Australian FOREX Daily Outlook 04/12/2008

US stocks gain on Mortgage data. ECB and BOE today

CURRENCY TRADING SUMMARY – 4th December 2008 (00:30GMT)

·U.S. Dollar Trading (USD) had a mixed day gaining as European stocks weakened before reversing in the US session as a record rise in mortgage applications buoyed the market. Weekly MBA Mortgage applications gained 112%. Other data was very weak though, November ADP unemployment showed a -250K decline vs. 205K expected and the ISM manufacturing showed a drop to 37.3 vs. 42 expected. In U.S. share markets, the NASDAQ was up 42.50 points (2.94%) and the Dow Jones was up 172 points (2.05%). Crude Oil closed down $0.17 ending the New York session at $46.79 per barrel. Looking ahead, Weekly Jobless Claims are seen at 539K vs. 529K previously. October Factory Orders are seen falling -4% vs. -2.5% previously.

·The Euro (EUR) kept to a tight range as the market awaits the ECB’s decision tonight with the market expecting a 0.5% cut with the possibility of more. Traders will await the commentary from ECB President Trichet following the decision to try and identify future rate direction. The EURO rose above 1.2700 as US stocks finished strong. Eurozone October Retail Sales fell -0.8% vs. -0.4% expected. Overall the EUR/USD traded with a low of 1.2604 and a high of 1.2740 before closing the day at 1.2715. Looking ahead, ECB expected to cut 0.5% to 2.75%. Also released the Q3 GDP expected to be unrevised at 0.2%.

·The Japanese Yen (JPY) dipped below 93 as European stocks weakened but found support there recovered with US stocks. GBP/JPY hit new year lows below 137 as the Market expects large rate cuts from the former high yielding pound. AUD/JPY was a solid performer as the market saw dips below 60 as good value for the beaten down Aussie. Overall the USDJPY traded with a low of 92.55 and a high of 93.62 before closing the day around 93.30 in the New York session.

·The Sterling (GBP) made further falls as the Services PMI fell to 40.1 in November, a new all time low for the series. The BoE meet tonight and could slash interest rates by as much as 1.50% given the steady decline of the economy. EUR/GBP and GBP/JPY show the broad based weakness the pound is experiencing. Overall the GDP/USD traded with a low of 1.4666 and a high of 1.4931 before closing the day at 1.4780 in the New York session. Looking ahead, Bank of England is expected to cut rates by 1.0% to 2%, 3% being the previous. Also released, Halifax House Price index is expected to fall -1% vs. -2.2% previously.

·The Australian Dollar (AUD) continued to range in the 64-65 area as the market waits for the next big move in Equities and USD. Falling Commodities weighed but a better stock market sentiment helped to limit the downside. Q3 GDP fell to +0.1% vs. 0.2% expected but as this is still positive the market felt some relief. Overall the AUD/USD traded with a low of 0.6396 and a high of 0.6512 before closing the US session at 0.6490. UPDATE October Trade Balance 2.952B vs. 1.6B forecast and Building Permits falling -5.4% vs. +0.7% expected.

·Gold (XAU) Concerns about possible deflation and falling Oil prices have dented the precious metals appeal but trading kept to the previous days range. Overall trading with a low of USD$764 and high of USD$783 before ending the New York session at USD$774 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.2705

Initial support at 1.2563 (Nov 28 low) followed by 1.2423 (Nov 21 low). Initial resistance is now located at 1.2766 (Dec 2 low) at followed by 1.2968 (Nov 27 high)

·Yen – 93.20

Initial support is located at 92.49 (Nov 28 low) followed by 91.9 (Oct 27 low). Initial resistance is now at 93.82 (Dec 2 high) followed by 95.95 (Nov 26 high).

·Pound – 1.4770

Initial support at 1.4647 (Nov 17 low) followed by 1.4557 (Nov 13 low). Initial resistance is now at 1.5070 (Dec 1 high) followed by 1.5398 (Dec 1 high).

·Australian Dollar – 0.6485

Initial support at 0.6333 (Nov 25 low) followed by the 0.6232 (Nov 24 low). Initial resistance is now at 0.6544 (Dec 1 high) followed by 0.6618 (Nov 25 high).

·Gold – 775

Initial support at 743 (Nov 21 low) followed by 725.4 (Nov 14 low). Initial resistance is now at 830.5 (Nov 25 high) followed by 856 (Oct 15 high).