Australian FOREX Daily Outlook 02/11/2009

Dark Clouds Return, Dollar Gains

CURRENCY TRADING SUMMARY – 2^nd November (00:30GMT)

U.S. Dollar Trading (USD) was very strong as risk aversion came back into the market as concerns about CIT bankruptcy and weak personal spending -0.5% in September sent US stock markets down over 2.5%. Also of note to traders was the largest jump in the VIX index this year, up over 20% on the day. In US Stocks, DJIA +199 points closing at 9712, S&amp P -29 points closing at 1036 and NASDAQ -52 points closing at 2045. Looking ahead, October ISM Manufacturing is forecast at 53 vs. 52.6 previously.

The Euro (EUR) after opening above 1.4800 in Asia the rebound stalled and profit taking turned in heavy Euro selling as US stocks fell heavily. October EU Inflation was -0.1% y/y as forecast. EU Unemployment Rate was 9.7% as forecast in September. Overall the EUR/USD traded with a low of 1.4712 and a high of 1.4858 before closing at 1.4713. Looking ahead, October PMI Manufacturing is forecast 50.7 vs. 49.3 previously.

The Japanese Yen (JPY) was once again the strongest currency outpacing the USD as the safe haven of choice when heavy unwinding of crosses dragged the major below the Key 90 Yen level. BOJ held at 0.1% but cut back the corporate bond buying program. September Unemployment at 5.3% vs. 5.5% forecast. Overall the USDJPY traded with a low of 89.93 and a high of 91.57 before closing the day around 90.00 in the New York session.

The Sterling (GBP) held up better than most risk currencies but was still on the back foot as GBP/JPY selling weighed. October Nationwide House Prices were at 0.4% vs. 0.9% previously. Support at 1.6500 finally gave way and the pair finished below 1.6450. Overall the GBP/USD traded with a low of 1.6410 and a high of 1.6578 before closing the day at 1.6415 in the New York session. Looking ahead, October PMI Manufacturing forecast at 50 vs. 49.5.

The Australian Dollar (AUD) was down sharply after opening above 0.9150 but ending below the key 0.9000 level. The markets still trade the AUD with a strong correlation to equities, and even the spectra of a rate rise as Tuesday’s RBA meeting failed to provide much support. Overall the AUD/USD traded with a low of 0.8980 and a high of 0.9180 before closing the US session at 0.8995.

Oil &amp Gold (XAU) was stronger than other commodities as fresh safe haven demand was sparked in a financial based risk aversion mood. Overall trading with a low of USD$1035 and high of USD$1049 before ending the New York session at USD$1045 an ounce. Was sold heavily on risk aversion and traders second guessing the strength of the stimulated US economy. Crude Oil was down $2.87 ending the New York session at $77.00.

TECHNICAL COMMENTARY

Euro – 1.4730

Initial support at 1.4683 (Oct 29 low) followed by 1.4646 (Oct 6 low). Initial resistance is now located at 1.4859 (Oct 29 high) followed by 1.4927 (Oct 27 high)

Yen – 90.00

Initial support is located at 89.93 (Oct 30 low) followed by 89.28 (Oct 15 low). Initial resistance is now at 91.82 (Oct 28 high) followed by 92.53 (Sept 21 high).

Pound – 1.6450

Initial support at 1.6339 (Oct 29 low) followed by 1.6252 (Oct 26 low). Initial resistance is now at 1.6604 (Oct 29 high) followed by 1.6693 (Oct 23 high).

Australian Dollar – 0.9015

Initial support at 0.8944 (Oct 29 low) followed by the 0.8866 (Oct 7 low). Initial resistance is now at 0.9218 (Oct 27 high) followed by 0.9329 (Oct 21 high).

Gold – 1045

Initial support at 1026 (Sept 29 low) followed by 1024 (Sept 17 high). Initial resistance is now at 1059 (Oct 25 high) followed by 1067 (Oct 20 high).

Oil – 76.90

Initial support at 76.40 (Intraday Support) followed by 75.22 (Intraday support). Initial resistance is now at 78.00 (previous support) followed by 80 (Major Level).