Australian FOREX Daily Outlook 20/01/2010

EURO Tumble Continues

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

U.S. Dollar Trading (USD) was able to gain against most pairs as the biggest currency pair the EUR/USD swooned and the USD/JPY garnered support from lows. Stocks markets were very strong and this led risk currencies such as the AUD and commodities to perform well. DJIA +115 points closing at 10725, S&amp P +14 points closing at 1150 and NASDAQ +32 points closing at 2320. Looking ahead, December Housing Starts forecast at 0.589mln vs. 0.574mln previously.

The Euro (EUR) was stable near the 1.4400 level in Asia before plummeting on terrible German ZEW data. January ZEW economic Sentiment 47.2 vs. 50.4 previously. EUR/JPY broke through the Y130 level albeit only briefly and the EUR/AUD broke through multi year support at 1.5500. Sentiment is quite weak towards the Euro at the moment with both technicals and fundamentals under-performing. Overall the EUR/USD traded with a low of 1.4251 and a high of 1.4416 before closing at 1.4295. Looking ahead, December German PPI is forecast at 0.2% vs. 0.1% previously.

The Japanese Yen (JPY) was strong against as EUR/JPY broke through the Y130 level but spent most of the US session on the back-foot as US stocks rallied. AUD/JPY and GBP/JPY both made nice recoveries and are leaders in the Yen Carry trade this year. Overall the USDJPY traded with a low of 90.30 and a high of 91.29 before closing the day around 91.15 in the New York session.

The Sterling (GBP) strong CPI data and news that Kraft was taking over Cadbury helped Cable break above 1.6400 during the European session but the pair fell back later in the US on Dovish Comments from BoE Governor King. King Commented that the MPC would wait until the picture is clearer before deciding the future of the Asset Purchase program. Overall the GBP/USD traded with a low of 1.6310 and a high of 1.6461 before closing the day at 1.6370 in the New York session. Looking ahead, November ILO Unemployment forecast at 8.0% vs. 7.9% previously.

The Australian Dollar (AUD) tested 0.9180 once again before rebounding on strong commodities and stocks. AUD/JPY buying on dips underpinned as did most crosses. Sentiment is still decidedly bullish towards the Aussie and should remain so whilst stocks continue to perform well. Overall the AUD/USD traded with a low of 0.9174 and a high of 0.9276 before closing the US session at 0.9240. Looking ahead, January Consumer Sentiment.

Oil &amp Gold (XAU) dips were bought at the $1130 level but the precious metal was once again contained by resistance above $1140. Overall trading with a low of USD$1128 and high of USD$1141 before ending the New York session at USD$1138 an ounce. Crude Oil rebounded on improving investor sentiment. Crude Oil was up +$0.59 ending the New York session at $78.59.

TECHNICAL COMMENTARY

Euro – 1.4295

Initial support at 1.4252 (Jan 19 low) followed by 1.4218 (Dec 22 low). Initial resistance is now located at 1.4512 (Jan 15 high) followed by 1.4579 (Dec 16 high)

Yen – 91.10

Initial support is located at 90.16 (Dec 21 low) followed by 89.30 (0.500 of 84.83-93.77). Initial resistance is now at 91.27 (Jan 19 high) followed by 91.32 (Jan 15 high).

Pound – 1.6360

Initial support at 1.6211 (Jan 15 low) followed by 1.6137 (Jan 13 low). Initial resistance is now at 1.6479 (0.618 of 1.6878-1.5833) followed by 1.6516 (Dec 7 high).

Australian Dollar – 0.9240

Initial support at 0.9175 (Jan 18 low) followed by the 0.9124 (Jan 8 low). Initial resistance is now at 0.9280 (Jan 18 high) followed by 0.9328 (Jan 14 high).

Gold – 1138

Initial support at 1127 (Jan 15 low) followed by 1115 (Jan 5 low). Initial resistance is now at 1146 (Jan 14 high) followed by 1161 (Jan 11 high).

Oil – 79.10

Initial support at 78.00 (Intraday support) followed by 77.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.00 (Intraday Resistance).