Australian FOREX Daily Outlook 22/01/2009

Sharp recovery as Obama hits the ground running

CURRENCY TRADING SUMMARY – 22nd January 2009 (00:30GMT)

·U.S. Dollar Trading (USD) had a volatile trading day with the market testing the previous day’s highs but spent most of the day consolidating gains. Shares rallied hard into the close and this helped the Dollar to gain against the Yen. The January NAHB Housing Market Index dropped to 8 vs. 9 expected in January. The market focused on the upcoming Treasury Secretary-nominee Tim Geithner’s confirmation hearing with anticipation of quick implementation of Obama’s stimulus plan. Crude Oil closed up $2.71 ending the New York session at $43.55 per barrel. In US share markets, the Dow Jones gained 279 points or 3.51% and the NASDAQ dropped 66 points or 4.60%. Looking ahead, December Housing starts are forecast at 0.61M and Weekly Jobless Claims are forecast at 540K.

·The Euro (EUR) ranged from 1.28 to 1.300 as the market consolidated recent weakness. EUR/GBP traded above 0.9400 as Pound weakness intensified. The rally in Oil and US stocks let the EURO finish the day on the front foot. German PPI fell 1% in December. Overall the EUR/USD traded with a low of 1.2826 and a high of 1.3085 before closing the day at 1.3030. Looking ahead, November Industrial Orders are forecast to fall -4.8% vs. -4.7% previously.

·The Japanese Yen (JPY) had tremendous movement yesterday after massive options expired and US Stocks opened weak. GBP/JPY dropped below 120 and EUR/JPY hit multiyear lows at 112 Yen. A sharp reversal in US stocks and profit taking sent most crosses rocketing back to initial levels. Overall the USDJPY traded with a low of 87.12 and a high of 90.15 before closing the day around 89.50 in the New York session. Looking ahead, BOJ meet today to discuss rates and are expected to hold at 0.1%. UPDATE December Trade Balance -320 Bn Yen.

·The Sterling (GBP) after testing the 1.4000 level in an Asian recovery, weak UK data sent the Pound to new 8 year lows under 1.3700. The December Claimant Count dropped to 77.9K from a revised 83.1K previously. Overall the GDP/USD traded with a low of 1.3621 and a high of 1.4025 before closing the day at 1.3980 in the New York session. Looking ahead, January CBI orders are forecast at -39 vs. -35 previously.

·The Australian Dollar (AUD) tracked equities and Euro lower initially before bouncing at the end of the US session as stocks rallied led by the banks on hopes of a revised bailout plan. Overall the AUD/USD traded with a low of 0.6460 and a high of 0.6657 before closing the US session at 0.6520. UPDATE CHINA GDP 6.8% as expected, sharp reduction in Q4 and a major trading partner with Australia.

·Gold (XAU) consolidated recent gains as the market was buoyed by large gains in Oil and stocks. Overall trading with a low of USD$843 and high of USD$865 before ending the New York session at USD$855 an ounce.

·Euro – 1.2865

Initial support at 1.2825 (Jan 21 low) followed by 1.2800 (Dec 9 low). Initial resistance is now located at 1.3104 (Jan 20 high) at followed by 1.3387 (Jan 19 high)

·Yen – 87.13

Initial support is located at 87.13 (Jan 21 low) followed by 86.33 (Projected downside target). Initial resistance is now at 90.16 (Jan 21 high) followed by 91.67 (Jan 9 high).

·Pound – 1.3980

Initial support at 1.3622 (Jan 21 low) followed by 1.3500 (Round Number). Initial resistance is now at 1.4024 (Jan 21 high) followed by 1.4443 (Jan 20 high).

·Australian Dollar – 0.6590

Initial support at 0.6457 (Jan 21 low) followed by the 0.6294 (Dec 5 low). Initial resistance is now at 0.6684 (Jan 20 high) followed by 0.6841 (Jan 19 high).

·Gold – 853

Initial support at 824 (Jan 21 low) followed by 816 (Dec 16 low). Initial resistance is now at 870 (Jan 6 high) followed by 890 (Dec 29 high).