Australian FOREX Daily Outlook 20/10/2009

Risk Appetite turned back on

CURRENCY TRADING SUMMARY – 20th October (00:30GMT)

U.S. Dollar Trading (USD) resumed weakening overnight as stock buying resumed on speculation that Q3 results will be robust. There was little data out and Bernanke’s speech was failed to offer the dollar support and if anything added to its woes by stating china must let there currency appreciate against the dollar to help rebalance the global economy. In US Stocks, DJIA +96 points closing at 1092, S&amp P +10 points closing at 1097 and NASDAQ +19 points closing at 2176. Looking ahead, September PPI forecast at 0.1% vs. 0.2% previously. September Housing Starts forecast at 0.61Mln vs. 0.598Mln previously.

The Euro (EUR) dipped in Asia on weak stocks but this move below 1.4850 proved fleeting and the pair rallied in Europe as concern about a Eurogroup meeting mentioning the recent strength of the Euro proved unfounded. Risk appetite and EUR/JPY buying underpinned. Overall the EUR/USD traded with a low of 1.4827 and a high of 1.4963 before closing at 1.4940. Looking ahead, German September PPI forecast at -0.1% vs. 0.5% previously.

The Japanese Yen (JPY) broad USD weakness overpowered cross selling of the Yen to send the USD/JPY slightly lower. Support in the low 90 yen area proved solid and the pair kept to a quiet range. AUD/JPY leaped to fresh year highs and EUR/JPY found solid support below 135 Yen. BOJ Minutes showed that the Central Bank was considering paring back QE support. Overall the USDJPY traded with a low of 90.37 and a high of 91.14 before closing the day around 90.60 in the New York session.

The Sterling (GBP) came under pressure at the start of Europe as attention turned to possible QE expansion by the BoE. The selling was short lived and the market pushed higher once again as US stocks rallied hard. October Rightmove HPI at 2.8% vs. 0.6% previously helped to improve sentiment. Overall the GBP/USD traded with a low of 1.6241 and a high of 1.6424 before closing the day at 1.6370 in the New York session. Looking ahead, September Public Sector Net Borrowing forecast at 15.3bn vs. 16.12bn previously.

The Australian Dollar (AUD) fell initially with Asian stocks and the Euro but found solid support and rebounded to fresh year highs above 0.9280. Attention has been given to the RBA and the speed at which the central bank will increase interest rates. AUD/JPY buying and strong commodities underpinned. Overall the AUD/USD traded with a low of 0.9113 and a high of 0.9293 before closing the US session at 0.9280. Looking ahead, RBA minutes Released.

Oil &amp Gold (XAU) rebounded above $1060 on USD weakness. Overall trading with a low of USD$1048 and high of USD$1064 before ending the New York session at USD$1061 an ounce. Oil pushed higher above $79 a barrel closing in on the key $80 level. Crude Oil was up $1.08 ending the New York session at $79.60.

TECHNICAL COMMENTARY

Euro – 1.4940

Initial support at 1.4839 (Oct 14 low) followed by 1.4674 (Oct 9 low). Initial resistance is now located at 1.4980 (Aug 13 high) followed by 1.5000 (Psychological Level)

Yen – 90.60

Initial support is located at 89.28 (Oct 16 low) followed by 88.84 (Oct 14 low). Initial resistance is now at 91.63 (Sept 13 high) followed by 92.53 (Sept 21 high).

Pound – 1.6370

Initial support at 1.6252 (Sept 28 low) followed by 1.5903 (Oct 14 low). Initial resistance is now at 1.6468 (Sept 23 high) followed by 1.6568 (Sept 23 high).

Australian Dollar – 0.9270

Initial support at 0.8985 (Oct 12 low) followed by the 0.8866 (Oct 7 low). Initial resistance is now at 0.9347 (Aug 4 08 high) followed by 0.9476 (Jul 31 08 high).

Gold – 1061

Initial support at 1036 (Oct 7 low) followed by 1015 (Oct 6 low). Initial resistance is now at 1070 (Oct 14 high) followed by 1100 (Psychological level).

Oil – 79.60

Initial support at 78 (Previous support) followed by 77.28 (Previous Support). Initial resistance is now at 80.0 (Major level) followed by 80.70 (Fib Projection).