Australian FOREX Daily Outlook 16/12/2009

Dollar Rally Continues, FOMC Ahead

CURRENCY TRADING SUMMARY – 16th December (00:30GMT)

U.S. Dollar Trading (USD) large gains were made across the board as USD strength intensified. November PPI jumped 1.8% vs. 0.8% forecast and helped stoke inflation concerns. Also strong November Industrial Output forecast at 0.8% vs. 0.5% previously. DJIA -49 points closing at 10452, S&amp P -6 points closing at 1107 and NASDAQ -11 points closing at 2201. Looking ahead, FOMC Rate Announcement forecast to remain at 0.25% vs. 0.25% previously.

The Euro (EUR) fresh 3 month lows were seen on a break below 1.4600 and subsequent push the 1.4500 support. EUR/JPY actually gained though as the Yen was also sold aggressively against the greenback. The Euro continues to receive support from Asian central banks although how large their appetite is still up for question. December ZEW sentiment was at 50.4 vs. 50 forecast. Overall the EUR/USD traded with a low of 1.4502 and a high of 1.4661 before closing at 1.4530. Looking ahead, December PMI Manufacturing forecast at 51.5 vs. 51.2 previously.

The Japanese Yen (JPY) was extremely weak even as US stocks fell with the USD/JPY making another push towards the key 90 Yen level. GBP/JPY finished near 146 and EUR/JPY closed about the 130 mark. Talk in the market is that the Yen may soon replace the USD as the carry trade of choice. Overall the USDJPY traded with a low of 88.60 and a high of 89.98 before closing the day around 89.50 in the New York session.

The Sterling (GBP) held up better than most as the heavily beaten down Pound found relief from EUR/GBP selling. GBP/JPY also once again underpinned and is a favorite amongst traders looking for a large intraday pip range. November CPI was 1.9% y/y vs. 1.8% forecast. Overall the GBP/USD traded with a low of 1.6204 and a high of 1.6322 before closing the day at 1.63 in the New York session. Looking ahead, October ILO unemployment rate forecast at 7.9% vs. 7.8% previously.

The Australian Dollar (AUD) was under pressure for most of the day as the December RBA minutes were very neutral and led to speculation that February rate rise was less likely. AUD/JPY managed to finish higher but AUD/NZD continued to test the downside support at 1.2500. Overall the AUD/USD traded with a low of 0.9035 and a high of 0.9168 before closing the US session at 0.9055. UPDATE Q3 GDP 0.2% vs. 0.4% forecast q/q.

Oil &amp Gold (XAU) tested $1110 again before bouncing back above $1120. Overall trading with a low of USD$1111 and high of USD$1129 before ending the New York session at USD$1125 an ounce. Rallied after 9 days of losses to regain the critical $70 level. Crude Oil was down +$1.10 ending the New York session at $70.70.

TECHNICAL COMMENTARY

Euro – 1.4535

Initial support at 1.4481 (Oct 2 low) followed by 1.4447 (Aug 5 low). Initial resistance is now located at 1.4685 (Dec 15 high) followed by 1.4782 (Dec 9 high)

Yen – 88.60

Initial support is located at 88.20 (Dec 11 low) followed by 87.37 (Dec 9 low). Initial resistance is now at 89.81 (Dec 11 high) followed by 90.77 (Dec 4 High).

Pound – 1.6275

Initial support at 1.6190 (Dec 14 low) followed by 1.6168 (Dec 9 low). Initial resistance is now at 1.6325 (Dec 14 high ) followed by 1.6375 (Dec 9 high).

Australian Dollar – 0.9060

Initial support at 0.9016 (Dec 9 low) followed by the 0.8947 (Nov 27 low). Initial resistance is now at 0.9175 (Dec 14 high) followed by 0.9195 (Dec 11 high).

Gold – 1125

Initial support at 1109 (Dec 11 low) followed by 1101 (Nov 13 low). Initial resistance is now at 1142 (Dec 11 high) followed by 1147 (Dec 09 high) .

Oil – 70.70

Initial support at 70.00 (Intraday support) followed by 68.50 (Intraday support). Initial resistance is now at 71.00 (Key Psychological Level) followed by 72.50 (Intraday resistance).