Australian FOREX Daily Outlook 11/09/2009

Dow Jones Closes at Fresh Year High

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

U.S. Dollar Trading (USD) the rout continued overnight with USD strength being once again turned around and the market testing multiple levels across the board. The catalyst for today’s dollar weakness was surprising weakness in July Trade Balance which fell to -32bn vs. -27bn forecast. Compounding Dollar woes was the extension of Global Stocks which further decreased demand for the Safe Haven. Crude Oil up $0.63 closing at $71.94. In US Stocks, DJIA +80 points closing at 9627, S&amp P +10 points closing at 1044 and NASDAQ +23 points closing at 2084. Looking ahead, September UoM Consumer Sentiment forecast at 67.3 vs. 65.7 previously.

The Euro (EUR) shrugged of downside attempts but failed a few times to break above 1.4600 as reported heavy central bank sell orders capped gains. Positive sentiment and a relentlessly weak USD are helping propel the Euro higher. Also Weighing was EUR/GBP selling which pulled back from the 0.8800 level. Overall the EUR/USD traded with a low of 1.4503 and a high of 1.4613 before closing at 1.4580. Looking ahead, August WPI previously at -0.5% m/m.

The Japanese Yen (JPY) another new multi-month low was put in place as the market hammers away on the USD/JPY downside. 91.60 is strong support and propped up for a second time although the bounce was very limited. July Machine Orders at -9.3% vs. +9.7% previously. Overall the USDJPY traded with a low of 91.42 and a high of 92.26 before closing the day around 91.75 in the New York session. Looking ahead, Q2 GDP forecast to remain unrevised at 0.9%.

The Sterling (GBP) was the strongest currency yesterday as pent up fears about the expansion of QE from the Bank of England proved unfounded when the bank held the status quo at 0.5% interest rates and 175bn QE. Cable broke above 1.6600 and fell just short of the next figure later in the day. Further gains are possible with year highs on nearly all majors except the GBP against the greenback. Overall the GBP/USD traded with a low of 1.6481 and a high of 1.6687 before closing the day at 1.6650 in the New York session. Looking ahead, August PPI Output forecast at 0.1% vs. 0.3% previously.

The Australian Dollar (AUD) was sold off after very weak Unemployment data in August at -27k vs. -15k forecast. The market continued to sell the Aussie in Europe but once again dip buyers emerged and the pair rallied back to recent highs above 0.8600. Dip buyers are pressuring sellers into taking profit quicker than usual and underpins the strength of Aussie recently. Overall the AUD/USD traded with a low of 0.8546 and a high of 0.8645 before closing the US session at 0.8620.

Gold (XAU) muddled around the $990 level unable to test $1000 again but not falling very far. Overall trading with a low of USD$983 and high of USD$998 before ending the New York session at USD$996 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4580

Initial support at 1.4467 (Sept 9 low) followed by 1.4287 (Sept 7 low). Initial resistance is now located at 1.4621 (61.8% retrace 1.6038 – 1.2330) followed by 1.4719 (Dec 18 high)

Yen – 91.75

Initial support is located at 90.54 (Feb 13 low) followed by 89.71 (February 11 low). Initial resistance is now at 94.07 (August 28 high) followed by 95.06 (Aug 24 high).

Pound – 1.6655

Initial support at 1.6323 (Sept 8 low) followed by 1.6237 (Sept 3 low). Initial resistance is now at 1.6687 (Sept 10 high) followed by 1.6831 (Aug 7 high).

Australian Dollar – 0.8630

Initial support at 0.8379 (Sept 4 low) followed by the 0.8239 (AUG 27 low). Initial resistance is now at 0.8694 (Aug 28 2008 high) followed by 0.8813 (AUG 22 2008 high).

Gold – 997

Initial support at 974 (Sept 3 low) followed by 944 (Aug 31 low). Initial resistance is now at 1032 (Mar 17′ 2008 high) followed by 1050 (Psychological Round Number).