Australian FOREX Weekly Outlook 19/01/2009

Market Bounces off year lows ahead of Obama Inauguration

19/01/09

last week’s currency trading review

The Dollar was able to make solid gains last week as risk aversion increased and banking concerns reemerged. The market was troubled by Citibank and BoA earnings but received well the news that the second half of the $750 TARP had been approved by the Senate. US stocks finished down -3.7% on the week. December Retail Sales dropped -2.7% vs. -1.2% forecast but CPI kept positive at +0.1% y/y. PPI registered its first negative y/y reading at -0.9% in December. The Euro came under pressure most of the week as the market speculated on the size and speed of ECB rate cuts. The ECB cut by 0.5% as expected but warned the market that the next meeting of note would be in March. The EUR/USD lost -3.39% closing at 1.3463, after opening the week at 1.3919. The Japanese Yen continued to gain against most currencies although broad USD strength meant the USD/JPY kept relatively unchanged. Stock weakness has raised risk aversion leading to heavy AUD/JPY and NZD/JPY selling down 4.1% and 7.2% respectively. Core Machinery Orders dropped 16.1% vs. -8.2% forecast in November. The USD/JPY gained 0.37% closing at 90.72 after opening at 90.38. The GBP weakened after being unable to sustain the rally seen last week heading back to support at 1.4500. GBP/JPY tested 13 year lows before recovering mildly on Friday. The GBP/USD lost -2.93% closing at 1.4729 after opening at 1.5160. The AUD continued to be sold aggressively as trader’s unwound long positions and AUD/JPY traded below 60 Yen. Oil continued to lead commodities lower and concern about the NZD economy overflowed onto the AUD. The AUD/USD closed down -3.83% at 0.7030 after opening at 0.6771.

The forex trading week preview

In the States Market holiday on Monday before Tuesday’s Swearing in of President-elect Obama in what may be a major market event. On Thursday December Housing Starts are expected at 605K vs. 625K previously. Also released, Weekly Jobless Claims seen rising to 545K (524K previously) and Building permits are forecast at 610K vs. 615K previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone Heavy data week. On Tuesday the highlight will be the German January Zew Survey forecast at -42.5 vs. -45.2 previously. On Wednesday ECB President speaks in Brussels. On Thursday, New Industrial Orders are forecast to fall -5% in November. On Friday, PMI Surveys are released with Eurozone Manufacturing forecast to 33.5 vs. 33.9 previously and Services at 41.7 vs. 42.1 previously. In the UK On Tuesday we have December CPI expected to drop to 2.6% vs. 4.1% previously Y/Y. Also released December Retail Prices Index expected to drop -1.7% vs. -0.8% previously. On Tuesday we have the Bank of England Minutes released form the January meeting in which they cut 0.5%. Also Released December Jobless Claims seen at 80K vs. 75.7K previously. Average Earning is forecast to rise 3.4% in November vs. 3.3% previously. The Big market event is on Friday the Q4 GDP is forecast to drop -1.2% q/q and Retail Sales are seen dropping -0.7% vs. 0.3% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan On Monday we have November Industrial Production expected to show a drop of -8.1%. On Thursday the Bank of Japan meet to discuss rates and are widely expected to keep them at 0.1%. On Friday the BoJ monthly report is released. We will provide our previews and reviews of these data releases in the daily summary.

In Australia Light data week with Consumer Confidence on Tuesday previously at 92. On Thursday Q4 Import prices are forecast at 5.9% vs. 5.0% previously whilst Export Prices are expected to drop to 7.0% vs. 13.80% previously. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.3320

Initial support at 1.3111 (Jan 16 low) followed by 1.3000 (Dec 11 low). Initial resistance is now located at 1.3374 (Jan 15 high) at followed by 1.3489 (Jan 12 high)

·Yen – 91.00

Initial support is located at 89.74 (Jan 16 low) followed by 88.48 (Jan 15 low). Initial resistance is now at 91.67 (Jan 9 high) followed by 92.29 (61.8% retrace 94.64 to 88.48).

·Pound – 1.4830

Initial support at 1.4622 (Jan 16 low) followed by 1.4470 (Jan 13 low). Initial resistance is now at 1.4981 (Jan 16 high) followed by 1.5029 (61.8% retrace 1.5374 to 1.4470).

·Australian Dollar – 0.6750

Initial support at 0.6628 (Jan 16 low) followed by the 0.6538 (Jan 15 low). Initial resistance is now at 0.6820 (Jan 15 high) followed by 0.7042 (Jan 12 high).

·Gold – 843

Initial support at 816 (Jan 16 low) followed by 802 (Jan 15 low). Initial resistance is now at 857 (Jan 12 high) followed by 870 (Jan 6 high).