Australian FOREX Daily Outlook 21/07/2010

Euro Trades Briefly Above 1.3000

CURRENCY TRADING SUMMARY – 21^st July (00:30 GMT)

Written by Anthony Darvall

U.S. Dollar Trading (USD) volatility was evident in a wide range of markets yesterday with sentiment turning from very negative to extremely positive over the trading day. Weak results from IBM and Housing data missing expectations sent the Dow Jones Index down at the start of trade for a test of the key 10000 level before rebounding aggressively for the rest of the day. In US stocks, DJIA +75 points closing at 10230, S&amp P +12 points closing at 1083 and NASDAQ +24 points closing at 2222. Looking ahead, Ben Bernanke Speaks before Congress.

The Euro (EUR) broke above 1.3000 in Early Europe on speculation the US FED may expand its easing operations to help a faltering recovery. This was played down and the Euro fell heavily on fresh worries the Eurozone bank tests were not be tough enough. EUR/USD traded with a low of 1.2838 and a high of 1.3030 before closing at 1.2890.

The Japanese Yen (JPY) was quiet at the start of the day but found solid selling on the mood change in the US session to rally above Y87 and test Y87.50 before easing slightly into the close. Crosses were well bid and the AUD/JPY led the risk currencies to day highs at the new York close. Overall the USDJPY traded with a low of 86.71 and a high of 87.59 before closing the day around 87.40 in the New York session. Update BOJ Policy Minutes – Concern H2 will slow down with withdrawal of stimulus.

The Sterling (GBP) once again weak economic data led to Cable selling at the start of Europe but strong Stocks in the US helped the market to rally above 1.5300. EUR/GBP found solid resistance at 0.8520 and slumped to 0.8430 on Euro weakness. June Public Sector Net Borrowing forecast at 13.1bn came in at 15.4bn. Overall the GBP/USD traded with a low of 1.5150 and a high of 1.5313 before closing the day at 1.5275 in the New York session. Looking ahead, June Retail Sales are forecast at 0.5% vs. 0.6% m/m.

The Australian Dollar (AUD) tracked the stocks markets for a rally in Asia, dip in Euro and rally again in the US finishing at day highs. RBA minutes offered little new with the market focused squarely on the CPI numbers next Wednesday as the decider of August’s Rate decision. AUD/JPY was the most active cross up near 2 yen on the day. Overall the AUD/USD traded with a low of 0.8681 and a high of 0.8849 before closing the US session at 0.8825.

Oil &amp Gold (XAU) rallied on USD weakness with support being found under the $1180 level. Overall trading with a low of USD$1175 and high of USD$1194 before ending the New York session at USD$1191 an ounce. Oil traded higher after dipping in Europe. WTI Oil Closed +$0.90 at $77.44 a barrel.

TECHNICAL COMMENTARY

Euro – 1.2890

Initial support at 1.2709 (July 15 low) followed by 1.2480 (July 6 low). Initial resistance is now located at 1.3094 (May 10 high) followed by 1.3416 (April 27 high)

Yen – 87.20

Initial support is located at 86.27 (July 16 low) followed by 85.87 (Nov 30 2009 low). Initial resistance is now at 88.50 (July 15 high) followed by 89.16 (July 12 high).

Pound – 1.5270

Initial support at 1.5172 (July 14 low) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5472 (38.2% retrace of 1.6878-1.4231) followed by 1.5816 (Feb 17 high).

Australian Dollar – 0.8815

Initial support at 0.8622 (July 8 high) followed by the 0.8450 (June 7 high). Initial resistance is now at 0. 8871 (July 14 high) followed by 0.9000 (Big Level).

Gold – 1190

Initial support at 1166 (May 21 low) followed by 1157 (May 5 low). Initial resistance is now at 1218 (July 13 high) followed by 1244 (July 1 high).

Oil – 77.50

Initial support at 77.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).