Australian FOREX Daily Outlook 01/09/2009

China stocks Crash -6.7%

CURRENCY TRADING SUMMARY – 1^st September (00:30GMT)

U.S. Dollar Trading (USD) strengthening in Asia as China stocks slipped further into the red before reversing in the US session to end on a weak note. USD/JPY has continued to weigh on the dollar as the two currencies fight for preferred safe haven and funding status. August Chicago PMI was strong at 50 vs. 43 previously. Crude Oil slumped $2.78 to $69.86 on demand concerns. In US share markets, S&amp P ended -8 points (-0.81%) at 1020, NASDAQ ended -19 points (-0.97%) at 2009 and DOW JONES ended -47 points (-0.50%) at 9496. Looking ahead, July Pending Home sales forecast at 2% vs. 3.6% previously. Also released August Manufacturing PMI forecast at 50.5 vs. 48.9 previously.

The Euro (EUR) was very strong with the market shrugging off the fall in china to rally into the 1.4300’s. EUR/JPY selling weighed in Asia but the low 132 level held and market bounced above 133 Yen. US data help lift but very weak Oil also acted as a stabilizing force. Overall the EUR/USD traded with a low of 1.4256 and a high of 1.4368 before closing at 1.4340. Looking ahead, July German Retail Sales forecast at 0.6% vs. -1.8% previously. Also released EU July Unemployment forecast at 9.5% vs. 9.4% previously.

The Japanese Yen (JPY) broke resistance on the downside on firstly the change of government bringing speculation of Yen strength and secondly the sharp fall in China stocks leading to safe haven demand. USD/JPY slipped below 93.20 supports but regained some of the losses in the US session. July Retail Sales at -2.55 vs. -3.6% forecast y/y. Also released July Industrial output at 1.9% vs. 1.4% previously. Overall the USDJPY traded with a low of 92.55 and a high of 93.45 before closing the day around 93.00 in the New York session.

The Sterling (GBP) broke 1.6200 going into Europe before finding support and bouncing above 1.6300 in the US session. The Pair is finding a solid range in recent days with the market waiting for major events later this week for a catalyst on either side. Overall the GBP/USD traded with a low of 1.6184 and a high of 1.6330 before closing the day at 1.6285 in the New York session. Looking ahead, August PMI manufacturing forecast at 51.5 vs. 50.8.

The Australian Dollar (AUD) fell with China stocks before rumors of a more bullish sentiment from the RBA meeting today help the pair bounce. The Aussie rallied from 0.8340 to test 0.8460 outpacing other commodity currencies which came under pressure from very weak Oil and sluggish gold. Overall the AUD/USD traded with a low of 0.8340 and a high of 0.8458 before closing the US session at 0.8430. Looking ahead, RBA meet forecast to remain at 3.0%. Also released, July Building Permits previously at 9.3%.

Gold (XAU) fell in sympathy with Oil although the precious metal was able to reclaim and close above the key $950 level. Overall trading with a low of USD$943 and high of USD$960 before ending the New York session at USD$951 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4330

Initial support at 1.4201 (AUG 20 low) followed by 1.4046 (AUG 17 low). Initial resistance is now located at 1.4447 (Aug 5 high) followed by 1.4621 (61.8% retrace 1.6038 – 1.2330)

Yen – 93.05

Initial support is located at 93.10 (July 22 low) followed by 92.72 (July 14 low). Initial resistance is now at 95.29 (August 18 high) followed by 96.73 (Aug 12 high).

Pound – 1.6275

Initial support at 1.6154 (Aug 27 low) followed by 1.6034 (Jul 13 low). Initial resistance is now at 1.6444 (AUG 25 high) followed by 1.6546 (AUG 24 high).

Australian Dollar – 0.8430

Initial support at 0.8216 (AUG 21 low) followed by the 0.8126 (July 29 low). Initial resistance is now at 0.8478 (Aug 14 high) followed by 0.8519 (Sept 22 high).

Gold – 951

Initial support at 939 (Aug 17 low) followed by 930 (July 29 low). Initial resistance is now at 971 (August 6 high) followed by 990 (Jun 3 high).