Australian FOREX Weekly Outlook 16/02/2009

Stocks Under pressure on Global Recession fears

16/02/09

last week’s currency trading review

The Dollar managed small gains during the week as the risk aversion theme remained dominant. Treasury Secretary Geithner’s failure to convince the markets of the revised banking bailout plan and the lack of specific details sent the market into freefall. In data releases, Retail Sales beat expectations in January climbing 1.0%. Of Concern though was the drop in Consumer sentiment falling to 56.2 in Feb vs. 61.2 previously. The Euro kept to a tight range with 1.300 proving the key level. Relentless weak economic data and fears of contagion from Eastern European Debt concerns kept the single currency under pressure. Eurozone December Industrial Output fell 2.6% whilst Q4 GDP fell -1.5% vs. -0.2% previously. The EUR/USD fell -0.62% closing at 1.2862, after opening the week at 1.2942. The Japanese Yen gained heavily during the week as safe haven flows kept carry trades such as AUD/JPY and NZD/JPY under pressure. GBP/JPY also came under pressure with Pound reversing recent gains. USD/JPY has remained very well supported though as the pair holds above key technical levels. The USD/JPY fell 0.02% closing at 91.87 after opening at 91.89. The GBP pulled back to significantly as the rebound off multi-year lows came to an end. Hurting Sentiment was the rise in risk aversion and comments from BoE Governor King stating that the UK was in deep recession expecting a 4% fall in GDP, adding further monetary easing may be required. The GBP/USD fell -3.03% closing at 1.4785 after opening at 1.4350. The AUD tracked stocks falling heavily off the .6800 level as US equities tumbled. January Unemployment data surprised to the upside though with a gain of 1.2K jobs. The rate climbed to 4.8% vs. 4.5% previously as more people entered the job market. The AUD/USD closed down -2.88% at 0.6565 after opening at 0.6754.

The forex trading week preview

In the States On Monday we have the President Day Holiday. On Tuesday we have TIC Flows previously at $56.8bn. Also released, Empire Manufacturing forecast at -23.75 vs. -22.3 previously. On Wednesday January Housing Starts forecast to drop to 530K vs. 550K previously. The market is keenly awaiting FOMC minutes from the January meeting for indication on future policies. On Thursday we have January PPI forecast at 0.20% vs. -1.90% previously. Finally on Friday January CPI forecast at -0.1% vs. +0.1% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Tuesday we have the German Zew Economic Survey forecast at -25 vs. -31 previously. On Friday we have the PMI Manufacturing in Feb forecast at 35 vs. 34.4 previously whilst the Services expected at 42.6 vs. 42.2 previously. In the UK On Tuesday CPI in January seen slowing to 2.7% Y/Y. On Wednesday the BoE minutes are released and are seen at 9-0 for the rate cut in January. On Friday, January Retail Sales are forecast to rise +0.1% vs. 1.6% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan Monday we have Preliminary Q4 GDP forecast to drop -3.1% vs.-0.5% previously. Also released, Revised Dec Industrial Production forecast at -9.5% vs. -9.6% initially. On Friday, BOJ meet to discuss rate and although are widely expected to hold at 0.1% the market will be awaiting the press conference for further commentary. We will provide our previews and reviews of these data releases in the daily summary.

In Australia light data week with Tuesday RBA minutes from the February meeting the highlight. On Wednesday, assistant RBA Governor Edey speaks. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.2810

Initial support at 1.2722 (Feb 12 low) followed by 1.2707 (Feb 2 low). Initial resistance is now located at 1.2821 (Feb 13 low) at followed by 1.2998 (Feb 11 high)

·Yen – 91.40

Initial support is located at 90.54 (Feb 13 low) followed by 89.71 (Feb 11 low). Initial resistance is now at 92.04 (Feb 13 high) followed by 92.42 (Feb 9 high).

·Pound – 1.4240

Initial support at 1.4137 (Feb 12 low) followed by 1.3929 (Jan 27 low). Initial resistance is now at 1.4415 (Feb 12 high) followed by 1.4565 (Feb 11 high).

·Australian Dollar – 0.6535

Initial support at 0.6523 (Feb 13 low) followed by the 0.6432 (Feb 12 low). Initial resistance is now at 0.6643 (Feb 13 high) followed by 0.6798 (Feb 10 high).

·Gold – 942

Initial support at 911 (Feb 11 low) followed by 889 (Feb 3 low). Initial resistance is now at 950 (Key level) followed by 952 (Feb 12 high).