Australian FOREX Daily Outlook 14/01/2010

Equity Rally Continues

CURRENCY TRADING SUMMARY –14th January (00:30GMT)

U.S. Dollar Trading (USD) remained on the back foot for most of the day as the Dollar buying from Tuesday subsided and risk appetite improved as US stocks climbed to fresh year highs. The Fed Beige Book kept the outlook quite weak and failed to inspire USD support. DJIA +55 points closing at 10680, S&amp P +9 points closing at 1145 and NASDAQ +25 points closing at 2307. Looking ahead, Weekly Jobless Claims forecast at 437k vs. 434k previously. December Retail Sales are forecast at 0.5% vs. 1.3% previously.

The Euro (EUR) traded at fresh highs above 1.4550 but pulled back from highs as traders took profit ahead of today’s ECB rate announcement. EUR/GBP remained under pressure as the Pound outpaced on the topside but the EUR/JPY uptrend did remain intact. Overall the EUR/USD traded with a low of 1.4455 and a high of 1.4581 before closing at 1.4510. Looking ahead, ECB Rate announcement widely tipped to remained at 1.0%. Focus will be on ECB President Trichet’s speech afterward.

The Japanese Yen (JPY) stabilized and then weakened as risk picked up. GBP/JPY managed a major rally on the back of Cable’s move. USD/JPY moved up from 91.10 to 91.50 quietly during the day. Overall the USDJPY traded with a low of 90.88 and a high of 91.58 before closing the day around 91.45 in the New York session. UPDATE NOVEMBER MACHINE ORDERS -11.3% vs. 0.2% forecast.

The Sterling (GBP) was well supported across the board as the market jumped upon hawkish comments from BoE Member Sentence that the QE program was a success and inferred the central bank was at a more neutral stance. Overall the GBP/USD traded with a low of 1.6134 and a high of 1.6310 before closing the day at 1.6270 in the New York session.

The Australian Dollar (AUD) recovered from the heavy losses seen on Tuesday to rally against the Yen and USD but still lagged behind most majors as the Chinese news was digested. Helping the pair remain buoyant was the strong performance of gold in the US session. Overall the AUD/USD traded with a low of 0.9188 and a high of 0.9269 before closing the US session at 0.9240. Looking ahead, December Employment change is forecast at 10k vs. 31k previously. December Unemployment Rate is forecast unchanged at 5.7%.

Oil &amp Gold (XAU) tested $1120 before rallying aggressively to $1140. Overall trading with a low of USD$1118 and high of USD$1140 before ending the New York session at USD$1138 an ounce. Weak Inventories data did little help Crude Oil which remained under pressure. Crude Oil was down -$1.14 ending the New York session at $79.65.

TECHNICAL COMMENTARY

Euro – 1.4500

Initial support at 1.4409 (Jan 11 low) followed by 1.4258 (Jan 4 low). Initial resistance is now located at 1.4591 (Dec 16 high) followed by 1.4685 (Dec 14 high)

Yen – 91.35

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 92.42 (Jan 12 high) followed by 92.66 (Jan 11 high).

Pound – 1.6270

Initial support at 1.6038 (Jan 11 low) followed by 1.5897 ( Jan 7 low). Initial resistance is now at 1.6341 (Jan 11 high) followed by 1.6411 (Jan 16 high).

Australian Dollar – 0.9230

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 – 1137

Initial support at 1119 (Jan 8 low) followed by 1115 (Jan 5 low). Initial resistance is now at 1161 (Jan 11 high) followed by 1161 (0.618 of 1226.56-1074.88).

Oil – 79.60

Initial support at 79.50 (Intraday support) followed by 78.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.00 (Intraday Resistance).