Australian FOREX Daily Outlook 22/07/2009

Bernanke Helps US Dollar and Bonds

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

U.S. Dollar Trading (USD) better than expected results from Caterpillar help US stocks extend their record breaking rally into a 7^th day. A lot of Attention was given to Ben Bernanke’s speech before the government in which he outlined the Fed’s monetary policy and helped keep interest rates expectations down by offering a cautious outlook. Crude Oil closed up $0.74 at $65.70 in September contract. In US share markets, S&amp P ended +3.45 points (+0.36%) at 954.58, NASDAQ ended +6.91 points (+0.36%) at 1916.2 and DOW JONES ended +67.79 points (+0.77%) at 8915.94. Looking ahead, Bernanke speaks again and Crude Oil inventories are released at -1.9M vs. -2.8M previously.

The Euro (EUR) broke through resistance at 1.4250 after the Canadian Interest Rate Decision but profit taking and mixed comments from Bernanke prompted fresh risk aversion matched by a fall in stocks at the US open to test support at 1.4160. A late US rally help the pair reclaim 1.4200 but upside momentum could start to wane if 1.4160 is broken on the downside today. Overall the EUR/USD traded with a low of 1.4163 and a high of 1.4279 before closing at 1.4200. Looking ahead, May Industrial Orders 1.9% vs. -1% previously.

The Japanese Yen (JPY) strengthened as Bernanke’s speech and CIT worries combined to create fresh risk aversion that outweighed the rally in the US stocks. A Drop US Treasuries Yields are also pressured the pair lower which in turn prompted liquidation of long EUR/JPY and AUD/JPY positions established over the past week. Overall the USDJPY traded with a low of 93.27 and a high of 94.42 before closing the day around 94.25 in the New York session.

The Sterling (GBP) was pressured by the PSNCR in June at 13.0B better than expected but still the worst on record for June and the market worried about UK finances sent the GBP lower. EUR/GBP jumped higher and GBP/JPY slumped. BoE Bean’s comments about not wanting a strong recovery of the sterling also weighed. Overall the GBP/USD traded with a low of 1.6382 and a high of 1.6533 before closing the day at 1.6420 in the New York session. Looking ahead, July MPC minutes released and July CBI Distributive Trades forecast at -45 vs. -51 previously.

The Australian Dollar (AUD) gained on the caterpillar news after easing for most of Asia on profit taking but was unable to break into the 0.8200 as the market mood soured on softer US stocks at the Open, CIT concerns and Bernanke’s sobering speech. RBA minutes released were relatively upbeat on the Global economy but still noted inflation risks were to the downside in the short term. Overall the AUD/USD traded with a low of 0.8088 and a high of 0.8195 before closing the US session at 0.8160. Looking ahead, Q2 CPI is forecast at 0.5% vs. 0.1% previously.

Gold (XAU) Traded in a tight range around the $950 level with USD strength being countered by dip buyers. Overall trading with a low of USD$936 and high of USD$955 before ending the New York session at USD$949 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4215

Initial support at 1.4056 (Jul 16 low) followed by 1.3833 (Jul 8 low). Initial resistance is now located at 1.4338 (Jun 3 high) followed by 1.4719 (Dec 19 high)

Yen – 93.75

Initial support is located at 93.26 (Jul 15 low) followed by 92.72 (July 14 low). Initial resistance is now at 94.89 (Jul 8 high) followed by 95.46 (Jul 7 high).

Pound – 1.6445

Initial support at 1.6266 (July 17 low) followed by 1.6034 (Jul 13 low). Initial resistance is now at 1.6558 (Jun 20 high) followed by 1.6745 (June 30 high).

Australian Dollar – 0.8160

Initial support at 0.7925 (July 15 low) followed by the 0.7814 (July 14 low). Initial resistance is now at 0.8237 (June 11 high) followed by 0.8263 (Jun 3 high).

Gold – 948

Initial support at 932 (Jul 17 low) followed by 918 (July 14 low). Initial resistance is now at 965 (June 10 high) followed by 990 (Jun 3 high).