Australian FOREX Daily Outlook 16/03/2010

China defiant on FX

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

U.S. Dollar Trading (USD) some mild risk aversion was the course of the day with Friday’s ‘risk on’ rally pared back across the board. The USD and Yen were the main winners ahead of there respective Central Bank meetings this week. Also causing concern to traders was Chinese Premier Wens speech over the weekend in which he stated the Yuan was not overvalued and outside pressure was not appropriate. In US stocks, DJIA +17 points closing at 10642, S&amp P +1 points closing at 1150 and NASDAQ -5 points closing at 2362. Looking ahead, FOMC meeting forecast to hold at 0.25%.

The Euro (EUR) fell back through 1.3700 support as the market took profit after the rally failed at 1.3800 on Friday. The Eurozone Finance ministers meeting failed to outline a Greece bailout package instead stating that such a package was not needed at the moment given the recent Austerity measures passed. Overall the EUR/USD traded with a low of 1.3638 and a high of 1.3776 before closing at 1.3780. Looking ahead, March German ZEW Index forecast at 43.7 vs. 45.1 previously.

The Japanese Yen (JPY) Yen gained heavily on the crosses as China concerns helped inspire profit taking. GBP/JPY was especially weak falling from Y138 to Y136. USD/JPY held up well in a tight range ahead of the FOMC/BOJ double beginning today. Overall the USDJPY traded with a low of 90.34 and a high of 90.82 before closing the day around 90.40 in the New York session. Looking ahead, 2 day BOJ meeting begins.

The Sterling (GBP) weakness returned with force in Europe falling from 1.5200 to 1.5020 in quick secession on GBP/JPY selling and EUR/GBP buying. Concerns remain about UK politics and there are reports of heavy M&amp A pound sales. Overall the GBP/USD traded with a low of 1.5017 and a high of 1.5210 before closing the day at 1.5045 in the New York session.

The Australian Dollar (AUD) fell back to 0.9100 support and bounced well at the end of the US session with US stocks. AUD/JPY selling was the main cause of pain the US session. Commodity weakness did little to help but there is still plenty of interest to buy the AUD on dips. Overall the AUD/USD traded with a low of 0.9094 and a high of 0.9205 before closing the US session at 0.9140. Looking ahead, RBA March meeting minutes.

Oil &amp Gold (XAU) Support was found at the $1100 and the market grinded higher for most of the day. Overall trading with a low of USD$1100 and high of USD$1110 before ending the New York session at USD$1109 an ounce. Selling continued today and the Key $80 was broken although follow through was limited. Crude Oil was down $1.44 ending the New York session at $79.80.

TECHNICAL COMMENTARY

Euro – 1.3675

Initial support at 1.3640 (Mar 15 low) followed by 1.3621 (Mar 11 low). Initial resistance is now located at 1.3796 (Mar 12 high) followed by 1.3839 (Feb 9 high)

Yen – 90.40

Initial support is located at 90.17 (Mar 12 low) followed by 89.63 (Mar 9 low). Initial resistance is now at 91.09 (Mar 12 high) followed by 91.29 (Feb 23 high).

Pound – 1.5050

Initial support at 1.4947 (Mar 11 low) followed by 1.4873 (Mar 10 low). Initial resistance is now at 1.5218 (Mar 12 high) followed by 1.5317 (Feb 26 low).

Australian Dollar – 0.9140

Initial support at 0.9096 (Mar 15 low) followed by the 0.9056 (Mar 4 low). Initial resistance is now at 0.9243 (Jan 20 high) followed by 0.9280 (Jan 18 high).

Gold – 1110

Initial support at 1098 (Mar 12 low) followed by 1094 (0.5 of 1044.85-1144.98). Initial resistance is now at 1119 (Mar 12 high) followed by 1128 (Mar 10 high).

Oil – 79.80

Initial support at 79.00 (Intraday Support) followed by 78.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 83.20 (March High).