Australian FOREX Daily Outlook 05/11/2008

Australia cuts rates by 0.75%. US Election Rally

CURRENCY TRADING SUMMARY – 5th November 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was sold against most currencies as risk appetite notched higher on another day of stock market gains. Stocks were buoyant all day as Americans voted for their next president. Factory Orders m/m fell -2.5% in September vs. -1.0% forecast. In the U.S. share markets, the NASDAQ was up 53 points (3.12%) and the Dow Jones was up 305 points (3.28%). Crude Oil closed down $7.59 ending the New York session at $71.50 per barrel. Looking ahead, a new President should be elected today. Also today, ADP employment report seen -100K vs. -8K previously.

·The Euro (EUR) surged to one of its biggest gains on record as investors flocked back into stocks and diversified out of the USD. The sharp rally in Oil underpinned the move higher. PPI eased to 7.9% Y/Y vs. 8.5% as recession fears brought prices lower. Overall the EUR/USD traded with a low of 1.2529 and a high of 1.3047 before closing the day at 1.2980 in the New York session. Looking ahead, September Retail Sales are seen -0.4% vs. 0.3%.

·The Japanese Yen (JPY) came under even more pressure than the dollar as investors rushed to cover shorts and crosses surged higher. USD/JPY broke above 100 fore the first time since Oct 22. Japanese stocks sent the Yen lower and that trend was sustained all day. Overall the USDJPY traded with a low of 98.40 and a high of 100.56 before closing the day around 99.60 in the New York session.

·The Sterling (GBP) after being under pressure during the Asian session the GBP jumped higher on strong central bank demand and increased risk appetite. 1.6000 is proving a key level and so far cable has struggled to close above this level. EUR/GBP was well above .8100 and hampered the Pound. Overall the GDP/USD traded with a low of 1.5605 and a high of 1.6108 before closing the day at 1.5980 in the New York session. Looking ahead, September Industrial Output is expected at -0.3% vs. -0.6% previously. October PMI services are seen at 49.7 vs. 50.2.

·The Australian Dollar (AUD) had an extremely wide range trading day as steep losses were seen after the RBA cut interest rates more than expected. The 0.75% cut was larger than the 0.5% forecast but helped to underpin the equity markets and as equities recovered off lows the AUD surged towards 0.7000. Overall the AUD/USD traded with a low of 0.6603 and a high of 0.7013 before closing the US session at 0.6975. Looking ahead, Australian Trade Balance is seen at 600M vs.1360M.

·Gold (XAU) leaped higher as Oil surged over $7 a barrel and the USD was sold across the board. Overall trading with a low of USD$722 and high of USD$769 before ending the New York session at USD$763 an ounce.

·Euro – 1.2965

Initial support at 1.2526 (Nov 4 low) followed by 1.2329 (Oct 28 low). Initial resistance is now located at 1.3116 (76.4% retrace 1.3298 to 1.2526) at followed by 1.3299 (38.2% retrace 1.4867 to 1.2329 and Oct 30 high).

·Yen – 999.75

Initial support is located at 98.22 (Nov 3 low) followed by 96.36 (Oct 31 low). Initial resistance is now at 100.57 (Oct 22 high) followed by 102.16 (Oct 21 high).

·Pound – 1.5935

Initial support at 1.5599 (76.4% retrace 1.5267 to 1.6672) followed by 1.5402 (Oct 28 low). Initial resistance is now at 1.6138 (50% retrace 1.6672 to 1.5604) followed by 1.6264 (61.8% retrace 1.6672 to 1.5604).

·Australian Dollar – 0.6965

Initial support at 0.6603 (Nov 3 low) followed by the 0.6551 (Oct 31 low). Initial resistance is now at 0.7065 (Oct 20 high) followed by 0.7239 (Oct 14 high).

·Gold – 764.50

Initial support at 718 (61.8% retrace 777.90-682.41) followed by 707 (Oct 27 low). Initial resistance is now at 777.5 (Oct 30 high) followed by 803.65 (Oct 21 Level).