Australian FOREX Daily Outlook 09/02/2010

Market Quiet, Still Weak

CURRENCY TRADING SUMMARY – 9th February (00:30GMT)

U.S. Dollar Trading (USD) traded in tight ranges against most pairs but finished on the front foot as US stocks slumped into the close. With little direction given from the G7 over the weekend the market continued to focus on unresolved Eurozone risks. January Employment trend was at 93.2 vs. 91.8. In US stocks DJIA -103 points closing at 9908, S&amp P -9 points closing at 1056 and NASDAQ -15 points closing at 2126. Looking ahead, December Wholesale Inventories is forecast at 0.5% vs. 1.5%.

The Euro (EUR) recovered into the 1.3700 a few times during the day but failed to hold onto gains and slipped back to the lower 1.36 region on weak US stocks. February Sentix fell to -8.2 vs. -3.7 previously. The Greek Fin Min stated that his government was fully committed to the stability program. Overall the EUR/USD traded with a low of 1.3620 and a high of 1.3715 before closing at 1.3645. Looking ahead, German December Trade Balance forecast at 15bn vs. 17.2bn. January CPI is forecast -0.6% vs. 0.8% m/m.

The Japanese Yen (JPY) was very quiet against the USD but was higher for most of the day against the Crosses as oversold conditions allowed the market to rebound. Late US stock market weakness induced some paring back of these gains but traders are wary of getting caught short from sudden changes in sentiment at these levels. Overall the USDJPY traded with a low of 89.13 and a high of 89.58 before closing the day around 89.33 in the New York session.

The Sterling (GBP) weekend press reports that the UK was headed for a hung Parliament after the next election sent the Pound to its lowest level in 9 months at 1.5535. Also weighing was comments from PIMCO CEO El-Erian that the UK should be put in the same category as Greece and Spain. Overall the GBP/USD traded with a low of 1.5532 and a high of 1.5663 before closing the day at 1.5595 in the New York session. Looking ahead, December Trade Balance forecast at -6.63bn vs. -6.78bn.

The Australian Dollar (AUD) tracked the Euro failing above 0.8700 but generally better supported than in previous days as AUD/JPY rebounded. Stock markets are still the AUD’s major driver and if weakness continues then further falls are likely. Overall the AUD/USD traded with a low of 0.8611 and a high of 0.8711 before closing the US session at 0.8640.

Oil &amp Gold (XAU) was very contained rallying in Asia before slipping back in the US session. Overall trading with a low of USD$1061 and high of USD$1074 before ending the New York session at USD$1064 an ounce. Bounced after heavy falls recently. Crude Oil was down +$0.50 ending the New York session at $71.70.

TECHNICAL COMMENTARY

Euro – 1.3645

Initial support at 1.3584 (May 20 low) followed by 1.3531 (May 19 low). Initial resistance is now located at 1.3903 (Feb 4 high) followed by 1.4026 (Feb 3 high)

Yen – 89.30

Initial support is located at 88.56 (Feb 4 low) followed by 88.20 (Dec 11 low). Initial resistance is now at 89.79 (0.236 of 93.77-88.56) followed by 90.55 (0.382 of 93.77-88.56).

Pound – 1.5580

Initial support at 1.5517 (May 17 low) followed by 1.5450 (May 20 low). Initial resistance is now at 1.5918 (Feb 4) followed by 1.6069 (Feb 3 high).

Australian Dollar – 0.8640

Initial support at 0.8608 (Feb 4 low) followed by the 0.8570 (Oct 2 low). Initial resistance is now at 0.8778 (0.382 of 0.9328-0.8608) followed by 0.8883 (0.382 of 0.9328-0.8608).

Gold – 1063

Initial support at 1041 (Nov 2 low) followed by 1035 (Oct 30 low). Initial resistance is now at 1073 (Jan 28 low) followed by 1111 (Feb 4 high).

Oil – 71.70

Initial support at 70.00 (Intraday Support) followed by 69.50 (Intraday Support). Initial resistance is now at 72.50 (Intraday Resistance) followed by 75.00 (Intraday Resistance).