Australian FOREX Daily Outlook 12/09/2008

Wild Trading Day on Currencies and USD

CURRENCY TRADING SUMMARY – 12th September 2008 (00:30GMT)

·U.S. Dollar Trading (USD) gained most of the trading day as commodities lead by Oil continued to weaken. Weak US data stalled the advance but it took comments from ECB President Trichet to take the Bid tone away. Concern over Lehman Brothers survival initially put stocks on the backfoot but a broad based rally ensued as speculation of takeovers and cheaper Oil buoyed stocks. US Trade Balance came in weaker at -$62.2 Billion vs. -58 Billion expected. Weekly Jobless Claims remained high at 445K but August Import Prices fell -3.7% as cheaper Oil worked its way through the economy. In the U.S. share markets, the NASDAQ was up 29 points (1.32%) and the Dow Jones was up 164 points (1.46%). Crude Oil closed down -$1.71 ending the New York session at $100.87 per barrel. Looking Ahead, August PPI is seen -0.5%, Core +0.2%. August Retail Sales are seen +0.2% up from -0.1% in July. Also on Friday we have September Michigan Preliminary Consumer Sentiment seen at 64 vs. 63 previously.

·The Euro (EUR) came under severe pressure at the key 1.4000 level gave way and downside risks to Eurozone were put in focus. Falling Oil and stock weakness put the EUR/JPY under severe pressure as another key level of 150.00 broke. ECB President Trichet stopped the rout and helped the Euro to bounce off lows with his comments “have to do what is needed to protect price stability medium term”. Overall the EUR/USD traded with a low of 1.3882 and a high of 1.4000 before closing the day at 1.3990 in the New York session. Looking ahead, July Industrial Production is seen -0.2% m/m.

·The Japanese Yen (JPY) was the strongest currency for most of the day as risk aversion spiked and key levels were broken on the AUD/JPY, EUR/JPY and NZD/JPY. A sharp reversal in US stocks lead to a paring of gains and most crosses closed near opening. Overall the USDJPY traded with a low of 106.07 and a high of 107.87 before closing the day around 107.20 in the New York session. UPDATE Japanese GDP Q2 -0.7% vs. -0.8%.

·The Sterling (GBP) was able to stand up to USD strength most of the day as the market digested comments from the MPC Treasury Committee Hearing. As the Euro bounced, cable also rallied. Overall the GDP/USD traded with a low of 1.7445 and a high of 1.7591 before closing the day at 1.7580 in the New York session.

·The Australian Dollar (AUD) traded heavily to the downside as it fell in sympathy with the NZD. The New Zealand Reserve Bank cut rates by 0.5% in a surprise to the market and led to heavy falls in both the Aussie and Kiwi. Strong Australian Employment Data was unable to stop the losses and as risk aversion spiked heavy falls were seen against the JPY. August Unemployment change was +15.4K and the Unemployment rate dropped to 4.1%. A Strong recovery was seen late in the day as US equities surged. Overall the AUD/USD traded with a low of 0.7900 and a high of 0.8080 before closing the US session at 0.8050.

·Gold (XAU) continued to plumb new lows as Oil closed in on the key $100 per barrel level and USD strengthened. Overall trading with a low of USD$736.90 and high of USD$757.40 before ending the New York session at USD$750 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.4000

Initial support at 1.3900 (Round Number) followed by 1.3838 (50% retracement of 1.1639-1.6038). Initial resistance is now located at 1.4003 (Sept 10 low) at followed by 1.4179 (Sept 10 high).

·Yen – 107.10

Initial support is located at 105.53 (Sept 5 low) followed by 104.76 (Jul 17 low). Initial resistance is now at 108.22 (Sep 9 high) followed by 109.08 (Sept 8 high).

·Pound – 1.7560

Initial support at 1.7447 (Sept 11 low) followed by 1.7371 (Apr 5, 2006 low). Initial resistance is now at 1.7590 (Sept 11 high) followed by 1.7707 (Sep 7 high).

·Australian Dollar – 0.8020

Initial support at 0.7893 (Aug 20, 2007 low) followed by 0.7675 (Aug 19, 2007 low). Initial resistance is now at 0.8131 (Sept 10 High) followed by 0.8178 (Sept 9 high).

·Gold – 749

Initial support at 736.70 (Sept 11 low) followed by 727.11 (Oct 9, 2007 low). Initial resistance is now at 757.85 (Sept 11 high) followed by 783.95 (Sep 10 high).