Australian FOREX Daily Outlook 10/12/2008

Big Rate Cut from Canada, USD mixed

CURRENCY TRADING SUMMARY – 10th December 2008 (00:30GMT)

·U.S. Dollar Trading (USD) had a mixed day gaining back some of the steep losses seen on Monday as US stocks slipped. US data beat expectations with October pending Home sales dropping -0.7% vs. -3.2% forecast. The dollar lost ground against the Yen though as risk aversion crept higher. The Canadian dollar had a volatile day initially losing ground as the BoC cut by 0.75% before reversing most of the losses. In U.S. share markets, the NASDAQ was down 24.40 points (-1.55%) and the Dow Jones was down 242 points (-2.42%). Crude Oil closed down $1.64 ending the New York session at $42.07 per barrel. Looking ahead, Crude Oil Inventories are expected to fall -0.2Mln vs. -0.4Mln last week.

·The Euro (EUR) tested the downside before a better than expected Zew Survey(-45.2 vs. -55.8 forecast) allowed the pair to rally hard up to 1.3000 before settling back into the close. Persistent EUR/JPY selling kept the pair under pressure during Asia. Overall the EUR/USD traded with a low of 1.2801 and a high of 1.3001 before closing the day at 1.2920. Looking ahead, German WPI is expected to fall -1.4% m/m in November.

·The Japanese Yen (JPY) strengthened on the equity pull back lead by declines in the USD/JPY to supports at 92. Most crosses gave up a lot of Mondays gains which were seen a little overdone. Equities movements are still accounting for the direction of Yen movement. Hurting Investor sentiment yesterday was the larger than expected revision of Q3 GDP to -0.5% vs. -0.1% initial. Overall the USDJPY traded with a low of 91.96 and a high of 93.06 before closing the day around 92.20 in the New York session. UPDATE OCTOBER Machine Orders -3.9% vs. 5.5% expected.

·The Sterling (GBP) fell heavily as another round of bad economic data was released. October Industrial Output was at -1.7% vs. -0.5% forecast. Also released Manufacturing Production at -1.4% vs. -0.6% expected. Finally the UK trade balance fell in October to -7.8b vs. -7.5b. The rally seen in the Euro helped the cable off lows but new highs in the EUR/GBP underpins how weak the Pound is. Overall the GDP/USD traded with a low of 1.4680 and a high of 1.4890 before closing the day at 1.4750 in the New York session.

·The Australian Dollar (AUD) fell as stocks and Commodities gave up some of the gains seen on Monday. The large rebound from 0.65 though, underpins the cautiously bullish stance that the AUD and EURO has experienced in the past week. Overall the AUD/USD traded with a low of 0.6495 and a high of 0.6644 before closing the US session at 0.65810. UPDATE Australian December Consumer Confidence gains to 7.5 vs. 4.3 previous.

·Gold (XAU) tracked USD strength, making small gains over the day but being capped as Oil fell. Overall trading with a low of USD$763 and high of USD$780 before ending the New York session at USD$775 an ounce.

·Euro – 1.2930

Initial support at 1.2215 (Dec 8 low) followed by 1.2628 (Dec 5 low). Initial resistance is now located at 1.3001 (Nov 27 high) at followed by 1.3080 (Nov 25 high)

·Yen – 92.30

Initial support is located at 91.59 (Dec 5 low) followed by 90.93 (Oct 24 low). Initial resistance is now at 93.91 (Dec 8 high) followed by 95.95 (Nov 26 high).

·Pound – 1.4755

Initial support at 1.4526 (Dec 5 low) followed by 1.4471 (Dec 4 trend low). Initial resistance is now at 1.5070 (Dec 2 high) followed by 1.5397 (Dec 1 high).

·Australian Dollar – 0.6580

Initial support at 0.6453 (Dec 8 low) followed by the 0.6294 (Dec 5 low). Initial resistance is now at 0.6696 (Nov 14 high) followed by 0.6758 (Nov 11 high).

·Gold – 777

Initial support at 754.26 (Dec 8 low) followed by 741.7 (Dec 5 low). Initial resistance is now at 786.5 (Dec 2 high) followed by 830 (Nov 25 high).