Australian FOREX Weekly Outlook 09/06/2008

Bernanke and Trichet comment’s drive USD in different directions.

09/06/08

last week’s currency trading review

The Dollar made strong gains early in the week with the May ISM manufacturing (49.6) and non-manufacturing (51.7) both coming in better than expected. Fed Chief Bernanke made a rare entrance into the Forex arena by commenting on the declining dollars effects on imports prices and inflation expectations. Crude Oil traded as low as $122 per barrel and Gold was down to $865 an ounce. The Sentiment quickly changed on Thursday though as ECB President Trichet issued an interest rate warning to the markets and left the Dollar on the backfoot going into Friday’s jobs reports. The Nonfarm payroll number came in slightly better than forecast at -49K (-57k expected) but this was overshadowed by a record jump in the actual Unemployment Rate from 5.0% to 5.5%. Stocks were sent into a tailspin and Crude Oil surged a record $10.75 ending the week at record highs of $138.54. The Euro rebounded from early weakness on the above mentioned interest speculation at the last ECB meeting. Thursdays Meeting also saw interest rates held at 4.00% but Trichet made it very clear that the ECB had an inflation mandate and would be seriously considering a small rate hike in July. The Eurozone data was slightly softer than expected with April Retail sales falling to -0.6% vs. an forecasted rise of 0.2% and German Factory orders falling -1.8% vs. an expected rise of 0.4%. The Euro closed last week +1.42% at 1.5777 having opened at 1.5553. The Japanese Yen had a mixed week with the EURJPY making fresh yearly high’s and the USDJPY trading above 106 for the first time since February. Stock weakness into the close on Friday saw the Yen supported after a heavy week of selling. The USD/JPY lost -0.58% closing at 104.89, after opening the week at 105.50. The GBP had a shaky start to start after a major UK lender revealed having financial trouble. May PMI figures came in weak with Manufacturing at 50 and Services slipping below 50 to 49.8 for the first time on record. The Pound bounced off weekly lows into the weekend on the back of the weak USD and the Bank of England’s decision to hold interest rates at 5.25%. The GBP/USD lost -0.58% closing at 1.9705 after opening at 1.9819. The AUD had a big data week although mixed figures gave the market little in the way of new direction. Retail sales disappointed on Monday coming in weaker at -0.2% vs. 0.2%. Tuesday saw building approvals coming in strong at 7.8% and the RBA holding rates at 7.25%. Australian GDP outperformed expectations coming in at 0.6% vs. the 0.3% expected and April’s Trade balance showed a sliming of the deficit to -0.957B vs. -1.7B forecasted. Friday’s poor US data along with the rally in gold saw the Aussie reclaim the .96 level. The AUD/USD closed up .7% at .9624 after opening at .9557.

The forex trading week preview

In the States Attention will be back on Consumers this week with the release of Pending Home sales on Monday expected in a 0.5%, May Retail sales on Thursday forecasted at 0.5% and finally May CPI at 0.5% and Michigan consumer sentiment at 59.8 on Friday. In other economic news the April Trade Balance is out on Tuesday expected to deepen to $59.5B. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone German Trade Balance out on Monday expected to fall on increasing imports forecast at 15.5B. French and German CPI out later in the week expected to remain above 3%. On Thursday the April Eurozone Industrial production released expected at -1.0% and on Friday the Eurozone Labor costs Q1 released forecasted at 2.9% will shine a light on second round inflation effects. We will provide our previews and reviews of these data releases in the daily summary.

In Japan Big week in Japan lead by Q1 GDP on Tuesday expected to come in at 0.9% along with the April Trade balance seen contracting at 600B yen. On Thursday the Bank of Japan meets to discuss interest rates and is widely believed to hold at 0.5% for some time yet. Shortly after the BOJ meeting Industrial Production figures are released forecast at -0.3%. We will provide our previews and reviews of these data releases in the daily summary.

In Australia After a big week last week market can only look forward to April Home loans on Tuesday and May Unemployment Figures on Thursday forecasted at 13.8K. Also note the Monday is a public holiday. We will provide our previews and reviews of these data releases in the daily summary.

Key Pivot levels

·Euro – 1.5575

Initial support at 1.5573 (Jun 6 low) followed by 1.5366 (Jun 5 reaction low). Initial resistance is now located 1.5818 (May 27 High) at followed by 1.5891 (April 24 high).

·Yen – 105.10

Initial support is located at 104.54 (June 4 low) followed by 103.88 (Jun 3 low). Initial resistance is now at 106.43 (Jun 5 high) followed by 106.65 (Feb 28 high).

·Pound – 1.9680

Initial support at 1.9538 (Jun 6 low) followed by 1.9463 (Jun 5 low). Initial resistance is now at 1.9741 (Jun 3 high) followed by 1.9816 (Jun 2 high)

·Australian Dollar – 0.9620

Initial support at .9564 (Jun 6 low) followed by 0.9488 (Jun 4 low). Initial resistance is now at 0.9643 (Jun 6 high) followed by 0.9655 (May 21 high).

·Gold – 900

Initial support at 877.65 (Jun 6 low) followed by 865 (Jun 5 low). Initial resistance is now at 909.85 (May 28 high) followed by 930.9 (May 27 high).