Australian FOREX Daily Outlook 10/07/2009

Currencies Rebound led by Pound

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

U.S. Dollar Trading (USD) was sold for most of the day as a profit taking on yesterday’s strength turned into a rally on most of the majors. USD/JPY held up well. Calls from China for an improved reserve currency system were joined by French President Sarkozy’s call for talks on FX in coming months for what he calls a ‘multi-monetary’ world. Such statement’s are widely seen as USD negative and although are still distant in implementation, they are gathering pace in broader support worldwide. Weekly Jobless Claims improved -52K to 565K vs. 603K expected and helped keep US stocks supported. Crude Oil closed up $0.11 at $60.25, although did test below the Key $60 a barrel in search of solid support. In US share markets, S&amp P ended +3.12 points (0.35%) at 882.68, NASDAQ ended +5.38 points (0.31%) at 1752.55 and DOW JONES ended +4.76 points (0.06%) at 8183.17. Looking ahead, July UoM Consumer Sentiment expected at 70.5 vs. 70.8 previously. Also released, May Trade Balance forecast at -30bn vs. -29Bn previously. Also released G8 meeting statement that could potentially contain market moving FX comments.

The Euro (EUR) retraced from lows overnight to test 1.3940 in Europe before popping higher on the back of large gains in the GBP post BOE. Negative USD comments and strong Global equities helped underpin the move above 1.4000 as well as talks of large Central bank bids under 1.3900 which discouraged attempts on the downside. EUR/JPY was volatile rallying over 3 Yen as Risk appetite roared back. Overall the EUR/USD traded with a low of 1.3857 and a high of 1.4073 before closing at 1.4030. Looking ahead, German WPI for June previously at 0.1% m/m.

The Japanese Yen (JPY) Yen strength was put on hold and then reversed as Japanese officials began to wade in with FX comments. Such interventionist comments are common after major moves such as those seen on Wednesday but are generally not taken too seriously until Yen is at such levels at 90 on the USD/JPY. More gains cannot be ruled out and equity markets will continue to provide fresh direction. Overall the USDJPY traded with a low of 92.49 and a high of 93.62 before closing the day around 92.90 in the New York session.

The Sterling (GBP) was the largest mover recovering from sub 1.60 seen yesterday to rally into the BOE decision on large GBP/JPY buying. Speculation on an increase in the BOE Quantitative Easing program proved off the mark and the GBP responded by rallying past resistance at 1.6300. During the week concern about the BOE QE program was linked to recent pound weakness and although it was not increased at this meeting the MPC statement said that the subject would be dealt with in August. Overall the GBP/USD traded with a low of 1.6034 and a high of 1.6384 before closing the day at 1.6340 in the New York session. Looking ahead, June PPI forecast at 0.3% m/m.

The Australian Dollar (AUD) recovered well after breaking a month long range to the downside but was capped by continued commodity weakness and flat US stocks. AUD/JPY provided a lot of the support and could lift the Aussie higher if stocks rally in Asia. Supporting the move back into the recent range was better than expected June Employment figures at -21k vs. -25k previously. The Unemployment Rate rose to 5.8% vs. 5.7% previously. Overall the AUD/USD traded with a low of 0.7767 and a high of 0.7864 before closing the US session at 0.7830.

Gold (XAU) found support in the low $900’s and bounced with the rest of the market. Overall trading with a low of USD$906 and high of USD$919 before ending the New York session at USD$912 an ounce.

Euro – 1.4025

Initial support at 1.3827 (Jun 22 low) followed by 1.3749 (Jun 16 low). Initial resistance is now located at 1.4051 (July 7 high) followed by 1.4201 (Jun 1 high)

Yen – 91.81

Initial support is located at 91.81 (Jul 8 low) followed by 90.52 (76.4 retrace 87.13-101.44). Initial resistance is now at 94.89 (Jul 8 high) followed by 95.46 (Jul 7 high).

Pound – 1.6340

Initial support at 1.5979 (23.6% retrace of 1.3503-1.6743) followed by 1.5803 (Jun 8 low). Initial resistance is now at 1.6346 (Jul 6 high) followed by 1.6546 (July 1 Level).

Australian Dollar – 0.7830

Initial support at 0.7724 (Jul 8 low) followed by the 0.7630 (May 19 low). Initial resistance is now at 0.8038 (Jul 7 high) followed by 0.8155 (Jun 30 high).

Gold – 912

Initial support at 895 (May 6 low) followed by 880 (May 1 low). Initial resistance is now at 934 (Jul 3 high) followed by 948 (Jun 26 high).