Australian FOREX Daily Outlook 23/06/2008

Slumping Stocks puts US dollar under pressure.

CURRENCY TRADING SUMMARY – 23rd June 2008 (00:30GMT)

·U.S. Dollar Trading (USD) fresh credit fears sent the dollar lower yesterday as expectations of an interest rate rise decreased. US stocks fell to a 3 month low with Moody’s downgrading bond insurers and increased Oil prices hurting US car manufacturers. Over the weekend world and industry leaders met in Jeddah to discuss the record Oil prices, reports suggest that no OPEC wide agreements were reached but Saudi Arabia again confirmed its willingness to increase production. In the US share markets, the NASDAQ was down 55 points (-2.27%) and the Dow Jones was down 220 points (-1.80%). Crude Oil closed up $2.77 ending the New York session at $134.70 per barrel.

·The Euro (EUR) made good gains against the struggling USD on the back of rallying oil and firming expectations of a July ECB Interest rate rise. Initially upside momentum came from May German PPI coming in higher at 1.0% vs. economist’s predictions of 0.9%. Overall the EUR/USD traded with a low of 1.5493 and a high of 1.5652 before closing the day at 1.5621 in the New York session. Looking ahead, a big day of data with June German manufacturing PMI expected at 53.2 alongside the Euro-zone Manufacturing PMI forecast at 50.2. Also released is the June German IFO Index expected to weaken to 102.3 from 103.5 in May.

·The Japanese Yen (JPY) sharply lower stocks allowed the Yen to make solid gains into the close of the week as a spike in risk aversion supported. The correlation between equities and JPY has been weakening of late with renewed carry trade and high oil prices becoming the new theme. EUR/JPY was supported by large gains in the EUR/USD trading above 168 for the second time last week. Overall the USDJPY traded with a low of 107.12 and a high of 108.07 before closing the day around 107.25 in the New York session. Looking ahead, BSI Large Manufacturing Conditions Q/Q forecast at -17. UPDATE BSI Large Manufacturing Conditions -15.1 Q/Q.

·The Sterling (GBP) supported from USD weakness as the market comes to grips with conflicting data and interest rate expectations. Early Monday saw the release of Rightmove House price index coming in at -1.2% for May. Overall the GBP/USD traded with a low of 1.9702 and a high of 1.9791 before closing the day at 1.9760 in the New York session.

·The Australian Dollar (AUD) with weak economic data now old news, renewed carry trade interest and a rally in gold supported the Aussie into the weekend. AUD/JPY made new highs as a result taking the Aussie Dollar for the ride yet any further upside potential was limited as stocks fell in the US session. Overall the AUD/USD traded with a low of 0.9482 and a high 0.9567 before closing the day at 0.9534.

·Gold (XAU) made good gains reclaiming the $900 level as risk aversion spiked and broad USD weakness supported. Overall trading with a low of USD$896 and high of USD$907.40 ending the New York session at USD$903 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.5610

Initial support at 1.5461 (June 17 low) followed by 1.5303 (June 13 low). Initial resistance is now located 1.5657 (Jun 10 High) at followed by 1.5844 (Jun 9 high).

·Yen – 107.40

Initial support is located at 107.13 (June 20 low) followed by 106.8 (Jun 12 low). Initial resistance is now at 108.61 (Feb 14 high) followed by 108.98 (Jan 14 high).

·Pound – 1.9750

Initial support at 1.9701 (June 20 low) followed by 1.9580 (Jun 19 low). Initial resistance is now at 1.9801 (Jun 9 high) followed by 1.9852 (May 23 high)

·Australian Dollar – 0.9550

Initial support at 0.9491 (June 20 low) followed by 0.9448 (June 19 low). Initial resistance is now at 0.9578 (76.4% retracement of the 0.9655 to .9328 decline) followed by 0.9648 (Jun 9 high).

·Gold – 904

Initial support at 858 (Jun 12 low) followed by 850 (Psychological Number). Initial resistance is now at 908 (June 20 high) followed by 909 (June 9 high).