Australian FOREX Daily Outlook 13/01/2010

China Moves to stem Overheating

CURRENCY TRADING SUMMARY –13th January (00:30GMT)

U.S. Dollar Trading (USD) gained in Asia and then again in Europe on two stories of note from China. Firstly Peng of China’s sovereign wealth fund stated he saw the USD near it’s bottom and then secondly the PBOC stated they would raise banks reserve requirements by 0.5% both helping the Dollar gain. November Trade Balance at -36.4 vs. -34.8bn forecast. DJIA -36 points closing at 10627, S&amp P -10 points closing at 1136 and NASDAQ -30 points closing at 2282. Looking ahead, Weekly Crude oil Inventories are forecast at 1.4mln vs. 1.3mln previously.

The Euro (EUR) gained on the weaker than expected US Trade balance but suffered from general risk aversion provoked by risk aversion from the China news. The 1.4500 level proved important once again as the market pivoted around the figure. Lingering fears still remain about Greece and Portugal and the market is still watching these developments closely. Overall the EUR/USD traded with a low of 1.4452 and a high of 1.4548 before closing at 1.4495.

The Japanese Yen (JPY) was the big winner from the increased risk aversion and China tightening story with many players buying the Yen as a proxy for the Chinese yuan which is not freely trade-able. AUD/JPY fell over -2% as risk aversion picked up. Overall the USDJPY traded with a low of 90.71 and a high of 92.45 before closing the day around 91.10 in the New York session.

The Sterling (GBP) Gained after UK trade figures improved unexpectedly. November Trade at -6.8bn vs. -7.0bn helped the pair rally from below 1.6100 to just under 1.6200. EUR/GBP slipped back 0.8950 after failing at 0.9000. Overall the GBP/USD traded with a low of 1.6061 and a high of 1.6197 before closing the day at 1.6150 in the New York session. Looking ahead, November Industrial Output forecast at 0.3% vs. 0.0% previously. November Manufacturing Production forecast at 0.3% vs. 0.0%.

The Australian Dollar (AUD) was the worst hit from the China story as the two countries economic outlook are closely linked. Concerns about the brakes being put on the Chinese economy does not help the trade outlook for Australia. Also hurting was the large drop in Gold and -5.6% drop in November Home loans. Overall the AUD/USD traded with a low of 0.9169 and a high of 0.9309 before closing the US session at 0.9210.

Oil &amp Gold (XAU) came under heavy selling pressure as commodities were broadly weaker and China’s Peng said current level were expensive. Overall trading with a low of USD$1123 and high of USD$1158 before ending the New York session at USD$1128 an ounce. Slumped a further $2 a barrel on demand concerns. Crude Oil was down -$1.73 ending the New York session at $80.79.

TECHNICAL COMMENTARY

Euro – 1.4475

Initial support at 1.4409 (Jan 11 low) followed by 1.4258 (Jan 4 low). Initial resistance is now located at 1.4557 (Jan 11 high) followed by 1.4591 (Dec 16 high)

Yen – 91.30

Initial support is located at 90.73 (Jan 12 low) followed by 90.35 (0.382 of 84.83-93.77). Initial resistance is now at 92.66 (Jan 11 high) followed by 93.77 (Jan 8 high).

Pound – 1.6160

Initial support at 1.6038 (Jan 11 low) followed by 1.5897 ( Jan 7 low). Initial resistance is now at 1.6194 (Jan 4 high) followed by 1.6241 (Jan 4 high).

Australian Dollar – 0.9220

Initial support at 0.9124 (Jan 8 low) followed by the 0.9093 (Jan 5 low). Initial resistance is now at 0.9326 (Jan 11 2009 high) followed by 0.9406 (Nov 16 high).

Gold – 1130

Initial support at 1125 (Jan 12 low) followed by 1119 (Jan 8 low). Initial resistance is now at 1161 (Jan 11 high) followed by 1161 (0.618 of 1226.56-1074.88).

Oil – 80.10

Initial support at 80.00 (Intraday support) followed by 79.50 (Intraday Support). Initial resistance is now at 82.00 (Intraday Resistance) followed by 84.00 (Jan 11 high).