Australian FOREX Daily Outlook 22/09/2008

Stocks extend gains on historic US intervention

CURRENCY TRADING SUMMARY – 22nd September 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was able to make gains only against the JPY as US stocks surged but Dollar sentiment was hurt by the bigger picture. Reports that the US government market will buy up to $700 billion in bad mortgages sent waves of relief throughout the financial markets that were in danger of freezing up. Concerns about the impact of such a plan on US government debt lead to broad based USD selling. In the U.S. share markets, the NASDAQ was up 74 points (3.40%) and the Dow Jones was up 368 points (3.35%). Crude Oil closed up $6.67 ending the New York session at $104.55 per barrel. Looking ahead, August National Activity Index.

·The Euro (EUR) gained again today after falling back on Thursday, surging towards the 1.4500 level into the weekend. Large gains in Oil and USD weakness the driving factors. German PPI in August fell -0.6% as cheaper oil filtered through the economy. Overall the EUR/USD traded with a low of 1.4152 and a high of 1.4460 before closing the day at 1.4450 in the New York session.

·The Japanese Yen (JPY) was the biggest loser yesterday as risk aversion subsided and carry trades surged back into life. AUD/JPY and GBP/JPY both gain over 300 pips as they had been under the most pressure earlier in the week. Overall the USDJPY traded with a low of 105.40 and a high of 108.06 before closing the day around 107.40 in the New York session.

·The Sterling (GBP) continued its recovery from multi year lows as GBP/JPY surged higher and the USD weakened. The brake and close above the 1.80 levels suggest that freefall that the pound has experienced may be bottoming in the short term. Overall the GDP/USD traded with a low of 1.7915 and a high of 1.8376 before closing the day at 1.8325 in the New York session. Looking ahead, September Nationwide House Price expected to fall -1.6% M/M

·The Australian Dollar (AUD) was possibly the biggest gainer from the US government bailout plan as waves of AUD/JPY selling subsided and stocks look recovered from the crash earlier in the week. Broad based gain in Commodities also supported. Overall the AUD/USD traded with a low of 0.8020 and a high of 0.8365 before closing the US session at 0.8040.

·Gold (XAU) large gains in Oil and USD weakness along with underlying market risk all contributed to buoyant gold market during Friday. Trading was quite volatile though and the downside was tested during the European session. Overall trading with a low of USD$825 and high of USD$877 before ending the New York session at USD$873 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.4495

Initial support at 1.4074 (Sept 16 low) followed by 1.3973 (Sept 12 low). Initial resistance is now located at 1.4544 (Sept 4 high) at followed by 1.4617 (Sept 2 high).

·Yen – 106.60

Initial support is located at 105.39 (Sept 19 low) followed by 103.54 (Sept 19 low). Initial resistance is now at 108.03 (Sep 19 high) followed by 109.08 (Sept 8 high).

·Pound – 1.8325

Initial support at 1.7916 (Sept 19 low) followed by 1.7787 (Sept 17 low). Initial resistance is now at 1.8401 (Aug 28 high) followed by 1.8482 (38.2% retrace of 2.0157-1.7447 decline).

·Australian Dollar – 0.8305

Initial support at 0.8011 (Sept 19 low) followed by the 0.7803 (Sep 17 low). Initial resistance is now at 0.8353 (Sept 8 high) followed by 0.8403 (Sept 3 high).

·Gold – 875

Initial support at 825 (Sept 19 low) followed by 774.4 (Sept 17 low). Initial resistance is now at 910.30 (Sep 18 high) followed by 915.55 (Aug 4 high).