Australian FOREX Daily Outlook 14/07/2009

Market Mood Flips Again

CURRENCY TRADING SUMMARY – 14th July (00:30GMT)

U.S. Dollar Trading (USD) was very volatile gaining in Asia to multi-month highs against some currencies but failing to hold these gains after the stocks reversed violently in US trade. Banking Analyst upgrades of the Banking sector led to major rallies in the bank. Safe haven Flows were reversed and risk sentiment picked up. June Fed Budget -94.3bn vs. -95bn forecast. Crude Oil closed down $0.20 at $59.69 but well off lows around $58.50. In US share markets, S&amp P ended +21.90 points (+2.49%) at 901.05, NASDAQ ended +37.18 points (2.12%) at 1793.21 and DOW JONES ended +185.16 points (+2.27%) at 8331.68. Looking ahead, June Retail Sales forecast at 0.4% vs. 0.5% previously. June PPI forecast at 0.9% m/m vs. 0.2% previously.

The Euro (EUR) was caught once again at 1.3900 even as EUR/JPY selling intensified with reported large central banks bids inducing short covering and fresh speculators onto the long side. The lack of downside potential has turned attention to the 1.4000 level as US equities soar. Trichet spoke overnight about the need to quickly clean up European Banks Balance sheets through the ECB’s covered bond program. Overall the EUR/USD traded with a low of 1.3878 and a high of 1.4030 before closing at 1.3949. Looking ahead, German Zew Survey Forecast at at -88 vs. -89.7 in July.

The Japanese Yen (JPY) was also very volatile as the largest US stock rally in 6 weeks saw early Yen strength given up and a new rally emerged. USD/JPY has now tested 91.80 support 3 times and this would discourage the bears who have gone heavily short on the break of 93.50 last week. EUR/JPY closed above 130. Overall the USDJPY traded with a low of 91.72 and a high of 93.18 before closing the day around 93.12 in the New York session.

The Sterling (GBP) recovered from heavy Asian selling on the back of reports Lloyds would be reporting a 13BN pound loss this quarter. The recovery envelope was pushed above 1.6200 into the US close. GBP/JPY buying supported on the way back up. BoE Member Bean did comment that the QE program is still able to be expanded. Overall the GBP/USD traded with a low of 1.6031 and a high of 1.6288 before closing the day at 1.6260 in the New York session. Looking ahead, UK CPI is forecast at 0.3% m/m in June vs. 0.6% previously. UPDATE BRC RETAIL SALES +1.4%m/m in June vs. -0.8% previously.

The Australian Dollar (AUD) tested new multi-month lows at 0.7700 with AUD/JPY selling from Japan reaching near capitulation mode. The recovery led by the Euro saw the pair regain 0.7800 and end on a strong footing. Risk appetite is the main mover of the AUD and future stock movement will provide fresh direction. Overall the AUD/USD traded with a low of 0.7700 and a high of 0.7848 before closing the US session at 0.7840.

Gold (XAU) grinded higher tracking USD weakness throughout the US session after dipping in Asia. Overall trading with a low of USD$907 and high of USD$924 before ending the New York session at USD$918 an ounce.

Euro – 1.4000

Initial support at 1.3827 (Jun 22 low) followed by 1.3749 (Jun 16 low). Initial resistance is now located at 1.4071 (July 1 high) followed by 1.4201 (Jun 1 high)

Yen – 93.00

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 93.60 (Jul 9 high) followed by 94.89 (Jul 8 high).

Pound – 1.6275

Initial support at 1.5985 (July 8) followed by 1.5803 (Jun 8 low). Initial resistance is now at 1.6380 (Jul 9 high) followed by 1.6546 (Jul 1 high).

Australian Dollar – 0.7835

Initial support at 0.7630 (May 19 low) followed by the 0.7451 (May 18 low). Initial resistance is now at 0.8038 (Jul 7 high) followed by 0.8155 (Jun 30 high).

Gold – 920

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).