944 (Mar 17 high) followed by 1.9875 (Former resistance Feb 27). Initial resistance is now at 2.0273 (Mar 18 high) followed by 2.0398 (Mar 14 high)

·Australian Dollar – 0.9320

Initial support a 0.9167 (Mar 18 low) followed by 0.9128 (Mar 17 low). Initial resistance is now at 0.9449 (Mar 17 high) followed by 0.9473 (Mar 13 high)

·Gold – 988

Initial support at 981.8 (Mar 13 low) followed by 950 (Psychological round number). Initial resistance is now at 1032.5 (Mar 17 high) followed by 1048.16 (Open this week + (range last weeks range * 0.618))