Australian FOREX Daily Outlook 16/04/2008

Dollar surges on the back of strong data and renewed positive outlook.

CURRENCY TRADING SUMMARY – 16 APRIL 2008 (00:30GMT)

·U.S. Dollar Trading (USD) surged on Tuesday following surprisingly strong economic data being released from the World’s biggest economy. New York Fed Manufacturing came in at 0.6 for the month of April, improving on March’s figure of -22.23 and vastly outstripping expectations of -17.5. Producer Price Index for the month of March also increased to 1.1%, improving on February’s figure of 0.3% and beating expectations of 0.6%. Furthermore, Capital Net Flows for the month of February surpassed expectations of $56.5 billion, coming in at $72.5 billion, up form $62 billion for the month of January. These results spelt good news for the dollar as it rose against all the major currencies overnight, trimming expectations of substantial monetary easing. Added to these data results, corporate profit readings for the first quarter of 2008 were also better than expected, with Intel posting stronger than predicted results. Added to this Delta’s takeover bid of Northwest Airline’s propelled consumer confidence and sent the signal that the worst of the financial market turbulence may be behind us. In light of this corporate news, share markets rose on Tuesday with the NASDAQ rising 10 points (0.5%), whilst the Dow Jones improved 60 points (0.5%). Oil prices rose to new heights on Tuesday on continued supply concerns and poor weather restricting distribution capabilities in Mexico. Crude oil rose to a record high up US$2.03 a barrel to close at US$113.79 in New York. Looking ahead, CPI data is to be released on Wednesday with expectations for the month of March rising to 0.4% in response to rising producer prices and retail store sales. Building permits and housing starts will also be released on Wednesday which will give a good indication to the state of the housing problems throughout the U.S.

·The Euro (EURO) eased on Tuesday in light of the strong data released from the U.S. French CPI was released on Tuesday with a result of 3.2%, which sat at the upper band of expectations, along with Italy’s CPI reading of 3.3%, which will put upward pressure on the already heated Euro Zone CPI. The EURUSD traded at a high of 1.5875 and a low 1.5752, before closing at 1.5775 in New York. Looking ahead, core CPI is to be released on Wednesday for Germany with forecasts of a growth from 2.8% to 3.1% y/y.

·The Japanese Yen (JPY) fell against the dollar on the release of strong U.S inflation and manufacturing data. The news supported a positive outlook for the greenback as the market believes the Federal Reserve may not need to cut rates as aggressively as seen since January. Meaning the yen may weaken further in the ensuing days if positive U.S data keeps flowing. The USDJPY traded at a high of 101.79 and a low of 100.81 before closing at 101.57 in the New York session.

·The Sterling (GBP) fell on Tuesday as reports suggest consumer prices have risen at a slower pace than forecast last month at 0.3%, worse than the predicted 0.5%, causing CPI to be lower than expected at 0.4% m/m compared to the forecasted 0.6% m/m. This is likely to put renewed expectations of further rate cuts from the BoE when it meets next. The pound fell to record lows against the Euro and to six week lows against the dollar. The GBPUSD traded at a high of 1.9766 and a low of 1.9605, before closing at 1.9607 in New York. Looking ahead, the ILO Unemployment Rate is due out on Wednesday with forecasts of no change from the current 5.2%.

·The Australian Dollar (AUD) weakened on the back of a stronger U.S currency overnight as positive results coming out of the States pushed the Aussie dollar down below the 92.5 cent mark, after it had tracked up above 0.9300 in the Asian session. RBA Governor Stevens spoke yesterday indicating the current rate of 7.25% is having the desired effect on reducing consumer demand, prompting traders to add to bets there will be no rate hike in the short-medium term. The AUDUSD traded at a low of 0.9234 and a high of .9308, before closing at 0.9242. Looking ahead, retailing giant Woolworths posts its third quarter profit results on Wednesday.

·Gold (XAU) prices rose on Wednesday as investors look to the precious metal as a hedge against rising inflation pressures. Gold rose US$3.30 (0.4%) to US$932.00.

TECHNICAL COMMENTARY

·Euro – 1.5780

Initial support at 1.5672 (Apr 14 low) followed by 1.5510 (Apr 3 Low). Initial resistance is now located at 1.5887 (Apr 14 high) followed by 1.5914 (April 10 trend).

·Yen – 101.80

Initial support is located at 100.03 (Apr 10 low) followed by 99.36 (50% retracement of the 95.76 to 102.95 advance). Initial resistance is now at 102.28 (Apr 11 high) followed by 102.84 (Apr 10 high).

·Pound – 1.9610

Initial support at 1.9651 (Apr 9 low) followed by 1.9607 (76.4 retracement of 1.9363-2.0398). Initial resistance is now at 1.9894 (Apr 14 high) followed by 1.9928 (Apr 8 high).

·Australian Dollar – 0.9260

Initial support a 0.9206 (Apr 14 high) followed by 0.9177 (Apr 7 low). Initial resistance is now at 0.9348 (Apr 10 high) followed by 0.9473 (Mar 13 high).

·Gold – 928.75

Initial support at 903.40 (Apr 9 low) followed by 900.50 (Apr 4 low). Initial resistance is now at 939.75 (Apr 10 high) followed by 954.98 (Mar 26 high).