Australian FOREX Daily Outlook 10/06/2008

Dollar regains ground on intervention and inflation talk.

CURRENCY TRADING SUMMARY – 10th June 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was able to recover after Friday’s drubbing on more talk from US government officials. Treasury Secretary Paulson commented that FX intervention is a policy tool that is never taken off the table. Fed’s Fisher backed these comments up reiterating that the Federal Reserve and the treasury are working together and paying particularly close attention to the Dollar. In economic news, Pending Homes Sales for the month of April came in strong at 6.3% and 2 year bonds rallied 40 basis points implying a US rate rise was still on the cards this year. The US share markets had a mixed day, the NASDAQ was down 15.10 points (-0.61%) and the Dow Jones was up 70 points (0.58%). Crude Oil closed down $4 ending the New York session at $134.54 per barrel. Looking ahead, April’s Trade Balance forecast to widen to a deficit of -59.5 Bln, whilst Fed Chairman Bernanke is due to give a speech on Inflation. UPDATE Bernanke comments on upside risks to inflation and inflation expectations, supporting the Dollar.

·The Euro (EUR) had a volatile day testing new multi month highs at the start of the European session before the strong US data and hawkish US comments weighed heavy on the single currency, encouraging a test of the downside. Overall the EUR/USD traded with a low of 1.5620 and a high of 1.5843 before closing the day at 1.5652 in the New York session. Looking ahead, French Industrial Production forecasted at 0.3%.

·The Japanese Yen (JPY) was broadly offered as equities recovered and USDJPY rallied on rising bond yields. EURJPY broke new ground again for the third day straight trading above the 167 level. Overall the USDJPY traded with a low of 104.40 and a high of 106.34 before closing the day around 106.10 in the New York session. Looking ahead, Core Machinery orders and Machine Tool Orders are scheduled for release.

·The Sterling (GBP) had a fairly positive day as May PPI input at 3.8% showed the fastest annual rate of costs increase since 1986, reiterating inflation fears on concerns producers will pass the price pressures on. Overall the GBP/USD traded with a low of 1.9665 and a high of 1.9801 before closing the day at 1.9748 in the New York session. Looking ahead, April Industrial Production is expected at 0.1%. Update RICS House Price balance better than expected falling to -92.9% vs. the forecasted -97.2%.

·The Australian Dollar (AUD) traded in a large range tracking the euro higher then falling to 3 week lows on weaker commodities and stronger USD. AUD/JPY fell in sympathy but remained above the key 100 level. Overall the AUDUSD traded with a low of 0.9484 and a high of 0.9647 before closing the day at 0.9487 in the New York session. Looking ahead, April Housing Finance is expected to show a further decline at -2.0%.

·Gold (XAU) tracked USD Strength and oil once again keeping to a fairly tight range pivoting the 900 level. Overall trading with a low of $891 and high of $909 ending the New York session at $893 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.5650

Initial support at 1.5620 (Jun 9 low) followed by 1.5573 (Jun 5 low). Initial resistance is now located 1.5844 (Jun 9 High) at followed by 1.5891 (April 24 high).

·Yen – 106.25

Initial support is located at 104.42 (June 9 low) followed by 103.88 (Jun 3 low). Initial resistance is now at 106.35 (Jun 9 high) followed by 106.65 (Feb 28 high).

·Pound – 1.9745

Initial support at 1.9662 (Jun 9 low) followed by 1.9538 (Jun 6 low). Initial resistance is now at 1.9801 (Jun 9 high) followed by 1.9816 (Jun 2 high)

·Australian Dollar – 0.9520

Initial support at .9483 (Jun 9 low) followed by 0.943 (61.8% Fib entrancement .9292 to .9655). Initial resistance is now at 0.9648 (Jun 9 high) followed by 0.9655 (May 21 high).

·Gold – 893

Initial support at 878 (Jun 6 low) followed by 865 (Jun 5 low). Initial resistance is now at 909.2 (June 9 high) followed by 930.9 (May 27 high).