Australian FOREX Daily Outlook 15/10/2008

Stock Rally stalls then free falls, USD regains Strength

CURRENCY TRADING SUMMARY – 15th October 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was initially on the back foot as large equity gains around the world (+14% Nikkei) led to reversal of safe haven buying which had supported the Dollar previously. The losses were mild though and as US stocks reversed direction from highs the USD strengthened. With little economic data yesterday, focus turned to weak earning outlooks and the Dow slipped up to 800 points from highs. The latest banking crisis bailout news concerned the US treasury’s $250 capital injection into the banking system. In the U.S. share markets, the NASDAQ was down 65 points (-3.54%) and the Dow Jones was down 76 points (-0.82%). Crude Oil closed down -$2.56 ending the New York session at $78.63 per barrel. Looking ahead, September PPI expected at 0.2% and Retails sales are seen negative for the 3^rd month in a row at -0.7%.

·The Euro (EUR) gained as Oil and stocks surged during the Asian and European sessions. A very weak German ZEW survey in October was largely ignored because it took place mainly last week during the stock crash. Gains were pared as US stocks reversed. Overall the EUR/USD traded with a low of 1.3609 and a high of 1.3768 before closing the day at 1.3650 in the New York session. Looking ahead, EU September CPI is expected at 0.3%.

·The Japanese Yen (JPY) continued to add to losses yesterday as the Nikkei had a record gain and risk appetite continued to recover. The recovery was put on hold as the Dow fell heavily from highs. USD/JPY remained relatively well bid. Overall the USDJPY traded with a low of 101.53 and a high of 103.05 before closing the day around 102.00 in the New York session. Looking ahead, Japanese Industrial Output for August previously at -3.5%.

·The Sterling (GBP) made large gains yesterday pushing the recovery enveloped further as it tracked the EUR higher and took advantage of the weaker USD. In a sign of the very illiquid conditions in the FX markets, when the US equities reversed the GBP crumbled. CPI was slightly stronger than expected at 5.2%Y/Y rate. Overall the GDP/USD traded with a low of 1.7394 and a high of 1.7629 before closing the day at 1.7400 in the New York session. Looking ahead, Claimant count seen at 35K in September and the Unemployment rate in August expected to tick higher to 5.6% from 5.5%.

·The Australian Dollar (AUD) continued to be very well supported as stocks headed higher. With a remarkable correlation the AUD tracked the US stocks down late in the day. Initially the Aussie found support from the rebound in commodities and extremely buoyant Asian Stock market.Also of note yesterday was the release of the Australian $10 billion stimulus package to help the economy through the credit crisis. Overall the AUD/USD traded with a low of 0.6938 and a high of 0.7236 before closing the US session at 0.7000.

·Gold (XAU) recovered early in Asia but came off as Oil fell below $80 in the US session. Risk aversion fell yesterday as Interbank lending rates lowered for the first time in weeks. Overall trading with a low of USD$832 and high of USD$852.50 before ending the New York session at USD$837 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.3550

Initial support at 1.3405 (Oct 13 low) followed by 1.3259 (Oct 10 trend low). Initial resistance is now located at 1.3786 (Oct 9 high) at followed by 1.3882 (Oct 9 high).

·Yen – 101.60

Initial support is located at 99.58 (Oct 13 low) followed by 97.91 (Oct 10 trend low). Initial resistance is now at 103.07 (Oct 7 low) followed by 103.29 (Key level).

·Pound – 1.7390

Initial support at 1.7334 (Oct 14 low) followed by 1.6909 (Oct 13 low). Initial resistance is now at 1.7656 (Oct 8 low) followed by 1.7725 (Oct 8 high).

·Australian Dollar – 0.6935

Initial support at 0.6435 (Oct 13 low) followed by the 0.6331 (Oct 10 low). Initial resistance is now at 0.6970 (Oct 14 high) followed by 0.7239 (Oct 7 high).

·Gold – 841

Initial support at 823 (Oct 13 low) followed by 820 (Oct 2 low). Initial resistance is now at 872 (Oct 13 high) followed by 930.25 (round number).