Australian FOREX Weekly Outlook 08/09/2008

Non Farm Payrolls overshadowed from GSE bailout Rumors

08/09/08

last week’s currency trading review

The Dollar the dollars advanced fairly consistently all week as hurricane Gustav missed Oil production facilities and fell to $105 a barrel. The rise was only hampered as Non Farm payrolls surprised with a jump in the Unemployment rate to 6.1% from 5.7% shocking the markets into profit taking on USD longs. Large falls in US stocks hurt the Dollar against the JPY as risk aversion spiked. Other US data last week included the August ISM Manufacturing PMI falling slightly to 49.9 from 50 in August and the ISM Non-Manufacturing Jumped to 50.6 from 49.5. Goods news on the productivity front with the Q2 reading a strong +4.3%. The Euro continued to slide as Oil pulled back and Eurozone data continued to weaken. The ECB held rates at 4.25% but was weighed down from President Trichet’s comments that growth was subject to downside risks. Other data out included the August Manufacturing PMI at 47.6 and Services at 48.5. Retails Sales dropped -0.4%m/m in July and Q2 GDP was confirmed at -0.2%q/q, or 1.5% y/y. PPI though continued to rise hitting 9.0% y/y in July. The EUR/USD fell -2.85% closing at 1.4264 after opening at 1.4670. The Japanese Yen was again the star performer outshining even the USD as risk aversion spiked higher especially after the heavy falls in US stocks on Thursday. Friday saw the continuation of heavy unwinding until news of government intervention in Fannie Mae and Freddie Mac emerged to stop the downside slide. Significant falls were seen in all crosses and USD/JPY traded below 106 for the first time in 2 months. Also not helping risk sentiment was the resignation of PM Fukuda. The USD/JPY fell -1.00% closing at 108.77, after opening the week at 110.10. The GBP fell the most of the majors as fears of recession began to mount and USD surged. Heavy selling of the GBP/JPY saw cable hit new multi year lows and a break higher on the EUR/GBP. The Bank of England kept rates at 5.00%. Other data while still low showed some improvement with the Construction(40.5), Services (49.2) and Manufacturing PMI’s (45.9) all rebounding. The GBP/USD lost 1.74% closing at 1.8208 after opening at 1.8524. The AUD came under severe pressure as the RBA cut rates to 7.00% from 7.25% and the Carry trade unwound. Very Heavy AUD/JPY sales kept the AUD on the backfoot. Also weighing was the faster than expected slowing of GDP to just 0.3% in the Q2. The AUD/USD closed down 5.25% at 0.8158 after opening at 0.8586.

The forex trading week preview

In the States Quieter Data week headlined by the August Retail Sales. On Tuesday we have July Pending Homes Sales forecast at -1.3% from the large rebound of +5.3% last month. On Thursday we have Weekly Jobless Claims and the July Trade Balance seen at -$58.0B. Also released the August Federal Budget forecast to show -$105.0B. Finally on Friday we have August PPI seen up 10.20% y/y. Retail Sales are forecast to rise 0.1%m/m with the Core at -0.2%m/m. Finally on Friday the August UoM Consumer Confidence is expected to rise to 63.9. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone light data week. On Tuesday German Trade Balance is seen at +18.5 Billion. Wednesday we have ECB President Trichet speaking before the EU parliament. On Thursday the ECB Bulletin. On Friday August French CPI is expected to gain 0.1% up from -0.2% in July. Finally on Friday we have the July Eurozone Industrial Production expected to fall -0.3% from +0.1% in June. In the UK On Monday with Have August PPI expected to fall -1.3% vs. -0.6% in July. Tuesday we have the RICS August House Price Balance expected to continue its fall to -85.0%. Also on Tuesday we have July Manufacturing Production forecast at -0.1%. On Wednesday we have the UK Trade Balance expected at -7.5 Billion. Finally on Thursday we have the MPC Treasury Committee Hearing and BoE inflation Attitudes. We will provide our previews and reviews of these data releases in the daily summary.

In Japan light data week with Core machinery Orders for July on Thursday the highlight expected at -4.00%. On Friday we also have the final Q2 GDP expected to fall to -0.9% from -0.6% previous. We will provide our previews and reviews of these data releases in the daily summary.

In Australia Economic Data kicks off on Tuesday with the July Retail sales expected to rebound to 0.3% from the -1.0% fall in June. July Home Loans are also released expected to be flat in July. On Wednesday New Zealand RBNZ is expected to cut 25bps to 7.75%. Finally on Thursday we have August Unemployment change seen at +5.9K with an unemployment rate increasing slightly to 4.4% from 4.3% in July. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.4410

Initial support at 1.4200 (Sep 5 low) followed by 1.4310 (Sept 8 low). Initial resistance is now located at 1.4535 (10 Day SMA) at followed by 1.4599 (Sept 2 high).

·Yen – 108.45

Initial support is located at 107.70 (Sep 8 hourly low) followed by 106.75 (Cloud Top). Initial resistance is now at 109.05 (Sep 8 hourly high) followed by 109.55 (Sep 3 high).

·Pound – 1.7905

Initial support at 1.7745 (Sept 5 high) followed by 1.7540 (Sept 5 low). Initial resistance is now at 1.7930 (Sep 8 hourly high) followed by 1.8005 (10 day SMA).

·Australian Dollar – 0.8315

Initial support at 0.8160 (Sept 8 hourly low) followed by 0.8030 (Sep 5 low). Initial resistance is now at 0.8340 (Sept 8 hourly High) followed by 0.8400 (Sept 3 high).

·Gold – 815

Initial support at 789.74 (Sept 3 low) followed by 783.35 (Aug 15 low). Initial resistance is now at 819.65 (Sep 5 high) followed by 836.5 (Sep 1 high).