Australian FOREX Daily Outlook 11/08/2009

USD Strength Continues, Stock Rally Stalls

CURRENCY TRADING SUMMARY – 11th August (00:30GMT)

U.S. Dollar Trading (USD) the Dollar continued to strengthen following on from Friday’s large move. Helping the cause was sluggish stocks and weak commodities. With little data the market was quiet and focus turned the coming FOMC meeting and whether the communique would begin to change to a more neutral stance. Crude Oil Closed down $0.33 at $70.60. In US share markets, S&amp P ended -3 points (-0.3%) at 1007, NASDAQ ended -8 points (-0.4%) at 1992 and DOW JONES ended -32 points (-0.3%) at 9337. Looking ahead, Q2 Productivity forecast at 5.3% vs. 1.6% previously and Q2 Labor Costs -2.4% vs. 3% previously.

The Euro (EUR) pivoted 1.4200 for most of the day until the sellers won out and forced the pair back to 1.4100 supports. EUR/JPY selling capped the rebound as US stocks started to slip and sentiment shifted to profit taking. Many analysts are pulling there long EUR/USD predictions given the price action over the last two days. Eurozone Sentix Index at -17 in August vs. -31 previously. Overall the EUR/USD traded with a low of 1.4154 and a high of 1.4413 before closing at 1.4169. Looking ahead, July German CPI is forecast at -0.1% vs. 0.4% previously.

The Japanese Yen (JPY) had a good day gaining back some of the substantial ground lost on Friday. EUR/JPY and GBP/JPY slipped on a paring back of risk trades across the market. AUD/JPY remained well supported and USD/JPY found support in the low 97’s. Helping the yen was better than expected local data with June Current Account +144% and June Machine Orders +9.7% vs. +2.9%. Overall the USDJPY traded with a low of 96.89 and a high of 97.51 before closing the day around 97.20 in the New York session. Looking ahead, BOJ Rate Meeting expected to hold at 0.1%.

The Sterling (GBP) fell the most of the majors with weekend press focusing on the downside risks for the UK economy. Concerns about the QE expansion will be addressed in the inflation report due to be released on Wednesday. GBP/USD slipped below the Key 1.6500 support level. Overall the GBP/USD traded with a low of 1.6431 and a high of 1.6718 before closing the day at 1.6480 in the New York session. Looking ahead, June Trade Balance forecast at -6.2bn vs. -6.26Bn previously.

The Australian Dollar (AUD) rallied by itself from below 0.8850 to test 0.8430 resistance in the European session before falling with Oil and US stocks. The Outlook is turning more neutral with headwinds beginning to emerge in the form of USD strength and questions about the sustainability of the recent equity rally. Overall the AUD/USD traded with a low of 0.8332 and a high of 0.8431 before closing the US session at 0.8370. Looking ahead, July Nab Business Confidence previously at 4.

Gold (XAU) broke $950 supports on broad USD strength. Overall trading with a low of USD$942 and high of USD$956 before ending the New York session at USD$945 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4130

Initial support at 1.4105 (Aug 10 low) followed by 1.4008 (Jul 29 low). Initial resistance is now located at 1.4447 (AUG 5 high) followed by 1.4621 (61.8% retrace 1.6038 -1.2330 )

Yen – 96.95

Initial support is located at 95.88 (AUG 30 low) followed by 94.02 (July 29 low). Initial resistance is now at 97.79 (AUG 7 high) followed by 98.89 (June 4 high).

Pound – 1.6470

Initial support at 1.6432 (AUG 10 low) followed by 1.6311 (Jul 22 low). Initial resistance is now at 1.6831 (AUG 7 high) followed by 1.7043 (AUG 5 high).

Australian Dollar – 0.8360

Initial support at 0.8238 (Jul 31 low) followed by the 0.8126 (July 29 low). Initial resistance is now at 0.8519 (Sept 22 high) followed by 0.8694 (Aug 28 low).

Gold – 945

Initial support at 932 (Jul 31 low) followed by 925 (July 29 low). Initial resistance is now at 971 (AUG 6 high) followed by 990 (Jun 3 high).